II 

Calendar No. 224 

112TH CONGRESS 

1ST SESSION H. R. 2930 

IN THE SENATE OF THE UNITED STATES 

NOVEMBER 7, 2011 

Received; read the first time 

NOVEMBER 8, 2011 

Read the second time and placed on the calendar 

AN ACT 

To amend the securities laws to provide for registration 

exemptions for certain crowdfunded securities, 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 ‘‘Entrepreneur Access 

5 to Capital Act’’. 

6 SEC. 2. CROWDFUNDING EXEMPTION. 

7 (a) SECURITIES ACT OF 1933.—Section 4 of the Se8 curities Act of 1933 (15 U.S.C. 77d) is amended by add9 ing at the end the following: 


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

2 securities by an issuer, provided that— 

3 ‘‘(A) the aggregate amount sold within the 

4 previous 12-month period in reliance upon this 

5 exemption is— 

6 ‘‘(i) $1,000,000, as such amount is 

7 adjusted by the Commission to reflect the 

8 annual change in the Consumer Price 

9 Index for All Urban Consumers published 

10 by the Bureau of Labor Statistics, or less; 

11 or 

12 ‘‘(ii) if the issuer provides potential 

13 investors with audited financial statements, 

14 $2,000,000, as such amount is adjusted by 

15 the Commission to reflect the annual 

16 change in the Consumer Price Index for 

17 All Urban Consumers published by the Bu18 reau of Labor Statistics, or less; 

19 ‘‘(B) the aggregate amount sold to any in20 vestor in reliance on this exemption within the 

21 previous 12-month period does not exceed the 

22 lesser of— 

23 ‘‘(i) $10,000, as such amount is ad24 justed by the Commission to reflect the an25 nual change in the Consumer Price Index 


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1 for All Urban Consumers published by the 

2 Bureau of Labor Statistics; and 

3 ‘‘(ii) 10 percent of such investor’s an4 nual income; 

5 ‘‘(C) in the case of a transaction involving 

6 an intermediary between the issuer and the in7 vestor, such intermediary complies with the re8 quirements under section 4A(a); and 

9 ‘‘(D) in the case of a transaction not in10 volving an intermediary between the issuer and 

11 the investor, the issuer complies with the re12 quirements under section 4A(b).’’. 

13 (b) REQUIREMENTS TO QUALIFY FOR

14 CROWDFUNDING EXEMPTION.—The Securities Act of 

15 1933 is amended by inserting after section 4 the following: 

16 ‘‘SEC. 4A. REQUIREMENTS WITH RESPECT TO CERTAIN 

17 SMALL TRANSACTIONS. 

18 ‘‘(a) REQUIREMENTS ON INTERMEDIARIES.—For 

19 purposes of section 4(6), a person acting as an inter20 mediary in a transaction involving the offer or sale of secu21 rities shall comply with the requirements of this subsection 

22 if the intermediary— 

23 ‘‘(1) warns investors, including on the 

24 intermediary’s website used for the offer and sale of 

25 such securities, of the speculative nature generally 


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1 applicable to investments in startups, emerging busi2 nesses, and small issuers, including risks in the sec3 ondary market related to illiquidity; 

4 ‘‘(2) warns investors that they are subject to 

5 the restriction on sales requirement described under 

6 subsection (e); 

7 ‘‘(3) takes reasonable measures to reduce the 

8 risk of fraud with respect to such transaction; 

9 ‘‘(4) provides the Commission with the 

10 intermediary’s physical address, website address, 

11 and the names of the intermediary and employees of 

12 the intermediary, and keep such information up-to13 date; 

14 ‘‘(5) provides the Commission with continuous 

15 investor-level access to the intermediary’s website; 

16 ‘‘(6) requires each potential investor to answer 

17 questions demonstrating— 

18 ‘‘(A) an understanding of the level of risk 

19 generally applicable to investments in startups, 

20 emerging businesses, and small issuers; 

21 ‘‘(B) an understanding of the risk of 

22 illiquidity; and 

23 ‘‘(C) such other areas as the Commission 

24 may determine appropriate by rule or regula25 tion; 


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1 ‘‘(7) requires the issuer to state a target offer2 ing amount and a deadline to reach the target offer3 ing amount and ensure the third party custodian de4 scribed under paragraph (10) withholds offering pro5 ceeds until aggregate capital raised from investors 

6 other than the issuer is no less than 60 percent of 

7 the target offering amount; 

8 ‘‘(8) carries out a background check on the 

9 issuer’s principals; 

10 ‘‘(9) provides the Commission and potential in11 vestors with notice of the offering, not later than the 

12 first day securities are offered to potential investors, 

13 including— 

14 ‘‘(A) the issuer’s name, legal status, phys15 ical address, and website address; 

16 ‘‘(B) the names of the issuer’s principals; 

17 ‘‘(C) the stated purpose and intended use 

18 of the proceeds of the offering sought by the 

19 issuer; and 

20 ‘‘(D) the target offering amount and the 

21 deadline to reach the target offering amount; 

22 ‘‘(10) outsources cash-management functions to 

23 a qualified third party custodian, such as a broker 

24 or dealer registered under section 15(b)(1) of the 


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1 Securities Exchange Act of 1934 or an insured de2 pository institution; 

3 ‘‘(11) maintains such books and records as the 

4 Commission determines appropriate; 

5 ‘‘(12) makes available on the intermediary’s 

6 website a method of communication that permits the 

7 issuer and investors to communicate with one an8 other; 

9 ‘‘(13) provides the Commission with a notice 

10 upon completion of the offering, which shall include 

11 the aggregate offering amount and the number of 

12 purchasers; and 

13 ‘‘(14) does not offer investment advice. 

14 ‘‘(b) REQUIREMENTS ON ISSUERS IF NO INTER15 MEDIARY.—For purposes of section 4(6), an issuer who 

16 offers or sells securities without an intermediary shall 

17 comply with the requirements of this subsection if the 

18 issuer— 

19 ‘‘(1) warns investors, including on the issuer’s 

20 website, of the speculative nature generally applica21 ble to investments in startups, emerging businesses, 

22 and small issuers, including risks in the secondary 

23 market related to illiquidity; 


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1 ‘‘(2) warns investors that they are subject to 

2 the restriction on sales requirement described under 

3 subsection (e); 

4 ‘‘(3) takes reasonable measures to reduce the 

5 risk of fraud with respect to such transaction; 

6 ‘‘(4) provides the Commission with the issuer’s 

7 physical address, website address, and the names of 

8 the principals and employees of the issuers, and 

9 keeps such information up-to-date; 

10 ‘‘(5) provides the Commission with continuous 

11 investor-level access to the issuer’s website; 

12 ‘‘(6) requires each potential investor to answer 

13 questions demonstrating— 

14 ‘‘(A) an understanding of the level of risk 

15 generally applicable to investments in startups, 

16 emerging businesses, and small issuers; 

17 ‘‘(B) an understanding of the risk of 

18 illiquidity; and 

19 ‘‘(C) such other areas as the Commission 

20 may determine appropriate by rule or regula21 tion; 

22 ‘‘(7) states a target offering amount and en23 sures that the third party custodian described under 

24 paragraph (9) withholds offering proceeds until the 

25 aggregate capital raised from investors other than 


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1 the issuer is no less than 60 percent of the target 

2 offering amount; 

3 ‘‘(8) provides the Commission with notice of the 

4 offering, not later than the first day securities are 

5 offered to potential investors, including— 

6 ‘‘(A) the stated purpose and intended use 

7 of the proceeds of the offering sought by the 

8 issuer; and 

9 ‘‘(B) the target offering amount and the 

10 deadline to reach the target offering amount; 

11 ‘‘(9) outsources cash-management functions to 

12 a qualified third party custodian, such as a broker 

13 or dealer registered under section 15(b)(1) of the 

14 Securities Exchange Act of 1934 or an insured de15 pository institution; 

16 ‘‘(10) maintains such books and records as the 

17 Commission determines appropriate; 

18 ‘‘(11) makes available on the issuer’s website a 

19 method of communication that permits the issuer 

20 and investors to communicate with one another; 

21 ‘‘(12) does not offer investment advice; 

22 ‘‘(13) provides the Commission with a notice 

23 upon completion of the offering, which shall include 

24 the aggregate offering amount and the number of 

25 purchasers; and 


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1 ‘‘(14) discloses to potential investors, on the 

2 issuer’s website, that the issuer has an interest in 

3 the issuance. 

4 ‘‘(c) VERIFICATION OF INCOME.—For purposes of 

5 section 4(6), an issuer or intermediary may rely on certifi6 cations as to annual income provided by the person to 

7 whom the securities are sold to verify the investor’s in8 come. 

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

10 Commission shall make the notices described under sub11 sections (a)(9), (a)(13), (b)(8), and (b)(13) and the infor12 mation described under subsections (a)(4) and (b)(4) 

13 available to the States. 

14 ‘‘(e) RESTRICTION ON SALES.—With respect to a 

15 transaction involving the issuance of securities described 

16 under section 4(6), a purchaser may not transfer such se17 curities during the 1-year period beginning on the date 

18 of purchase, unless such securities are sold to— 

19 ‘‘(1) the issuer of such securities; or 

20 ‘‘(2) an accredited investor. 

21 ‘‘(f) CONSTRUCTION.— 

22 ‘‘(1) NO REGISTRATION AS BROKER.—With re23 spect to a transaction described under section 4(6) 

24 involving an intermediary, such intermediary shall 

25 not be required to register as a broker under section 


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1 15(a)(1) of the Securities Exchange Act of 1934 

2 solely by reason of participation in such transaction. 

3 ‘‘(2) NO PRECLUSION OF OTHER CAPITAL RAIS4 ING.—Nothing in this section or section 4(6) shall 

5 be construed as preventing an issuer from raising 

6 capital through methods not described under section 

7 4(6).’’. 

8 (c) RULEMAKING.—Not later than 180 days after the 

9 date of the enactment of this Act, the Securities and Ex10 change Commission shall issue such rules as may be nec11 essary to carry out section 4A of the Securities Act of 

12 1933. In issuing such rules, the Commission shall consider 

13 the costs and benefits of the action. 

14 (d) DISQUALIFICATION.—Not later than 180 days 

15 after the date of the enactment of this Act, the Securities 

16 and Exchange Commission shall by rule or regulation es17 tablish disqualification provisions under which an issuer 

18 shall not be eligible to utilize the exemption under section 

19 4(6) of the Securities Act of 1933 based on the discipli20 nary history of the issuer or its predecessors, affiliates, 

21 officers, directors, or persons fulfilling similar roles. The 

22 Commission shall also establish disqualification provisions 

23 under which an intermediary shall not be eligible to act 

24 as an intermediary in connection with an offering utilizing 

25 the exemption under section 4(6) of the Securities Act of 


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1 1933 based on the disciplinary history of the intermediary 

2 or its predecessors, affiliates, officers, directors, or persons 

3 fulfilling similar roles. Such provisions shall be substan4 tially similar to the disqualification provisions contained 

5 in the regulations adopted in accordance with section 926 

6 of the Dodd-Frank Wall Street Reform and Consumer 

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

8 SEC. 3. EXCLUSION OF CROWDFUNDING INVESTORS FROM 

9 SHAREHOLDER CAP. 

10 Section 12(g)(5) of the Securities Exchange Act of 

11 1934 (15 U.S.C. 78l(g)(5)) is amended— 

12 (1) by striking ‘‘(5) For the purposes’’ and in13 serting: 

14 ‘‘(5) DEFINITIONS.— 

15 ‘‘(A) IN GENERAL.—For the purposes’’; 

16 and 

17 (2) by adding at the end the following: 

18 ‘‘(B) EXCLUSION FOR PERSONS HOLDING

19 CERTAIN SECURITIES.—For purposes of this 

20 subsection, securities held by persons who pur21 chase such securities in transactions described 

22 under section 4(6) of the Securities Act of 1933 

23 shall not be deemed to be ‘held of record’.’’. 


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1 SEC. 4. PREEMPTION OF STATE LAW. 

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

3 Act of 1933 (15 U.S.C. 77r(b)(4)) is amended— 

4 (1) by redesignating subparagraphs (C) and 

5 (D) as subparagraphs (D) and (E), respectively; and 

6 (2) by inserting after subparagraph (B) the fol7 lowing: 

8 ‘‘(C) section 4(6);’’. 

9 (b) CLARIFICATION OF THE PRESERVATION OF

10 STATE ENFORCEMENT AUTHORITY.— 

11 (1) IN GENERAL.—The amendments made by 

12 subsection (a) relate solely to State registration, doc13 umentation, and offering requirements, as described 

14 under section 18(a) of Securities Act of 1933 (15 

15 U.S.C. 77r(a)), and shall have no impact or limita16 tion on other State authority to take enforcement 

17 action with regard to an issuer, intermediary, or any 

18 other person or entity using the exemption from reg19 istration provided by section 4(6) of such Act. 

20 (2) CLARIFICATION OF STATE JURISDICTION

21 OVER UNLAWFUL CONDUCT OF INTERMEDIARIES, 

22 ISSUERS, AND CUSTODIANS.—Section 18(c)(1) of the 

23 Securities Act of 1933 is amended by striking ‘‘with 

24 respect to fraud or deceit, or unlawful conduct by a 

25 broker or dealer, in connection with securities or se26 curities transactions.’’ and inserting the following: ‘‘, 


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1 in connection with securities or securities trans2 actions, with respect to— 

3 ‘‘(A) fraud or deceit; 

4 ‘‘(B) unlawful conduct by a broker or deal5 er; and 

6 ‘‘(C) with respect to a transaction de7 scribed under section 4(6), unlawful conduct by 

8 an intermediary, issuer, or custodian.’’. 

Passed the House of Representatives November 3, 

2011. 

Attest: KAREN L. HAAS, 

Clerk. 


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Calendar No. 224 

112TH CONGRESS 

1ST SESSION H. R. 2930 

AN ACT 

To amend the securities laws to provide for regcurities, and for other purposes. istration exemptions for certain crowdfunded seNOVEMBER 8, 2011 

Read the second time and placed on the calendar 


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