112TH CONGRESS 

1ST SESSION H. R. 2930 

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, 
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1 SECTION 1. SHORT TITLE. 

2 This Act may be cited as the ‘‘Entrepreneur Access 

3 to Capital Act’’. 

4 SEC. 2. CROWDFUNDING EXEMPTION. 

5 (a) SECURITIES ACT OF 1933.—Section 4 of the Se6 curities Act of 1933 (15 U.S.C. 77d) is amended by add7 ing at the end the following: 

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

9 securities by an issuer, provided that— 

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

11 previous 12-month period in reliance upon this 

12 exemption is— 

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

14 adjusted by the Commission to reflect the 

15 annual change in the Consumer Price 

16 Index for All Urban Consumers published 

17 by the Bureau of Labor Statistics, or less; 

18 or 

19 ‘‘(ii) if the issuer provides potential 

20 investors with audited financial statements, 

21 $2,000,000, as such amount is adjusted by 

22 the Commission to reflect the annual 

23 change in the Consumer Price Index for 

24 All Urban Consumers published by the Bu25 reau of Labor Statistics, or less; 
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1 ‘‘(B) the aggregate amount sold to any in2 vestor in reliance on this exemption within the 

3 previous 12-month period does not exceed the 

4 lesser of— 

5 ‘‘(i) $10,000, as such amount is ad6 justed by the Commission to reflect the an7 nual change in the Consumer Price Index 

8 for All Urban Consumers published by the 

9 Bureau of Labor Statistics; and 

10 ‘‘(ii) 10 percent of such investor’s an11 nual income; 

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

13 an intermediary between the issuer and the in14 vestor, such intermediary complies with the re15 quirements under section 4A(a); and 

16 ‘‘(D) in the case of a transaction not in17 volving an intermediary between the issuer and 

18 the investor, the issuer complies with the re19 quirements under section 4A(b).’’. 

20 (b) REQUIREMENTS TO QUALIFY FOR

21 CROWDFUNDING EXEMPTION.—The Securities Act of 

22 1933 is amended by inserting after section 4 the following: 
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1 ‘‘SEC. 4A. REQUIREMENTS WITH RESPECT TO CERTAIN 

2 SMALL TRANSACTIONS. 

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

4 purposes of section 4(6), a person acting as an inter5 mediary in a transaction involving the offer or sale of secu6 rities shall comply with the requirements of this subsection 

7 if the intermediary— 

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

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

10 such securities, of the speculative nature generally 

11 applicable to investments in startups, emerging busi12 nesses, and small issuers, including risks in the sec13 ondary market related to illiquidity; 

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

15 the restriction on sales requirement described under 

16 subsection (e); 

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

18 risk of fraud with respect to such transaction; 

19 ‘‘(4) provides the Commission with the 

20 intermediary’s physical address, website address, 

21 and the names of the intermediary and employees of 

22 the intermediary, and keep such information up-to23 date; 

24 ‘‘(5) provides the Commission with continuous 

25 investor-level access to the intermediary’s website; 
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1 ‘‘(6) requires each potential investor to answer 

2 questions demonstrating— 

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

4 generally applicable to investments in startups, 

5 emerging businesses, and small issuers; 

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

7 illiquidity; and 

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

9 may determine appropriate by rule or regula10 tion; 

11 ‘‘(7) requires the issuer to state a target offer12 ing amount and a deadline to reach the target offer13 ing amount and ensure the third party custodian de14 scribed under paragraph (10) withholds offering pro15 ceeds until aggregate capital raised from investors 

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

17 the target offering amount; 

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

19 issuer’s principals; 

20 ‘‘(9) provides the Commission and potential in21 vestors with notice of the offering, not later than the 

22 first day securities are offered to potential investors, 

23 including— 

24 ‘‘(A) the issuer’s name, legal status, phys25 ical address, and website address; 
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1 ‘‘(B) the names of the issuer’s principals; 

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

3 of the proceeds of the offering sought by the 

4 issuer; and 

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

6 deadline to reach the target offering amount; 

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

8 a qualified third party custodian, such as a broker 

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

10 Securities Exchange Act of 1934 or an insured de11 pository institution; 

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

13 Commission determines appropriate; 

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

15 website a method of communication that permits the 

16 issuer and investors to communicate with one an17 other; 

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

19 upon completion of the offering, which shall include 

20 the aggregate offering amount and the number of 

21 purchasers; and 

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

23 ‘‘(b) REQUIREMENTS ON ISSUERS IF NO INTER24 MEDIARY.—For purposes of section 4(6), an issuer who 

25 offers or sells securities without an intermediary shall 
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1 comply with the requirements of this subsection if the 

2 issuer— 

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

4 website, of the speculative nature generally applica5 ble to investments in startups, emerging businesses, 

6 and small issuers, including risks in the secondary 

7 market related to illiquidity; 

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

9 the restriction on sales requirement described under 

10 subsection (e); 

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

12 risk of fraud with respect to such transaction; 

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

14 physical address, website address, and the names of 

15 the principals and employees of the issuers, and 

16 keeps such information up-to-date; 

17 ‘‘(5) provides the Commission with continuous 

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

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

20 questions demonstrating— 

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

22 generally applicable to investments in startups, 

23 emerging businesses, and small issuers; 

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

25 illiquidity; and 
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1 ‘‘(C) such other areas as the Commission 

2 may determine appropriate by rule or regula3 tion; 

4 ‘‘(7) states a target offering amount and en5 sures that the third party custodian described under 

6 paragraph (9) withholds offering proceeds until the 

7 aggregate capital raised from investors other than 

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

9 offering amount; 

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

11 offering, not later than the first day securities are 

12 offered to potential investors, including— 

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

14 of the proceeds of the offering sought by the 

15 issuer; and 

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

17 deadline to reach the target offering amount; 

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

19 a qualified third party custodian, such as a broker 

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

21 Securities Exchange Act of 1934 or an insured de22 pository institution; 

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

24 Commission determines appropriate; 
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1 ‘‘(11) makes available on the issuer’s website a 

2 method of communication that permits the issuer 

3 and investors to communicate with one another; 

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

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

6 upon completion of the offering, which shall include 

7 the aggregate offering amount and the number of 

8 purchasers; and 

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

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

11 the issuance. 

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

13 section 4(6), an issuer or intermediary may rely on certifi14 cations as to annual income provided by the person to 

15 whom the securities are sold to verify the investor’s in16 come. 

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

18 Commission shall make the notices described under sub19 sections (a)(9), (a)(13), (b)(8), and (b)(13) and the infor20 mation described under subsections (a)(4) and (b)(4) 

21 available to the States. 

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

23 transaction involving the issuance of securities described 

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

2 of purchase, unless such securities are sold to— 

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

4 ‘‘(2) an accredited investor. 

5 ‘‘(f) CONSTRUCTION.— 

6 ‘‘(1) NO REGISTRATION AS BROKER.—With re7 spect to a transaction described under section 4(6) 

8 involving an intermediary, such intermediary shall 

9 not be required to register as a broker under section 

10 15(a)(1) of the Securities Exchange Act of 1934 

11 solely by reason of participation in such transaction. 

12 ‘‘(2) NO PRECLUSION OF OTHER CAPITAL RAIS13 ING.—Nothing in this section or section 4(6) shall 

14 be construed as preventing an issuer from raising 

15 capital through methods not described under section 

16 4(6).’’. 

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

18 date of the enactment of this Act, the Securities and Ex19 change Commission shall issue such rules as may be nec20 essary to carry out section 4A of the Securities Act of 

21 1933. In issuing such rules, the Commission shall consider 

22 the costs and benefits of the action. 

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

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

25 and Exchange Commission shall by rule or regulation es-
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1 tablish disqualification provisions under which an issuer 

2 shall not be eligible to utilize the exemption under section 

3 4(6) of the Securities Act of 1933 based on the discipli4 nary history of the issuer or its predecessors, affiliates, 

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

6 Commission shall also establish disqualification provisions 

7 under which an intermediary shall not be eligible to act 

8 as an intermediary in connection with an offering utilizing 

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

10 1933 based on the disciplinary history of the intermediary 

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

12 fulfilling similar roles. Such provisions shall be substan13 tially similar to the disqualification provisions contained 

14 in the regulations adopted in accordance with section 926 

15 of the Dodd-Frank Wall Street Reform and Consumer 

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

17 SEC. 3. EXCLUSION OF CROWDFUNDING INVESTORS FROM 

18 SHAREHOLDER CAP. 

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

20 1934 (15 U.S.C. 78l(g)(5)) is amended— 

21 (1) by striking ‘‘(5) For the purposes’’ and in22 serting: 

23 ‘‘(5) DEFINITIONS.— 

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

25 and 
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1 (2) by adding at the end the following: 

2 ‘‘(B) EXCLUSION FOR PERSONS HOLDING

3 CERTAIN SECURITIES.—For purposes of this 

4 subsection, securities held by persons who pur5 chase such securities in transactions described 

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

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

8 SEC. 4. PREEMPTION OF STATE LAW. 

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

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

11 (1) by redesignating subparagraphs (C) and 

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

13 (2) by inserting after subparagraph (B) the fol14 lowing: 

15 ‘‘(C) section 4(6);’’. 

16 (b) CLARIFICATION OF THE PRESERVATION OF

17 STATE ENFORCEMENT AUTHORITY.— 

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

19 subsection (a) relate solely to State registration, doc20 umentation, and offering requirements, as described 

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

22 U.S.C. 77r(a)), and shall have no impact or limita23 tion on other State authority to take enforcement 

24 action with regard to an issuer, intermediary, or any 
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1 other person or entity using the exemption from reg2 istration provided by section 4(6) of such Act. 

3 (2) CLARIFICATION OF STATE JURISDICTION

4 OVER UNLAWFUL CONDUCT OF INTERMEDIARIES, 

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

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

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

8 broker or dealer, in connection with securities or se9 curities transactions.’’ and inserting the following: ‘‘, 

10 in connection with securities or securities trans11 actions, with respect to— 

12 ‘‘(A) fraud or deceit; 

13 ‘‘(B) unlawful conduct by a broker or deal14 er; and 

15 ‘‘(C) with respect to a transaction de16 scribed under section 4(6), unlawful conduct by 

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

Passed the House of Representatives November 3, 

2011. 

Attest: 

Clerk. 
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 se-