Hearings to examine empowering Main Street by unlocking access to capital.

Yes.

It is. Good morning. I call this hearing to order. Today the committee meets to discuss how we can make it easier for entrepreneurs, small businesses, growing companies, and everyday investors to build opportunity in America through capital formation. Capital formation may sound like a Wall Street term, but at its core, this is about Main Street in America. It gives local businesses and everyday investors the tools to turn good ideas into jobs, growth, and a stronger future for their own communities. The best ideas in America do not come just from New York or San Francisco. or a handful of other communities. They come from places in South Carolina like Latson, Irmo, and Simpsonville, and communities all across America. But too often, access to capital is concentrated in too few places and in too few hands. That means an entrepreneur in South Carolina may have a harder time accessing capital than someone with the same idea in Silicon Valley. That should not be the case. Opportunity should not be dictated by your zip code, and it should not take wealth to create wealth. My priorities are simple, to expand investment opportunities for everyday Americans and increase wealth outside of the hands of a concentrated few. To do this, we need help to help companies go public and stay company and stay public. And we need to help small and medium-sized businesses access the capital they need to grow, hire, and compete. That's good news in so many ways, and it is not starting from scratch. Last Congress, I introduced the Empowering Main Street in America Act, because too many Americans lack access to our capital markets. IMSA would have expanded the ways everyday Americans can invest in growing businesses, and it would have tailored regulations for companies at every stage of growth, from a start-up uh and beyond. Since then, members on both sides of the aisle have also put forward common sense proposals that can help move us in the right direction. I've teamed up with Senator Warner on legislation to help emerging companies, growth companies, scale and ultimately access the public market. Senator Britt has introduced legislation, co-sponsored by Senator Warnock, to level the playing field between four O three B's and four O one K plans. giving fifteen million non-profit employees, from hospital workers to teachers, access to the same lower-cost investment options as everyday 401K savers. Already thirteen members of this committee have signed on as cosponsors. Senator McCormick and Senator Alsobrooks have introduced legislation to eliminate red tape that inflates the reported cost of business development companies. making it more attractive for investors to put capital into the small and middle market businesses that BDCs are built to serve. And there are more ideas we can build on. That is why this committee is working to update the capital formation package that I put together. Our capital markets should help a company grow from an idea to a small business, from a small business to a larger employer, and maybe one day to the next great public company. That is the point of today's hearing. We want to hear from our witnesses about what it is, what is working, what is not working, and where Congress should focus our attention to make capital formation even easier. This committee has shown time and time again that we can work together on serious issues that matter to the American people. Helping a small business grow is not about politics. Giving families a chance to invest is not partisan. Keeping America the best place in the world to build the future should not be controversial. Capital formation should unite us. So today, let's focus on practical solutions for every community, not just a few zip codes. I look forward to hearing our testimonies from our witnesses. Ranking member, you are now recognized.

Uh, thank you, Mister Chairman, and thank you for holding this hearing. I believe and markets. Fair and transparent markets promote innovation, they power economic growth, they give everyone a chance to thrive. The confidence that investors at home and around the world place in the integrity of our markets is a critical part of why our nation's economy is the envy of the world. But under President Trump, the corruption is so massive and so unprecedented that it has fundamentally changed our markets, rigging them for the wealthy and the well-connected. Those with money and power get special treatment, while families, small businesses, and communities pay the price. We should be working together to make our market stronger and to ensure that they serve American businesses and American families. I know that we share that goal. Our number one job, number one, should be to put a stop to this corruption and to protect investors. Understand, the corruption is everywhere. It's been about fifteen months since Paul Atkins was sworn in to lead the Trump SEC. At every turn, he has let scammers off the hook and rolled back the rules that protect investors from getting cheated. Corruption, corruption, corruption. Under Trump and Chair Atkins, there is no cop on the beat to protect investors. The SEC's enforcement activity dropped by twenty percent last year. Chair Atkins couldn't even say, under oath in this room, that insider trading is bad. Fraudsters and cheats, it appears that everyone gets a free pass. Chair Atkins is also making markets more secretive. He's slashing disclosure rules so that companies can hide just how risky they've become. He's gutting oversight and enforcement tools that help financial cops on the beat, go after insider trading, after market manipulation, and other corporate crimes. He's making it easier for executives to silent shareholders and to strip them of their rights. He's even making it harder for states to protect their own citizens from being defrauded. Across the board, every day, investors are losing. Chair Atkins' rigs the rules is just one more example of the corruption that hangs over the entire Trump administration. This corruption costs American families and retirees. But who wins? Well, corruption is really profitable for some people. Companies and executives whose business models are built on fraud win, while honest businesses competing on this unfair playing field lose. Trump's billionaire buddies win. Donating big time to Trump could mean, eh, the SEC case against you just suddenly disappears. Another Trump friend who won big, Elon Musk, who briefly became the world's first trillionaire, got his SpaceX IPO greenlit despite despite analysts calling the numbers nonsensical. SpaceX got an additional boost when Elon Musk reportedly pushed some index providers to bend their rules, so tens of millions of Americans are forced to have SpaceX in their retirement funds, even if it injects significant risk. And then, President Trump himself is the ultimate winner. He made one point four billion dollars off his major crypto ventures just last year, while nearly a million investors lost out on nearly four billion dollars on Trump meme coins alone. And now his social media company has come up with a plan to sell Wall Street firms access to his market-moving posts on Truth Social before everyone else gets to see them. And who benefits? Well, only people who can pay more than a million dollars a year for the inside scoop on what Trump will be doing. This is a brazen scheme to profit off the presidency, and it may be and should be flatly illegal. How can Americans, or the world for that matter, trust the honesty of our markets as Trump and the SEC burn our credibility. Study after study shows that corruption significantly reduces growth and investment even in America. There is a cost to this corruption, and we all have a responsibility to rein it in. I have not given up on the original promise of our capital markets. We need to act before our standing in the world craters. And our people pay for this for generations to come. Thank you, Mister Chairman.

Thank you, ma'am. Each witness will be given five minutes for your uh testimony, and we will take your written testimony and put it in the record. I now recognize our first witness, Miss Dahlia Blass, Senior Investment Management Partner at Sullivan and Cromwell. You may begin your testimony. Thank you.

Thank you, Mister Chairman. Um, Chairman Scott, Ranking Member Warren, and distinguished members of Thank you very much for the opportunity to testify today on this important topic. My name is Dalia Blass and I'm the Senior Investment Management Partner at Salvin and Cromwell. Before returning to private practice, I had the honor of serving at the SEC, concluding my tenure as the Director of the Division of Investment Management. I'm testifying solely in my personal capacity, um, and not on behalf of Salvin and Cromwell or any of its clients. I applaud members of this committee for advancing key legislative proposals that expand retail access. to investment opportunities, providing them with greater tools to save for retirement and other financial goals. My written testimony covers a broad set of topics related to today's hearing, and I would like to focus my remark on three main points. First, retail access is about thoughtfully reintroducing access to private market investments for all, rather than a subset of retail investors. Coverage of retail access and the use of descriptors such as retailization have left the impression that we're building bridges to new uncharted territories, and that is not the case. The historical shift from defined benefit to defined contribution plans has significantly curtailed retail access to private market investments. Compounding this is the decision by more companies to remain private longer. The result is that retail investors increasingly are missing out on the opportunities for early compounding returns. Second, I believe current regulations undermine retail investor access to private markets. For example, retirement-focused products that are unnecessarily limit limited to daily liquid products, permitting products that are more tailored to the liquidity needs of plans would provide access to more diversified investment opportunities, while maintaining important investor protections. Outside the retirement p space, the SEC's staff prior practice of limiting private fund investments and publicly offered closed-end funds, combined with activist Target uh investors targeting those funds has significantly limited the number of listed funds on the market. These funds can provide meaningful access to private investments under important investor protections. The result has been the growth in two related trends. First, increasing use of retail focused vehicles that operate outside the protections of the Investment Company Act. While innovative, these will always have limitations because they lack the protections of the Act. Second is the increasing use of periodic liquidity structures, loosely called semi-liquid. These funds have been around for decades, but have seen a resurgence in the alternative space. I have a few observations about them. Despite assertions by the press, they do not have gates. The regulations require them to provide periodic liquidity subject to a predisclosed limit. Also, the use of the term semi-liquid while plain English may create a false sense of an ability to reliably access liquidity. And these funds offer periodic liquidity under rules that are frankly not fit for purpose. With respect to publicly offered funds, key pieces of legislation proposed by this committee would provide much needed reforms. For example, they would protect the statutory right of closed-end funds to invest in alternative assets, and they would correct the AFFE technical error that double counts BDC expenses and investor disclosures. But opportunities further exist to enhance retail access. One is for the SEC to take action to protect listed closed-end funds from activist investor campaigns. Another is revising the really high quorum requirement for shareholder meetings for funds which effectively just add cost to fund investors. This brings me to my third and final point, empowering responsible product innovation under the Investment Company Act which requires an overhaul of the SEC's exemptive process. Novel applications can take anywhere from five to ten years from start to finish, imposing significant cost, uncertainty, and a material barrier to entry in innovation. Congress addressed a very similar issue in twenty ten when it amended section nineteen B two of the exchange act for self-regulatory organization filings. That process is transparent, it promotes certainty, and holds both regulators and market participants accountable. Congress can look to that process for a similar framework under the nineteen forty act, and my written testimony explains how that can work. Thank you again for the opportunity to share my views with you, and I very much look forward to answering your questions.

Thank you, ma'am. We will now hear from the Honorable Kenneth Benson, President, CEO of SIFMA. You are now recognized for five minutes.

Uh, Chairman Scott, uh, Ranking Member Warren, and distinguished members of the committee, thank you for the opportunity to testify today. My name is Ken Benson. I'm the President and CEO of the Securities Industry and Financial Markets Association. SIFMA's long supported legislative and regulatory efforts to encourage companies to go public by ensuring the costs and requirements associated are appropriately tailored allowing issuance to flourish without introducing unnecessary risk to investors or the broader market. The Jobs Act passed by the Congress in twenty twelve, uh with our support, is a prime example of how legislation can help companies access public markets and secure funding for growth. We believe this benefits not only issuers but also investors by providing greater opportunities to participate in long-term wealth creation. Supporting stronger public markets does not mean diminishing the role of private markets, both play uh important and complementary roles in capital formation. While private markets provide valuable financing options, policymakers should seek to reverse the long decline in public company listings like IPOs. By conducting an uh an initial public offering, a company gains access to a broader pool of capital that can be used uh to fund growth initiatives, invest in innovation, pursue acquisitions, and strengthen its overall financial position. Liquidity and public price formation further distinguish public markets. Shares can be generally, shares can generally be bought and sold with relative ease in secondary markets at transparent prices giving investors the flexibility to reallocate capital as their financial needs or market conditions change. In addition, public companies enjoy broader access to capital markets for follow-on equity offerings and debt issuance. Uh, while mar- while the market value of US listed equities has increased more than five-fold over the past quarter century the number of publicly listed companies has moved in the opposite direction. The US public company universe has contracted from approximately seventy-two hundred firms to fifty-five hundred firms over the same period, a decline of nearly twenty-five percent. Whereas US averaged, uh, four hundred fifty-nine IPOs annually during the nineteen nineties, the average since twenty-twenty has fallen to just a hundred and ninety-six. Even so, there's ample evidence that the Jobs Act has expanded access to public capital markets for smaller companies, facilitating capital formation through a more efficient and less burdensome IPO process. The Jobs Act has expanded access to public markets for s- uh, uh, uh, since its enactment, uh emerging growth companies have raised nearly uh four hundred and forty billion dollars across twenty-one hundred offerings. Notwithstanding the success of the Jobs Act, we believe policymakers should continue to evaluate whether existing regulations appropriately balance investor protection with the costs and complexities associated with becoming and remaining a public company. SIFMA supports the recent legislative and regulatory steps, including the House's passage of the Invest Act and several measures introduced by members of this committee. We also support the SEC's proposed reforms to expand shelf registration eligibility and emerging growth company status, as well as SEC and FINRA efforts uh to expand research coverage. Congress should also consider policies that broaden investment opportunities for retail investors. Targeted reforms in these areas can strengthen the competitiveness of U.S. capital markets while preserving robust investor protections. I thank the committee for holding this hearing. and the work by the members to advance important legislation. Smithmas stands ready to work with this committee, Congress, and the SEC and other policymakers to advance thoughtful reforms.

Thank you. We now recognize Mister Mike Flood, Senior Vice President of the Center for Capital Markets Competitiveness at the US Chamber of Commerce. You're now recognized for up to five minutes.

Chairman Scott, Ranking Member Warren, and members of the committee, thank you for the opportunity to testify in the need to empower Main Street by enhancing and growing our capital markets. Chamber of Commerce, the world's largest business organization, represents businesses of all sizes, the substantial majority of which are small businesses. We thank Chair Scott for leading the charge on capital formation with the empowering Main Street America Act, and the broad bipartisan effort by senators of this committee on capital reform legis- capital formation legislation.

Mm.

Main Street America depends upon vibrant and accessible capital markets for economic growth, innovation, job creation, retirement security, and America's ability to lead in the global economy. When businesses can access capital efficiently, They hire more workers, invest in new technologies, and build the products and services that drive the American economy. When investors, including everyday Americans, can participate in that growth, wealth is built broadly, not just at the top. The wealth changes lives, and enables parents to send their kids to college, families to buy homes, and entrepreneurs to start new businesses. Chamber is here today because we believe Congress has a critical and time-sensitive opportunity to enact meaningful capital reformation policy that reflects the needs of today's small businesses, investors, and the overall economy. Strong capital markets are essential to American leadership. The United States is the deepest, most liquid, and most innovative capital markets in the world, representing approximately forty-five percent of global public equity and fixed income capitalization. And nearly seventy-five percent of all US corporate finance comes from US capital markets. However, the capital markets must be enhanced in order to compete. The number of US public companies has fallen by nearly forty percent since the nineteen nineties from over seventy eight hundred companies in nineteen ninety seven to forty seven hundred today. Let's put that in perspective. There aren't enough public companies to fully comprise the Wilshire five thousand. The decline is not a market anomaly. It is evidence that the current framework is not working, that the cost and complexity of access pub- of accessing c- public markets has outpaced the benefits for far too many companies. And just as importantly, foreign capital markets are offering effective solutions. If the trend consti continues, your constituents will lose out on access to potential jobs through public companies, and also options to save for their futures. Another answer is expanding small business access to capital. It's like to say the chamber represents nearly three million businesses. While many are recognized in the Fortune five hundred, the other two million nine hundred ninety nine thousand five hundred are small and medium sized enterprises. Small businesses comprise ninety nine point nine percent of all companies in the United States, forty seven percent of the workforce, and have comprised sixty two percent of net job creation since nineteen ninety five. From start-up to IPO and every step in between, the regulatory framework should facilitate, not obstruct, access to capital. Smart reforms like Halos and raising the investment advisor for example, for inflation, can expand the networks that are crucial to entrepreneurship. And finally, another solution is to strengthen and create more public companies. Investor protection and capital formation are complementary goals. The reforms proposed by s- by this committee, such as Elevate and allowing companies to submit draft IPO documents to the the SEC achieve both. And finally, we should expand investment opportunities for American investors workers and retirees. Capital formation is more than just helping companies raise money. It is about providing American, every American the opportunity to invest in the growth of both the US public and private markets. For too long, the most dynamic investment opportunities have been available only to those who who already have wealth.

Yeah.

Smart legislation can target this fundamental societal inequality while maintaining strong investor protections. So, Senator Warren, we agree that money and power and spec- should not equate to special treatment, and that's why we wanna provide responsible access to retail investors to the private market. We therefore ask the committee to continue its bipartisan momentum. You passed legislation that will help millions find an affordable home. It was not easy, but you prevailed, as you always do. Bipartisan support for capital formation legislation is just as ov- as overwhelming, including with the administration. The Senate work product has much in common with the House-passed Invest Act, which passed with a whopping thirty-two votes. There's absolutely no reason why Congress can't come together again to pass bi- bipartisan legislation this year to provide Main Street businesses better opportunities to grow and thrive, increase public company jobs in America, and allow every U investor, not because of their income or wealth, but precisely because of their aptitude, a better opportunity to save for their futures. If we accomplish this together, your constituents will be much closer to living the American dream. Thank you and I look forward to your questions.

Thank you. Finally, we will hear from Mister Cantrell Dumas, Senior Research for Financial Regulation and Policy at the Joint Center for Political and Economic Studies. You are now recognized for up to five minutes.

Chairman Scott, Ranking Member Warren, and members of the committee, thank you for the opportunity to testify. My name is Cantrell Dumas. I'm a senior researcher at the Joint Center for Political and Economic Studies. Founded in nineteen seventy, the joint center is a nonprofit, nonpartisan organization known as America's Black Think-Tank. We develop evidence-based policies to improve the economic and civic well-being of black Americans. My work focuses on retirement security, financial regulation, and the policies that affect how black families build wealth. I have more than a decade of public service experience, including work at the Kamali Future Training Commission, and service at the Federal Deposit Insurance Corporation during the two thousand eight financial crisis. I've also worked in private practice as an attorney advising clients on financial transactions. Expanding access to capital is important. Small businesses need affordable financing to start, grow, and hire. At the same time, workers and families supply capital through savings and retirement accounts. Mainstreet is on both sides of our capital markets. Past deregul past deregulatory may have made it easier for some firms and investment funds to raise capital. But the amount raised tells us little about whether capital reached black-owned businesses and underserved entrepreneurs or whether low-wealth families gain meaningful opportunities to build wealth. Black entrepreneurs continue to face a significant scaling gap. They own forty percent of businesses without paid employees, but only three percent with paid employees. And the Federal Reserve's latest survey, only thirty-five percent of black-owned businesses that applied for financing receive all the financing they sought compared with fifty-six percent of white-owned firms. These disparities show why capital markets' policies should be judged, not only about how much capital it helps businesses raise, but also who receives it, what terms, and whether the workers and families supplying it are protected.

Um, I think

Capital formation and investor protection are not competing objectives. Reliable information, fair markets, protection against fraud and abuse build the confidence that makes capital formation possible. These protections are especially important to black households. In twenty twenty-two, median black family wealth was approximately forty-four thousand nine hundred dollars compared with approximately two hundred and eighty-five thousand dollars for white families with less wealth to fall back on, black households have less capacity to absorb investment losses, excessive fees, and financial misconduct. Financial policies should therefore help low-wealth household build assets while protecting the assets they are working to accumulate. When information becomes less available, investments become harder to evaluate, or enforcement weakens, families with the least financial cushion have the most to lose. With that in mind, I want to highlight three principles that should guide capital markets' policy. First, disclosure should reduce information gaps. Large institutional investors may have access to company management, professional analysts, and private data services. Ordinary investors rely more heavily on public disclosures. Moving from quarterly to semi-annual reporting could have them making decisions with less current information. The answer should be clear. More information, m- answer should be clear information, not less. Second, we should be cautious about placing private market investments and digital assets in workers' retirement accounts. Private equity and private credit may involve limited disclosure, subjective valuations, layered fees, conflicts of interest, and limits on when investors can assess their money. Digital asset raise a different concern. Even if Congress establish clear rules for digital asset markets, there is little evidence that crypto is a reliable wealth building mechanism for ordinary families. Regulatory clarity should not be confused with evidence that crypto belongs in workers' retirement accounts. Expanding access to risk is not the same as expanding access to wealth. Third, consistent enforcement strengthens confidence in our markets. Rules matter only when they are enforced. and investors must believe they're applied to every participant. Without that confidence, capital formation suffers. But protecting investors is only part of the answer. Empowering mainstream also means directing capital to businesses that have historically faced barriers. Congress should strengthen minority depository institutions, community development financial institutions, and federal small business programs so that black-owned businesses and other underserved businesses can obtain the capital they need to grow. Our goal should be to ensure that capital reaches businesses that need it, and that workers and families can build and preserve wealth. That requires transparent markets, strong investor protection, consistent enforcement, and clear rules of the road. Thank you. I look forward to your questions.

Thank you, sir. Senator Rounds will kick off our question and answer. Each senator gets up to five minutes to ask and get the answers from you all. And we are pretty uh consistent on keeping five minutes to five minutes. Senator Rounds, you're recognized for your first five minutes.

Th- thank you, Mister Chairman, f- first of all thank you to all of you for being here today. And I I think this is a really important opportunity for us to really kinda rethink a little bit about whether or not the the existing regulations are appropriate for today, and what improvements we can make. I I've appreciated the fact that the House of Representatives has passed out a product uh on a bipartisan basis that uh I believe will help to allow more individuals to invest in equity uh to uh to actually invest in businesses that are not theirs per se and at the same time for businesses to be able to accumulate um uh resources that they can use to build those businesses what i don't wanna do is to restrict anyone from being able to invest in it if they have the resources the savings that they put together to do so um mister Benson just to begin with you it it there is no question but that as times change as different technologies come forward and and as we learn about what regulations work correctly and which ones need to be tweaked there's no question but that there has to be a review of regulations on a regular basis. I believe in your opening statements you've indicated that the jobs act is probably one of the last times that we've actually looked at this with regard to capital formation. That was in twenty twelve. So here we are sixteen years

Mm.

or fourteen, fourteen years later, we're now looking at it again and on a bipartisan basis. Can you talk a little bit about the the the reason why those regulations that were there at that time versus what they are now, why there would be a reason why we should take a look at at uh maybe updating those regulations?

Uh uh thank you, Senator, I and and that's a great question. The securities industry is one of the most regulated industries in the in the American economy. Uh, and we operate under a, a, a, a rule book that was really set in place eighty years ago, right, coming out of the Great Depression. And over the years Congress has ch- made changes to that through multiple statues, appropriately so. But, uh, I do think, uh, that it's important for Congress, uh, to go back on a periodic basis, not just to look at the rule book that the regulators put in place, but to look at the own, their own laws that they put in place. Because markets change, products change, technology comes into place. Uh, you know, some of the things we're dealing with today, uh, in terms of the, you know, capital formation, Edgar filings at the SEC, those were originally done with paper. Now they're done electronically. And, you know, um, uh, how we deliver, uh, confirms and proxies to, uh, to clients is changed, uh, and where we're going more and more to e-delivery and, and many in this, in the, on this committee are proposing going to e-delivery, the SEC, et cetera. So, I do think it's appropriate for Congress to go back And, and look, they do the best job they can at the time, but they have to go back and see did it work, uh, and what's changed in the market since then.

And the vast majority of that could be done on a bipartisan basis, I suspect.

Absolutely.

Mister Flood, uh, uh, I appreciated your comments. I think it's important that we talk about both the individuals who are, are trying to invest, that wanna find a, something other than simply investing in a savings account. And they look at where real wealth is developed. And, and part of it is, is you start out with savings. And once you have some savings where, where you're, because of the work you're doing as a family, as as an individual, uh at the end of the month you've got more in your, in your account than what you had to begin with and you've paid your bills. And at some point you wanna take that as wealth, uh as a, as a, as an opportunity to grow your own wealth. And you wanna put it someplace where it could perhaps gain interest or in some cases equity. The markets today allow for two different types. One is for, individuals to invest in privately owned businesses. Uh, it might be their own business or it might be with a small group, and those seem to have a real opportunity for development. The other is in the natu- the the the the markets themselves, the public markets. But there's a big cost involved in that because we're trying to make them as safe as possible for average investors. Can you talk a little bit about what the real opportunities are for someone to invest perhaps a little bit easier in some of those those IPO or pre-IPO programs versus in the markets that we supposedly put out for the general public, but that are regulated to the point where there's added costs and perhaps a little bit lower rate of return on investments in them. And the reason why we want to perhaps provide more opportunity for small investors to look at both, those that are private type companies and those that are publicly traded.

Sure. Um, I think you could get me on this.

No, it's not working.

Slide it up, slide it over, slide it over, slide it over.

Slide slide it up to you, yeah.

Slide it over. I promise you I can, I can string of sounds together.

There we go.

Uh, but when I think about that, I think there are, are, are few opportunities. One is on the investment side, but you talked about two technical fixes that I think bring things into today's world. One is um, when you think

Man, I'm gonna run out of time, so you might wanna make it quick.

Okay. Closed-end funds, allowing access, um by changing the exemption. And then two, um, making sure that when we talk about, um, uh, double, well, some call it double counting fees, but with AFFA, making sure that we rationalize the disclosure. Cuz right now the disclosure's wrong.

Thank you.

Um, so those would be my two fixes.

Par.

Senator Warren.

Uh, thank you, Mr. Chairman. So this is a hearing about making capital markets stronger. Let's start with some recent market news. On Saturday, President Trump's social media company began offering faster access to his social media posts to investors who pay up to a hundred thousand dollars a month. That's over a million dollars a year per investor. So let me ask all of our witnesses here. Raise your hand if you believe that President Trump selling information about our economy and foreign policy to Wall Street before everyone else gets access to that information is good for the integrity of our capital markets. Well, there we go. I see no hands, so maybe if the Republicans on this committee wanna strengthen the capital markets, we could start by outlawing what President Trump is doing. Um, we all know that this is wrong. Let's look at another scam. Trump's private equity buddies have a problem. Big investors are starting to head for the exits. Trump's crypto buddies also have a problem with billions in losses for investors. So last August, President Trump threw them a lifeline. He directed federal agencies to make it easier for private equity, private credit, crypto, and other risky assets to be shoveled into retirement accounts. The idea is to give all of those sketchy dealers access to families four O one Ks. Now, mister Dumas, you're an expert on financial regulation and its impact on working families and black communities is pushing these risky assets like crypto and private equity into retirement accounts likely to help families?

So, think of the question, Senator. Uh, not likely. Um, pushing private equity into retirement accounts, uh, creates a certain risk. Uh, private equity has, um, less it's it's it's risky because it's less transparent, not disclosure, and there aren't any um customer protection. Digital assets also is a volatile asset as well. Uh there is an evidence out there uh currently that says that cryptocurrency provides uh any type of wealth building um growth for, spe- especially for families, well ordinary families. Um so I think that ob- obviously um it can these volatile assets can definitely um provide a less wealth opportunity for um families.

All right, thank you. You know, let's look at another Trump administration policy. When you invest in a public company, you know, like Pepsi or Apple, those companies are required to file basic financial and business information with the SEC four times a year. In May, the SEC proposed reducing those disclosures to two times a year. Days later, the SEC proposed rules that exempt eighty percent of public companies from disclosures and accountability. on what executives get paid. The SEC even exempted most companies from the requirement that their auditor must swear that the company has systems in place to produce accurate financial information. So, mister Dumas, is getting less information less often about a company's operations helpful for working people for mom-and-pop investors or for black communities?

No, Senator, um it's not helpful at all. Um, disclosure and transparency uh is is vital for confidence in a in in in investment. Um, less information leads ordinary investors in the dark. What we need is better information t- in order for in order for investors to um have the same amount of information as the sophisticated investors have. Without that, there'll be information gap between the sophisticated investors and ordinary investors.

So, thank you, Mister Dumas. Let me do one more. In addition to weakening the rules, Trump's SEC is simply taking the cop off the beat. Last year enforcement activity dropped by over twenty percent to its low lowest level in nearly twenty years. Mister Dimas, who benefits when the SEC fails to enforce the law?

Senator, I believe bad actors would benefit. Uh actually I believe that uh without strong enforcement, uh you have a a a more of a opportunity for scammers and fraudsters to take advantage of everyday Americans. Strong enforcement uh provides confidence in the marketplace so people can put more into the capital markets as well.

Thank you. You know, every one of these steps is designed to help Wall Street insiders, big corporations, and President Trump himself, not American families. Congress needs to clean this up. Thank you, Mister President uh, Mister Chairman, I yield back.

Thank you, ma'am.

Or condolences at this point, but Yeah, um Let me just uh think about what Mister Flood said earlier, not wealth but aptitude. I wanna ask a question. Mister Benson has relates to the definition of an accredited cred accredited investor. Yeah, well I like that. I grew up in poverty in a single parent household. I will say that without any question, wealth creating wealth seems to be something that is consistent but not necessary. There are a lot of bright folks with great ideas who need early access. And when you look at the accreditor investor definition, I think it actually should be updated. I think this is a bipartisan conversation that we are now having, both Republicans and Democrats seem to understand the, and appreciate the importance of not just having a, a wealth definition for whether or not you have the aptitude to be an accredited investor. Love to get your thoughts on that topic, and Mister Fleming may come to you next.

Uh uh thank you, Mister Chairman, uh you know Congress over the years has gone back and forth and looked at at how they should define accredited investor, and they've looked at it in terms of a quantitative test. But also now there's efforts and there's legislation as you referenced to look at it on a qualitative and and there are i- i- and and I think it is appropriate, we think it's appropriate to look at it in terms of of other types of of of sophistication and accreditation that that an investor may have. For instance, when I was an investment banker, I was a series seven, series sixty-three, uh uh registrant that ha- requires you to go through multiple t- financial testing and the like. You can have CFAs, one of the most intense uh uh financial testings uh that go on. You may not necessarily have millions of dollars but you are a sophisticated party at that point in time. So we do think it's appropriate for Congress to take a look at that and make adjustments based upon the individual investors' accredit uh other accreditations.

Yeah. Mr. Floyd, any thoughts on that?

Yeah, actually when I looked at the proposals that the diocese put together, it attempts to allow retail investors to access the private markets in three responsible ways. One, show your aptitude by passing a task. Clearly someone who's going to take the time to do that, is interested in the market, is gonna understand the risks. Two, if you allow four O three B access like we allow on four one K, let's not forget that there will be a plan administer. They will look at the investments, they will look at the risks, and they will curate them and display those to the retail investor. And then three, um, you, you, if you can use an advisor, you can go that route too. So if you ha- you have all three routes, and all three come with the exact same protections that you would have if you invested in the stock market.

Mm-hmm.

And if you think about it, we will allow an individual to invest in penny stocks,

Yeah.

OTC, and equities. And we're actually enhancing the controls to allow people to invest in the private markets. So I think people understand the risks.

Absolutely. It's the strength of our economy depends on getting capital to the innovators and entrepreneurs who are willing to take risk build new businesses and create jobs with talent and good ideas are distributed across America, not just in big cities. In many communities, entrepreneurs rely on smaller, specialized investors to get their first real shot at turning an idea into a company. But the rules were written for a different time. When small venture capital funds were expected to stay small, and when capital was far more concentrated in major cities. That's why I'm proud to work with Senators Moran, Warner, Gallego, and many others on the expanding American Entrepreneurship Act. Our bill would modernize their these outdated rules so more money can reach entrepreneurs and small businesses in South Carolina, across the country. Given how much fund sizes and private investing have changed, how would modernizing these outdated rules help more capital reach entrepreneurs particularly in rural and traditionally underserved regions of our country.

Thank you, Mister Chairman, so venture capital funds uh provide critical funding for start-ups. Um, unlocking their investment and capital flow for the smaller funds would enable uh enable them to unlock critical capital funding for smaller um, um, entities for more start-ups and in turn for our communities. And these start-ups, by the way, they es- they essentially become our small businesses, which become the backbone of the American economy. So the proposals that you have that would unlock um the investment and capital flow, as well as deal with the liquidity issues, the investments for some of these funds, would be critical to capital formation. And I would also note, Mister Chairman, that when you look at that and you look at um updating thresholds for all small entities, not just VC funds, that in turn would really unlock investments and capital flow for for smaller communities.

I think Miss Blass makes a really good point that I hope this committee uh t- has the courage to take on which is the conversation around indexing. Uh we have not gotten there yet, but it's such an important part of the conversation that I think myself as a ranking member would be able to lead the charge on looking at ways to index. Everything from BSA to uh capital formation, we have a a litany of legislation that was written for a different time, that requires in my opinion for us to take a serious look at ways to index uh our thresholds. Mister Van Hollen?

Uh thank you, thank you, Mister Chairman, and and thank you for having a hearing focusing on these um issues, it's important to make sure that our capital markets serve Americans effectively, both savers looking to build up retirement and companies looking to raise money. Uh I just want to flag for our colleagues uh a bipartisan bill that's been introduced and I would hope that we could move forward at some point entitled the Encouraging Public Offerings Act. I've introduced that with Senator Budd, Senator Warnock, Senator Tillis and Senator Alcer Brooks. And it would help make it easier for companies, uh, to go public and support strong markets. So I hope we can work on that, uh, together. Uh, Mister Benson, you would agree, uh, that in general, businesses that do the kind, same kind of activities in the market should be subject to the same kind of regulations. Right?

Uh, yeah. Uh, first I have to say we support your legislation. Um, uh, but yes, sir. Uh, I'm

Thank you. I mean, we wanna have a even playing field. I I don't, would anybody disagree with that?

All right, we we should, we we have a rule book, the rule book should apply. It may be, you know, regulation is often written based upon size and stuff like that, but there should be a baseline rule book, yes.

Exactly. And and that's how you prevent loopholes. That's how you create an even playing field. Uh, as I'm sure you're aware, SEC Chair Atkins has said that he'd like to put out what he calls an innovation exemption from the security laws. We don't know all the details yet because the SEC hasn't released them, but it does seem that this exemption would carve out certain crypto businesses, like DeFi platforms, from the rules that apply to everybody else. Uh, Mister Benson, in a comment, uh, about this innovation exemption to the DS uh to the SEC, you wrote that " many crypto firms, including DeFi platforms, per- per- perform the same functions as traditional brokers and exchanges. That means, and I'm quoting, the crypto intermediaries should be subject to identical or at least substantially similar rules and oversight, end quote. In other words, if the FCC exempts crypto and DeFi platforms from security laws, we'd get an uneven playing field that undermines the markets. Right?