Small Entity Update Act
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The bill would require the Securities and Exchange Commission to study its definition of "small entity" and report to Congress on ways to expand how many businesses qualify for lighter regulatory treatment.
It would also require the SEC to revise its rules to match the study's recommendations and to adjust related dollar thresholds for inflation every five years, potentially easing compliance burdens for more small firms over time.
What this bill would do
What it would do
The bill would require the Securities and Exchange Commission to study, within one year of enactment and every five years afterward, how it defines "small entity" for purposes of the Regulatory Flexibility Act. The study would examine whether the current definition aligns with that law's goal of reducing burdens on small entities, how much financial markets have grown since the definition was last updated, and how to ensure a meaningful number of entities qualify as small. The SEC would then submit a report to Congress with specific recommendations for expanding the definition's coverage. The bill would also require the SEC, through public notice-and-comment rulemaking, to revise its rules to match each study's findings, and to adjust for inflation any dollar figures used in its small-entity definitions every five years after the rule revisions take effect. It does not itself change the definition of small entity or any SEC rule.
Key provisions
- 1Would require the SEC to study its "small entity" definition within one year of enactment and every five years thereafter, examining regulatory burden, market growth, and definitional scope
- 2Would require the SEC to report to Congress with specific recommendations for expanding the number of entities covered by the small-entity definition
- 3Would require the SEC to revise its rules through notice-and-comment rulemaking consistent with each study's results
- 4Would require the SEC to adjust dollar figures in its small-entity definitions for inflation every five years after completing the required rule revisions
Who would be affected
The Securities and Exchange Commission, which must conduct the studies, issue reports, and complete rulemakings, and small businesses, small organizations, and other entities regulated by the SEC that could become newly classified as "small" and gain access to reduced regulatory burdens under the Regulatory Flexibility Act.
Why it matters
If the SEC expands its small-entity definitions as the bill directs, more businesses could qualify for reduced regulatory paperwork and compliance costs under the Regulatory Flexibility Act. The periodic inflation adjustments would keep dollar-based thresholds from becoming outdated as markets grow, potentially widening the pool of eligible small entities over time.
What would change
Changes to existing law
Amends Regulatory Flexibility Act (5 U.S.C. 601 note) (Sec. 2(b))
Requires the SEC to study whether its small-entity definition aligns with the Act's goals and to revise rules accordingly
Amends 5 U.S.C. § 601 (chapter 6, title 5) (Sec. 2)
Directs the SEC to revise its definitions of small business, organization, jurisdiction, or entity and adjust dollar thresholds for inflation
Agencies directed to act
Effective dates
- First required study and report on the small entity definition
- Subsequent studies and reports on the small entity definition
- Inflation adjustments to dollar figures in the small entity definition
Funding and costs
Congressional Budget Office estimate
CBO estimates H.R. 3382 would cost approximately $2 million over the 2025–2030 period in discretionary spending, with no effect on direct spending, revenues, or the deficit.
CBO estimates that implementing H.R. 3382 would cost $2 million over the 2025–2030 period, primarily to fund approximately five SEC employees (at roughly $330,000 each per year) needed to conduct a study of the SEC's "small entity" definition and revise rules accordingly. Because the SEC is authorized to collect fees to offset its annual appropriation, the net effect on discretionary spending — money Congress must appropriate each year — is expected to be negligible. The bill has no effect on direct (mandatory) spending or revenues, and would not increase the deficit in any scoring period. It contains no intergovernmental mandates; it does contain a private-sector mandate (higher SEC fees), but CBO estimates its cost would fall well below UMRA's $206 million annual threshold.
How implementation would work
Within one year of enactment, and every five years after, the SEC must study its small-entity definition and report specific recommendations to Congress on expanding coverage. Concurrently with or after each study, the SEC must revise its rules through public notice-and-comment rulemaking to match the study's results. After completing the required rule revisions, and every five years thereafter, the SEC must adjust any dollar figures in its small-entity definitions for inflation using the Consumer Price Index published by the Bureau of Labor Statistics.
Legislative status & sources
Latest action
Received in the Senate and Read twice and referred to the Committee on Banking, Housing, and Urban Affairs.
Official CRS summary
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This bill requires the Securities and Exchange Commission (SEC) to study approaches to reduce the impact of SEC rules on small businesses and other small entities, make appropriate recommendations, and revise applicable rules.
Specifically, the bill requires the SEC to evaluate the current definition of small entity with respect to SEC rules.
Under the bill, the SEC must provide specific and detailed recommendations to Congress on how the SEC can revise the definition of small entity to (1) align with specified statutory goals, including reducing unnecessary burdens on small entities; and (2) expand the number of entities covered. In addition, the SEC must adjust for inflation every five years any dollar amounts used to define small entities.
The SEC must also revise the applicable rules to implement these recommendations.
Legislative subjects
Administrative law and regulatory procedures; Congressional oversight; Finance and Financial Sector; Government studies and investigations; Securities and Exchange Commission (SEC); Small business
Committee report
H. Rept. 119-125