HR 4431

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AN ACT

To amend the Investment Company Act of 1940 with respect to the definition of qualifying venture capital funds, 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 “Improving Capital Allocation for Newcomers Act of 2025”.

SEC. 2. QUALIFYING VENTURE CAPITAL FUNDS.

Section 3(c)(1) of the Investment Company Act of 1940 (15 U.S.C. 80a-3(c)(1)) is amended—

(1) in the matter preceding subparagraph (A), by striking “250 persons” and inserting “500 persons”; and

(2) in subparagraph (C)(i)—

(A) by striking “$10,000,000” and inserting “$50,000,000”; and

(B) by striking “beginning from a measurement made by the Commission on a date selected by the Commission” and inserting “beginning from a measurement made on the date of the enactment of the Improving Capital Allocation for Newcomers Act of 2025”.

SEC. 3. STUDY AND RULEMAKING.

(a) Study Required.—

(1) In general.—Beginning 5 years after the date of enactment of this Act, the Advocate for Small Business Capital Formation, in consultation with the Investor Advocate, shall conduct a study on the effect of the amendments made by section 2 on the businesses and startup entities in which qualifying venture capital funds invest, specifically including, with respect to such businesses and startup entities, changes or trends relating to—

(A) the geographic distribution of capital to portfolio companies;

(B) the socio-economic characteristics of founders or controlling persons;

(C) the veteran status of founders or controlling persons;

(D) the industry sector, size, stage of development, and related details; and

(E) other factors or metrics determined by the Advocate for Small Business Capital Formation.

(2) Authorities related to required study.—For purposes of conducting the study required by paragraph (1), the Advocate for Small Business Capital Formation and the Investor Advocate shall have authority to—

(A) obtain from the Securities and Exchange Commission (in this section referred to as the “Commission”) and utilize any data or information necessary to carry out the study;

(B) request and receive assistance from any division or office of the Commission, including the Division of Economic and Risk Analysis; and

(C) enter into agreements with third parties to assist in data analysis.

(b) Report.—The Advocate for Small Business Capital Formation shall issue a report to the Congress containing all findings and determinations made in carrying out the study required by subsection

(a)(1), and make such report available to the public on the website of the Commission.

(c) Public Comment.—During the 180-day period beginning on the date the report is issued under subsection (b), the Commission shall solicit feedback from the public on the findings and determinations contained in the report.

(d) Rulemaking.—

(1) In general.—The Commission, in consultation with the Investor Advocate and the Advocate for Small Business Capital Formation, may, after considering all comments received under subsection (c) and only if the Commission determines in such report that the amendments made by section 2 have had a demonstrable effect on increasing the geographic distribution of capital to portfolio companies, increasing the variety of the socio-economic characteristics of founders or controlling persons, or increasing the number of founders or controlling persons who are veterans, issue rules to—

(A) increase or decrease the 500 person threshold described in the matter preceding subparagraph (A) of section 3(c)(1) of the Investment Company Act of 1940, but such threshold may not exceed 750 persons or be reduced below 250 persons; and

(B) increase or decrease the $50,000,000 dollar figure in section 3(c)(1)(C)(i) of the Investment Company Act of 1940, but such dollar figure may not exceed $100,000,000 or be reduced below $10,000,000.

(2) Deadline for rulemaking.—The rulemaking authority in paragraph (1) only applies to a rule with respect to which the proposed rule was issued during the 180-day period beginning at the end of the public comment period described in subsection

(c).

(3) No effect on inflation adjustments.—A rule issued under this subsection shall have no effect on the requirement under clause (i) of section 3(c)(1)(C) of the Investment Company Act of 1940 (15 U.S.C. 80a-3(c)(1)(C)), as amended by section 2, to index the first dollar amount in such clause for inflation.

Passed the House of Representatives December 1, 2025.

Attest:

Clerk. 119th CONGRESS

1st Session

H. R. 4431

AN ACT

To amend the Investment Company Act of 1940 with respect to the definition of qualifying venture capital funds, and for other purposes.