SEC Small Business Advocate Act Signed Into Law


There will soon be a new office at the Securities and Exchange Commission. Today, President Barack Obama signed into law HR 3784 or the SEC Small Business Advocate Act of 2016.  The legislation passed the Senate without amendment late last week (December 9, 2016). The legislation rushed through the House earlier in the year and became one of a number of bills presented to the President before the end of the year.

The Act will create a new office within the SEC for an individual tasked with protecting and promoting the interests of small business.  The legislation was created in recognition of the fact that too many rules are designed to address larger firms but end up harming smaller firms that are ill-equipped to manage excessive regulatory demands.  As described in the Congressional summary, the Advocate will;

  • assist small businesses and small business investors in resolving significant problems they may have with the SEC or with self-regulatory organizations;
  • identify areas in which such businesses and investors would benefit from changes in SEC regulations or the rules of such organizations;
  • identify problems that small businesses have with securing access to capital, including any unique challenges to minority-owned and women-owned small businesses;
  • analyze the potential impact on such businesses and investors of proposed SEC regulations and proposed rules that are likely to have a significant economic impact on small businesses and small business capital formation;
  • conduct outreach to such businesses and investors to solicit views on relevant capital formation issues;
  • propose to the SEC changes in its regulations or orders, and propose to Congress legislative, administrative, or personnel changes, to mitigate problems identified and to promote the interests of such businesses and investors;
  • consult with the Investor Advocate on such proposals and advise the Investor Advocate on small business-related issues;
  • submit annual reports on its activities to specified congressional committees; and
  • be responsible for planning, organizing, and executing the annual Government-Business Forum on Small Business Capital Formation.

The White House Washington DCThe bill also establishes the Small Business Capital Formation Advisory Committee, which shall provide the SEC with advice on SEC rules, regulations, and policies regarding its mission of protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation, as they relate to:

  • capital raising by emerging, privately held small businesses and publicly traded companies with less than $250 million in public market capitalization through securities offerings;
  • trading in the securities of such businesses and companies; and
  • public reporting and corporate governance requirements of such businesses and companies.

The SEC shall assess the committee’s recommendations and disclose any action it intends to take with respect to such recommendations.

SEC Securities and Exchange CommissionThe concept of an SEC Small Business Advocate was first presented on the pages of Crowdfund Insider by Sam Guzik, a noted securities attorney and contributor to this publication. Guzik stated in early 2014;

“Surely, if after 80 years of protecting investors an Investor Advocate is appropriate, then after more than 33 years of inaction following well intentioned federal legislation, a Small Business Advocate to protect the interests of small business is long overdue.”


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