The Small Entity Update Act requires the Securities and Exchange Commission to study and update its definition of "small entity" for securities law purposes, starting within one year of the bill's enactment and then every five years after that. The SEC must examine whether its current small entity definition still makes sense given how much U.S. financial markets have grown and whether the definition covers a meaningful number of actual small businesses. After completing each study, the SEC must propose rule changes based on its findings and hold a public comment period before finalizing any updates. Additionally, the SEC must adjust all dollar amounts used in its small entity definition every five years to account for inflation. This legislation primarily affects small businesses and organizations that operate in securities markets, as updating the definition could expand or clarify which companies qualify for certain regulatory accommodations or exemptions.