[House Report 119-246]
[From the U.S. Government Publishing Office]
119th Congress } { Report
HOUSE OF REPRESENTATIVES
1st Session } { 119-246
=======================================================================
DEVELOPING AND EMPOWERING OUR ASPIRING LEADERS
ACT OF 2025
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September 8, 2025.--Committed to the Committee of the Whole House on
the State of the Union and ordered to be printed
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Mr. Hill of Arkansas, from the Committee on Financial Services,
submitted the following
R E P O R T
[To accompany H.R. 4429]
The Committee on Financial Services, to whom was referred
the bill (H.R. 4429) to require the Securities and Exchange
Commission to revise the definition of a qualifying investment,
for purposes of the exemption from registration for venture
capital fund advisers under the Investment Advisers Act of
1940, to include an equity security issued by a qualifying
portfolio company and to include an investment in another
venture capital fund, and for other purposes, having considered
the same, reports favorably thereon with an amendment and
recommends that the bill as amended do pass.
CONTENTS
Page
Purpose and Summary.............................................. 2
Background and Need for Legislation.............................. 2
Committee Consideration.......................................... 3
Related Hearings................................................. 4
Committee Votes.................................................. 4
Committee Oversight Findings..................................... 7
Performance Goals and Objectives................................. 7
Committee Cost Estimate.......................................... 7
New Budget Authority and CBO Cost Estimate....................... 7
Unfunded Mandates Statement...................................... 7
Earmark Statement................................................ 7
Federal Advisory Committee Act Statement......................... 8
Applicability to the Legislative Branch.......................... 8
Duplication of Federal Programs.................................. 8
Section-by-Section Analysis of the Legislation................... 8
Changes in Existing Law Made by the Bill, as Reported............ 8
Documents Included by Unanimous Consent.......................... 9
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Developing and Empowering our Aspiring
Leaders Act of 2025''.
SEC. 2. DEFINITIONS.
Not later than the end of the 180-day period beginning on the date of
the enactment of this Act, the Securities and Exchange Commission
shall--
(1) revise the definition of a qualifying investment under
paragraph (c) of section 275.203(l)-1 of title 17, Code of
Federal Regulations--
(A) to include an equity security issued by a
qualifying portfolio company, whether acquired directly
from the company or in a secondary acquisition; and
(B) to specify that an investment in another venture
capital fund is a qualifying investment under such
definition; and
(2) revise paragraph (a) of such section to--
(A) require, as a condition of a private fund
qualifying as a venture capital fund under such
paragraph, that not less than 51 percent of the fund's
aggregate capital contributions and uncalled committed
capital (other than short term holdings) shall consist
of equity securities acquired directly from a
qualifying portfolio company, including immediately
after the acquisition of any asset; and
(B) specify that up to 49 percent of the fund's
aggregate capital contributions and uncalled committed
capital (other than short term holdings) may consist of
investments in one or more venture capital funds, as
well as securities acquired in a secondary acquisition.
PURPOSE AND SUMMARY
H.R. 4429, the Developing and Empowering our Aspiring
Leaders Act of 2025, was introduced on July 16, 2025, by
Republican Representative Ann Wagner (MO-02). H.R. 4429
requires the Securities and Exchange Commission (SEC) to revise
the definition of a qualifying investment, for purposes of the
exemption from registration for venture capital (VC) fund
advisers under the Investment Advisers Act of 1940. The revised
definition is to include an equity security issued by a
qualifying portfolio company. It also requires the SEC to
revise the definition of a qualifying investment to include an
investment in another VC fund (i.e., fund of funds
investments). Furthermore, the bill establishes that the SEC
shall require 51 percent of a qualifying VC fund's aggregate
capital contributions and uncalled committed capital to consist
of equity securities acquired directly from a qualifying
portfolio company.
BACKGROUND AND NEED FOR LEGISLATION
Founders of portfolio companies often rely on early-stage
investors for hands-on support, participation in board
meetings, and developing customer acquisition strategies.
Location and proximity to portfolio companies are key factors
for early-stage investors when assessing investment
opportunities. Likewise, the number of companies the investor
can reasonably and actively advise constrains the number of
their investments. As such, larger VC funds typically invest
larger amounts in several later-stage companies, whereas
smaller funds generally invest smaller amounts in a
proportionate number of early-stage companies.
A ``fund of funds'' model, in which a larger fund invests
in smaller, regional funds, would mobilize capital previously
reserved for late-stage investments and support smaller
companies in aspiring startup hubs. The current limitations on
exempt reporting advisers' qualifying investments render this
model unworkable due to the competing demands on the 20 percent
non-qualifying basket. This includes public offering
obligations and secondary liquidity for founders.
H.R. 4429 amends the ``venture capital fund'' definition
under Rule 203(l)-1 of the Investment Advisers Act of 1940 to
allow VC ``fund of funds'' investments by treating an
investment in another VC fund--which meets the Rule 203(l)-1
requirements itself--as a ``qualifying investment.'' By
allowing large VC funds to deploy more capital to smaller
funds, this change will facilitate a more diverse pool of VC
funds providing capital to a more diverse pool of founders
located outside of the usual VC and tech destinations.
Additionally, by allowing VC funds to acquire more shares
from founders and early investors, H.R. 4429 will drive capital
to emerging VC funds while avoiding the costs and hurdles of
fund registration, providing liquidity and improving returns.
This will allow early-stage investors to deploy that capital as
new investments in additional American startups.
COMMITTEE CONSIDERATION
119TH CONGRESS
On July 16, 2025, Representative Wagner introduced H.R.
4429, the Developing and Empowering our Aspiring Leaders Act of
2025. Representative Sean Casten (D-IL) was added subsequently
as a cosponsor. The bill was referred solely to the Committee
on Financial Services. The bill was attached to the February
26, 2025, hearing titled ``The Future of American Capital:
Strengthening Public and Private Markets by Increasing Investor
Access and Facilitating Capital Formation,'' and the March 25,
2025, hearing titled, ``Beyond Silicon Valley: Expanding Access
to Capital Across America.''
On July 22, 2025, the Committee on Financial Services met
in open session to consider, among others, H.R. 4429. The
Committee ordered H.R. 4429, as amended, to be favorably
reported to the House of Representatives.
118TH CONGRESS
On April 13, 2023, Representative Andy Barr (R-KY)
introduced H.R. 2579, the Developing and Empowering our
Aspiring Leaders Act of 2023. This bill is an earlier iteration
of H.R. 4429. The bill was referred solely to the Committee on
Financial Services. The bill was included in H.R. 2799, the
Expanding Access to Capital Act of 2023, which passed the House
on March 8, 2024, by a recorded vote of 212 yeas and 205 nays.
It was received in the Senate and referred to the Committee on
Banking, Housing, and Urban Affairs. There was no further
action on the bill in the 118th Congress.
117TH CONGRESS
On June 29, 2021, Representative Trey Hollingsworth (R-IN)
introduced H.R. 4227, the Developing and Empowering our
Aspiring Leaders Act of 2022. This bill is an earlier iteration
of H.R. 4429. The bill was referred solely to the Committee on
Financial Services. On July 26, 2022, the bill passed the House
under suspension of the rules by voice vote. It was received in
the Senate and referred to the Committee on Banking, Housing,
and Urban Affairs. In addition, on March 24, 2022, Senator Mike
Rounds (R-SD) introduced S. 3914, a companion bill to H.R.
4227. There was no further action on the bill in the 117th
Congress.
116TH CONGRESS
On October 16, 2020, Representative Hollingsworth
introduced H.R. 8603, the Developing and Empowering our
Aspiring Leaders Act of 2020, with Representative Ben McAdams
(D-UT) as an original cosponsor. This bill is an earlier
iteration of H.R. 4429. The bill was referred solely to the
Committee on Financial Services. There was no further action on
the bill in the 116th Congress.
115TH CONGRESS
On June 21, 2018, Representative Hollingsworth introduced
H.R. 6177, the Developing and Empowering our Aspiring Leaders
Act of 2018. This bill is an earlier iteration of H.R. 4429.
The bill was referred solely to the Committee on Financial
Services. On July 11, 2018, the Committee on Financial Services
ordered H.R. 6177, as amended, to be favorably reported to the
House by voice vote. There was no further action on the bill in
the 115th Congress.
RELATED HEARINGS
Pursuant to clause 3(c)(6) of rule XIII of the Rules of the
House of Representatives, the following hearings were used to
develop H.R. 4429:
The Capital Markets Subcommittee of the Committee on
Financial Services held a February 26, 2025, hearing titled
``The Future of American Capital: Strengthening Public and
Private Markets by Increasing Investor Access and Facilitating
Capital Formation'' and the Full Committee held a March 25,
2025, hearing titled, ``Beyond Silicon Valley: Expanding Access
to Capital Across America.'' A discussion draft version of the
bill was attached to both hearings. The following witnesses
testified at the February 26, 2025, hearing: Mr. Andrew
Barnell, CEO and Co-Founder, Geneoscopy; Mr. McKeever Conwell,
Founder and Managing Partner, RareBreed Ventures; Ms. Rebecca
Kacaba, CEO and Co-Founder, DealMaker; Ms. Anna Pinedo,
Partner, Mayer Brown; and Ms. Alexandra Thornton, Senior
Director, Financial Regulation, Center for American Progress.
The following witnesses testified at the March 25, 2025,
hearing: Mr. Steve Case, Chairman and CEO, Revolution LLC; Mr.
Bill Newell, Senior Business Advisor & Former CEO, Sutro
Biopharma; Ms. Candice Matthews Brackeen, General Partner,
Lightship Capital; Mr. Joel Trotter, Partner, Latham & Watkins
LLP; and Ms. Amanda Senn, Director of the Alabama Securities
Commission.
COMMITTEE VOTES
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee Report to include record
votes on the motion to report legislation and amendments
thereto.
On July 22, 2025, the Committee ordered H.R. 4429, as
amended, to be reported favorably to the House by a recorded
vote of 50 yeas and 2 nays. (Record Vote No. FC-171).
Before the question to report was called, the Committee
adopted an amendment in the nature of a substitute offered by
Representative Wagner, designated as Wagner_021, which requires
that not less than 51 percent of a qualifying venture capital
fund's aggregate capital contributions and uncalled committed
capital shall consist of equity securities acquired directly
from a qualifying portfolio company, and specifies that up to
49 percent of the fund's aggregate capital contributions and
uncalled committed capital may consist of investments in one or
more venture capital funds, as well as securities acquired in a
secondary acquisition. This amendment was adopted by voice
vote.
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COMMITTEE OVERSIGHT FINDINGS
Pursuant to clause 3(c) of rule XIII of the Rules of the
House of Representatives, the findings and recommendations of
the Committee, based on oversight activities under clause
2(b)(1) of rule X of the Rules of the House of Representatives
are incorporated in the descriptive portions of this report.
PERFORMANCE GOALS AND OBJECTIVES
Pursuant to clause 3(c)(4) of rule XIII of the Rules of the
House of Representatives, the goal of H.R. 4429 is to allow
large VC funds to deploy more capital to smaller funds to
facilitate a more diverse pool of VC funds providing capital to
a more diverse pool of founders located outside the usual VC
and tech destinations.
COMMITTEE COST ESTIMATE
Clause 3(d)(1) of rule XIII of the Rules of the House of
Representatives requires an estimate and a comparison of the
costs that would be incurred in carrying out H.R. 4429. The
Committee has requested but not received a cost estimate from
the Director of the Congressional Budget Office. However,
pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee will adopt as its own
the cost estimate by the Director of the Congressional Budget
Office once it has been prepared.
NEW BUDGET AUTHORITY AND CBO COST ESTIMATE
With respect to the requirements of clause 3(c)(2) of rule
XIII of the Rules of the House of Representatives and section
308(a) of the Congressional Budget Act of 1974 and with respect
to requirements of clause 3(c)(3) of rule XIII of the Rules of
the House of Representatives and section 402 of the
Congressional Budget Act of 1974, the Committee will adopt as
its own the cost estimate for the bill prepared by the Director
of the Congressional Budget Office. However, a cost estimate
was not made available to the Committee in time for the filing
of this report. The Chairman of the Committee shall cause such
estimate to be printed in the Congressional Record upon its
receipt by the Committee.
UNFUNDED MANDATES STATEMENT
The Committee has requested but not received from the
Director of the Congressional Budget Office an estimate of the
Federal mandates pursuant to section 423 of the Unfunded
Mandates Reform Act. The Chairman of the Committee shall cause
such estimate to be printed in the Congressional Record upon
its receipt by the Committee.
EARMARK STATEMENT
In compliance with clause 9 of rule XXI of the Rules of the
House of Representatives, this bill, as reported, contains no
congressional earmarks, limited tax benefits, or limited tariff
benefits as defined in clause 9(e), 9(f), or 9(g) of rule XXI.
FEDERAL ADVISORY COMMITTEE ACT STATEMENT
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
APPLICABILITY TO THE LEGISLATIVE BRANCH
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of section
102(b)(3) of the Congressional Accountability Act.
DUPLICATION OF FEDERAL PROGRAMS
Pursuant to clause 3(c)(5) of rule XIII of the Rules of the
House of Representatives, the Committee states that no
provision of the bill establishes or reauthorizes a program of
the Federal Government known to be duplicative of another
Federal program, including any program that was included in a
report to Congress pursuant to section 21 of the Public Law
111-139 or the most recent Catalog of Federal Domestic
Assistance.
SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION
Section 1. Short title
Section 1 provides the short title is the ``Developing and
Empowering our Aspiring Leaders Act of 2025.''
Section 2. Definitions
Section 2 revises the definition of a qualifying investment
to include an equity security issued by a qualifying portfolio
company and to specify that an investment in another venture
capital fund is a qualifying investment under such definition.
Section 2 also requires that not less than 51 percent of a
qualifying venture capital fund's aggregate capital
contributions and uncalled committed capital shall consist of
equity securities acquired directly from a qualifying portfolio
company, and specified that up to 49 percent of the fund's
aggregate capital contributions and uncalled committed capital
may consist of investments in one or more venture capital
funds, as well as securities acquired in a secondary
acquisition.
CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
H.R. 4429 does not repeal or amend any section of a
statute. Therefore, the Office of Legislative Counsel did not
prepare the report required under clause 3(e) of rule XIII of
the House of Representatives.
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