[House Report 115-531]
[From the U.S. Government Publishing Office]
115th Congress Report
HOUSE OF REPRESENTATIVES
2d Session 115-531
======================================================================
EXPANDING ACCESS TO CAPITAL FOR RURAL JOB CREATORS ACT
_______
January 29, 2018.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Hensarling, from the Committee on Financial Services, submitted the
following
R E P O R T
[To accompany H.R. 4281]
[Including cost estimate of the Congressional Budget Office]
The Committee on Financial Services, to whom was referred
the bill (H.R. 4281) to amend the Securities Exchange Act of
1934 to expand access to capital for rural-area small
businesses, and for other purposes, having considered the same,
report favorably thereon with an amendment and recommend that
the bill as amended do pass.
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 ``Expanding Access to Capital for Rural
Job Creators Act''.
SEC. 2. ACCESS TO CAPITAL FOR RURAL-AREA SMALL BUSINESSES.
Section 4 of the Securities Exchange Act of 1934 (15 U.S.C. 78d) is
amended--
(1) in subsection (j)(4)(C), by striking ``and women-owned
small businesses'' and inserting ``, women-owned, and rural-
area small businesses''; and
(2) in subsection (j)(6)(B)(iii), by striking ``and women-
owned small businesses'' and inserting ``, women-owned, and
rural-area small businesses''.
Purpose and Summary
On November 7, 2017, Representatives Ruben Kihuen and Alex
Mooney introduced H.R. 4281, the ``Expanding Access to Capital
for Rural Job Creators Act'', which amends the Securities
Exchange Act of 1934 (Exchange Act) to ensure the Securities
and Exchange Commission's (SEC) Advocate for Small Business
Capital Formation (Small Business Advocate) considers and
identifies any unique challenges to rural area small businesses
when identifying problems that small businesses have with
securing access to capital. H.R. 4281 also requires that the
annual report of the Small Business Advocate include a summary
of any unique issues encountered by rural area small
businesses.
Background and Need for Legislation
In the 114th Congress, Congress passed and President Obama
signed into law, H.R. 3874, the SEC Small Business Advocate Act
of 2016 (P.L. 114-284). This law created within the SEC the
Office for Small Business Capital Formation (OSBCF) and the
Small Business Capital Formation Advisory Committee (Advisory
Committee) within the Securities and Exchange Commission (SEC).
The OSBCF will be led by the Advocate for Small Business
Capital Formation, who will be appointed by and reports to the
Commission, with the responsibility to, among other things:
Help small businesses resolve problems with
the SEC;
Analyze the potential impact of proposed
rules and regulations that are likely to have a
significant effect on small businesses; and
Reach out to small businesses to understand
issues related to capital formation.
The Advisory Committee provides advice to the Commission on
rules and policies related to capital formulation, securities
trading, and reporting and governance requirements for emerging
and smaller public companies.
Prior to the enactment of H.R. 3874, the responsibility to
facilitate and promote capital formation resided within the
SEC's Office of Small Business Policy (OSBP), which is housed
within the SEC's Division of Corporation Finance. OSBP answers
questions on disclosure and other issues relating to smaller
public companies, including those classified as `smaller
reporting companies,' and on limited, private, and intrastate
offerings of securities. OSBP also processes requests for
waivers of disqualification arising under Rule 262 of
Regulation A and Rule 505(b)(2)(iii) and Rule 506(d)(2)(ii) of
Regulation D. In addition, OSBP reaches out to smaller
companies to facilitate capital formation. These efforts
include coordinating the annual SEC Government-Business Forum
on Small Business Capital Formation, which focuses on the
current status of issues and programs related to small business
capital formation.
Unfortunately, the OSBP is a functional office rather than
an advocacy office. The OSBP does not advocate for changes to
the securities laws for smaller public companies, small
businesses seeking equity capital, or investors in those
companies or businesses. The OSBP does not advance initiatives
to make equity capital more readily available to smaller
issuers. Rather than neglecting the needs of small businesses,
a permanent office dedicated to small business capital
formation within the SEC is a logical outcome of the JOBS Act
since the SEC has taken little to no action to advance the many
recommendations the agency has received from its annual
Government-Business Forum on Small Business Capital Formation
(Forum) to help small businesses and EGCs access the capital
markets.
A major purpose of the Forum is to identify unnecessary
impediments to small business capital formation and find ways
to eliminate or reduce them. Each Forum develops
recommendations for government and private action to improve
the environment for small business capital formation. But the
SEC rarely, if ever, acts on the recommendations made by the
Forum's participants, which include small business executives,
venture capitalists, government officials, trade association
representatives, lawyers, accountants, academics and small
business advocates. The law promotes capital formation and
creates an office within the SEC to advocate for the job
creators and entrepreneurs seeking equity capital as well as
their investors. The office will then be able to leverage the
recommendations the SEC has collected and prompt the SEC to act
on those most likely to help small businesses and EGCs access
the capital markets.
At a December 2, 2015, Subcommittee on Capital Markets and
Government Sponsored Enterprises hearing, Chris Mathieu, Chief
Financial Officer of Horizon Technology Finance, who testified
on behalf of the Small Business Investor Alliance (SBIA),
stated that `the SEC Small Business Advocate Act strengthens
the voice of small business at the SEC by making significant
changes to the way the SEC hears from small business
stakeholders; responds to stakeholder requests; and makes
recommendations to Congress and the SEC to improve the ability
of small business to access capital.' Mr. Mathieu further noted
that `[s]maller business investors have a much lower threshold
for pain and the SEC needs to understand the challenges of
scale when creating policy.' At the same hearing, Brian Hahn,
the chief financial officer of GlycoMimetics, testified on
behalf of the Biotechnology Industry Organization (BIO), stated
that `[t]he Small Business Advocate would serve as a partner to
the existing Investor Advocate, giving small businesses an
independent voice at the SEC and helping the SEC to understand
the impact of regulatory burdens on growing companies as it
considers new compliance requirements.'
On September 13, 2017, SEC Chairman Jay Clayton along with
Commissioners Michael Piwowar and Kara Stein issued a joint
statement to announce the launch of a nationwide search for
candidates for a new senior executive position at the SEC, the
Advocate for Small Business Capital Formation and specifically
noted, ``The Advocate will be a powerful voice for small
businesses and small business investors, providing assistance,
conducting outreach to better understand their concerns and
recommending improvements to the regulatory environment.''
Even though the SEC has to yet to appoint its first Small
Business Advocate, the need to expand the Advocate's area of
focus is worthy of Congressional action. The goal of H.R. 4281
is to facilitate increased access to capital to small
businesses located in rural areas. After all, small and rural
counties are extremely vulnerable during recessions and their
subsequent recoveries.
As a whole, 59 percent of U.S. counties saw more business
establishments close than open during the first five years of
the most recent financial crisis--a decline that was even more
stark in rural areas, where the percentage of business closures
was 64 percent. Additionally, as our economy has turned the
corner, the facts show that small businesses and startups are
less likely to form in rural areas than urban areas. For
example, over 355,000 new companies were formed in urban areas
in 2014, while rural areas saw fewer than 50,000 companies
form. This is the first time that rural areas have ever had
fewer than 50,000 companies form. In other words, while urban
areas are recovering from the financial crisis, the
disproportionate impact the financial crisis had on rural area
businesses has left rural areas with far less optimism for
economic recovery in their communities.
This is important because of the net national businesses
created from 2010 to 2014, 50 percent are located in only 20
counties across the United States, and these counties account
for only 17 percent of the total U.S. population. Additionally,
half of the 9.1 million jobs that were created from 2010 to
2014 following the financial crisis were created in just 73
counties that contain only 34 percent of the U.S. population
and 39 percent of the nation's employment base. Moreover, a
mere three regions of the United States account for more than
75 percent of venture capital investment in the U.S.--e.g., the
San Francisco Bay Area, the Boston-Washington Corridor, and
Southern California--with the rest of the country fighting over
the rest of the 25% of venture capital.
In light of these facts and the essential role small
businesses play in innovation and job creation, it is
imperative that the Small Business Advocate always considers
and identifies unique issues that affect capital formation in
rural areas. After all, the Small Business Advocate's
responsibilities include: (1) helping small businesses resolve
problems with the SEC; (2) analyzing the potential impact of
proposed rules and regulations that are likely to have a
significant effect on small businesses; and (3) reaching out to
small businesses to understand issues related to capital
formation. Further, the Small Business Advocate's annual report
to Congress can and will be a valuable resource for Congress to
consider how to improve capital formation, and this bill
ensures that Congress will readily have information regarding
challenges rural areas face when it comes to encouraging
capital formation in those important communities.
Hearings
The Committee on Financial Services held a hearing
examining matters relating to H.R. 4281 on November 3, 2017.
Committee Consideration
The Committee on Financial Services met in open session on
November 13, 2017, and November 14, 2017, and ordered H.R. 4281
to be reported favorably to the House without amendment by a
recorded vote of 60 yeas to 0 nays (Record vote no. FC-113), a
quorum being present.
Committee Votes
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list the record votes
on the motion to report legislation and amendments thereto. The
sole recorded vote was on a motion by Chairman Hensarling to
report the bill favorably to the House without amendment. The
motion was agreed to by a recorded vote of 60 yeas to 0 nays
(Record vote no. FC-113), a quorum being present.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Committee Oversight Findings
Pursuant to clause 3(c)(1) 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 Committee states that H.R. 4281
will expand access to capital for rural small businesses by
requiring the SEC's Advocate for Small Business Capital
Formation to identify any unique capital formation challenges
to rural area small businesses.
New Budget Authority, Entitlement Authority, and Tax Expenditures
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee adopts as its
own the estimate of new budget authority, entitlement
authority, or tax expenditures or revenues contained in the
cost estimate prepared by the Director of the Congressional
Budget Office pursuant to section 402 of the Congressional
Budget Act of 1974.
Congressional Budget Office Estimates
Pursuant to clause 3(c)(3) of rule XIII of the Rules of the
House of Representatives, the following is the cost estimate
provided by the Congressional Budget Office pursuant to section
402 of the Congressional Budget Act of 1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, December 4, 2017.
Hon. Jeb Hensarling,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 4281, the
Expanding Access to Capital for Rural Job Creators Act.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Stephen
Rabent.
Sincerely,
Keith Hall,
Director.
Enclosure.
H.R. 4281--Expanding Access to Capital for Rural Job Creators Act
H.R. 4281 would expand the function of the Office of the
Advocate for Small Business Capital Formation within the
Securities and Exchange Commission (SEC) to include identifying
problems that small businesses in rural areas experience with
securing access to capital. The office would be required to
summarize those issues within an existing annual report.
Using information from the SEC, CBO estimates that
implementing H.R. 4281 would cost less than $500,000 over the
2018-2022 period for the agency to broaden the scope of its
current activities. However, because the SEC is authorized to
collect fees sufficient to offset its annual appropriation and
assuming that appropriation actions were consistent with that
authority, CBO estimates that the net effect on discretionary
spending would be negligible.
Enacting H.R. 4281 would not affect direct spending or
revenues; therefore, pay-as-you-go procedures do not apply.
CBO estimates that enacting H.R. 4281 would not increase
net direct spending or on-budget deficits in any of the four
consecutive 10-year periods beginning in 2028.
H.R. 4281 contains no intergovernmental mandates as defined
in the Unfunded Mandates Reform Act (UMRA).
If the SEC increased fees to offset the costs associated
with implementing the bill, H.R. 4281 would increase the cost
of an existing mandate on private entities that are required to
pay those assessments. CBO estimates that the incremental cost
of the mandate would be small and fall well below the annual
threshold for private-sector mandates established in UMRA ($156
million in 2017, adjusted annually for inflation).
The CBO staff contacts for this estimate are Stephen Rabent
(for federal costs) and Amy Petz (for mandates). The estimate
was approved by H. Samuel Papenfuss, Deputy Assistant Director
for Budget Analysis.
Federal Mandates Statement
This information is provided in accordance with section 423
of the Unfunded Mandates Reform Act of 1995.
The Committee has determined that the bill does not contain
Federal mandates on the private sector. The Committee has
determined that the bill does not impose a Federal
intergovernmental mandate on State, local, or tribal
governments.
Advisory Committee Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Applicability to 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 the section
102(b)(3) of the Congressional Accountability Act.
Earmark Identification
With respect to clause 9 of rule XXI of the Rules of the
House of Representatives, the Committee has carefully reviewed
the provisions of the bill and states that the provisions of
the bill do not contain any congressional earmarks, limited tax
benefits, or limited tariff benefits within the meaning of the
rule.
Duplication of Federal Programs
In compliance with 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: (1) a
program of the Federal Government known to be duplicative of
another Federal program; (2) a program included in any report
from the Government Accountability Office to Congress pursuant
to section 21 of Public Law 111-139; or (3) a program related
to a program identified in the most recent Catalog of Federal
Domestic Assistance, published pursuant to the Federal Program
Information Act (Pub. L. No. 95-220, as amended by Pub. L. No.
98-169).
Disclosure of Directed Rulemaking
Pursuant to section 3(i) of H. Res. 5, (115th Congress),
the following statement is made concerning directed
rulemakings: The Committee estimates that the bill requires no
directed rulemakings within the meaning of such section.
Section-by-Section Analysis of the Legislation
Section 1. Short title
This section cites H.R. 4281 as the ``Expanding Access to
Capital for Rural Job Creators Act''.
Section 2. Access to capital for rural-area small businesses.
This section amends section 4 of the Securities Exchange
Act of 1934 to require the Small Business Advocate to identify
problems that rural-area small businesses have with securing
access to capital and to summarize such issues in the Small
Business Advocate's annual report.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, and existing law in which no
change is proposed is shown in roman):
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, and existing law in which no
change is proposed is shown in roman):
SECURITIES EXCHANGE ACT OF 1934
TITLE I--REGULATION OF SECURITIES EXCHANGES
* * * * * * *
securities and exchange commission
Sec. 4. (a) There is hereby established a Securities and
Exchange Commission (hereinafter referred to as the
``Commission'') to be composed of five commissioners to be
appointed by the President by and with the advice and consent
of the Senate. Not more than three of such commissioners shall
be members of the same political party, and in making
appointments members of different political parties shall be
appointed alternately as nearly as may be practicable. No
commissioner shall engage in any other business, vocation, or
employment than that of serving as commissioner, nor shall any
commissioner participate, directly or indirectly, in any stock-
market operations or transactions of a character subject to
regulation by the Commission pursuant to this title. Each
commissioner shall hold office for a term of five years and
until his successor is appointed and has qualified, except that
he shall not so continue to serve beyond the expiration of the
next session of Congress subsequent to the expiration of said
fixed term of office, and except (1) any commissioner appointed
to fill a vacancy occurring prior to the expiration of the term
for which his predecessor was appointed shall be appointed for
the remainder of such term, and (2) the terms of office of the
commissioners first taking office after the enactment of this
title shall expire as designated by the President at the time
of nomination, one at the end of one year, one at the end of
two years, one at the end of three years, one at the end of
four years, and one at the end of five years, after the date of
the enactment of this title.
(b) Appointment and Compensation of Staff and Leasing
Authority.--
(1) Appointment and compensation.--The Commission
shall appoint and compensate officers, attorneys,
economists, examiners, and other employees in
accordance with section 4802 of title 5, United States
Code.
(2) Reporting of information.--In establishing and
adjusting schedules of compensation and benefits for
officers, attorneys, economists, examiners, and other
employees of the Commission under applicable provisions
of law, the Commission shall inform the heads of the
agencies referred to under section 1206 of the
Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 (12 U.S.C. 1833b) and Congress
of such compensation and benefits and shall seek to
maintain comparability with such agencies regarding
compensation and benefits.
(3) Leasing authority.--Nothwithstanding any other
provision of law, the Commission is authorized to enter
directly into leases for real property for office,
meeting, storage, and such other space as is necessary
to carry out its functions, and shall be exempt from
any General Services Administration space management
regulations or directives.
(c) Notwithstanding any other provision of law, in accordance
with regulations which the Commission shall prescribe to
prevent conflicts of interest, the Commission may accept
payment and reimbursement, in cash or in kind, from non-Federal
agencies, organizations, and individuals for travel,
subsistence, and other necessary expenses incurred by
Commission members and employees in attending meetings and
conferences concerning the functions or activities of the
Commission. Any payment or reimbursement accepted shall be
credited to the appropriated funds of the Commission. The
amount of travel, subsistence, and other necessary expenses for
members and employees paid or reimbursed under this subsection
may exceed per diem amounts established in official travel
regulations, but the Commission may include in its regulations
under this subsection a limitation on such amounts.
(d) Notwithstanding any other provision of law, former
employers of participants in the Commission's professional
fellows programs may pay such participants their actual
expenses for relocation to Washington, District of Columbia, to
facilitate their participation in such programs, and program
participants may accept such payments.
(e) Notwithstanding any other provision of law, whenever any
fee is required to be paid to the Commission pursuant to any
provision of the securities laws or any other law, the
Commission may provide by rule that such fee shall be paid in a
manner other than in cash and the Commission may also specify
the time that such fee shall be determined and paid relative to
the filing of any statement or document with the Commission.
(f) Reimbursement of Expenses for Assisting Foreign
Securities Authorities.--Notwithstanding any other provision of
law, the Commission may accept payment and reimbursement, in
cash or in kind, from a foreign securities authority, or made
on behalf of such authority, for necessary expenses incurred by
the Commission, its members, and employees in carrying out any
investigation pursuant to section 21(a)(2) of this title or in
providing any other assistance to a foreign securities
authority. Any payment or reimbursement accepted shall be
considered a reimbursement to the appropriated funds of the
Commission.
(g) Office of the Investor Advocate.--
(1) Office established.--There is established within
the Commission the Office of the Investor Advocate (in
this subsection referred to as the ``Office'').
(2) Investor advocate.--
(A) In general.--The head of the Office shall
be the Investor Advocate, who shall--
(i) report directly to the Chairman;
and
(ii) be appointed by the Chairman, in
consultation with the Commission, from
among individuals having experience in
advocating for the interests of
investors in securities and investor
protection issues, from the perspective
of investors.
(B) Compensation.--The annual rate of pay for
the Investor Advocate shall be equal to the
highest rate of annual pay for other senior
executives who report to the Chairman of the
Commission.
(C) Limitation on service.--An individual who
serves as the Investor Advocate may not be
employed by the Commission--
(i) during the 2-year period ending
on the date of appointment as Investor
Advocate; or
(ii) during the 5-year period
beginning on the date on which the
person ceases to serve as the Investor
Advocate.
(3) Staff of office.--The Investor Advocate, after
consultation with the Chairman of the Commission, may
retain or employ independent counsel, research staff,
and service staff, as the Investor Advocate deems
necessary to carry out the functions, powers, and
duties of the Office.
(4) Functions of the investor advocate.--The Investor
Advocate shall--
(A) assist retail investors in resolving
significant problems such investors may have
with the Commission or with self-regulatory
organizations;
(B) identify areas in which investors would
benefit from changes in the regulations of the
Commission or the rules of self-regulatory
organizations;
(C) identify problems that investors have
with financial service providers and investment
products;
(D) analyze the potential impact on investors
of--
(i) proposed regulations of the
Commission; and
(ii) proposed rules of self-
regulatory organizations registered
under this title; and
(E) to the extent practicable, propose to the
Commission changes in the regulations or orders
of the Commission and to Congress any
legislative, administrative, or personnel
changes that may be appropriate to mitigate
problems identified under this paragraph and to
promote the interests of investors.
(5) Access to documents.--The Commission shall ensure
that the Investor Advocate has full access to the
documents of the Commission and any self-regulatory
organization, as necessary to carry out the functions
of the Office.
(6) Annual reports.--
(A) Report on objectives.--
(i) In general.--Not later than June
30 of each year after 2010, the
Investor Advocate shall submit to the
Committee on Banking, Housing, and
Urban Affairs of the Senate and the
Committee on Financial Services of the
House of Representatives a report on
the objectives of the Investor Advocate
for the following fiscal year.
(ii) Contents.--Each report required
under clause (i) shall contain full and
substantive analysis and explanation.
(B) Report on activities.--
(i) In general.--Not later than
December 31 of each year after 2010,
the Investor Advocate shall submit to
the Committee on Banking, Housing, and
Urban Affairs of the Senate and the
Committee on Financial Services of the
House of Representatives a report on
the activities of the Investor Advocate
during the immediately preceding fiscal
year.
(ii) Contents.--Each report required
under clause (i) shall include--
(I) appropriate statistical
information and full and
substantive analysis;
(II) information on steps
that the Investor Advocate has
taken during the reporting
period to improve investor
services and the responsiveness
of the Commission and self-
regulatory organizations to
investor concerns;
(III) a summary of the most
serious problems encountered by
investors during the reporting
period;
(IV) an inventory of the
items described in subclause
(III) that includes--
(aa) identification
of any action taken by
the Commission or the
self-regulatory
organization and the
result of such action;
(bb) the length of
time that each item has
remained on such
inventory; and
(cc) for items on
which no action has
been taken, the reasons
for inaction, and an
identification of any
official who is
responsible for such
action;
(V) recommendations for such
administrative and legislative
actions as may be appropriate
to resolve problems encountered
by investors; and
(VI) any other information,
as determined appropriate by
the Investor Advocate.
(iii) Independence.--Each report
required under this paragraph shall be
provided directly to the Committees
listed in clause (i) without any prior
review or comment from the Commission,
any commissioner, any other officer or
employee of the Commission, or the
Office of Management and Budget.
(iv) Confidentiality.--No report
required under clause (i) may contain
confidential information.
(7) Regulations.--The Commission shall, by
regulation, establish procedures requiring a formal
response to all recommendations submitted to the
Commission by the Investor Advocate, not later than 3
months after the date of such submission.
(8) Ombudsman.--
(A) Appointment.--Not later than 180 days
after the date on which the first Investor
Advocate is appointed under paragraph
(2)(A)(i), the Investor Advocate shall appoint
an Ombudsman, who shall report directly to the
Investor Advocate.
(B) Duties.--The Ombudsman appointed under
subparagraph (A) shall--
(i) act as a liaison between the
Commission and any retail investor in
resolving problems that retail
investors may have with the Commission
or with self-regulatory organizations;
(ii) review and make recommendations
regarding policies and procedures to
encourage persons to present questions
to the Investor Advocate regarding
compliance with the securities laws;
and
(iii) establish safeguards to
maintain the confidentiality of
communications between the persons
described in clause (ii) and the
Ombudsman.
(C) Limitation.--In carrying out the duties
of the Ombudsman under subparagraph (B), the
Ombudsman shall utilize personnel of the
Commission to the extent practicable. Nothing
in this paragraph shall be construed as
replacing, altering, or diminishing the
activities of any ombudsman or similar office
of any other agency.
(D) Report.--The Ombudsman shall submit a
semiannual report to the Investor Advocate that
describes the activities and evaluates the
effectiveness of the Ombudsman during the
preceding year. The Investor Advocate shall
include the reports required under this section
in the reports required to be submitted by the
Inspector Advocate under paragraph (6).
(h) Examiners.--
(1) Division of trading and markets.--The Division of
Trading and Markets of the Commission, or any successor
organizational unit, shall have a staff of examiners
who shall--
(A) perform compliance inspections and
examinations of entities under the jurisdiction
of that Division; and
(B) report to the Director of that Division.
(2) Division of investment management.--The Division
of Investment Management of the Commission, or any
successor organizational unit, shall have a staff of
examiners who shall--
(A) perform compliance inspections and
examinations of entities under the jurisdiction
of that Division; and
(B) report to the Director of that Division.
(i) Securities and Exchange Commission Reserve Fund.--
(1) Reserve fund established.--There is established
in the Treasury of the United States a separate fund,
to be known as the ``Securities and Exchange Commission
Reserve Fund'' (referred to in this subsection as the
``Reserve Fund'').
(2) Reserve fund amounts.--
(A) In general.--Except as provided in
subparagraph (B), any registration fees
collected by the Commission under section 6(b)
of the Securities Act of 1933 (15 U.S.C.
77f(b)) or section 24(f) of the Investment
Company Act of 1940 (15 U.S.C. 80a-24(f)) shall
be deposited into the Reserve Fund.
(B) Limitations.--For any 1 fiscal year--
(i) the amount deposited in the Fund
may not exceed $50,000,000; and
(ii) the balance in the Fund may not
exceed $100,000,000.
(C) Excess fees.--Any amounts in excess of
the limitations described in subparagraph (B)
that the Commission collects from registration
fees under section 6(b) of the Securities Act
of 1933 (15 U.S.C. 77f(b)) or section 24(f) of
the Investment Company Act of 1940 (15 U.S.C.
80a-24(f)) shall be deposited in the General
Fund of the Treasury of the United States and
shall not be available for obligation by the
Commission.
(3) Use of amounts in reserve fund.--The Commission
may obligate amounts in the Reserve Fund, not to exceed
a total of $100,000,000 in any 1 fiscal year, as the
Commission determines is necessary to carry out the
functions of the Commission. Any amounts in the reserve
fund shall remain available until expended. Not later
than 10 days after the date on which the Commission
obligates amounts under this paragraph, the Commission
shall notify Congress of the date, amount, and purpose
of the obligation.
(4) Rule of construction.--Amounts collected and
deposited in the Reserve Fund shall not be construed to
be Government funds or appropriated monies and shall
not be subject to apportionment for the purpose of
chapter 15 of title 31, United States Code, or under
any other authority.
(j) Office of the Advocate for Small Business Capital
Formation.--
(1) Office established.--There is established within
the Commission the Office of the Advocate for Small
Business Capital Formation (hereafter in this
subsection referred to as the ``Office'').
(2) Advocate for small business capital formation.--
(A) In general.--The head of the Office shall
be the Advocate for Small Business Capital
Formation, who shall--
(i) report directly to the
Commission; and
(ii) be appointed by the Commission,
from among individuals having
experience in advocating for the
interests of small businesses and
encouraging small business capital
formation.
(B) Compensation.--The annual rate of pay for
the Advocate for Small Business Capital
Formation shall be equal to the highest rate of
annual pay for other senior executives who
report directly to the Commission.
(C) No current employee of the commission.--
An individual may not be appointed as the
Advocate for Small Business Capital Formation
if the individual is currently employed by the
Commission.
(3) Staff of office.--The Advocate for Small Business
Capital Formation, after consultation with the
Commission, may retain or employ independent counsel,
research staff, and service staff, as the Advocate for
Small Business Capital Formation determines to be
necessary to carry out the functions of the Office.
(4) Functions of the advocate for small business
capital formation.--The Advocate for Small Business
Capital Formation shall--
(A) assist small businesses and small
business investors in resolving significant
problems such businesses and investors may have
with the Commission or with self-regulatory
organizations;
(B) identify areas in which small businesses
and small business investors would benefit from
changes in the regulations of the Commission or
the rules of self-regulatory organizations;
(C) identify problems that small businesses
have with securing access to capital, including
any unique challenges to minority-owned [and
women-owned small businesses], women-owned, and
rural-area small businesses;
(D) analyze the potential impact on small
businesses and small business investors of--
(i) proposed regulations of the
Commission that are likely to have a
significant economic impact on small
businesses and small business capital
formation; and
(ii) proposed rules that are likely
to have a significant economic impact
on small businesses and small business
capital formation of self-regulatory
organizations registered under this
title;
(E) conduct outreach to small businesses and
small business investors, including through
regional roundtables, in order to solicit views
on relevant capital formation issues;
(F) to the extent practicable, propose to the
Commission changes in the regulations or orders
of the Commission and to Congress any
legislative, administrative, or personnel
changes that may be appropriate to mitigate
problems identified under this paragraph and to
promote the interests of small businesses and
small business investors;
(G) consult with the Investor Advocate on
proposed recommendations made under
subparagraph (F); and
(H) advise the Investor Advocate on issues
related to small businesses and small business
investors.
(5) Access to documents.--The Commission shall ensure
that the Advocate for Small Business Capital Formation
has full access to the documents and information of the
Commission and any self-regulatory organization, as
necessary to carry out the functions of the Office.
(6) Annual report on activities.--
(A) In general.--Not later than December 31
of each year after 2015, the Advocate for Small
Business Capital Formation shall submit to the
Committee on Banking, Housing, and Urban
Affairs of the Senate and the Committee on
Financial Services of the House of
Representatives a report on the activities of
the Advocate for Small Business Capital
Formation during the immediately preceding
fiscal year.
(B) Contents.--Each report required under
subparagraph (A) shall include--
(i) appropriate statistical
information and full and substantive
analysis;
(ii) information on steps that the
Advocate for Small Business Capital
Formation has taken during the
reporting period to improve small
business services and the
responsiveness of the Commission and
self-regulatory organizations to small
business and small business investor
concerns;
(iii) a summary of the most serious
issues encountered by small businesses
and small business investors, including
any unique issues encountered by
minority-owned [and women-owned small
businesses], women-owned, and rural-
area small businesses and their
investors, during the reporting period;
(iv) an inventory of the items
summarized under clause (iii)
(including items summarized under such
clause for any prior reporting period
on which no action has been taken or
that have not been resolved to the
satisfaction of the Advocate for Small
Business Capital Formation as of the
beginning of the reporting period
covered by the report) that includes--
(I) identification of any
action taken by the Commission
or the self-regulatory
organization and the result of
such action;
(II) the length of time that
each item has remained on such
inventory; and
(III) for items on which no
action has been taken, the
reasons for inaction, and an
identification of any official
who is responsible for such
action;
(v) recommendations for such changes
to the regulations, guidance and orders
of the Commission and such legislative
actions as may be appropriate to
resolve problems with the Commission
and self-regulatory organizations
encountered by small businesses and
small business investors and to
encourage small business capital
formation; and
(vi) any other information, as
determined appropriate by the Advocate
for Small Business Capital Formation.
(C) Confidentiality.--No report required by
subparagraph (A) may contain confidential
information.
(D) Independence.--Each report required under
subparagraph (A) shall be provided directly to
the committees of Congress listed in such
subparagraph without any prior review or
comment from the Commission, any commissioner,
any other officer or employee of the
Commission, or the Office of Management and
Budget.
(7) Regulations.--The Commission shall establish
procedures requiring a formal response to all
recommendations submitted to the Commission by the
Advocate for Small Business Capital Formation, not
later than 3 months after the date of such submission.
(8) Government-business forum on small business
capital formation.--The Advocate for Small Business
Capital Formation shall be responsible for planning,
organizing, and executing the annual Government-
Business Forum on Small Business Capital Formation
described in section 503 of the Small Business
Investment Incentive Act of 1980 (15 U.S.C. 80c-1).
(9) Rule of construction.--Nothing in this subsection
may be construed as replacing or reducing the
responsibilities of the Investor Advocate with respect
to small business investors.
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