I 
113TH CONGRESS 
2D SESSION 
H. R. 4565 
To amend the securities laws to improve the small company capital formation 
provisions, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
MAY 6, 2014 
Mr. MCHENRY (for himself and Mr. GARRETT) introduced the following bill; 
which was referred to the Committee on Financial Services 
A BILL 
To amend the securities laws to improve the small company 
capital formation provisions, and for other purposes. 
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 ‘‘Startup Capital Mod-
ernization Act of 2014’’. 
SEC. 2. INCREASE IN SMALL ISSUES EXEMPTIVE AUTHOR-
ITY. 
Section 3(b)(1) of the Securities Act of 1933 (15 
U.S.C. 77c(b)(1)) is amended by striking ‘‘$5,000,000’’ 
and inserting ‘‘$10,000,000’’. 
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SEC. 3. PREEMPTION OF STATE LAWS. 
(a) IN GENERAL.—The first subparagraph (D) of 
section 18(b)(4) of the Securities Act of 1933 (15 U.S.C. 
77r(b)(4)) (relating to a rule or regulation adopted pursu-
ant to section 3(b)(2)) is amended by inserting ‘‘section 
3(b)(1) or’’ before ‘‘section 3(b)(2)’’. 
(b) CLARIFICATION
OF
THE
PRESERVATION
OF 
STATE ENFORCEMENT AUTHORITY.— 
(1) IN
GENERAL.—The amendment made by 
subsection (a) relates solely to State registration, 
documentation, and offering requirements, as de-
scribed under section 18(a) of the Securities Act of 
1933 (15 U.S.C. 77r(a)), and shall have no impact 
or limitation on other State authority to take en-
forcement action with regard to an issuer, inter-
mediary, or any other person or entity using the ex-
emption from registration provided by section 
3(b)(1) 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— 
(A) in subparagraph (A), by striking 
‘‘and’’ at the end; 
(B) in subparagraph (B), by striking the 
period at the end and inserting ‘‘; and’’; and 
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(C) by adding at the end the following: 
‘‘(C) with respect to a transaction de-
scribed under section 3(b), unlawful conduct by 
an issuer or custodian.’’. 
SEC. 4. EXCLUSION FROM SHAREHOLDER CAP. 
(a) IN GENERAL.—Section 12(g) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78l(g)) is amended by 
adding at the end the following: 
‘‘(7) EXCLUSION
FOR
SECURITIES
ISSUED 
UNDER REGULATION A PURSUANT TO SECTION 3(b) 
OF
THE
SECURITIES
ACT
OF
1933.—All securities 
issued under Regulation A (17 C.F.R. 230.251 et 
seq.) pursuant to section 3(b) of the Securities Act 
of 1933 shall be exempt from the provisions of this 
subsection if the issuer has filed audited financial 
statements with the Commission and the issuer is in 
compliance with all periodic disclosures required by 
the Commission pursuant to section 3(b)(4) of the 
Securities Act of 1933.’’. 
(b) RULEMAKING.—The Securities and Exchange 
Commission shall issue a rule to carry out section 12(g)(7) 
of the Securities Exchange Act of 1934 (15 U.S.C. 78c), 
as added by this section, not later than 180 days after 
the date of enactment of this section. 
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(c) RULE OF APPLICABILITY.—The exclusion pro-
vided under section 12(g)(7) of the Securities Exchange 
Act of 1934 (15 U.S.C. 78c), as added by this section, 
shall apply to securities issued before, on, or after the date 
of the enactment of this Act. 
SEC. 5. EXEMPTED TRANSACTIONS. 
(a) EXEMPTED TRANSACTIONS.—Section 4 of the Se-
curities Act of 1933 (15 U.S.C. 77d) is amended— 
(1) in subsection (a), by adding at the end the 
following new paragraph: 
‘‘(7) transactions meeting the requirements of 
subsection (d).’’; 
(2) by redesignating the second subsection (b) 
(relating to securities offered and sold in compliance 
with Rule 506 of Regulation D) as subsection (c); 
and 
(3) by adding at the end the following: 
‘‘(d)(1) The transactions referred to in subsection 
(a)(7) are transactions where— 
‘‘(A) each purchaser is an accredited inves-
tor, as that term is defined in section 
230.501(a) of title 17, Code of Federal Regula-
tions (or any successor thereto); and 
‘‘(B) if any securities sold in reliance on 
subsection (a)(7) are offered by means of any 
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general solicitation or general advertising, the 
seller takes reasonable steps to verify, in the 
manner set forth in section 230.506(c)(ii) of 
title 17, Code of Federal Regulations (or any 
successor regulation), that each purchaser is an 
accredited investor. 
‘‘(2) Securities sold in reliance on subsection (a)(7) 
shall be deemed to have been acquired in a transaction 
not involving any public offering. 
‘‘(3) The exemption provided by this subsection shall 
not be available for a transaction where the seller is— 
‘‘(A) an issuer, its subsidiaries or parent; 
‘‘(B) an underwriter acting on behalf of the 
issuer, its subsidiaries or parent, which receives com-
pensation from the issuer with respect to such sale; 
or 
‘‘(C) a dealer. 
‘‘(4) A transaction meeting the requirements of this 
subsection shall be deemed not to be a distribution for 
purposes of section 2(a)(11).’’. 
(b) EXEMPTION IN CONNECTION WITH CERTAIN EX-
EMPT OFFERINGS.—Section 18(b)(4) of the Securities Act 
of 1933 (15 U.S.C. 77r(b)(4)) is amended— 
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