U.S. Senators Katie Britt (R-Ala.) and Andy Kim (D-N.J.) have introduced the Small Entity Update Act, a bipartisan bill aimed at updating the Securities and Exchange Commission’s (SEC) regulatory framework to ease compliance for small businesses and entrepreneurs. The legislation would require the SEC to revise its definition of “small entity” and evaluate the costs of regulatory compliance on these businesses, with the goal of preventing excessive regulatory burdens.
Senator Britt emphasized the importance of small businesses in Alabama, stating, “Alabama’s small businesses create opportunity, jobs, and economic growth throughout the state, and our small investment advisers help to provide financial guidance and personalized services for so many families, entrepreneurs, and businesses planning for their financial futures. My legislation, the Small Entity Update Act, would ensure these small entities across the state and country are not unduly impacted by onerous regulations so they can continue to play pivotal roles in our economy. It is paramount that the SEC considers the unique challenges facing our smallest businesses when issuing any future rulemakings.”
Under current law established by the Regulatory Flexibility Act of 1980, federal agencies like the SEC must consider how their rules affect small entities and look for less burdensome alternatives if significant impacts are found. However, since 1996, the SEC has defined a “small entity” as an investment adviser managing less than $25 million in assets under management (AUM). Meanwhile, most investment advisers now register with the SEC only if they manage at least $100 million AUM. This gap means that nearly all small investment advisers are excluded from protections meant for them.
Senator Kim said: “Every entrepreneur deserves a fair shot at success, free from outdated and overburdensome red tape. This bill is a straightforward way we can modernize and stand by our smallest businesses so they can continue to contribute to our local communities and economies.”
The proposed act would instruct the SEC to study market growth since it last updated its definition of “small entity,” assess regulatory costs on smaller firms, propose an updated threshold reflecting current conditions, and adjust this threshold every five years based on inflation.
This Senate bill complements similar legislation already introduced in the U.S. House of Representatives by Congresswoman Ann Wagner (R-Mo.).
The Investment Adviser Association expressed support for this measure: “The IAA thanks Senator Katie Britt (R-AL) and Senator Andy Kim (D-NJ) for introducing the Small Entity Update Act, a critical measure that directs the SEC to modernize its outdated definition of a small business. For too long, this outdated standard has allowed the SEC to bypass meaningful consideration of less burdensome regulatory alternatives for small investment advisers. The IAA strongly supports this bipartisan legislation and urges the Senate to act swiftly to ensure small advisers receive the tailored regulatory treatment they need.”
Senator Britt continues her advocacy for policies supporting local Alabama businesses as well as broader Main Street interests nationwide.
