Bill Summary
The "Small Entity Update Act" is legislation aimed at requiring the Securities and Exchange Commission (SEC) to review and potentially revise the definition of "small entity" as it pertains to securities laws. The Act mandates the SEC to conduct a study within one year of enactment, and again five years later, to evaluate how the current definition aligns with the growth of financial markets and the intent of the Regulatory Flexibility Act.
This study should assess the adequacy of the existing definition and consider ways to ensure it encompasses a meaningful number of entities. Following the study, the SEC is required to submit a report to Congress with findings and recommendations for amendments to the definition of "small entity." Additionally, the SEC must revise its rules based on the study results, allowing for public input.
The Act also includes provisions for adjusting the financial thresholds related to the definition to account for inflation every five years, ensuring that the definition remains relevant over time.
Possible Impacts
The "Small Entity Update Act" as described in the provided legislation could affect people in several significant ways:
1. **Increased Access to Capital for Small Businesses**:
By revising the definition of "small entity," more businesses may qualify for regulatory exemptions or simplified reporting requirements. This could lower compliance costs and make it easier for small businesses to access capital markets, fostering entrepreneurship and potentially leading to job creation.
2. **Updated Regulatory Framework**:
As the Securities and Exchange Commission (SEC) conducts studies and revises its rules, the resulting changes may better align with current economic conditions and market dynamics. This could lead to a regulatory framework that is more conducive to the growth and sustainability of small entities, ensuring they remain competitive in an evolving market landscape.
3. **Consumer Protection and Market Stability**:
The studies and subsequent rulemaking process may lead to updated definitions that consider the growth of financial markets and inflation adjustments. This can help protect investors and maintain market stability by ensuring that small entities participating in the markets adhere to appropriate standards, thus reducing the risk of fraud or financial instability that could arise from outdated definitions.
These effects highlight the importance of the legislation in adapting regulatory definitions to contemporary economic realities, which can have broad implications for small businesses, investors, and the overall economy.
[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 2924 Introduced in Senate (IS)]
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119th CONGRESS
1st Session
S. 2924
To require the Securities and Exchange Commission to carry out a study
and rulemaking on the definition of the term ``small entity'' under the
securities laws for purposes of chapter 6 of title 5, United States
Code, and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
September 29, 2025
Mrs. Britt (for herself and Mr. Kim) introduced the following bill;
which was read twice and referred to the Committee on Banking, Housing,
and Urban Affairs
_______________________________________________________________________
A BILL
To require the Securities and Exchange Commission to carry out a study
and rulemaking on the definition of the term ``small entity'' under the
securities laws for purposes of chapter 6 of title 5, United States
Code, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Small Entity Update Act''.
SEC. 2. STUDIES, REPORTS, AND RULES REGARDING SMALL ENTITIES.
(a) Definitions.--In this section--
(1) the term ``Commission'' means the Securities and
Exchange Commission; and
(2) the term ``small entity''--
(A) has the meaning given the term in section 601
of title 5, United States Code, with respect to the
activities of the Commission; and
(B) includes any definition established by the
Commission of the term ``small business'', ``small
organization'', ``small governmental jurisdiction'', or
``small entity'' under paragraph (3), (4), (5), or (6),
respectively, of section 601 of title 5, United States
Code, with respect to the activities of the Commission.
(b) Studies and Reports.--Not later than 1 year after the date of
enactment of this Act, and again 5 years thereafter, the Commission
shall--
(1) conduct a study of the definition of the term ``small
entity'' with respect to the activities of the Commission for
the purposes of chapter 6 of title 5, United States Code, which
shall consider--
(A) the extent to which the definition of the term
``small entity'', as in effect during the period in
which the study is conducted, aligns with the findings
and declarations made under section 2(a) of the
Regulatory Flexibility Act (5 U.S.C. 601 note);
(B) the amount by which financial markets in the
United States have grown since the last time the
Commission amended the definition of the term ``small
entity'', if applicable; and
(C) how the Commission should define the term
``small entity'' to ensure that a meaningful number of
entities would fall under that definition; and
(2) submit to Congress a report that includes--
(A) the results of the applicable study conducted
under paragraph (1); and
(B) specific and detailed recommendations on the
ways in which the Commission could amend the definition
of the term ``small entity'' to--
(i) be consistent with the results
described in subparagraph (A); and
(ii) expand the number of entities covered
by such definition.
(c) Rulemaking.--Concurrently with, or after the completion of,
each study required under subsection (b), the Commission shall, subject
to public notice and comment, revise the rules of the Commission
consistent with the results of such study.
(d) Inflation Adjustments.--After the Commission issued the final
rule revisions required under subsection (c), and every 5 years
thereafter, the Commission shall adjust any dollar figures under the
definition of small entity established by the Commission to reflect the
change in the Consumer Price Index for All Urban Consumers published by
the Bureau of Labor Statistics of the Department of Labor.
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