I 

116TH CONGRESS 

1ST SESSION H. R. 3768 

To amend the Securities Exchange Act of 1934 to create a safe harbor 

for finders and private placement brokers, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

JULY 16, 2019 

Mr. BUDD introduced the following bill; which was referred to the Committee 

on Financial Services 

A BILL 

To amend the Securities Exchange Act of 1934 to create 

a safe harbor for finders and private placement brokers, 

and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Unlocking Capital for 

5 Small Businesses Act of 2019’’. 

6 SEC. 2. SAFE HARBORS FOR PRIVATE PLACEMENT BRO7 KERS AND FINDERS. 

8 (a) IN GENERAL.—Section 15 of the Securities Ex9 change Act of 1934 (15 U.S.C. 78o) is amended by adding 

10 at the end the following: 


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1 ‘‘(p) PRIVATE PLACEMENT BROKER SAFE HAR2 BOR.— 

3 ‘‘(1) REGISTRATION REQUIREMENTS.—Not 

4 later than 180 days after the date of the enactment 

5 of this subsection the Commission shall promulgate 

6 regulations with respect to private placement brokers 

7 that are no more stringent than those imposed on 

8 funding portals. 

9 ‘‘(2) NATIONAL SECURITIES ASSOCIATIONS.— 

10 Not later than 180 days after the date of the enact11 ment of this subsection the Commission shall pro12 mulgate regulations that require the rules of any na13 tional securities association to allow a private place14 ment broker to become a member of such national 

15 securities association subject to reduced membership 

16 requirements consistent with this subsection. 

17 ‘‘(3) DISCLOSURES REQUIRED.—Before effect18 ing a transaction, a private placement broker shall 

19 disclose clearly and conspicuously, in writing, to all 

20 parties to the transaction as a result of the broker’s 

21 activities— 

22 ‘‘(A) that the broker is acting as a private 

23 placement broker; 

24 ‘‘(B) the amount of any payment or antici25 pated payment for services rendered as a priVerDate Sep 11 2014 01:49 Jul 26, 2019 Jkt 034408 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H3768.IH H3768

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1 vate placement broker in connection with such 

2 transaction; 

3 ‘‘(C) the person to whom any such pay4 ment is made; 

5 ‘‘(D) any beneficial interest in the issuer, 

6 direct or indirect, of the private placement 

7 broker, of a member of the immediate family of 

8 the private placement broker, of an associated 

9 person of the private placement broker, or of a 

10 member of the immediate family of such associ11 ated person. 

12 ‘‘(4) PRIVATE PLACEMENT BROKER DE13 FINED.—In this subsection, the term ‘private place14 ment broker’ means a person that— 

15 ‘‘(A) receives transaction-based compensa16 tion— 

17 ‘‘(i) for effecting a transaction by— 

18 ‘‘(I) introducing an issuer of se19 curities and a buyer of such securities 

20 in connection with the sale of a busi21 ness effected as the sale of securities; 

22 or 

23 ‘‘(II) introducing an issuer of se24 curities and a buyer of such securities 

25 in connection with the placement of 


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1 securities in transactions that are ex2 empt from registration requirements 

3 under the Securities Act of 1933; and 

4 ‘‘(ii) that is not with respect to— 

5 ‘‘(I) a class of publicly traded se6 curities; 

7 ‘‘(II) the securities of an invest8 ment company (as defined in section 3 

9 of the Investment Company Act of 

10 1940); or 

11 ‘‘(III) a variable or equity-in12 dexed annuity or other variable or eq13 uity-indexed life insurance product; 

14 ‘‘(B) with respect to a transaction for 

15 which such transaction-based compensation is 

16 received— 

17 ‘‘(i) does not handle or take posses18 sion of the funds or securities; and 

19 ‘‘(ii) does not engage in an activity 

20 that requires registration as an investment 

21 adviser under State or Federal law; and 

22 ‘‘(C) is not a finder as defined under sub23 section (q). 

24 ‘‘(q) FINDER SAFE HARBOR.— 


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1 ‘‘(1) NONREGISTRATION.—A finder is exempt 

2 from the registration requirements of this Act. 

3 ‘‘(2) NATIONAL SECURITIES ASSOCIATIONS.—A 

4 finder shall not be required to become a member of 

5 any national securities association. 

6 ‘‘(3) FINDER DEFINED.—In this subsection, the 

7 term ‘finder’ means a person described in para8 graphs (A) and (B) of subsection (p)(4) that— 

9 ‘‘(A) receives transaction-based compensa10 tion of equal to or less than $500,000 in any 

11 calendar year; 

12 ‘‘(B) receives transaction-based compensa13 tion in connection with transactions that result 

14 in a single issuer selling securities valued at 

15 equal to or less than $15 million in any cal16 endar year; 

17 ‘‘(C) receives transaction-based compensa18 tion in connection with transactions that result 

19 in any combination of issuers selling securities 

20 valued at equal to or less than $30 million in 

21 any calendar year; or 

22 ‘‘(D) receives transaction-based compensa23 tion in connection with fewer than 16 trans24 actions that are not part of the same offering 


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1 or are otherwise unrelated in any calendar 

2 year.’’. 

3 (b) VALIDITY OF CONTRACTS WITH REGISTERED

4 PRIVATE PLACEMENT BROKERS AND FINDERS.—Section 

5 29 of the Securities Exchange Act (15 U.S.C. 78cc) is 

6 amended by adding at the end the following: 

7 ‘‘(d) Subsection (b) shall not apply to a contract 

8 made for a transaction if— 

9 ‘‘(1) the transaction is one in which the issuer 

10 engaged the services of a broker or dealer that is not 

11 registered under this Act with respect to such trans12 action; 

13 ‘‘(2) such issuer received a self-certification 

14 from such broker or dealer certifying that such 

15 broker or dealer is a registered private placement 

16 broker under section 15(p) or a finder under section 

17 15(q); and 

18 ‘‘(3) the issuer either did not know that such 

19 self-certification was false or did not have a reason20 able basis to believe that such self-certification was 

21 false.’’. 

22 (c) REMOVAL OF PRIVATE PLACEMENT BROKERS

23 FROM DEFINITIONS OF BROKER.— 

24 (1) RECORDS AND REPORTS ON MONETARY IN25 STRUMENTS TRANSACTIONS.—Section 5312 of title 


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1 31, United States Code, is amended in subsection 

2 (a)(2)(G) by inserting ‘‘with the exception of a pri3 vate placement broker as defined in section 15(p)(4) 

4 of the Securities Exchange Act of 1934 (15 U.S.C. 

5 78o(p)(4))’’ before the semicolon at the end. 

6 (2) SECURITIES EXCHANGE ACT OF 1934.—Sec7 tion 3(a)(4) of the Securities Exchange Act of 1934 

8 (15 U.S.C. 78c(a)(4)) is amended by adding at the 

9 end the following: 

10 ‘‘(G) PRIVATE PLACEMENT BROKERS.—A 

11 private placement broker as defined in section 

12 15(p)(4) is not a broker for the purposes of this 

13 Act.’’. 

14 SEC. 3. LIMITATIONS ON STATE LAW. 

15 Section 15(i) of the Securities Exchange Act of 1934 

16 (15 U.S.C. 78o(i)) is amended— 

17 (1) by redesignating paragraph (3) as para18 graph (4); and 

19 (2) by inserting after paragraph (2) the fol20 lowing: 

21 ‘‘(3) PRIVATE PLACEMENT BROKERS AND FIND22 ERS.— 

23 ‘‘(A) IN GENERAL.—No State or political 

24 subdivision thereof may enforce any law, rule, 

25 regulation, or other administrative action that 


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1 imposes greater registration, audit, financial 

2 recordkeeping, or reporting requirements on a 

3 private placement broker or finder than those 

4 that are required under subsections (p) and (q), 

5 respectively. 

6 ‘‘(B) DEFINITION OF STATE.—For pur7 poses of this paragraph, the term ‘State’ in8 cludes the District of Columbia and each terri9 tory of the United States.’’. 

Æ 


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