IB 
Union Calendar No. 175 
112TH CONGRESS 
1ST SESSION H. R. 2930 
[Report No. 112–262] 
To amend the securities laws to provide for registration exemptions for 
certain crowdfunded securities, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
SEPTEMBER 14, 2011 
Mr. MCHENRY introduced the following bill; which was referred to the 
Committee on Financial Services 
OCTOBER 31, 2011 
Additional sponsors: Mr. SCHWEIKERT, Mr. DOLD, Mr. DUFFY, Mrs. 
SCHMIDT, and Mr. BRADY of Texas 
OCTOBER 31, 2011 
Reported with an amendment, committed to the Committee of the Whole 
House on the State of the Union, and ordered to be printed 
[Strike out all after the enacting clause and insert the part printed in italic] 
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Be it enacted by the Senate and House of Representa-
tives 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 Se-
curities Act of 1933 (15 U.S.C. 77d) is amended by add-
ing at the end the following: 
‘‘(6) transactions involving the issuance of secu-
rities for which— 
‘‘(A) the aggregate annual amount raised 
through
the
issue
of
the
securities
is 
$5,000,000 or less; and 
‘‘(B) individual investments in the securi-
ties are limited to an aggregate annual amount 
equal to the lesser of— 
‘‘(i) $10,000; and 
‘‘(ii) 10 percent of the investor’s an-
nual income.’’. 
(b) VERIFICATION OF INCOME.—For purposes of sec-
tion 4(6) of the Securities Act of 1933, an issuer may rely 
on certifications provided by investors. 
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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 ‘‘For the purposes’’ and insert-
ing: 
‘‘(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, the term ‘held of record’ shall not 
include holders of securities issued pursuant to 
transactions described under section 4(6) of the 
Securities Act of 1933.’’. 
SEC. 4. PREEMPTION OF STATE LAW. 
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 (D) and (E), respectively; and 
(2) by inserting after subparagraph (B) the fol-
lowing: 
‘‘(C) section 4(6);’’. 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Entrepreneur Access to 
Capital Act’’. 
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SEC. 2. CROWDFUNDING EXEMPTION. 
(a) SECURITIES ACT OF 1933.—Section 4 of the Secu-
rities Act of 1933 (15 U.S.C. 77d) is amended by adding 
at the end the following: 
‘‘(6) transactions involving the issuance of secu-
rities for which— 
‘‘(A) the aggregate annual amount raised 
through the issue of the securities is— 
‘‘(i) $1,000,000 or less; or 
‘‘(ii) if the issuer provides potential in-
vestors with audited financial statements, 
$2,000,000 or less; 
‘‘(B) individual investments in the securi-
ties are limited to an aggregate annual amount 
equal to the lesser of— 
‘‘(i) $10,000; and 
‘‘(ii) 10 percent of the investor’s an-
nual income; 
‘‘(C) in the case of a transaction involving 
an intermediary between the issuer and the in-
vestor, such intermediary complies with the re-
quirements under section 4A(a); and 
‘‘(D) in the case of a transaction not involv-
ing an intermediary between the issuer and the 
investor, the issuer complies with the require-
ments under section 4A(b).’’. 
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(b) REQUIREMENTS TO QUALIFY FOR CROWDFUNDING 
EXEMPTION.—The Securities Act of 1933 is amended by in-
serting after section 4 the following: 
‘‘SEC. 4A. REQUIREMENTS WITH RESPECT TO CERTAIN 
SMALL TRANSACTIONS. 
‘‘(a) REQUIREMENTS ON INTERMEDIARIES.—For pur-
poses of section 4(6), a person acting as an intermediary 
in a transaction involving the issuance of securities shall 
comply with the requirements of this subsection if the inter-
mediary— 
‘‘(1) 
warns 
investors, 
including 
on 
the 
intermediary’s website, of the speculative nature gen-
erally 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 sub-
section (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 
person, and keep such information up-to-date; 
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‘‘(5) provides the Commission with continuous 
investor-level access to the intermediary’s website; 
‘‘(6) requires each potential investor to answer 
questions demonstrating competency in— 
‘‘(A) recognition of the level of risk gen-
erally applicable to investments in startups, 
emerging businesses, and small issuers; 
‘‘(B) risk of illiquidity; and 
‘‘(C) such other areas as the Commission 
may determine appropriate; 
‘‘(7) requires the issuer to state a target offering 
amount and withhold capital formation 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 with basic notice 
of the offering, not later than the first day funds are 
solicited from potential investors, including— 
‘‘(A) the issuer’s name, legal status, phys-
ical address, and website address; 
‘‘(B) the names of the issuer’s principals; 
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‘‘(C) the stated purpose and intended use of 
the capital formation funds sought by the issuer; 
and 
‘‘(D) the target offering amount; 
‘‘(10) outsources cash-management functions to a 
qualified third party custodian, such as a traditional 
broker or dealer or 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 an-
other; and 
‘‘(13) does not offer investment advice. 
‘‘(b) REQUIREMENTS
ON ISSUERS
IF NO INTER-
MEDIARY.—For purposes of section 4(6), an issuer who of-
fers 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; 
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‘‘(2) warns investors that they are subject to the 
restriction on sales requirement described under sub-
section (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 competency in— 
‘‘(A) recognition of the level of risk gen-
erally applicable to investments in startups, 
emerging businesses, and small issuers; 
‘‘(B) risk of illiquidity; and 
‘‘(C) such other areas as the Commission 
may determine appropriate; 
‘‘(7) states a target offering amount and with-
holds capital formation proceeds until the aggregate 
capital raised from investors other than the issuer is 
no less than 60 percent of the target offering amount; 
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‘‘(8) provides the Commission with basic notice 
of the offering, not later than the first day funds are 
solicited from potential investors, including— 
‘‘(A) the stated purpose and intended use of 
the capital formation funds sought by the issuer; 
and 
‘‘(B) the target offering amount; 
‘‘(9) outsources cash-management functions to a 
qualified third party custodian, such as a traditional 
broker or dealer or 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; and 
‘‘(13) 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 sec-
tion 4(6), an issuer or intermediary may rely on certifi-
cations provided by an investor to verify the investor’s in-
come. 
‘‘(d) INFORMATION AVAILABLE TO STATES.—The Com-
mission shall make the notices described under subsections 
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(a)(9) and (b)(8) and the information described under sub-
sections (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), an investor may not sell 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 TREATMENT AS BROKER.—With respect 
to a transaction described under section 4(6) involv-
ing an intermediary, such intermediary shall not be 
treated as a broker under the securities laws solely by 
reason of participation in such transaction. 
‘‘(2) NO PRECLUSION OF OTHER CAPITAL RAIS-
ING.—Nothing in this section or section 4(6) shall be 
construed as preventing an issuer from raising cap-
ital through methods not described under section 
4(6).’’. 
(c) RULEMAKING.—Not later than 90 days after the 
date of the enactment of this Act, the Securities and Ex-
change Commission shall issue such rules as may be nec-
essary to carry out section 4A of the Securities Act of 1933. 
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In issuing such rules, the Commission shall carry out the 
cost-benefit analysis required under section 2(b) of such Act. 
(d) DISQUALIFICATION.—Not later than 90 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 a person shall not 
be eligible to utilize the exemption under section 4(6) of the 
Securities Act of 1933 or to participate in the affairs of 
an intermediary facilitating the use of that exemption. 
Such provisions shall be substantially similar to the dis-
qualification provisions contained in the regulations adopt-
ed 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 in-
serting: 
‘‘(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 sub-
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section, the term ‘held of record’ shall not include 
holders of securities issued pursuant to trans-
actions described under section 4(6) of the Secu-
rities Act of 1933.’’. 
SEC. 4. PREEMPTION OF STATE LAW. 
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 fol-
lowing: 
‘‘(C) section 4(6);’’. 
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Union Calendar No. 175 
112TH CONGRESS 
1ST SESSION 
H. R. 2930 
[Report No. 112–262] 
A BILL 
To amend the securities laws to provide for reg-
istration exemptions for certain crowdfunded se-
curities, and for other purposes. 
OCTOBER 31, 2011 
Reported with an amendment, committed to the Com-
mittee of the Whole House on the State of the Union, 
and ordered to be printed 
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