House Passes Bill Requiring SEC to Update Small Business Definition

The SEC must also issue a proposed rule to implement these recommendations.

The Investment Adviser Association said Wednesday in a statement that it’s “delighted” the House passed the bill.

“The SEC has not, as a practical matter, been required to analyze the economic impact of its regulations on small businesses under the Regulatory Flexibility Act (RegFlex) because virtually no SEC-registered advisers fall under the definition of small business adopted by the SEC,” Neil Simon, vice president of government relations for the IAA, told ThinkAdvisor Wednesday in an email.

“Inexplicably, the SEC definition includes only advisory firms with less than $25 million in assets under management (AUM) — when, with rare exceptions, an advisory firm must have a minimum of $100 million AUM to fall under the SEC’s jurisdiction,” Simon said.

Congress, Simon continued, “gave the agency authority under the RegFlex Act to update this definition, but the agency has failed to do so.”

For this reason, the IAA “strongly supports” the Small Entity Update Act as it would “require the SEC to analyze the impact of regulations and consider alternative approaches that minimize the burden on small businesses” and urges the Senate to consider it promptly.