This Act may be cited as the “Small Entity Update Act”.

(a) Definitions.—In this section—

(1) the term “Commission” means the Securities and Exchange Commission;

(2) the term “Committee” means the Small Business Capital Formation Advisory Committee established under section 40 of the Securities Exchange Act of 1934 (15 U.S.C. 78qq);

(3) the term “Office” means the Office of the Advocate for Small Business Capital Formation established under section 4(j) of the Securities Exchange Act of 1934 (15 U.S.C. 78d(j)); and

(4) the term “small entity”—

(A) has the meaning given the term in section 601 of title 5, United States Code, with respect to the activities of the Commission; and

(B) includes any definition established by the Commission of the term “small business”, “small organization”, or “small governmental jurisdiction” under paragraph (3), (4), or (5), respectively, of section 601 of title 5, United States Code, with respect to the activities of the Commission.

(b) Studies and reports.—Not later than 1 year after the date of enactment of this Act, and once every 5 years thereafter, the Commission shall—

(1) in consultation with the Committee, the Office, and the Office of Advocacy of the Small Business Administration, conduct a study of the definition of the term “small entity” with respect to the activities of the Commission for the purposes of chapter 6 of title 5, United States Code, which shall consider—

(A) the extent to which the definition of the term “small entity”, as in effect during the period in which the study is conducted, aligns with the findings and declarations made under section 2(a) of the Regulatory Flexibility Act (5 U.S.C. 601 note);

(B) the amount by which financial markets in the United States have grown since the last time the Commission amended the definition of the term “small entity”, if applicable; and

(C) how the Commission should define the term “small entity” to ensure that a meaningful number of entities would fall under that definition; and

(2) submit to Congress a report that includes—

(A) the results of the applicable study conducted under paragraph (1); and

(B) specific and detailed recommendations on the ways in which the Commission could amend the definition of the term “small entity” to—

(i) be consistent with the results described in subparagraph (A); and

(ii) expand the number of entities covered by such definition.

(c) Rulemaking.—

(1) PROPOSED RULES.—Not later than 180 days after the date on which the Commission submits to Congress a report required under subsection (b)(2), the Commission shall issue a proposed rule that implements the recommendations described in subsection (b)(2)(B).

(2) FINAL RULES.—Not later than 180 days after the date on which the Commission publishes a proposed rule under paragraph (1) in the Federal Register, the Commission shall issue a final version of that rule.