The main reason for using sub-machine guns as compared to carbines/assault rifles is generally the ammunition; pistol rounds are less likely to over-penetrate, they're usually cheaper, they're cross-compatible with sidearms, less recoil, etc. You use one when armor penetration isn't your top concern, generally, and when fire-rate, magazine capacity and stability are your concerns as compared to a pistol. I'd leave a carbine at the bullpup assault rifle concealability, or perhaps at +2 for a bullpup carbine itself; at that rate, however, I'd say such a gun uses SMG ranges, not assault rifle, as +2 concealability cuts down on barrel length and rifling, which'll definitely affect accuracy). It'd still be a great weapon for CQC, but you're screwed in a long-range engagement if you can't close the distance somehow.
As far as penalties go (specifically Bear's), I'd definitely not apply them to automatics in close-quarters. It makes sense for certain longarms, primarily the bolt-action sniper and sporting rifles (not so much the designated marksman rifles like the SVD or EBR), but an assault rifle is generally designed with close-quarters combat at least somewhat in mind nowadays. I've done some training in regards to engaging at that distance, and a rifle will do just fine; even if they got so close that I couldn't present my rifle fully, it'll at least be pointing at their stomach, and I know that'll put someone on their ass, even if they have body-armor. If anything, I'd just rule no called shots at melee range, which already has penalties on shooting while in a melee (-3, if I remember correctly).
