S 2924119th CongressIn Committee

Small Entity Update Act

Introduced: Sep 29, 2025

Financial Services

Standard Summary

Comprehensive overview in 1-2 paragraphs

Small Entity Update Act would require the Securities and Exchange Commission (SEC) to study and potentially revise how the term “small entity” is defined for purposes of the Regulatory Flexibility Act (Chapter 6 of title 5, United States Code). The bill directs the SEC to conduct an initial study within one year of enactment and then conduct another study five years later. The agency must report the findings and propose specific recommendations on amending the definition to cover more entities, while ensuring consistency with the Regulatory Flexibility Act’s goals. After each study, the SEC would revise its rules accordingly through notice-and-comment rulemaking. Additionally, once final rule revisions are issued, the bill requires periodic inflation-adjusted updates to dollar figures within the small-entity definition every five years.

Key Points

1Definition scope: The term “small entity” for SEC purposes would include the standard meaning in 5 U.S.C. 601(3) and would also cover any SEC-specific definitions of “small business,” “small organization,” “small governmental jurisdiction,” or “small entity” under 5 U.S.C. 601(3)-(6).
2Studies and reports: Within one year of enactment and again five years later, the SEC must study how the current definition aligns with the Regulatory Flexibility Act, assess market growth since the last amendment, and determine how to redefine to cover a meaningful number of entities. The agency must submit a detailed report with recommendations to expand coverage.
3Rulemaking: Following each study, the SEC must revise its rules (with public notice and opportunity for comment) to reflect the study results.
4Inflation adjustments: After final rule changes, the SEC must adjust the dollar thresholds in the small-entity definition every five years to keep pace with changes in the Consumer Price Index (CPI-U).
5Purpose: To modernize and potentially broaden which entities are considered “small” under SEC rules so that regulatory flexibility analyses and protections apply to a larger set of entities over time.

Impact Areas

Primary group/area affected- Small entities regulated by the SEC (e.g., small businesses, small organizations, and small governmental jurisdictions) whose regulatory burdens and exemptions under the Regulatory Flexibility Act could be triggered or adjusted as thresholds change.Secondary group/area affected- The Securities and Exchange Commission itself (additional rulemaking workload and periodic studies).- Investors and market participants who interact with entities newly or newly-fully covered as “small entities” under the updated definitions, potentially benefiting from greater regulatory flexibility.Additional impacts- Regulatory impact analysis: More entities would fall under RFA protections, potentially leading to greater consideration of compliance costs and alternative approaches in rulemakings.- Administrative costs: The SEC would incur costs to conduct the required studies and to carry out subsequent rulemaking and inflation updates.- Economic alignment: Inflation-adjusted thresholds may gradually increase, affecting when entities qualify as “small” over time.- Policy uncertainty during transitions: As definitions and rules are revised, entities may face changes in regulatory expectations or exemptions, depending on how thresholds shift.

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