WASHINGTON – Congressman Byron Donalds (R-FL) has introduced legislation to amend the Securities Exchange Act of 1934, establishing a clear distinction between professional firms and private traders to prevent government overreach in our financial markets.
The "Defining Dealer Act" is the 22nd piece of legislation proposed by Congressman Donalds during the 119th Congress. By defining 'dealer' as: an entity trading solely for customers—not their own accounts, this bill establishes clear, separate regulatory distinctions between professional firms and private traders.
This bill has received endorsements from the Small Public Company Coalition and the Investor Choice Advocates Network.
“It is no secret that the Biden administration deputized regulators to circumvent Congress and carry out their political agenda. Under then-Chairman Gensler, the SEC disregarded decades of securities law, and tried to put the federal government in the middle of every transaction. Thankfully, this extreme overreach has been stopped for now, but it is time for Congress to codify these long-standing principles and prevent this political interference from happening again. That is why I am proud to introduce the Defining Dealer Act, which codifies the universally understood and accepted definition of dealer as any person buying and selling securities for customers,” said Congressman Byron Donalds (R-FL).
“The SEC has pursued a novel and boundless enforcement theory that treats professional investors as unregistered broker-dealers simply because buying and selling securities is central to what they do. That is not what the Exchange Act says, it is not what Congress intended, and it is not what decades of settled practice have reflected. The Defining Dealer Act restores clarity, protects capital formation, and ensures that the professional investment community can continue to serve the small public companies that depend on it,” said Marc Indeglia, President, Small Public Company Coalition.
"The Defining Dealer Act protects investors' freedom to actively manage their own portfolios without fear that the government will recast their investment activity as a regulated business — because when investors can't tell where the line is, they stop investing,” said Nick Morgan, President, Investor Choice Advocates Network.
WHAT THIS BILL DOES:
While the current SEC has sought to rectify the wrongs of the previous administration, this statutory ambiguity is ripe for malicious misinterpretation and casts uncertainty on market participants.
The "Defining Dealer Act" codifies a long-standing and universally understood definition of dealer as “any person buying and selling securities for customers.”
BACKGROUND:
Micro-caps, which are small public companies, often cannot obtain bank loans and instead turn to lenders who provide capital in exchange for convertible notes—the conversion of the loan into stock.
As a result, certain funds and individuals began doing this process frequently: buying a micro-cap company’s convertible note, converting it into stock, then selling that stock into the public market.
For decades, this was considered “investing” rather than “dealing.” Historically, “investors” buy and sell for themselves, whereas “dealers” buy and sell for customers. These micro-cap lenders never registered as “dealers,” as they believed they were investing for themselves.
