Bill Overview
Title: Unlocking Capital for Small Businesses Act of 2022
Description: This bill revises the regulatory treatment of private-placement brokers (brokers who receive transaction-based compensation for the sale of securities to preselected individuals or institutions) and finders (private-placement brokers who do not exceed a specified amount of compensation, transaction value, or number of transactions in a year). Specifically, the bill (1) requires the Securities and Exchange Commission to establish registration requirements for private-placement brokers that are no more stringent than those imposed on crowdfunding portals, (2) allows for membership in any national securities association for private-placement brokers, (3) exempts private-placement brokers from broker regulations, and (4) otherwise modifies provisions related to private-placement brokers and finders.
Sponsors: Sen. Cramer, Kevin [R-ND]
Target Audience
Population: Small business investors, private-placement brokers, and small business owners
Estimated Size: 1000000
- This bill primarily affects private-placement brokers and finders who facilitate the sale of securities to preselected individuals or institutions.
- Private-placement brokers play an important role in helping small businesses access capital by connecting them with potential investors. Thus, any change in regulation for these brokers can directly impact small businesses looking for investment.
- The Securities and Exchange Commission (SEC) will also be affected as they will need to adjust their registration requirements to align with the new legislation.
- Investors who participate in private placements might indirectly feel the impact through potentially increased or simplified access to investment opportunities in small businesses.
- Small businesses in the U.S., particularly those seeking capital through private placements, will be impacted, as this bill aims to make it easier for brokers to facilitate investment.
Reasoning
- The Unlocking Capital for Small Businesses Act of 2022 primarily influences private-placement brokers and small business investors. Therefore, the interviews will focus on individuals in these roles, including private-placement brokers, small business owners, investors, and individuals within the SEC who may also experience indirect effects of changed registration processes.
- Approximately 33.2 million small businesses are present in the U.S., which serves as the target market for facilitators of capital investments—like private-placement brokers. Given this sizable figure, the number of individuals who will experience direct job-related benefits is limited but can influence a broad secondary tier through improved capital facilitation and business scaling.
- The $2.5 million USD budget for the first year suggests a limited number of brokers and businesses directly benefitted—likely a pilot or scaled-down rollout of the policy. The cumulative $7.5 million USD over 10 years reinforces this gradual scale-up perspective, necessitating prioritization in registration processes and program expansions.
- Variability in impact is expected based on geographic locations, types of businesses, and pre-existing investment connections. More urban areas might see higher policy impacts compared to rural regions due to larger networks of brokers and investors.
Simulated Interviews
Private-Placement Broker (San Francisco, CA)
Age: 34 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 20.0 years
Commonness: 12/20
Statement of Opinion:
- This policy is promising as it reduces the registration hurdles for brokers like me.
- Easier regulations could mean that I can expand my client base and help more startups get funded.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 9 | 7 |
| Year 5 | 9 | 8 |
| Year 10 | 10 | 8 |
| Year 20 | 10 | 8 |
Small Business Owner (Chicago, IL)
Age: 48 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 10.0 years
Commonness: 15/20
Statement of Opinion:
- Finding funding has been a hurdle and this could ease that process.
- If brokers have fewer regulations, they might work with me more readily.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 8 | 6 |
| Year 5 | 8 | 7 |
| Year 10 | 9 | 7 |
| Year 20 | 9 | 7 |
Early-stage Investor (Seattle, WA)
Age: 29 | Gender: other
Wellbeing Before Policy: 8
Duration of Impact: 5.0 years
Commonness: 10/20
Statement of Opinion:
- Increased brokerage could mean more opportunities for investments.
- Simplified processes could lead to more competitive deals in the space I invest in.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 8 | 8 |
| Year 3 | 9 | 8 |
| Year 5 | 9 | 8 |
| Year 10 | 9 | 8 |
| Year 20 | 9 | 8 |
SEC Compliance Officer (Dallas, TX)
Age: 63 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 15.0 years
Commonness: 8/20
Statement of Opinion:
- Adapting requirements will be challenging but necessary.
- This change acknowledges the shift towards facilitating small business investments.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 7 | 5 |
| Year 5 | 7 | 6 |
| Year 10 | 8 | 6 |
| Year 20 | 8 | 6 |
Financial Advisor (New York, NY)
Age: 40 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 10.0 years
Commonness: 11/20
Statement of Opinion:
- This is a crucial change for brokers; low regulations mean they can operate more freely.
- Potentially opens new strategies for small business capital avenues.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 9 | 8 |
| Year 10 | 9 | 8 |
| Year 20 | 9 | 8 |
Private-Placement Broker (Boston, MA)
Age: 55 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 20.0 years
Commonness: 7/20
Statement of Opinion:
- Easing regulations could simplify operations and drive more deals.
- Regulatory relief is beneficial but should be carefully balanced with investor protection.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 8 | 6 |
| Year 3 | 9 | 7 |
| Year 5 | 9 | 7 |
| Year 10 | 9 | 7 |
| Year 20 | 9 | 7 |
Tech Startup Owner (Austin, TX)
Age: 36 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 5.0 years
Commonness: 16/20
Statement of Opinion:
- A streamlined brokerage process could be pivotal for securing seed funding.
- The policy sounds positive but the real impact will depend on its execution and market adoption.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 7 | 5 |
| Year 3 | 8 | 6 |
| Year 5 | 8 | 6 |
| Year 10 | 9 | 7 |
| Year 20 | 9 | 7 |
Private Equity Firm Partner (Miami, FL)
Age: 47 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 3.0 years
Commonness: 5/20
Statement of Opinion:
- Any regulatory simplification is welcome as it opens new channels for funding targets.
- It's critical to ensure it attracts quality deal flows rather than just increasing quantity.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 8 | 7 |
| Year 10 | 8 | 7 |
| Year 20 | 8 | 7 |
Marketing Consultant for Small Businesses (Los Angeles, CA)
Age: 30 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 15.0 years
Commonness: 14/20
Statement of Opinion:
- This eases the pathway for small businesses seeking investment which could boost my clientele.
- The approach aligns with current trends favoring small businesses and innovation.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 8 | 6 |
| Year 3 | 8 | 7 |
| Year 5 | 9 | 7 |
| Year 10 | 9 | 7 |
| Year 20 | 9 | 7 |
Socially-Responsible Investor (Portland, OR)
Age: 50 | Gender: other
Wellbeing Before Policy: 6
Duration of Impact: 4.0 years
Commonness: 13/20
Statement of Opinion:
- Less stringent regulation will be advantageous if applied ethically.
- It could allow more diverse funds to find the right startups, impacting positively on sustainability efforts.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 8 | 6 |
| Year 5 | 8 | 7 |
| Year 10 | 8 | 7 |
| Year 20 | 8 | 7 |
Cost Estimates
Year 1: $2500000 (Low: $2000000, High: $3000000)
Year 2: $2000000 (Low: $1500000, High: $2500000)
Year 3: $2000000 (Low: $1500000, High: $2500000)
Year 5: $0 (Low: $0, High: $0)
Year 10: $0 (Low: $0, High: $0)
Year 100: $0 (Low: $0, High: $0)
Key Considerations
- Implementation and compliance costs for new SEC requirements.
- The potential boost in small business capital formation and growth resulting from simplified access to investment.
- Changes to the competitive landscape for private-placement brokers and finders.