Large Bill Includes Bringing CITs to 403(b) Plans

The Incentivizing New Ventures and Economic Strength Through Capital Formation Act, also known as the INVEST Act, introduced by House Financial Services Committee Chair French Hill, R-Arkansas; Capital Markets Subcommittee Chair Ann Wagner, R-Missouri; Representative Gregory Meeks, D-New York; and Representative Josh Gottheimer, D-New Jersey, consolidates more than 20 bipartisan bills, all aimed at strengthening capital markets and all of which have progressed out of committee. 

The full House of Representatives is expected to consider the INVEST Act next week, according to the release announcing the legislation.  

What the Bill Includes 

The 64-page INVEST Act includes three titles, which each collect several proposed legislative changes. The first title focuses on small business and startup growth. It directs the Securities and Exchange Commission to broaden its Office of the Advocate for Small Business Capital Formation to include rural-area job creators and to establish new Offices of Small Business within key SEC divisions. 

Title 1 would: 

• Allow startups to present to states; public agencies or instrumentalities; angel investors; universities; or “accelerators” without violating federal “general solicitation” rules; 

• Raise the crowdfunding accountant review threshold to $250,000 (with discretion to go as high as $400,000) from $100,000; 

• Increase the exemption threshold for small investment advisers to $175 million, with inflation adjustments; and 

• Double the investor cap for qualifying venture capital funds to 500 from 250 people and raise their capital limit to $50 million from $10 million.  

Improving Investor Opportunities  

The second title seeks to make investment opportunities more inclusive. It expands the SEC’s definition of accredited investor to include people with professional brokerage or investment adviser licenses; qualifying financial education or job experience; and those who pass a newly created certification exam. It also requires the SEC to establish the certification exam within one year of the bill’s enactment. 

Other provisions include: 

• Creating a Senior Investor Taskforce at the SEC to address fraud and exploitation targeting Americans older than 65; 

• Allowing 403(b) retirement plans—used largely by teachers and nonprofit employees—to invest in the same products as 401(k) plans; and 

• Enabling electronic delivery of investor documents and expanding access to private funds for retail investors. 

“Today, more than half of American households have exposure to the stock market, not as day-traders or large-scale market players, but as teachers, firefighters, nurses, and workers saving for the future through mutual funds, pensions, and retirement plans like 401(k)s and IRAs,” Meeks said in a statement. “These reforms are a meaningful step toward addressing the affordability crisis and empowering people to secure their financial futures.” 

Strengthening Public Markets and IPOs 

The final title of the bill addresses public company growth and transparency. It seeks to: 

• Reduce audited financial statement requirements for “emerging growth companies” to two from three years; 

• Expand eligibility for companies to be regarded as “well-known seasoned issuers” by lowering the market value threshold to $400 million from $700 million;  

• Simplify IPO processes and reduce disclosure burdens; and 

• Direct the Government Accountability Office to study IPO costs for small and midsize firms. 

The legislation also mandates clearer disclosures on multi-class share structures to enhance transparency for public investors.  

On Tuesday, SEC chair Paul Atkins said in a speech at the New York Stock Exchange that reducing disclosures and encouraging more IPOs—including smaller companies—is a commission priority.