Securities Bill Swaps 'Emerging Growth Company' for 'Issuer,' Broadening Regulatory Reach

The aptly named “Securities Research Modernization Act” is kicking off its changes with a technical but potentially significant update to the foundational Securities Act of 1933. This isn't about creating a massive new program; it’s about swapping out specific words in the law’s definitions, which often has a bigger ripple effect than you’d think.

The Fine Print Swap: From Specific to General

Section 2 of the bill focuses entirely on amending Section 2(a)(3) of the Securities Act. Essentially, it takes two very specific terms and replaces them with much broader ones. First, wherever the existing law referenced an “emerging growth company” (EGC)—a term tied to specific regulatory relief for smaller, newer companies under the JOBS Act—it now just says “issuer.” Second, the term “common equity” is being replaced with the extremely broad word “any.” This is a classic example of legislative surgery: a few word changes that fundamentally alter the scope of the rule they define.

Why This Matters for the Real World

When a law changes a specific term like “emerging growth company”—which is a defined status that comes with certain regulatory breaks—to the general term “issuer” (which covers virtually every company that sells stock), it means whatever rule follows that definition now applies to everyone, not just the small guys. For a busy person, this means the regulatory environment for large, established companies and tiny startups just got a little more uniform, potentially making life harder for the smaller companies that relied on that EGC status for flexibility.

Even more impactful is the change from “common equity” to “any.” Common equity is the typical stock most people buy. Replacing it with “any” means the rule now applies to preferred stock, bonds, warrants, or maybe even complex derivatives. If you hold a diverse investment portfolio, this change broadens the types of financial instruments potentially subject to the rules in this section. The core worry here is that by replacing specific, narrow terms with broad, general ones, the bill might unintentionally sweep in securities or companies that were never meant to be covered by that particular part of the 1933 Act, creating compliance headaches and potentially raising costs for companies that issue a variety of financial products.