Startup Capital Modernization Act of 2014

Bill: 113-hr-4565
Sponsor: full_name: Rep. McHenry, Patrick T. [R-NC-10]
Introduced: 2014-05-06
Policy area: Finance and Financial Sector
Subjects: Accounting and auditing

Administrative law and regulatory procedures

Business investment and capital

Business records

Federal preemption

Government information and archives

Licensing and registrations

Securities

Securities and Exchange Commission (SEC)

Small business
Latest action: action_date: 2014-05-22
text: Ordered to be Reported by the Yeas and Nays: 31 - 28.

Summaries:
action_date: 2014-05-06
action_desc: Introduced in House
text: <p> Startup Capital Modernization Act of 2014 - Amends the Securities Act of 1933 (Act) to increase from $5 million to $10 million the maximum aggregate amount of securities exempt from its purview due to either the small amount involved, or the limited character of the public offering.</p> <p>Preempts state requirements governing securities registration, documentation, and offerings in connection with small issues related to small company capital formation. </p> <p>Declares that this Act shall have no impact on state enforcement authority over the unlawful conduct of issuers, intermediaries, or custodians who are exempt from federal registration requirements under the Act.</p> <p>Amends the Securities Exchange Act of 1934 to exempt certain small issues from its securities registration requirements if the issuer: (1) has filed audited financial statements with the Securities and Exchange Commission (SEC), and (2) is in compliance with all periodic disclosures required by the SEC.</p> <p> Exempts from prohibitions relating to interstate commerce and the mails any transaction where: (1) each purchaser is an accredited investor; and (2) if the securities are offered by means of any general solicitation or general advertising, the seller verifies that the purchaser is an accredited investor. </p> <p>Denies such an exemption to transactions where the seller is: (1) either an issuer, its subsidiaries or parent; (2) a dealer; or (3) an underwriter acting on behalf of the issuer, its subsidiaries, or parent, which receives compensation from the issuer with respect to such sale.</p>

tv_txt: I 113th CONGRESS 2d Session H. R. 4565 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.

1. Short title This Act may be cited as the Startup Capital Modernization Act of 2014 . 2. Increase in small issues exemptive authority 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 . 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 pursuant 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 described 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 enforcement action with regard to an issuer, intermediary, or any other person or entity using the exemption 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 (C) by adding at the end the following: (C) with respect to a transaction described under section 3(b), unlawful conduct by an issuer or custodian. . 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. (c) Rule of applicability The exclusion provided 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. 5. Exempted transactions (a) Exempted transactions Section 4 of the Securities 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 investor, as that term is defined in section 230.501(a) of title 17, Code of Federal Regulations (or any successor thereto); and (B) if any securities sold in reliance on subsection (a)(7) are offered by means of any 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 compensation 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 exempt offerings Section 18(b)(4) of the Securities Act of 1933 ( 15 U.S.C. 77r(b)(4) ) is amended— (1) by redesignating the second subparagraph (D) and subparagraph (E) as subparagraphs (E) and (F), respectively; (2) in subparagraph (E), as so redesignated, by striking ; or and inserting a semicolon; (3) in subparagraph (F), as so redesignated, by striking the period and inserting ; or ; and (4) by adding at the end the following new subparagraph: (G) section 4(a)(7). .