114-HR4855 Fix Crowdfunding Act

Legislation
Title	114-HR4855 Fix Crowdfunding Act
Congress	114
Sponsor	Rep. McHenry, Patrick T. (R-NC-10)
Committee(s)	House Financial Services
Status	Died
Keywords	McCarthy
© edegan.com, 2016

(Sec. 2) This bill amends the Securities Act of 1933 to allow a crowdfunding issuer to sell shares through a crowdfunding vehicle.

(Crowdfunding is a method of capital formation in which groups of people pool money, typically composed of small individual contributions, and often via Internet platforms, either to invest in a company or to support an effort by others to accomplish a specific goal.)

A "crowdfunding vehicle" is a company that:

has purposes limited to acquiring, holding, and disposing securities issued by a single company in one or more transactions and made pursuant to crowdfunding exemption transaction requirements; issues only one class of securities; receives no compensation for such acquisition, holding, or disposition of securities; is a co-issuer with the company whose securities it holds; and meets specified requirements related to disclosure obligations and the use of investment advisers. (Sec. 3) The bill amends the Securities Exchange Act of 1934 to revise the conditions upon which the Securities and Exchange Commission (SEC) shall exempt securities issued in crowdfunding transactions from SEC registration requirements.

Under current law, holders of crowdfunded shares do not count toward the shareholder threshold beyond which an issuer is required to register its securities with the SEC, provided that the issuer: (1) is current in its annual reporting obligations, (2) retains the services of a registered transfer agent, and (3) has less than $25 million in assets. The bill maintains this exemption but removes and replaces the conditions upon which it applies. Specifically, holders of crowdfunded shares shall not count toward the shareholder threshold if the issuer has: (1) a public float of less than $75 million, and (2) annual revenues of less than $50 million.

Bill Text

Congressional Bills 114th Congress From the U.S. Government Publishing Office H.R. 4855 Received in Senate (RDS)

114th CONGRESS 2d Session H. R. 4855

_______________________________________________________________________

                  IN THE SENATE OF THE UNITED STATES

                             July 6, 2016

                               Received

_______________________________________________________________________

                                AN ACT

  To amend provisions in the securities laws relating to regulation 
crowdfunding to raise the dollar amount limit and to clarify certain 
 requirements and exclusions for funding portals established by such 
                                 Act.

   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 ``Fix Crowdfunding Act.

SEC. 2. CROWDFUNDING VEHICLES.

   (a) Amendments to the Securities Act of 1933.--The Securities Act 

of 1933 (15 U.S.C. 77a et seq.) is amended--

           (1) in section 4A(f)(3), by inserting ``by any of 
       paragraphs (1) through (14) of before ``section 3(c); and
           (2) in section 4(a)(6)(B), by inserting after ``any 
       investor the following: ``, other than a crowdfunding vehicle 
       (as defined in section 2(a) of the Investment Company Act of 
       1940),.
   (b) Amendments to the Investment Company Act of 1940.--The 

Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.) is amended--

           (1) in section 2(a), by adding at the end the following:
           ``(55) The term `crowdfunding vehicle' means a company--
                   ``(A) whose purpose (as set forth in its 
               organizational documents) is limited to acquiring, 
               holding, and disposing securities issued by a single 
               company in one or more transactions and made pursuant 
               to section 4(a)(6) of the Securities Act of 1933;
                   ``(B) which issues only one class of securities;
                   ``(C) which receives no compensation in connection 
               with such acquisition, holding, or disposition of 
               securities;
                   ``(D) no associated person of which receives any 
               compensation in connection with such acquisition, 
               holding or disposition of securities unless such person 
               is acting as or on behalf of an investment adviser 
               registered under the Investment Advisers Act of 1940 or 
               registered as an investment adviser in the State in 
               which the investment adviser maintains its principal 
               office and place of business;
                   ``(E) the securities of which have been issued in a 
               transaction made pursuant to section 4(a)(6) of the 
               Securities Act of 1933, where both the crowdfunding 
               vehicle and the company whose securities it holds are 
               co-issuers;
                   ``(F) which is current in its ongoing disclosure 
               obligations under Rule 202 of Regulation Crowdfunding 
               (17 CFR 227.202);
                   ``(G) the company whose securities it holds is 
               current in its ongoing disclosure obligations under 
               Rule 202 of Regulation Crowdfunding (17 CFR 227.202); 
               and
                   ``(H) is advised by an investment adviser 
               registered under the Investment Advisers Act of 1940 or 
               registered as an investment adviser in the State in 
               which the investment adviser maintains its principal 
               office and place of business.; and
           (2) in section 3(c), by adding at the end the following:
           ``(15) Any crowdfunding vehicle..

SEC. 3. CROWDFUNDING EXEMPTION FROM REGISTRATION.

   Section 12(g)(6) of the Securities Exchange Act of 1934 (15 U.S.C. 

78l(g)(6)) is amended--

           (1) by striking ``The Commission and inserting the 
       following:
                   ``(A) In general.--The Commission;
           (2) by striking ``section 4(6) and inserting ``section 
       4(a)(6); and
           (3) by adding at the end the following:
                   ``(B) Treatment of securities issued by certain 
               issuers.--An exemption under subparagraph (A) shall be 
               unconditional for securities offered by an issuer that 
               had a public float of less than $75,000,000 as of the 
               last business day of the issuer's most recently 
               completed semiannual period, computed by multiplying 
               the aggregate worldwide number of shares of the 
               issuer's common equity securities held by non-
               affiliates by the price at which such securities were 
               last sold (or the average bid and asked prices of such 
               securities) in the principal market for such securities 
               or, in the event the result of such public float 
               calculation is zero, had annual revenues of less than 
               $50,000,000 as of the issuer's most recently completed 
               fiscal year..

           Passed the House of Representatives July 5, 2016.

           Attest:

                                                KAREN L. HAAS,

                                                                Clerk.