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[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2930 Placed on Calendar Senate (PCS)]

                                                       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.

    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 ``Entrepreneur Access to Capital 
Act''.

SEC. 2. 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, provided that--
                    ``(A) the aggregate amount sold within the previous 
                12-month period in reliance upon this exemption is--
                            ``(i) $1,000,000, as such amount is 
                        adjusted by the Commission to reflect the 
                        annual change in the Consumer Price Index for 
                        All Urban Consumers published by the Bureau of 
                        Labor Statistics, or less; or
                            ``(ii) if the issuer provides potential 
                        investors with audited financial statements, 
                        $2,000,000, as such amount is adjusted by the 
                        Commission to reflect the annual change in the 
                        Consumer Price Index for All Urban Consumers 
                        published by the Bureau of Labor Statistics, or 
                        less;
                    ``(B) the aggregate amount sold to any investor in 
                reliance on this exemption within the previous 12-month 
                period does not exceed the lesser of--
                            ``(i) $10,000, as such amount is adjusted 
                        by the Commission to reflect the annual change 
                        in the Consumer Price Index for All Urban 
                        Consumers published by the Bureau of Labor 
                        Statistics; and
                            ``(ii) 10 percent of such investor's annual 
                        income;
                    ``(C) in the case of a transaction involving an 
                intermediary between the issuer and the investor, such 
                intermediary complies with the requirements under 
                section 4A(a); and
                    ``(D) in the case of a transaction not involving an 
                intermediary between the issuer and the investor, the 
                issuer complies with the requirements under section 
                4A(b).''.
    (b) Requirements to Qualify for Crowdfunding Exemption.--The 
Securities Act of 1933 is amended by inserting after section 4 the 
following:

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

    ``(a) Requirements on Intermediaries.--For purposes of section 
4(6), a person acting as an intermediary in a transaction involving the 
offer or sale of securities shall comply with the requirements of this 
subsection if the intermediary--
            ``(1) warns investors, including on the intermediary's 
        website used for the offer and sale of such securities, of the 
        speculative nature generally applicable to investments in 
        startups, emerging businesses, and small issuers, including 
        risks in the secondary market related to illiquidity;
            ``(2) warns investors that they are subject to the 
        restriction on sales requirement described under subsection 
        (e);
            ``(3) takes reasonable measures to reduce the risk of fraud 
        with respect to such transaction;
            ``(4) provides the Commission with the intermediary's 
        physical address, website address, and the names of the 
        intermediary and employees of the intermediary, and keep such 
        information up-to-date;
            ``(5) provides the Commission with continuous investor-
        level access to the intermediary's website;
            ``(6) requires each potential investor to answer questions 
        demonstrating--
                    ``(A) an understanding of the level of risk 
                generally applicable to investments in startups, 
                emerging businesses, and small issuers;
                    ``(B) an understanding of the risk of illiquidity; 
                and
                    ``(C) such other areas as the Commission may 
                determine appropriate by rule or regulation;
            ``(7) requires the issuer to state a target offering amount 
        and a deadline to reach the target offering amount and ensure 
        the third party custodian described under paragraph (10) 
        withholds offering proceeds until aggregate capital raised from 
        investors other than the issuer is no less than 60 percent of 
        the target offering amount;
            ``(8) carries out a background check on the issuer's 
        principals;
            ``(9) provides the Commission and potential investors with 
        notice of the offering, not later than the first day securities 
        are offered to potential investors, including--
                    ``(A) the issuer's name, legal status, physical 
                address, and website address;
                    ``(B) the names of the issuer's principals;
                    ``(C) the stated purpose and intended use of the 
                proceeds of the offering sought by the issuer; and
                    ``(D) the target offering amount and the deadline 
                to reach the target offering amount;
            ``(10) outsources cash-management functions to a qualified 
        third party custodian, such as a broker or dealer registered 
        under section 15(b)(1) of the Securities Exchange Act of 1934 
        or an insured depository institution;
            ``(11) maintains such books and records as the Commission 
        determines appropriate;
            ``(12) makes available on the intermediary's website a 
        method of communication that permits the issuer and investors 
        to communicate with one another;
            ``(13) provides the Commission with a notice upon 
        completion of the offering, which shall include the aggregate 
        offering amount and the number of purchasers; and
            ``(14) does not offer investment advice.
    ``(b) Requirements on Issuers if No Intermediary.--For purposes of 
section 4(6), an issuer who offers or sells securities without an 
intermediary shall comply with the requirements of this subsection if 
the issuer--
            ``(1) warns investors, including on the issuer's website, 
        of the speculative nature generally applicable to investments 
        in startups, emerging businesses, and small issuers, including 
        risks in the secondary market related to illiquidity;
            ``(2) warns investors that they are subject to the 
        restriction on sales requirement described under subsection 
        (e);
            ``(3) takes reasonable measures to reduce the risk of fraud 
        with respect to such transaction;
            ``(4) provides the Commission with the issuer's physical 
        address, website address, and the names of the principals and 
        employees of the issuers, and keeps such information up-to-
        date;
            ``(5) provides the Commission with continuous investor-
        level access to the issuer's website;
            ``(6) requires each potential investor to answer questions 
        demonstrating--
                    ``(A) an understanding of the level of risk 
                generally applicable to investments in startups, 
                emerging businesses, and small issuers;
                    ``(B) an understanding of the risk of illiquidity; 
                and
                    ``(C) such other areas as the Commission may 
                determine appropriate by rule or regulation;
            ``(7) states a target offering amount and ensures that the 
        third party custodian described under paragraph (9) withholds 
        offering proceeds until the aggregate capital raised from 
        investors other than the issuer is no less than 60 percent of 
        the target offering amount;
            ``(8) provides the Commission with notice of the offering, 
        not later than the first day securities are offered to 
        potential investors, including--
                    ``(A) the stated purpose and intended use of the 
                proceeds of the offering sought by the issuer; and
                    ``(B) the target offering amount and the deadline 
                to reach the target offering amount;
            ``(9) outsources cash-management functions to a qualified 
        third party custodian, such as a broker or dealer registered 
        under section 15(b)(1) of the Securities Exchange Act of 1934 
        or an insured depository institution;
            ``(10) maintains such books and records as the Commission 
        determines appropriate;
            ``(11) makes available on the issuer's website a method of 
        communication that permits the issuer and investors to 
        communicate with one another;
            ``(12) does not offer investment advice;
            ``(13) provides the Commission with a notice upon 
        completion of the offering, which shall include the aggregate 
        offering amount and the number of purchasers; and
            ``(14) discloses to potential investors, on the issuer's 
        website, that the issuer has an interest in the issuance.
    ``(c) Verification of Income.--For purposes of section 4(6), an 
issuer or intermediary may rely on certifications as to annual income 
provided by the person to whom the securities are sold to verify the 
investor's income.
    ``(d) Information Available to States.--The Commission shall make 
the notices described under subsections (a)(9), (a)(13), (b)(8), and 
(b)(13) and the information described under subsections (a)(4) and 
(b)(4) available to the States.
    ``(e) Restriction on Sales.--With respect to a transaction 
involving the issuance of securities described under section 4(6), a 
purchaser may not transfer such securities during the 1-year period 
beginning on the date of purchase, unless such securities are sold to--
            ``(1) the issuer of such securities; or
            ``(2) an accredited investor.
    ``(f) Construction.--
            ``(1) No registration as broker.--With respect to a 
        transaction described under section 4(6) involving an 
        intermediary, such intermediary shall not be required to 
        register as a broker under section 15(a)(1) of the Securities 
        Exchange Act of 1934 solely by reason of participation in such 
        transaction.
            ``(2) No preclusion of other capital raising.--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).''.
    (c) Rulemaking.--Not later than 180 days after the date of the 
enactment of this Act, the Securities and Exchange Commission shall 
issue such rules as may be necessary to carry out section 4A of the 
Securities Act of 1933. In issuing such rules, the Commission shall 
consider the costs and benefits of the action.
    (d) Disqualification.--Not later than 180 days after the date of 
the enactment of this Act, the Securities and Exchange Commission shall 
by rule or regulation establish disqualification provisions under which 
an issuer shall not be eligible to utilize the exemption under section 
4(6) of the Securities Act of 1933 based on the disciplinary history of 
the issuer or its predecessors, affiliates, officers, directors, or 
persons fulfilling similar roles. The Commission shall also establish 
disqualification provisions under which an intermediary shall not be 
eligible to act as an intermediary in connection with an offering 
utilizing the exemption under section 4(6) of the Securities Act of 
1933 based on the disciplinary history of the intermediary or its 
predecessors, affiliates, officers, directors, or persons fulfilling 
similar roles. Such provisions 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).

SEC. 3. EXCLUSION OF CROWDFUNDING INVESTORS FROM SHAREHOLDER CAP.

    Section 12(g)(5) of the Securities Exchange Act of 1934 (15 U.S.C. 
78l(g)(5)) is amended--
            (1) by striking ``(5) For the purposes'' and inserting:
            ``(5) Definitions.--
                    ``(A) In general.--For the purposes''; and
            (2) by adding at the end the following:
                    ``(B) Exclusion for persons holding certain 
                securities.--For purposes of this subsection, 
                securities held by persons who purchase such securities 
                in transactions described under section 4(6) of the 
                Securities Act of 1933 shall not be deemed to be `held 
                of record'.''.

SEC. 4. PREEMPTION OF 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 Enforcement 
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, intermediary, or 
        any other person or entity using the exemption from 
        registration provided by section 4(6) of such Act.
            (2) Clarification of state jurisdiction over unlawful 
        conduct of intermediaries, issuers, and custodians.--Section 
        18(c)(1) of the Securities Act of 1933 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, with respect to--
                    ``(A) fraud or deceit;
                    ``(B) unlawful conduct by a broker or dealer; and
                    ``(C) with respect to a transaction described under 
                section 4(6), unlawful conduct by an intermediary, 
                issuer, or custodian.''.

            Passed the House of Representatives November 3, 2011.

            Attest:

                                                 KAREN L. HAAS,

                                                                 Clerk.
                                                       Calendar No. 224

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.

_______________________________________________________________________

                            November 8, 2011

            Read the second time and placed on the calendar
```