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Williams, Luetkemeyer, Ellzey, and Bean Write to SEC Over New Exchange Rule and Private Fund Advisor Rule

Letter to SEC Chairman Gary Gensler

WASHINGTON, D.C. – Today, Congressman Roger Williams (R-TX), Chairman of the House Committee on Small Business, along with Reps. Luetkemeyer (R-MO), Ellzey (R-TX), and Bean (R-FL), penned a letter to Chairman Gary Gensler of the Securities and Exchange Commission (SEC) concerning the newly proposed Exchange Rule and the Private Fund Advisor Rule.

This letter builds on the House Committee on Small Business’ work to ensure federal agencies adhere to the Regulatory Flexibility Act and Small Business Regulatory Enforcement Fairness Act to protect small businesses from burdensome regulations and rulemaking.

Read the full letter here.

Read excerpts from the letter below:

“The SEC proposed updating its definition of an ‘Exchange’ and ‘Alternative Trading Systems’ under the Securities and Exchange Act of 1934. This rule incorporates Communication Protocol Systems, Alternative Trading Systems, and many Decentralized Finance (DeFi) firms into the SEC’s regulatory scheme. By broadly interpreting the term “exchange,” the Commission’s rule could impact numerous platforms only tangentially related to finance and financial exchanges, such as messaging platforms and certain types of software. This change would not only increase costs for Communication Protocol System and the small businesses that rely on them, but also discourage the creation of new Communication Protocol Systems. Additionally, DeFi firms represent an emerging avenue for innovation and capital access for many small businesses. These changes to the exchange rule place additional burdens on small business that the rule does not adequately consider.

“The proposed Private Fund Advisor Rule would add additional disclosure requirements relating to preferential treatment and fund performance, and prohibit certain sales practices, conflicts of interest, and compensation schemes. These requirements will add compliance costs for investors and limit the creativity and innovation of investment vehicles. Private equity is a crucial component of capital access for US small businesses—85 percent of private equity investment goes toward small entities. Additionally, due to the current high interest rate environment, private equity investment has certain advantages for small businesses when compared to traditional loans. As with most regulation, this rule would have a disproportionate impact on smaller investors, for whom regulatory compliance is more expensive, and adds additional barriers to capital access for other small businesses.”


Signatories include Chairman Roger Williams (R-TX), Vice Chairman Blaine Luetkemeyer (R-MO), Rep. Jake Ellzey (R-TX), and Rep. Aaron Bean (R-FL).