I 116th CONGRESS 1st Session H. R. 3768 IN THE HOUSE OF REPRESENTATIVES July 16, 2019 Mr. Budd introduced the following bill; which was referred to the Committee on Financial Services A BILL To amend the Securities Exchange Act of 1934 to create a safe harbor for finders and private placement brokers, and for other purposes.

1. Short title This Act may be cited as the Unlocking Capital for Small Businesses Act of 2019 . 2. Safe harbors for private placement brokers and finders (a) In general Section 15 of the Securities Exchange Act of 1934 ( 15 U.S.C. 78o ) is amended by adding at the end the following: (p) Private placement broker safe harbor (1) Registration requirements Not later than 180 days after the date of the enactment of this subsection the Commission shall promulgate regulations with respect to private placement brokers that are no more stringent than those imposed on funding portals. (2) National securities associations Not later than 180 days after the date of the enactment of this subsection the Commission shall promulgate regulations that require the rules of any national securities association to allow a private placement broker to become a member of such national securities association subject to reduced membership requirements consistent with this subsection. (3) Disclosures required Before effecting a transaction, a private placement broker shall disclose clearly and conspicuously, in writing, to all parties to the transaction as a result of the broker’s activities— (A) that the broker is acting as a private placement broker; (B) the amount of any payment or anticipated payment for services rendered as a private placement broker in connection with such transaction; (C) the person to whom any such payment is made; (D) any beneficial interest in the issuer, direct or indirect, of the private placement broker, of a member of the immediate family of the private placement broker, of an associated person of the private placement broker, or of a member of the immediate family of such associated person. (4) Private placement broker defined In this subsection, the term private placement broker means a person that— (A) receives transaction-based compensation— (i) for effecting a transaction by— (I) introducing an issuer of securities and a buyer of such securities in connection with the sale of a business effected as the sale of securities; or (II) introducing an issuer of securities and a buyer of such securities in connection with the placement of securities in transactions that are exempt from registration requirements under the Securities Act of 1933; and (ii) that is not with respect to— (I) a class of publicly traded securities; (II) the securities of an investment company (as defined in section 3 of the Investment Company Act of 1940); or (III) a variable or equity-indexed annuity or other variable or equity-indexed life insurance product; (B) with respect to a transaction for which such transaction-based compensation is received— (i) does not handle or take possession of the funds or securities; and (ii) does not engage in an activity that requires registration as an investment adviser under State or Federal law; and (C) is not a finder as defined under subsection (q). (q) Finder safe harbor (1) Nonregistration A finder is exempt from the registration requirements of this Act. (2) National securities associations A finder shall not be required to become a member of any national securities association. (3) Finder defined In this subsection, the term finder means a person described in paragraphs (A) and (B) of subsection (p)(4) that— (A) receives transaction-based compensation of equal to or less than $500,000 in any calendar year; (B) receives transaction-based compensation in connection with transactions that result in a single issuer selling securities valued at equal to or less than $15 million in any calendar year; (C) receives transaction-based compensation in connection with transactions that result in any combination of issuers selling securities valued at equal to or less than $30 million in any calendar year; or (D) receives transaction-based compensation in connection with fewer than 16 transactions that are not part of the same offering or are otherwise unrelated in any calendar year. . (b) Validity of contracts with registered private placement brokers and finders Section 29 of the Securities Exchange Act ( 15 U.S.C. 78cc ) is amended by adding at the end the following: (d) Subsection (b) shall not apply to a contract made for a transaction if— (1) the transaction is one in which the issuer engaged the services of a broker or dealer that is not registered under this Act with respect to such transaction; (2) such issuer received a self-certification from such broker or dealer certifying that such broker or dealer is a registered private placement broker under section 15(p) or a finder under section 15(q); and (3) the issuer either did not know that such self-certification was false or did not have a reasonable basis to believe that such self-certification was false. . (c) Removal of private placement brokers from definitions of broker (1) Records and reports on monetary instruments transactions Section 5312 of title 31, United States Code, is amended in subsection (a)(2)(G) by inserting with the exception of a private placement broker as defined in section 15(p)(4) of the Securities Exchange Act of 1934 ( 15 U.S.C. 78o(p)(4) ) before the semicolon at the end. (2) Securities Exchange Act of 1934 Section 3(a)(4) of the Securities Exchange Act of 1934 ( 15 U.S.C. 78c(a)(4) ) is amended by adding at the end the following: (G) Private placement brokers A private placement broker as defined in section 15(p)(4) is not a broker for the purposes of this Act. . 3. Limitations on State law Section 15(i) of the Securities Exchange Act of 1934 ( 15 U.S.C. 78o(i) ) is amended— (1) by redesignating paragraph (3) as paragraph (4); and (2) by inserting after paragraph (2) the following: (3) Private placement brokers and finders (A) In general No State or political subdivision thereof may enforce any law, rule, regulation, or other administrative action that imposes greater registration, audit, financial recordkeeping, or reporting requirements on a private placement broker or finder than those that are required under subsections (p) and (q), respectively. (B) Definition of State For purposes of this paragraph, the term State includes the District of Columbia and each territory of the United States. .