H. R. 3606 

One Hundred Twelfth Congress 

of the 

United States of America 

AT THE SECOND SESSION 

Begun and held at the City of Washington on Tuesday, 

the third day of January, two thousand and twelve 

An Act 

To increase American job creation and economic growth by improving access to 

the public capital markets for emerging growth companies. 

Be it enacted by the Senate and House of Representatives of 

the United States of America in Congress assembled, 

SECTION 1. SHORT TITLE. 

This Act may be cited as the ‘‘Jumpstart Our Business Startups 

Act’’. 

SEC. 2. TABLE OF CONTENTS. 

The table of contents of this Act is as follows: 

Sec. 1. Short title. 

Sec. 2. Table of contents. 

TITLE I—REOPENING AMERICAN CAPITAL MARKETS TO EMERGING 

GROWTH COMPANIES 

Sec. 101. Definitions. 

Sec. 102. Disclosure obligations. 

Sec. 103. Internal controls audit. 

Sec. 104. Auditing standards. 

Sec. 105. Availability of information about emerging growth companies. 

Sec. 106. Other matters. 

Sec. 107. Opt-in right for emerging growth companies. 

Sec. 108. Review of Regulation S-K. 

TITLE II—ACCESS TO CAPITAL FOR JOB CREATORS 

Sec. 201. Modification of exemption. 

TITLE III—CROWDFUNDING 

Sec. 301. Short title. 

Sec. 302. Crowdfunding exemption. 

Sec. 303. Exclusion of crowdfunding investors from shareholder cap. 

Sec. 304. Funding portal regulation. 

Sec. 305. Relationship with State law. 

TITLE IV—SMALL COMPANY CAPITAL FORMATION 

Sec. 401. Authority to exempt certain securities. 

Sec. 402. Study on the impact of State Blue Sky laws on Regulation A offerings. 

TITLE V—PRIVATE COMPANY FLEXIBILITY AND GROWTH 

Sec. 501. Threshold for registration. 

Sec. 502. Employees. 

Sec. 503. Commission rulemaking. 

Sec. 504. Commission study of enforcement authority under Rule 12g5–1. 

TITLE VI—CAPITAL EXPANSION 

Sec. 601. Shareholder threshold for registration. 

Sec. 602. Rulemaking. 

TITLE VII—OUTREACH ON CHANGES TO THE LAW 

Sec. 701. Outreach by the Commission. 
H. R. 3606—2 

TITLE I—REOPENING AMERICAN CAPITAL MARKETS TO EMERGING 

GROWTH COMPANIES 

SEC. 101. DEFINITIONS. 

(a) SECURITIES ACT OF 1933.—Section 2(a) of the Securities 

Act of 1933 (15 U.S.C. 77b(a)) is amended by adding at the end 

the following: 

‘‘(19) The term ‘emerging growth company’ means an issuer 

that had total annual gross revenues of less than 

$1,000,000,000 (as such amount is indexed for inflation every 

5 years by the Commission to reflect the change in the Consumer Price Index for All Urban Consumers published by the 

Bureau of Labor Statistics, setting the threshold to the nearest 

1,000,000) during its most recently completed fiscal year. An 

issuer that is an emerging growth company as of the first 

day of that fiscal year shall continue to be deemed an emerging 

growth company until the earliest of— 

‘‘(A) the last day of the fiscal year of the issuer during 

which it had total annual gross revenues of $1,000,000,000 

(as such amount is indexed for inflation every 5 years 

by the Commission to reflect the change in the Consumer 

Price Index for All Urban Consumers published by the 

Bureau of Labor Statistics, setting the threshold to the 

nearest 1,000,000) or more; 

‘‘(B) the last day of the fiscal year of the issuer following the fifth anniversary of the date of the first sale 

of common equity securities of the issuer pursuant to an 

effective registration statement under this title; 

‘‘(C) the date on which such issuer has, during the 

previous 3-year period, issued more than $1,000,000,000 

in non-convertible debt; or 

‘‘(D) the date on which such issuer is deemed to be 

a ‘large accelerated filer’, as defined in section 240.12b– 

2 of title 17, Code of Federal Regulations, or any successor 

thereto.’’. 

(b) SECURITIES EXCHANGE ACT OF 1934.—Section 3(a) of the 

Securities Exchange Act of 1934 (15 U.S.C. 78c(a)) is amended— 

(1) by redesignating paragraph (77), as added by section 

941(a) of the Investor Protection and Securities Reform Act 

of 2010 (Public Law 111–203, 124 Stat. 1890), as paragraph 

(79); and 

(2) by adding at the end the following: 

‘‘(80) EMERGING GROWTH COMPANY.—The term ‘emerging 

growth company’ means an issuer that had total annual gross 

revenues of less than $1,000,000,000 (as such amount is indexed 

for inflation every 5 years by the Commission to reflect the 

change in the Consumer Price Index for All Urban Consumers 

published by the Bureau of Labor Statistics, setting the 

threshold to the nearest 1,000,000) during its most recently 

completed fiscal year. An issuer that is an emerging growth 

company as of the first day of that fiscal year shall continue 

to be deemed an emerging growth company until the earliest 

of— 
H. R. 3606—3 

‘‘(A) the last day of the fiscal year of the issuer during 

which it had total annual gross revenues of $1,000,000,000 

(as such amount is indexed for inflation every 5 years 

by the Commission to reflect the change in the Consumer 

Price Index for All Urban Consumers published by the 

Bureau of Labor Statistics, setting the threshold to the 

nearest 1,000,000) or more; 

‘‘(B) the last day of the fiscal year of the issuer following the fifth anniversary of the date of the first sale 

of common equity securities of the issuer pursuant to an 

effective registration statement under the Securities Act 

of 1933; 

‘‘(C) the date on which such issuer has, during the 

previous 3-year period, issued more than $1,000,000,000 

in non-convertible debt; or 

‘‘(D) the date on which such issuer is deemed to be 

a ‘large accelerated filer’, as defined in section 240.12b– 

2 of title 17, Code of Federal Regulations, or any successor 

thereto.’’. 

(c) OTHER DEFINITIONS.—As used in this title, the following 

definitions shall apply: 

(1) COMMISSION.—The term ‘‘Commission’’ means the Securities and Exchange Commission. 

(2) INITIAL PUBLIC OFFERING DATE.—The term ‘‘initial public 

offering date’’ means the date of the first sale of common 

equity securities of an issuer pursuant to an effective registration statement under the Securities Act of 1933. 

(d) EFFECTIVE DATE.—Notwithstanding section 2(a)(19) of the 

Securities Act of 1933 and section 3(a)(80) of the Securities 

Exchange Act of 1934, an issuer shall not be an emerging growth 

company for purposes of such Acts if the first sale of common 

equity securities of such issuer pursuant to an effective registration 

statement under the Securities Act of 1933 occurred on or before 

December 8, 2011. 

SEC. 102. DISCLOSURE OBLIGATIONS. 

(a) EXECUTIVE COMPENSATION.— (1) EXEMPTION.—Section 14A(e) of the Securities Exchange 

Act of 1934 (15 U.S.C. 78n–1(e)) is amended— 

(A) by striking ‘‘The Commission may’’ and inserting 

the following: 

‘‘(1) IN GENERAL.—The Commission may’’; 

(B) by striking ‘‘an issuer’’ and inserting ‘‘any other 

issuer’’; and 

(C) by adding at the end the following: 

‘‘(2) TREATMENT OF EMERGING GROWTH COMPANIES.— 

‘‘(A) IN GENERAL.—An emerging growth company shall 

be exempt from the requirements of subsections (a) and 

(b). 

‘‘(B) COMPLIANCE AFTER TERMINATION OF EMERGING

GROWTH COMPANY TREATMENT.—An issuer that was an 

emerging growth company but is no longer an emerging 

growth company shall include the first separate resolution 

described under subsection (a)(1) not later than the end 

of— 

‘‘(i) in the case of an issuer that was an emerging 

growth company for less than 2 years after the date 
H. R. 3606—4 

of first sale of common equity securities of the issuer 

pursuant to an effective registration statement under 

the Securities Act of 1933, the 3-year period beginning 

on such date; and 

‘‘(ii) in the case of any other issuer, the 1-year 

period beginning on the date the issuer is no longer 

an emerging growth company.’’. 

(2) PROXIES.—Section 14(i) of the Securities Exchange Act 

of 1934 (15 U.S.C. 78n(i)) is amended by inserting ‘‘, for any 

issuer other than an emerging growth company,’’ after 

‘‘including’’. 

(3) COMPENSATION DISCLOSURES.—Section 953(b)(1) of the 

Investor Protection and Securities Reform Act of 2010 (Public 

Law 111–203; 124 Stat. 1904) is amended by inserting ‘‘, other 

than an emerging growth company, as that term is defined 

in section 3(a) of the Securities Exchange Act of 1934,’’ after 

‘‘require each issuer’’. 

(b) FINANCIAL DISCLOSURES AND ACCOUNTING PRONOUNCEMENTS.— 

(1) SECURITIES ACT OF 1933.—Section 7(a) of the Securities 

Act of 1933 (15 U.S.C. 77g(a)) is amended— 

(A) by striking ‘‘(a) The registration’’ and inserting 

the following: 

‘‘(a) INFORMATION REQUIRED IN REGISTRATION STATEMENT.— 

‘‘(1) IN GENERAL.—The registration’’; and 

(B) by adding at the end the following: 

‘‘(2) TREATMENT OF EMERGING GROWTH COMPANIES.—An 

emerging growth company— 

‘‘(A) need not present more than 2 years of audited 

financial statements in order for the registration statement 

of such emerging growth company with respect to an initial 

public offering of its common equity securities to be effective, and in any other registration statement to be filed 

with the Commission, an emerging growth company need 

not present selected financial data in accordance with section 229.301 of title 17, Code of Federal Regulations, for 

any period prior to the earliest audited period presented 

in connection with its initial public offering; and 

‘‘(B) may not be required to comply with any new 

or revised financial accounting standard until such date 

that a company that is not an issuer (as defined under 

section 2(a) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 

7201(a))) is required to comply with such new or revised 

accounting standard, if such standard applies to companies 

that are not issuers.’’. 

(2) SECURITIES EXCHANGE ACT OF 1934.—Section 13(a) of 

the Securities Exchange Act of 1934 (15 U.S.C. 78m(a)) is 

amended by adding at the end the following: ‘‘In any registration statement, periodic report, or other reports to be filed 

with the Commission, an emerging growth company need not 

present selected financial data in accordance with section 

229.301 of title 17, Code of Federal Regulations, for any period 

prior to the earliest audited period presented in connection 

with its first registration statement that became effective under 

this Act or the Securities Act of 1933 and, with respect to 

any such statement or reports, an emerging growth company 

may not be required to comply with any new or revised financial 
H. R. 3606—5 

accounting standard until such date that a company that is 

not an issuer (as defined under section 2(a) of the SarbanesOxley Act of 2002 (15 U.S.C. 7201(a))) is required to comply 

with such new or revised accounting standard, if such standard 

applies to companies that are not issuers.’’. 

(c) OTHER DISCLOSURES.—An emerging growth company may 

comply with section 229.303(a) of title 17, Code of Federal Regulations, or any successor thereto, by providing information required 

by such section with respect to the financial statements of the 

emerging growth company for each period presented pursuant to 

section 7(a) of the Securities Act of 1933 (15 U.S.C. 77g(a)). An 

emerging growth company may comply with section 229.402 of 

title 17, Code of Federal Regulations, or any successor thereto, 

by disclosing the same information as any issuer with a market 

value of outstanding voting and nonvoting common equity held 

by non-affiliates of less than $75,000,000. 

SEC. 103. INTERNAL CONTROLS AUDIT. 

Section 404(b) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 

7262(b)) is amended by inserting ‘‘, other than an issuer that 

is an emerging growth company (as defined in section 3 of the 

Securities Exchange Act of 1934),’’ before ‘‘shall attest to’’. 

SEC. 104. AUDITING STANDARDS. 

Section 103(a)(3) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 

7213(a)(3)) is amended by adding at the end the following: 

‘‘(C) TRANSITION PERIOD FOR EMERGING GROWTH COMPA- NIES.—Any rules of the Board requiring mandatory audit 

firm rotation or a supplement to the auditor’s report in 

which the auditor would be required to provide additional 

information about the audit and the financial statements 

of the issuer (auditor discussion and analysis) shall not 

apply to an audit of an emerging growth company, as 

defined in section 3 of the Securities Exchange Act of 

1934. Any additional rules adopted by the Board after 

the date of enactment of this subparagraph shall not apply 

to an audit of any emerging growth company, unless the 

Commission determines that the application of such additional requirements is necessary or appropriate in the 

public interest, after considering the protection of investors 

and whether the action will promote efficiency, competition, 

and capital formation.’’. 

SEC. 105. AVAILABILITY OF INFORMATION ABOUT EMERGING GROWTH 

COMPANIES. 

(a) PROVISION OF RESEARCH.—Section 2(a)(3) of the Securities 

Act of 1933 (15 U.S.C. 77b(a)(3)) is amended by adding at the 

end the following: ‘‘The publication or distribution by a broker 

or dealer of a research report about an emerging growth company 

that is the subject of a proposed public offering of the common 

equity securities of such emerging growth company pursuant to 

a registration statement that the issuer proposes to file, or has 

filed, or that is effective shall be deemed for purposes of paragraph 

(10) of this subsection and section 5(c) not to constitute an offer 

for sale or offer to sell a security, even if the broker or dealer 

is participating or will participate in the registered offering of 

the securities of the issuer. As used in this paragraph, the term 

‘research report’ means a written, electronic, or oral communication 
H. R. 3606—6 

that includes information, opinions, or recommendations with 

respect to securities of an issuer or an analysis of a security or 

an issuer, whether or not it provides information reasonably sufficient upon which to base an investment decision.’’. 

(b) SECURITIES ANALYST COMMUNICATIONS.—Section 15D of the 

Securities Exchange Act of 1934 (15 U.S.C. 78o–6) is amended— 

(1) by redesignating subsection (c) as subsection (d); and 

(2) by inserting after subsection (b) the following: 

‘‘(c) LIMITATION.—Notwithstanding subsection (a) or any other 

provision of law, neither the Commission nor any national securities 

association registered under section 15A may adopt or maintain 

any rule or regulation in connection with an initial public offering 

of the common equity of an emerging growth company— 

‘‘(1) restricting, based on functional role, which associated 

persons of a broker, dealer, or member of a national securities 

association, may arrange for communications between a securities analyst and a potential investor; or 

‘‘(2) restricting a securities analyst from participating in 

any communications with the management of an emerging 

growth company that is also attended by any other associated 

person of a broker, dealer, or member of a national securities 

association whose functional role is other than as a securities 

analyst.’’. 

(c) EXPANDING PERMISSIBLE COMMUNICATIONS.—Section 5 of 

the Securities Act of 1933 (15 U.S.C. 77e) is amended— 

(1) by redesignating subsection (d) as subsection (e); and 

(2) by inserting after subsection (c) the following: 

‘‘(d) LIMITATION.—Notwithstanding any other provision of this 

section, an emerging growth company or any person authorized 

to act on behalf of an emerging growth company may engage in 

oral or written communications with potential investors that are 

qualified institutional buyers or institutions that are accredited 

investors, as such terms are respectively defined in section 230.144A 

and section 230.501(a) of title 17, Code of Federal Regulations, 

or any successor thereto, to determine whether such investors might 

have an interest in a contemplated securities offering, either prior 

to or following the date of filing of a registration statement with 

respect to such securities with the Commission, subject to the 

requirement of subsection (b)(2).’’. 

(d) POST OFFERING COMMUNICATIONS.—Neither the Commission nor any national securities association registered under section 

15A of the Securities Exchange Act of 1934 may adopt or maintain 

any rule or regulation prohibiting any broker, dealer, or member 

of a national securities association from publishing or distributing 

any research report or making a public appearance, with respect 

to the securities of an emerging growth company, either— 

(1) within any prescribed period of time following the initial 

public offering date of the emerging growth company; or 

(2) within any prescribed period of time prior to the expiration date of any agreement between the broker, dealer, or 

member of a national securities association and the emerging 

growth company or its shareholders that restricts or prohibits 

the sale of securities held by the emerging growth company 

or its shareholders after the initial public offering date. 
H. R. 3606—7 

SEC. 106. OTHER MATTERS. 

(a) DRAFT REGISTRATION STATEMENTS.—Section 6 of the Securities Act of 1933 (15 U.S.C. 77f) is amended by adding at the 

end the following: 

‘‘(e) EMERGING GROWTH COMPANIES.— 

‘‘(1) IN GENERAL.—Any emerging growth company, prior 

to its initial public offering date, may confidentially submit 

to the Commission a draft registration statement, for confidential nonpublic review by the staff of the Commission prior 

to public filing, provided that the initial confidential submission 

and all amendments thereto shall be publicly filed with the 

Commission not later than 21 days before the date on which 

the issuer conducts a road show, as such term is defined in 

section 230.433(h)(4) of title 17, Code of Federal Regulations, 

or any successor thereto. 

‘‘(2) CONFIDENTIALITY.—Notwithstanding any other provision of this title, the Commission shall not be compelled to 

disclose any information provided to or obtained by the Commission pursuant to this subsection. For purposes of section 552 

of title 5, United States Code, this subsection shall be considered a statute described in subsection (b)(3)(B) of such section 

552. Information described in or obtained pursuant to this 

subsection shall be deemed to constitute confidential information for purposes of section 24(b)(2) of the Securities Exchange 

Act of 1934.’’. 

(b) TICK SIZE.—Section 11A(c) of the Securities Exchange Act 

of 1934 (15 U.S.C. 78k–1(c)) is amended by adding at the end 

the following new paragraph: 

‘‘(6) TICK SIZE.— 

‘‘(A) STUDY AND REPORT.—The Commission shall conduct a study examining the transition to trading and 

quoting securities in one penny increments, also known 

as decimalization. The study shall examine the impact 

that decimalization has had on the number of initial public 

offerings since its implementation relative to the period 

before its implementation. The study shall also examine 

the impact that this change has had on liquidity for small 

and middle capitalization company securities and whether 

there is sufficient economic incentive to support trading 

operations in these securities in penny increments. Not 

later than 90 days after the date of enactment of this 

paragraph, the Commission shall submit to Congress a 

report on the findings of the study. 

‘‘(B) DESIGNATION.—If the Commission determines that 

the securities of emerging growth companies should be 

quoted and traded using a minimum increment of greater 

than $0.01, the Commission may, by rule not later than 

180 days after the date of enactment of this paragraph, 

designate a minimum increment for the securities of 

emerging growth companies that is greater than $0.01 

but less than $0.10 for use in all quoting and trading 

of securities in any exchange or other execution venue.’’. 

SEC. 107. OPT-IN RIGHT FOR EMERGING GROWTH COMPANIES. 

(a) IN GENERAL.—With respect to an exemption provided to 

emerging growth companies under this title, or an amendment 

made by this title, an emerging growth company may choose to 
H. R. 3606—8 

forgo such exemption and instead comply with the requirements 

that apply to an issuer that is not an emerging growth company. 

(b) SPECIAL RULE.—Notwithstanding subsection (a), with 

respect to the extension of time to comply with new or revised 

financial accounting standards provided under section 7(a)(2)(B) 

of the Securities Act of 1933 and section 13(a) of the Securities 

Exchange Act of 1934, as added by section 102(b), if an emerging 

growth company chooses to comply with such standards to the 

same extent that a non-emerging growth company is required to 

comply with such standards, the emerging growth company— 

(1) must make such choice at the time the company is 

first required to file a registration statement, periodic report, 

or other report with the Commission under section 13 of the 

Securities Exchange Act of 1934 and notify the Securities and 

Exchange Commission of such choice; 

(2) may not select some standards to comply with in such 

manner and not others, but must comply with all such standards to the same extent that a non-emerging growth company 

is required to comply with such standards; and 

(3) must continue to comply with such standards to the 

same extent that a non-emerging growth company is required 

to comply with such standards for as long as the company 

remains an emerging growth company. 

SEC. 108. REVIEW OF REGULATION S-K. 

(a) REVIEW.—The Securities and Exchange Commission shall 

conduct a review of its Regulation S-K (17 CFR 229.10 et seq.) 

to— 

(1) comprehensively analyze the current registration 

requirements of such regulation; and 

(2) determine how such requirements can be updated to 

modernize and simplify the registration process and reduce 

the costs and other burdens associated with these requirements 

for issuers who are emerging growth companies. 

(b) REPORT.—Not later than 180 days after the date of enactment of this title, the Commission shall transmit to Congress a 

report of the review conducted under subsection (a). The report 

shall include the specific recommendations of the Commission on 

how to streamline the registration process in order to make it 

more efficient and less burdensome for the Commission and for 

prospective issuers who are emerging growth companies. 

TITLE II—ACCESS TO CAPITAL FOR JOB 

CREATORS 

SEC. 201. MODIFICATION OF EXEMPTION. 

(a) MODIFICATION OF RULES.— (1) Not later than 90 days after the date of the enactment 

of this Act, the Securities and Exchange Commission shall 

revise its rules issued in section 230.506 of title 17, Code 

of Federal Regulations, to provide that the prohibition against 

general solicitation or general advertising contained in section 

230.502(c) of such title shall not apply to offers and sales 

of securities made pursuant to section 230.506, provided that 

all purchasers of the securities are accredited investors. Such 

rules shall require the issuer to take reasonable steps to verify 
H. R. 3606—9 

that purchasers of the securities are accredited investors, using 

such methods as determined by the Commission. Section 

230.506 of title 17, Code of Federal Regulations, as revised 

pursuant to this section, shall continue to be treated as a 

regulation issued under section 4(2) of the Securities Act of 

1933 (15 U.S.C. 77d(2)). 

(2) Not later than 90 days after the date of enactment 

of this Act, the Securities and Exchange Commission shall 

revise subsection (d)(1) of section 230.144A of title 17, Code 

of Federal Regulations, to provide that securities sold under 

such revised exemption may be offered to persons other than 

qualified institutional buyers, including by means of general 

solicitation or general advertising, provided that securities are 

sold only to persons that the seller and any person acting 

on behalf of the seller reasonably believe is a qualified institutional buyer. 

(b) CONSISTENCY IN INTERPRETATION.—Section 4 of the Securities Act of 1933 (15 U.S.C. 77d) is amended— 

(1) by striking ‘‘The provisions of section 5’’ and inserting 

‘‘(a) The provisions of section 5’’; and 

(2) by adding at the end the following: 

‘‘(b) Offers and sales exempt under section 230.506 of title 

17, Code of Federal Regulations (as revised pursuant to section 

201 of the Jumpstart Our Business Startups Act) shall not be 

deemed public offerings under the Federal securities laws as a 

result of general advertising or general solicitation.’’. 

(c) EXPLANATION OF EXEMPTION.—Section 4 of the Securities 

Act of 1933 (15 U.S.C. 77d) is amended— 

(1) by striking ‘‘The provisions of section 5’’ and inserting 

‘‘(a) The provisions of section 5’’; and 

(2) by adding at the end the following: 

‘‘(b)(1) With respect to securities offered and sold in compliance 

with Rule 506 of Regulation D under this Act, no person who 

meets the conditions set forth in paragraph (2) shall be subject 

to registration as a broker or dealer pursuant to section 15(a)(1) 

of this title, solely because— 

‘‘(A) that person maintains a platform or mechanism 

that permits the offer, sale, purchase, or negotiation of 

or with respect to securities, or permits general solicitations, general advertisements, or similar or related activities by issuers of such securities, whether online, in person, 

or through any other means; 

‘‘(B) that person or any person associated with that 

person co-invests in such securities; or 

‘‘(C) that person or any person associated with that 

person provides ancillary services with respect to such securities. 

‘‘(2) The exemption provided in paragraph (1) shall apply to 

any person described in such paragraph if— 

‘‘(A) such person and each person associated with that 

person receives no compensation in connection with the purchase or sale of such security; 

‘‘(B) such person and each person associated with that 

person does not have possession of customer funds or securities 

in connection with the purchase or sale of such security; and 

‘‘(C) such person is not subject to a statutory disqualification as defined in section 3(a)(39) of this title and does not 
H. R. 3606—10 

have any person associated with that person subject to such 

a statutory disqualification. 

‘‘(3) For the purposes of this subsection, the term ‘ancillary 

services’ means— 

‘‘(A) the provision of due diligence services, in connection 

with the offer, sale, purchase, or negotiation of such security, 

so long as such services do not include, for separate compensation, investment advice or recommendations to issuers or investors; and 

‘‘(B) the provision of standardized documents to the issuers 

and investors, so long as such person or entity does not negotiate the terms of the issuance for and on behalf of third 

parties and issuers are not required to use the standardized 

documents as a condition of using the service.’’. 

TITLE III—CROWDFUNDING 

SEC. 301. SHORT TITLE. 

This title may be cited as the ‘‘Capital Raising Online While 

Deterring Fraud and Unethical Non-Disclosure Act of 2012’’ or 

the ‘‘CROWDFUND Act’’. 

SEC. 302. CROWDFUNDING EXEMPTION. 

(a) SECURITIES ACT OF 1933.—Section 4 of the Securities Act 

of 1933 (15 U.S.C. 77d) is amended by adding at the end the 

following: 

‘‘(6) transactions involving the offer or sale of securities 

by an issuer (including all entities controlled by or under 

common control with the issuer), provided that— 

‘‘(A) the aggregate amount sold to all investors by 

the issuer, including any amount sold in reliance on the 

exemption provided under this paragraph during the 12- 

month period preceding the date of such transaction, is 

not more than $1,000,000; 

‘‘(B) the aggregate amount sold to any investor by 

an issuer, including any amount sold in reliance on the 

exemption provided under this paragraph during the 12- 

month period preceding the date of such transaction, does 

not exceed— 

‘‘(i) the greater of $2,000 or 5 percent of the annual 

income or net worth of such investor, as applicable, 

if either the annual income or the net worth of the 

investor is less than $100,000; and 

‘‘(ii) 10 percent of the annual income or net worth 

of such investor, as applicable, not to exceed a maximum aggregate amount sold of $100,000, if either 

the annual income or net worth of the investor is 

equal to or more than $100,000; 

‘‘(C) the transaction is conducted through a broker 

or funding portal that complies with the requirements of 

section 4A(a); and 

‘‘(D) the issuer complies with the requirements of section 4A(b).’’. 

(b) REQUIREMENTS TO QUALIFY FOR CROWDFUNDING EXEMPTION.—The Securities Act of 1933 (15 U.S.C. 77a et seq.) is amended 

by inserting after section 4 the following: 
H. R. 3606—11 

‘‘SEC. 4A. REQUIREMENTS WITH RESPECT TO CERTAIN SMALL TRANSACTIONS. 

‘‘(a) REQUIREMENTS ON INTERMEDIARIES.—A person acting as 

an intermediary in a transaction involving the offer or sale of 

securities for the account of others pursuant to section 4(6) shall— 

‘‘(1) register with the Commission as— 

‘‘(A) a broker; or 

‘‘(B) a funding portal (as defined in section 3(a)(80) 

of the Securities Exchange Act of 1934); 

‘‘(2) register with any applicable self-regulatory organization (as defined in section 3(a)(26) of the Securities Exchange 

Act of 1934); 

‘‘(3) provide such disclosures, including disclosures related 

to risks and other investor education materials, as the Commission shall, by rule, determine appropriate; 

‘‘(4) ensure that each investor— 

‘‘(A) reviews investor-education information, in accordance with standards established by the Commission, by 

rule; 

‘‘(B) positively affirms that the investor understands 

that the investor is risking the loss of the entire investment, and that the investor could bear such a loss; and 

‘‘(C) answers questions demonstrating— 

‘‘(i) an understanding of the level of risk generally 

applicable to investments in startups, emerging 

businesses, and small issuers; 

‘‘(ii) an understanding of the risk of illiquidity; 

and 

‘‘(iii) an understanding of such other matters as 

the Commission determines appropriate, by rule; 

‘‘(5) take such measures to reduce the risk of fraud with 

respect to such transactions, as established by the Commission, 

by rule, including obtaining a background and securities 

enforcement regulatory history check on each officer, director, 

and person holding more than 20 percent of the outstanding 

equity of every issuer whose securities are offered by such 

person; 

‘‘(6) not later than 21 days prior to the first day on which 

securities are sold to any investor (or such other period as 

the Commission may establish), make available to the Commission and to potential investors any information provided by 

the issuer pursuant to subsection (b); 

‘‘(7) ensure that all offering proceeds are only provided 

to the issuer when the aggregate capital raised from all investors is equal to or greater than a target offering amount, 

and allow all investors to cancel their commitments to invest, 

as the Commission shall, by rule, determine appropriate; 

‘‘(8) make such efforts as the Commission determines appropriate, by rule, to ensure that no investor in a 12-month period 

has purchased securities offered pursuant to section 4(6) that, 

in the aggregate, from all issuers, exceed the investment limits 

set forth in section 4(6)(B); 

‘‘(9) take such steps to protect the privacy of information 

collected from investors as the Commission shall, by rule, determine appropriate; 
H. R. 3606—12 

‘‘(10) not compensate promoters, finders, or lead generators 

for providing the broker or funding portal with the personal 

identifying information of any potential investor; 

‘‘(11) prohibit its directors, officers, or partners (or any 

person occupying a similar status or performing a similar function) from having any financial interest in an issuer using 

its services; and 

‘‘(12) meet such other requirements as the Commission 

may, by rule, prescribe, for the protection of investors and 

in the public interest. 

‘‘(b) REQUIREMENTS FOR ISSUERS.—For purposes of section 4(6), 

an issuer who offers or sells securities shall— 

‘‘(1) file with the Commission and provide to investors 

and the relevant broker or funding portal, and make available 

to potential investors— 

‘‘(A) the name, legal status, physical address, and 

website address of the issuer; 

‘‘(B) the names of the directors and officers (and any 

persons occupying a similar status or performing a similar 

function), and each person holding more than 20 percent 

of the shares of the issuer; 

‘‘(C) a description of the business of the issuer and 

the anticipated business plan of the issuer; 

‘‘(D) a description of the financial condition of the 

issuer, including, for offerings that, together with all other 

offerings of the issuer under section 4(6) within the preceding 12-month period, have, in the aggregate, target 

offering amounts of— ‘‘(i) $100,000 or less— 

‘‘(I) the income tax returns filed by the issuer 

for the most recently completed year (if any); and 

‘‘(II) financial statements of the issuer, which 

shall be certified by the principal executive officer 

of the issuer to be true and complete in all material 

respects; 

‘‘(ii) more than $100,000, but not more than 

$500,000, financial statements reviewed by a public 

accountant who is independent of the issuer, using 

professional standards and procedures for such review 

or standards and procedures established by the 

Commission, by rule, for such purpose; and ‘‘(iii) more than $500,000 (or such other amount 

as the Commission may establish, by rule), audited 

financial statements; 

‘‘(E) a description of the stated purpose and intended 

use of the proceeds of the offering sought by the issuer 

with respect to the target offering amount; 

‘‘(F) the target offering amount, the deadline to reach 

the target offering amount, and regular updates regarding 

the progress of the issuer in meeting the target offering 

amount; 

‘‘(G) the price to the public of the securities or the 

method for determining the price, provided that, prior to 

sale, each investor shall be provided in writing the final 

price and all required disclosures, with a reasonable opportunity to rescind the commitment to purchase the securities; 
H. R. 3606—13 

‘‘(H) a description of the ownership and capital structure of the issuer, including— 

‘‘(i) terms of the securities of the issuer being 

offered and each other class of security of the issuer, 

including how such terms may be modified, and a 

summary of the differences between such securities, 

including how the rights of the securities being offered 

may be materially limited, diluted, or qualified by the 

rights of any other class of security of the issuer; 

‘‘(ii) a description of how the exercise of the rights 

held by the principal shareholders of the issuer could 

negatively impact the purchasers of the securities being 

offered; 

‘‘(iii) the name and ownership level of each existing 

shareholder who owns more than 20 percent of any 

class of the securities of the issuer; 

‘‘(iv) how the securities being offered are being 

valued, and examples of methods for how such securities may be valued by the issuer in the future, 

including during subsequent corporate actions; and 

‘‘(v) the risks to purchasers of the securities 

relating to minority ownership in the issuer, the risks 

associated with corporate actions, including additional 

issuances of shares, a sale of the issuer or of assets 

of the issuer, or transactions with related parties; and 

‘‘(I) such other information as the Commission may, 

by rule, prescribe, for the protection of investors and in 

the public interest; 

‘‘(2) not advertise the terms of the offering, except for 

notices which direct investors to the funding portal or broker; 

‘‘(3) not compensate or commit to compensate, directly or 

indirectly, any person to promote its offerings through communication channels provided by a broker or funding portal, without taking such steps as the Commission shall, by rule, require 

to ensure that such person clearly discloses the receipt, past 

or prospective, of such compensation, upon each instance of 

such promotional communication; 

‘‘(4) not less than annually, file with the Commission and 

provide to investors reports of the results of operations and 

financial statements of the issuer, as the Commission shall, 

by rule, determine appropriate, subject to such exceptions and 

termination dates as the Commission may establish, by rule; 

and 

‘‘(5) comply with such other requirements as the Commission may, by rule, prescribe, for the protection of investors 

and in the public interest. 

‘‘(c) LIABILITY FOR MATERIAL MISSTATEMENTS AND OMISSIONS.— ‘‘(1) ACTIONS AUTHORIZED.— ‘‘(A) IN GENERAL.—Subject to paragraph (2), a person 

who purchases a security in a transaction exempted by 

the provisions of section 4(6) may bring an action against 

an issuer described in paragraph (2), either at law or 

in equity in any court of competent jurisdiction, to recover 

the consideration paid for such security with interest 

thereon, less the amount of any income received thereon, 

upon the tender of such security, or for damages if such 

person no longer owns the security. 
H. R. 3606—14 

‘‘(B) LIABILITY.—An action brought under this paragraph shall be subject to the provisions of section 12(b) 

and section 13, as if the liability were created under section 

12(a)(2). 

‘‘(2) APPLICABILITY.—An issuer shall be liable in an action 

under paragraph (1), if the issuer— 

‘‘(A) by the use of any means or instruments of 

transportation or communication in interstate commerce 

or of the mails, by any means of any written or oral 

communication, in the offering or sale of a security in 

a transaction exempted by the provisions of section 4(6), 

makes an untrue statement of a material fact or omits 

to state a material fact required to be stated or necessary 

in order to make the statements, in the light of the circumstances under which they were made, not misleading, 

provided that the purchaser did not know of such untruth 

or omission; and 

‘‘(B) does not sustain the burden of proof that such 

issuer did not know, and in the exercise of reasonable 

care could not have known, of such untruth or omission. 

‘‘(3) DEFINITION.—As used in this subsection, the term 

‘issuer’ includes any person who is a director or partner of 

the issuer, and the principal executive officer or officers, principal financial officer, and controller or principal accounting 

officer of the issuer (and any person occupying a similar status 

or performing a similar function) that offers or sells a security 

in a transaction exempted by the provisions of section 4(6), 

and any person who offers or sells the security in such offering. 

‘‘(d) INFORMATION AVAILABLE TO STATES.—The Commission 

shall make, or shall cause to be made by the relevant broker 

or funding portal, the information described in subsection (b) and 

such other information as the Commission, by rule, determines 

appropriate, available to the securities commission (or any agency 

or office performing like functions) of each State and territory 

of the United States and the District of Columbia. 

‘‘(e) RESTRICTIONS ON SALES.—Securities issued pursuant to 

a transaction described in section 4(6)— 

‘‘(1) may not be transferred by the purchaser of such securities during the 1-year period beginning on the date of purchase, 

unless such securities are transferred— 

‘‘(A) to the issuer of the securities; 

‘‘(B) to an accredited investor; 

‘‘(C) as part of an offering registered with the Commission; or 

‘‘(D) to a member of the family of the purchaser or 

the equivalent, or in connection with the death or divorce 

of the purchaser or other similar circumstance, in the 

discretion of the Commission; and 

‘‘(2) shall be subject to such other limitations as the 

Commission shall, by rule, establish. 

‘‘(f) APPLICABILITY.—Section 4(6) shall not apply to transactions 

involving the offer or sale of securities by any issuer that— 

‘‘(1) is not organized under and subject to the laws of 

a State or territory of the United States or the District of 

Columbia; 
H. R. 3606—15 

‘‘(2) is subject to the requirement to file reports pursuant 

to section 13 or section 15(d) of the Securities Exchange Act 

of 1934; 

‘‘(3) is an investment company, as defined in section 3 

of the Investment Company Act of 1940, or is excluded from 

the definition of investment company by section 3(b) or section 

3(c) of that Act; or 

‘‘(4) the Commission, by rule or regulation, determines 

appropriate. 

‘‘(g) RULE OF CONSTRUCTION.—Nothing in this section or section 

4(6) shall be construed as preventing an issuer from raising capital 

through methods not described under section 4(6). 

‘‘(h) CERTAIN CALCULATIONS.— 

‘‘(1) DOLLAR AMOUNTS.—Dollar amounts in section 4(6) and 

subsection (b) of this section shall be adjusted by the Commission not less frequently than once every 5 years, by notice 

published in the Federal Register to reflect any change in 

the Consumer Price Index for All Urban Consumers published 

by the Bureau of Labor Statistics. 

‘‘(2) INCOME AND NET WORTH.—The income and net worth 

of a natural person under section 4(6)(B) shall be calculated 

in accordance with any rules of the Commission under this 

title regarding the calculation of the income and net worth, 

respectively, of an accredited investor.’’. 

(c) RULEMAKING.—Not later than 270 days after the date of 

enactment of this Act, the Securities and Exchange Commission 

(in this title referred to as the ‘‘Commission’’) shall issue such 

rules as the Commission determines may be necessary or appropriate for the protection of investors to carry out sections 4(6) 

and section 4A of the Securities Act of 1933, as added by this 

title. In carrying out this section, the Commission shall consult 

with any securities commission (or any agency or office performing 

like functions) of the States, any territory of the United States, 

and the District of Columbia, which seeks to consult with the 

Commission, and with any applicable national securities association. 

(d) DISQUALIFICATION.— (1) IN GENERAL.—Not later than 270 days after the date 

of enactment of this Act, the Commission shall, by rule, establish disqualification provisions under which— 

(A) an issuer shall not be eligible to offer securities 

pursuant to section 4(6) of the Securities Act of 1933, 

as added by this title; and 

(B) a broker or funding portal shall not be eligible 

to effect or participate in transactions pursuant to that 

section 4(6). 

(2) INCLUSIONS.—Disqualification provisions required by 

this subsection shall— 

(A) be substantially similar to the provisions of section 

230.262 of title 17, Code of Federal Regulations (or any 

successor thereto); and 

(B) disqualify any offering or sale of securities by a 

person that— 

(i) is subject to a final order of a State securities 

commission (or an agency or officer of a State performing like functions), a State authority that supervises or examines banks, savings associations, or credit 

unions, a State insurance commission (or an agency 
H. R. 3606—16 

or officer of a State performing like functions), an 

appropriate Federal banking agency, or the National 

Credit Union Administration, that— 

(I) bars the person from— 

(aa) association with an entity regulated 

by such commission, authority, agency, or 

officer; 

(bb) engaging in the business of securities, 

insurance, or banking; or 

(cc) engaging in savings association or 

credit union activities; or 

(II) constitutes a final order based on a violation of any law or regulation that prohibits fraudulent, manipulative, or deceptive conduct within the 

10-year period ending on the date of the filing 

of the offer or sale; or 

(ii) has been convicted of any felony or misdemeanor in connection with the purchase or sale of 

any security or involving the making of any false filing 

with the Commission. 

SEC. 303. EXCLUSION OF CROWDFUNDING INVESTORS FROM SHAREHOLDER CAP. 

(a) EXEMPTION.—Section 12(g) of the Securities Exchange Act 

of 1934 (15 U.S.C. 78l(g)) is amended by adding at the end the 

following: 

‘‘(6) EXCLUSION FOR PERSONS HOLDING CERTAIN SECURI- TIES.—The Commission shall, by rule, exempt, conditionally 

or unconditionally, securities acquired pursuant to an offering 

made under section 4(6) of the Securities Act of 1933 from 

the provisions of this subsection.’’. 

(b) RULEMAKING.—The Commission shall issue a rule to carry 

out section 12(g)(6) of the Securities Exchange Act of 1934 (15 

U.S.C. 78c), as added by this section, not later than 270 days 

after the date of enactment of this Act. 

SEC. 304. FUNDING PORTAL REGULATION. 

(a) EXEMPTION.— (1) IN GENERAL.—Section 3 of the Securities Exchange Act 

of 1934 (15 U.S.C. 78c) is amended by adding at the end 

the following: 

‘‘(h) LIMITED EXEMPTION FOR FUNDING PORTALS.— ‘‘(1) IN GENERAL.—The Commission shall, by rule, exempt, 

conditionally or unconditionally, a registered funding portal 

from the requirement to register as a broker or dealer under 

section 15(a)(1), provided that such funding portal— 

‘‘(A) remains subject to the examination, enforcement, 

and other rulemaking authority of the Commission; 

‘‘(B) is a member of a national securities association 

registered under section 15A; and 

‘‘(C) is subject to such other requirements under this 

title as the Commission determines appropriate under such 

rule. 

‘‘(2) NATIONAL SECURITIES ASSOCIATION MEMBERSHIP.—For 

purposes of sections 15(b)(8) and 15A, the term ‘broker or 

dealer’ includes a funding portal and the term ‘registered broker 

or dealer’ includes a registered funding portal, except to the 

extent that the Commission, by rule, determines otherwise, 
H. R. 3606—17 

provided that a national securities association shall only 

examine for and enforce against a registered funding portal 

rules of such national securities association written specifically 

for registered funding portals.’’. 

(2) RULEMAKING.—The Commission shall issue a rule to 

carry out section 3(h) of the Securities Exchange Act of 1934 

(15 U.S.C. 78c), as added by this subsection, not later than 

270 days after the date of enactment of this Act. 

(b) DEFINITION.—Section 3(a) of the Securities Exchange Act 

of 1934 (15 U.S.C. 78c(a)) is amended by adding at the end the 

following: 

‘‘(80) FUNDING PORTAL.—The term ‘funding portal’ means 

any person acting as an intermediary in a transaction involving 

the offer or sale of securities for the account of others, solely 

pursuant to section 4(6) of the Securities Act of 1933 (15 U.S.C. 

77d(6)), that does not— 

‘‘(A) offer investment advice or recommendations; 

‘‘(B) solicit purchases, sales, or offers to buy the securities offered or displayed on its website or portal; 

‘‘(C) compensate employees, agents, or other persons 

for such solicitation or based on the sale of securities displayed or referenced on its website or portal; 

‘‘(D) hold, manage, possess, or otherwise handle 

investor funds or securities; or 

‘‘(E) engage in such other activities as the Commission, 

by rule, determines appropriate.’’. 

SEC. 305. RELATIONSHIP WITH STATE LAW. 

(a) IN GENERAL.—Section 18(b)(4) of the Securities Act of 1933 

(15 U.S.C. 77r(b)(4)) is amended— 

(1) by redesignating subparagraphs (C) and (D) as subparagraphs (D) and (E), respectively; and 

(2) by inserting after subparagraph (B) the following: 

‘‘(C) section 4(6);’’. 

(b) CLARIFICATION OF THE PRESERVATION OF STATE ENFORCE- MENT AUTHORITY.— (1) IN GENERAL.—The amendments made by subsection 

(a) relate solely to State registration, documentation, and 

offering requirements, as described under section 18(a) of Securities Act of 1933 (15 U.S.C. 77r(a)), and shall have no impact 

or limitation on other State authority to take enforcement 

action with regard to an issuer, funding portal, or any other 

person or entity using the exemption from registration provided 

by section 4(6) of that Act. 

(2) CLARIFICATION OF STATE JURISDICTION OVER UNLAWFUL

CONDUCT OF FUNDING PORTALS AND ISSUERS.—Section 18(c)(1) 

of the Securities Act of 1933 (15 U.S.C. 77r(c)(1)) is amended 

by striking ‘‘with respect to fraud or deceit, or unlawful conduct 

by a broker or dealer, in connection with securities or securities 

transactions.’’ and inserting the following: ‘‘, in connection with 

securities or securities transactions 

‘‘(A) with respect to— 

‘‘(i) fraud or deceit; or 

‘‘(ii) unlawful conduct by a broker or dealer; and 

‘‘(B) in connection to a transaction described under 

section 4(6), with respect to— 

‘‘(i) fraud or deceit; or 
H. R. 3606—18 

‘‘(ii) unlawful conduct by a broker, dealer, funding 

portal, or issuer.’’. 

(c) NOTICE FILINGS PERMITTED.—Section 18(c)(2) of the Securities Act of 1933 (15 U.S.C. 77r(c)(2)) is amended by adding at 

the end the following: 

‘‘(F) FEES NOT PERMITTED ON CROWDFUNDED SECURI- TIES.—Notwithstanding subparagraphs (A), (B), and (C), 

no filing or fee may be required with respect to any security 

that is a covered security pursuant to subsection (b)(4)(B), 

or will be such a covered security upon completion of the 

transaction, except for the securities commission (or any 

agency or office performing like functions) of the State 

of the principal place of business of the issuer, or any 

State in which purchasers of 50 percent or greater of the 

aggregate amount of the issue are residents, provided that 

for purposes of this subparagraph, the term ‘State’ includes 

the District of Columbia and the territories of the United 

States.’’. 

(d) FUNDING PORTALS.— (1) STATE EXEMPTIONS AND OVERSIGHT.—Section 15(i) of 

the Securities Exchange Act of 1934 (15 U.S.C. 78o(i)) is 

amended— 

(A) by redesignating paragraphs (2) and (3) as paragraphs (3) and (4), respectively; and 

(B) by inserting after paragraph (1) the following: 

‘‘(2) FUNDING PORTALS.— ‘‘(A) LIMITATION ON STATE LAWS.—Except as provided 

in subparagraph (B), no State or political subdivision 

thereof may enforce any law, rule, regulation, or other 

administrative action against a registered funding portal 

with respect to its business as such. 

‘‘(B) EXAMINATION AND ENFORCEMENT AUTHORITY.— Subparagraph (A) does not apply with respect to the examination and enforcement of any law, rule, regulation, or 

administrative action of a State or political subdivision 

thereof in which the principal place of business of a registered funding portal is located, provided that such law, 

rule, regulation, or administrative action is not in addition 

to or different from the requirements for registered funding 

portals established by the Commission. 

‘‘(C) DEFINITION.—For purposes of this paragraph, the 

term ‘State’ includes the District of Columbia and the territories of the United States.’’. 

(2) STATE FRAUD AUTHORITY.—Section 18(c)(1) of the Securities Act of 1933 (15 U.S.C. 77r(c)(1)) is amended by striking 

‘‘or dealer’’ and inserting ‘‘, dealer, or funding portal’’. 

TITLE IV—SMALL COMPANY CAPITAL 

FORMATION 

SEC. 401. AUTHORITY TO EXEMPT CERTAIN SECURITIES. 

(a) IN GENERAL.—Section 3(b) of the Securities Act of 1933 

(15 U.S.C. 77c(b)) is amended— 

(1) by striking ‘‘(b) The Commission’’ and inserting the 

following: 

‘‘(b) ADDITIONAL EXEMPTIONS.— 
H. R. 3606—19 

‘‘(1) SMALL ISSUES EXEMPTIVE AUTHORITY.—The Commission’’; and 

(2) by adding at the end the following: 

‘‘(2) ADDITIONAL ISSUES.—The Commission shall by rule 

or regulation add a class of securities to the securities exempted 

pursuant to this section in accordance with the following terms 

and conditions: 

‘‘(A) The aggregate offering amount of all securities 

offered and sold within the prior 12-month period in reliance on the exemption added in accordance with this paragraph shall not exceed $50,000,000. 

‘‘(B) The securities may be offered and sold publicly. 

‘‘(C) The securities shall not be restricted securities 

within the meaning of the Federal securities laws and 

the regulations promulgated thereunder. 

‘‘(D) The civil liability provision in section 12(a)(2) shall 

apply to any person offering or selling such securities. 

‘‘(E) The issuer may solicit interest in the offering 

prior to filing any offering statement, on such terms and 

conditions as the Commission may prescribe in the public 

interest or for the protection of investors. 

‘‘(F) The Commission shall require the issuer to file 

audited financial statements with the Commission 

annually. 

‘‘(G) Such other terms, conditions, or requirements as 

the Commission may determine necessary in the public 

interest and for the protection of investors, which may 

include— 

‘‘(i) a requirement that the issuer prepare and 

electronically file with the Commission and distribute 

to prospective investors an offering statement, and any 

related documents, in such form and with such content 

as prescribed by the Commission, including audited 

financial statements, a description of the issuer’s business operations, its financial condition, its corporate 

governance principles, its use of investor funds, and 

other appropriate matters; and 

‘‘(ii) disqualification provisions under which the 

exemption shall not be available to the issuer or its 

predecessors, affiliates, officers, directors, underwriters, or other related persons, which shall be 

substantially similar to the disqualification provisions 

contained in the regulations adopted in accordance 

with section 926 of the Dodd-Frank Wall Street Reform 

and Consumer Protection Act (15 U.S.C. 77d note). 

‘‘(3) LIMITATION.—Only the following types of securities 

may be exempted under a rule or regulation adopted pursuant 

to paragraph (2): equity securities, debt securities, and debt 

securities convertible or exchangeable to equity interests, 

including any guarantees of such securities. 

‘‘(4) PERIODIC DISCLOSURES.—Upon such terms and conditions as the Commission determines necessary in the public 

interest and for the protection of investors, the Commission 

by rule or regulation may require an issuer of a class of securities exempted under paragraph (2) to make available to investors and file with the Commission periodic disclosures regarding 

the issuer, its business operations, its financial condition, its 
H. R. 3606—20 

corporate governance principles, its use of investor funds, and 

other appropriate matters, and also may provide for the suspension and termination of such a requirement with respect to 

that issuer. 

‘‘(5) ADJUSTMENT.—Not later than 2 years after the date 

of enactment of the Small Company Capital Formation Act 

of 2011 and every 2 years thereafter, the Commission shall 

review the offering amount limitation described in paragraph 

(2)(A) and shall increase such amount as the Commission determines appropriate. If the Commission determines not to 

increase such amount, it shall report to the Committee on 

Financial Services of the House of Representatives and the 

Committee on Banking, Housing, and Urban Affairs of the 

Senate on its reasons for not increasing the amount.’’. 

(b) TREATMENT AS COVERED SECURITIES FOR PURPOSES OF

NSMIA.—Section 18(b)(4) of the Securities Act of 1933 (as amended 

by section 303) (15 U.S.C. 77r(b)(4)) is further amended by inserting 

after subparagraph (C) (as added by such section) the following: 

‘‘(D) a rule or regulation adopted pursuant to section 

3(b)(2) and such security is— 

‘‘(i) offered or sold on a national securities 

exchange; or 

‘‘(ii) offered or sold to a qualified purchaser, as 

defined by the Commission pursuant to paragraph (3) 

with respect to that purchase or sale;’’. 

(c) CONFORMING AMENDMENT.—Section 4(5) of the Securities 

Act of 1933 is amended by striking ‘‘section 3(b)’’ and inserting 

‘‘section 3(b)(1)’’. 

SEC. 402. STUDY ON THE IMPACT OF STATE BLUE SKY LAWS ON REGULATION A OFFERINGS. 

The Comptroller General shall conduct a study on the impact 

of State laws regulating securities offerings, or ‘‘Blue Sky laws’’, 

on offerings made under Regulation A (17 CFR 230.251 et seq.). 

The Comptroller General shall transmit a report on the findings 

of the study to the Committee on Financial Services of the House 

of Representatives, and the Committee on Banking, Housing, and 

Urban Affairs of the Senate not later than 3 months after the 

date of enactment of this Act. 

TITLE V—PRIVATE COMPANY 

FLEXIBILITY AND GROWTH 

SEC. 501. THRESHOLD FOR REGISTRATION. 

Section 12(g)(1)(A) of the Securities Exchange Act of 1934 (15 

U.S.C. 78l(g)(1)(A)) is amended to read as follows: 

‘‘(A) within 120 days after the last day of its first fiscal 

year ended on which the issuer has total assets exceeding 

$10,000,000 and a class of equity security (other than an 

exempted security) held of record by either— 

‘‘(i) 2,000 persons, or 

‘‘(ii) 500 persons who are not accredited investors (as such 

term is defined by the Commission), and’’. 
H. R. 3606—21 

SEC. 502. EMPLOYEES. 

Section 12(g)(5) of the Securities Exchange Act of 1934 (15 

U.S.C. 78l(g)(5)), as amended by section 302, is amended in subparagraph (A) by adding at the end the following: ‘‘For purposes of 

determining whether an issuer is required to register a security 

with the Commission pursuant to paragraph (1), the definition 

of ‘held of record’ shall not include securities held by persons who 

received the securities pursuant to an employee compensation plan 

in transactions exempted from the registration requirements of 

section 5 of the Securities Act of 1933.’’. 

SEC. 503. COMMISSION RULEMAKING. 

The Securities and Exchange Commission shall revise the definition of ‘‘held of record’’ pursuant to section 12(g)(5) of the Securities Exchange Act of 1934 (15 U.S.C. 78l(g)(5)) to implement the 

amendment made by section 502. The Commission shall also adopt 

safe harbor provisions that issuers can follow when determining 

whether holders of their securities received the securities pursuant 

to an employee compensation plan in transactions that were exempt 

from the registration requirements of section 5 of the Securities 

Act of 1933. 

SEC. 504. COMMISSION STUDY OF ENFORCEMENT AUTHORITY UNDER 

RULE 12G5–1. 

The Securities and Exchange Commission shall examine its 

authority to enforce Rule 12g5–1 to determine if new enforcement 

tools are needed to enforce the anti-evasion provision contained 

in subsection (b)(3) of the rule, and shall, not later than 120 days 

after the date of enactment of this Act transmit its recommendations 

to Congress. 

TITLE VI—CAPITAL EXPANSION 

SEC. 601. SHAREHOLDER THRESHOLD FOR REGISTRATION. 

(a) AMENDMENTS TO SECTION 12 OF THE SECURITIES EXCHANGE

ACT OF 1934.—Section 12(g) of the Securities Exchange Act of 

1934 (15 U.S.C. 78l(g)) is further amended— 

(1) in paragraph (1), by amending subparagraph (B) to 

read as follows: 

‘‘(B) in the case of an issuer that is a bank or a bank 

holding company, as such term is defined in section 2 of the 

Bank Holding Company Act of 1956 (12 U.S.C. 1841), not 

later than 120 days after the last day of its first fiscal year 

ended after the effective date of this subsection, on which 

the issuer has total assets exceeding $10,000,000 and a class 

of equity security (other than an exempted security) held of 

record by 2,000 or more persons,’’; and 

(2) in paragraph (4), by striking ‘‘three hundred’’ and 

inserting ‘‘300 persons, or, in the case of a bank or a bank 

holding company, as such term is defined in section 2 of the 

Bank Holding Company Act of 1956 (12 U.S.C. 1841), 1,200 

persons’’. 

(b) AMENDMENTS TO SECTION 15 OF THE SECURITIES EXCHANGE

ACT OF 1934.—Section 15(d) of the Securities Exchange Act of 

1934 (15 U.S.C. 78o(d)) is amended, in the third sentence, by 

striking ‘‘three hundred’’ and inserting ‘‘300 persons, or, in the 

case of bank or a bank holding company, as such term is defined 
H. R. 3606—22 

in section 2 of the Bank Holding Company Act of 1956 (12 U.S.C. 

1841), 1,200 persons’’. 

SEC. 602. RULEMAKING. 

Not later than 1 year after the date of enactment of this 

Act, the Securities and Exchange Commission shall issue final 

regulations to implement this title and the amendments made 

by this title. 

TITLE VII—OUTREACH ON CHANGES TO 

THE LAW 

SEC. 701. OUTREACH BY THE COMMISSION. 

The Securities and Exchange Commission shall provide online 

information and conduct outreach to inform small and medium 

sized businesses, women owned businesses, veteran owned 

businesses, and minority owned businesses of the changes made 

by this Act. 

Speaker of the House of Representatives. 

Vice President of the United States and

President of the Senate.