L:\XML\CPRT-112-HPRT-RU00-HR3606FLOOR.XML XML hhalpern 2/27/2012 18:53 hhalpern 02/27/2012 15:43 L:\vr\022712\R022712.005.xml 02/27/2012 18:53:32 hhalpern x:\xx\xxxxxx\xxxxxx.xxx.xml xx/xx/xxxx xx:xx:xx xx hhalpern [Discussion Draft] [Discussion Draft] February 27, 2012 112th CONGRESS 2d Session Rules Committee Print 112-17 Text of H.R. 3606, the Reopening American Capital Markets to Emerging Growth Companies Act of 2011 [Showing the text of H.R. 1070, H.R. 2930, and H.R. 2940 as passed by the House, H.R. 2167 as reported and H.R. 3606 as ordered reported by the Committee on Financial Services, and H.R. 4088 as introduced, along with necessary technical and conforming changes.]
1.
Short title
This Act may be cited as the Jumpstart Our Business Startups Act.
2.
Table of contents
The table of contents of this Act is as follows: Sec. 1. Short title. Sec. 2. Table of contents. Title I—Reopening American Capital Markets to Emerging Growth Companies Sec. 101. Definitions. Sec. 102. Disclosure obligations. Sec. 103. Internal controls audit. Sec. 104. Auditing standards. Sec. 105. Availability of information about emerging growth companies. Sec. 106. Other matters. Sec. 107. Opt-in right for emerging growth companies. Sec. 108. Review of Regulation S-K. Title II—Access to Capital for Job Creators Sec. 201. Modification of exemption. Title III—Entrepreneur Access to Capital Sec. 301. Crowdfunding exemption. Sec. 302. Exclusion of crowdfunding investors from shareholder cap. Sec. 303. Preemption of State law. Title IV—Small Company Capital Formation Sec. 401. Authority to exempt certain securities. Sec. 402. Study on the impact of State Blue Sky laws on Regulation A offerings. Title V—Private Company Flexibility and Growth Sec. 501. Threshold for registration. Sec. 502. Employees. Sec. 503. Commission rulemaking. Title VI—Capital Expansion Sec. 601. Shareholder threshold for registration. Sec. 602. Rulemaking.
<enum>I</enum> <header>Reopening American Capital Markets to Emerging Growth Companies</header> <section id="H237F3454A9D24A51BFCC4A8B7BC549AD"> <enum>101.</enum> <header>Definitions</header> <subsection id="H8E81AAD56A34430F96420804CAE71D8F"> <enum>(a)</enum> <header>Securities Act of 1933</header> <text>Section 2(a) of the Securities Act of 1933 (15 U.S.C. 77b(a)) is amended by adding at the end the following:</text> <quoted-block display-inline="no-display-inline" id="H3E664AD7D7F1457BB2040C6947499E75" style="OLC"> <paragraph id="H8AD9EF365D8E4E539FDB69299C88FA0A"> <enum>(19)</enum> <text>The term <term>emerging growth company</term> means an issuer that had total annual gross revenues of less than $1,000,000,000 during its most recently completed fiscal year. An issuer that is an emerging growth company as of the first day of that fiscal year shall continue to be deemed an emerging growth company until the earliest of—</text> <subparagraph id="HC70905D1C12C4F118DD94BEB0E82E060"> <enum>(A)</enum> <text>the last day of the fiscal year of the issuer during which it had total annual gross revenues of $1,000,000,000 or more;</text> </subparagraph> <subparagraph id="H108AB1469F5847E6A7295992149605F8"> <enum>(B)</enum> <text>the last day of the fiscal year of the issuer following the fifth anniversary of the date of the first sale of common equity securities of the issuer pursuant to an effective registration statement under this title; or</text> </subparagraph> <subparagraph id="H88D4DCA6C218459EA54CE3D3CEB5DD40"> <enum>(C)</enum> <text>the date on which such issuer is deemed to be a <quote>large accelerated filer</quote>, as defined in section 240.12b–2 of title 17, Code of Federal Regulations, or any successor thereto.</text> </subparagraph> </paragraph> <after-quoted-block>.</after-quoted-block> </quoted-block> </subsection> <subsection id="HEDD0D92A23004B4AB523D20B4648EE6B"> <enum>(b)</enum> <header>Securities Exchange Act of 1934</header> <text>Section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)) is amended—</text> <paragraph id="HF297DDC01647474BA775B96D0BFCA188"> <enum>(1)</enum> <text>by redesignating paragraph (77), as added by section 941(a) of the Investor Protection and Securities Reform Act of 2010 (Public Law 111–203, 124 Stat. 1890), as paragraph (79); and</text> </paragraph> <paragraph id="HB2E72BC2299C4C118DE21369CBEB9F46"> <enum>(2)</enum> <text>by adding at the end the following:</text> <quoted-block display-inline="no-display-inline" id="HF9EDDCAFBA424CEB9F5ACBCBB46DFFCD" style="OLC"> <paragraph id="HE54381CAC497423ABFAAB62DE39B6B2D"> <enum>(80)</enum> <text>The term <term>emerging growth company</term> means an issuer that had total annual gross revenues of less than $1,000,000,000 during its most recently completed fiscal year. An issuer that is an emerging growth company as of the first day of that fiscal year shall continue to be deemed an emerging growth company until the earliest of—</text> <subparagraph id="H72168E7F2CB840239E2B172A54BD56B2"> <enum>(A)</enum> <text>the last day of the fiscal year of the issuer during which it had total annual gross revenues of $1,000,000,000 or more;</text> </subparagraph> <subparagraph id="H4923A1D9F7C34500A38743CA5AD23322"> <enum>(B)</enum> <text>the last day of the fiscal year of the issuer following the fifth anniversary of the date of the first sale of common equity securities of the issuer pursuant to an effective registration statement under the Securities Act of 1933; or</text> </subparagraph> <subparagraph id="HC47AE94359044DA4908C04DB77220653"> <enum>(C)</enum> <text>the date on which such issuer is deemed to be a <quote>large accelerated filer</quote>, as defined in section 240.12b–2 of title 17, Code of Federal Regulations, or any successor thereto.</text> </subparagraph> </paragraph> <after-quoted-block>.</after-quoted-block> </quoted-block> </paragraph> </subsection> <subsection id="H7813C30CCDF146A08B5561656D794BFA"> <enum>(c)</enum> <header>Other definitions</header> <text>As used in this title, the following definitions shall apply:</text> <paragraph id="HD646A7974E1D4C97A79268BDEA51332B"> <enum>(1)</enum> <header>Commission</header> <text>The term <term>Commission</term> means the Securities and Exchange Commission.</text> </paragraph> <paragraph id="H1E266B022F454EB0911876C7C58A90A2"> <enum>(2)</enum> <header>Initial public offering date</header> <text>The term <term>initial public offering date</term> means the date of the first sale of common equity securities of an issuer pursuant to an effective registration statement under the Securities Act of 1933.</text> </paragraph> </subsection> <subsection id="H96C65131E6A446BA95C06B439031679B"> <enum>(d)</enum> <header>Effective date</header> <text display-inline="yes-display-inline">Notwithstanding section 2(a)(19) of the Securities Act of 1933 and section 3(a)(80) of the Securities Exchange Act of 1934, an issuer shall not be an emerging growth company for purposes of such Acts if the first sale of common equity securities of such issuer pursuant to an effective registration statement under the Securities Act of 1933 occurred on or before December 8, 2011.</text> </subsection> </section> <section id="H1E15E1F0C1E24179A4BF8A9C03432167"> <enum>102.</enum> <header>Disclosure obligations</header> <subsection id="H1BF5833F984041B6AE023973E36D7430"> <enum>(a)</enum> <header>Executive compensation</header> <paragraph id="HDEDE17D775AE4E68A86D01EA91A85DAB"> <enum>(1)</enum> <header>Exemption</header> <text>Section 14A(e) of the Securities Exchange Act of 1934 (15 U.S.C. 78n–1(e)) is amended—</text> <subparagraph id="HD93723F387D74BDB8DB2AF025A85E7A6"> <enum>(A)</enum> <text display-inline="yes-display-inline">by striking <quote>The Commission may</quote> and inserting the following:</text> <quoted-block style="OLC" id="HEAF568E89E9C410FB26CD884849EA3F2" display-inline="no-display-inline"> <paragraph id="HCA2DBE2B1C2646CFAF6DC8EA9520CE9E"> <enum>(1)</enum> <header>In general</header> <text display-inline="yes-display-inline"> The Commission may</text> </paragraph> <after-quoted-block>;</after-quoted-block> </quoted-block> </subparagraph> <subparagraph id="H5DEE3166D7E74724BEB6B59A2CF8718F"> <enum>(B)</enum> <text>by striking <quote>an issuer</quote> and inserting <quote>any other issuer</quote>; and</text> </subparagraph> <subparagraph id="HED09A3F5947A4EE58E40E2806CB58684"> <enum>(C)</enum> <text display-inline="yes-display-inline">by adding at the end the following:</text> <quoted-block style="OLC" id="H999C925206274CFA9FC484CAE923DE90" display-inline="no-display-inline"> <paragraph id="H87016658E15F4873A91EDDACEF3275DB"> <enum>(2)</enum> <header>Treatment of emerging growth companies</header> <subparagraph id="H43E79991639D478AB2D801AB0F7A3884"> <enum>(A)</enum> <header>In general</header> <text display-inline="yes-display-inline">An emerging growth company shall be exempt from the requirements of subsections (a) and (b).</text> </subparagraph> <subparagraph id="HBD07152DD16D42EEBA6D013696D75828"> <enum>(B)</enum> <header>Compliance after termination of emerging growth company treatment</header> <text>An issuer that was an emerging growth company but is no longer an emerging growth company shall include the first separate resolution described under subsection (a)(1) not later than the end of—</text> <clause id="H479CEF884561479AB7F6E88D713984CE"> <enum>(i)</enum> <text display-inline="yes-display-inline">in the case of an issuer that was an emerging growth company for less than 2 years after the date of first sale of common equity securities of the issuer pursuant to an effective registration statement under the Securities Act of 1933, the 3-year period beginning on such date; and</text> </clause> <clause id="H9F98FBEA8F94407282CED86A133070A4"> <enum>(ii)</enum> <text>in the case of any other issuer, the 1-year period beginning on the date the issuer is no longer an emerging growth company.</text> </clause> </subparagraph> </paragraph> <after-quoted-block>.</after-quoted-block> </quoted-block> </subparagraph> </paragraph> <paragraph id="HA1705C3BE7D441C580C928435C405AC3"> <enum>(2)</enum> <header>Proxies</header> <text>Section 14(i) of the Securities Exchange Act of 1934 (15 U.S.C. 78n(i)) is amended by inserting <quote>, for any issuer other than an emerging growth company,</quote> after <quote>including</quote>.</text> </paragraph> <paragraph id="HCE7FF44ECF56479B8A1E2FAE1BC4E77C"> <enum>(3)</enum> <header>Compensation disclosures</header> <text display-inline="yes-display-inline">Section 953(b)(1) of the Investor Protection and Securities Reform Act of 2010 (Public Law 111–203; 124 Stat. 1904) is amended by inserting <quote>, other than an emerging growth company, as that term is defined in section 3(a) of the Securities Exchange Act of 1934,</quote> after <quote>require each issuer</quote>.</text> </paragraph> </subsection> <subsection id="H831BF58F71BF430DAF89BB4B884363E0"> <enum>(b)</enum> <header>Financial disclosures and accounting pronouncements</header> <paragraph id="H79DC7E4D5C4845C8A069174D6FE0B6A0"> <enum>(1)</enum> <header>Securities Act of 1933</header> <text>Section 7(a) of the Securities Act of 1933 (15 U.S.C. 77g(a)) is amended—</text> <subparagraph id="H6D1CC2395877465F8A4BB84756B235EC"> <enum>(A)</enum> <text>by striking <quote>(a) The registration</quote> and inserting the following: </text> <quoted-block style="OLC" id="H9E669DE19F264CF084DCCC8069959C0D" display-inline="no-display-inline"> <subsection id="H3C6FB1C87E1A4C1A9033652D489A78F4"> <enum>(a)</enum> <header>Information required in registration statement</header> <paragraph id="HDBAD58D57AB54E5E8ED75CDA2A200BCA"> <enum>(1)</enum> <header>In general</header> <text display-inline="yes-display-inline">The registration</text> </paragraph> </subsection> <after-quoted-block>; and</after-quoted-block> </quoted-block> </subparagraph> <subparagraph id="H669618877849477983F22F58062C55F1"> <enum>(B)</enum> <text>by adding at the end the following:</text> <quoted-block style="OLC" id="H6E3F66F6898F439DB8A69854B83838D6" display-inline="no-display-inline"> <paragraph id="HBDA0FFDB1B0546B88F628301125BF644"> <enum>(2)</enum> <header>Treatment of emerging growth companies</header> <text display-inline="yes-display-inline">An emerging growth company—</text> <subparagraph id="HBC5AAA3E36B844829CDACF5FA4EE1111"> <enum>(A)</enum> <text>need not present more than 2 years of audited financial statements in order for the registration statement of such emerging growth company with respect to an initial public offering of its common equity securities to be effective, and in any other registration statement to be filed with the Commission, an emerging growth company need not present selected financial data in accordance with section 229.301 of title 17, Code of Federal Regulations, for any period prior to the earliest audited period presented in connection with its initial public offering; and</text> </subparagraph> <subparagraph id="H52E8A0F298A0496689086A3BB9C2B2C1" commented="no"> <enum>(B)</enum> <text display-inline="yes-display-inline">may not be required to comply with any new or revised financial accounting standard until such date that a company that is not an issuer (as defined under section 2(a) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7201(a)) is required to comply with such new or revised accounting standard, if such standard applies to companies that are not issuers.</text> </subparagraph> </paragraph> <after-quoted-block>.</after-quoted-block> </quoted-block> </subparagraph> </paragraph> <paragraph id="HDC564A94CA294CFB8A8A4A2EDBB5503A"> <enum>(2)</enum> <header>Securities Exchange Act of 1934</header> <text>Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a)) is amended by adding at the end the following: <quote>In any registration statement, periodic report, or other reports to be filed with the Commission, an emerging growth company need not present selected financial data in accordance with section 229.301 of title 17, Code of Federal Regulations, for any period prior to the earliest audited period presented in connection with its first registration statement that became effective under this Act or the Securities Act of 1933 and, with respect to any such statement or reports, an emerging growth company may not be required to comply with any new or revised financial accounting standard until such date that a company that is not an issuer (as defined under section 2(a) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7201(a)) is required to comply with such new or revised accounting standard, if such standard applies to companies that are not issuers.</quote>.</text> </paragraph> </subsection> <subsection commented="no" id="H788055EB980B4087BC3D05670F5F860C"> <enum>(c)</enum> <header>Other disclosures</header> <text>An emerging growth company may comply with section 229.303(a) of title 17, Code of Federal Regulations, or any successor thereto, by providing information required by such section with respect to the financial statements of the emerging growth company for each period presented pursuant to section 7(a) of the Securities Act of 1933 (15 U.S.C. 77g(a)). An emerging growth company may comply with section 229.402 of title 17, Code of Federal Regulations, or any successor thereto, by disclosing the same information as any issuer with a market value of outstanding voting and nonvoting common equity held by non-affiliates of less than $75,000,000.</text> </subsection> </section> <section id="HAFF6504C0A944DA3A2F03B5858E5CF57"> <enum>103.</enum> <header>Internal controls audit</header> <text display-inline="no-display-inline">Section 404(b) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7262(b)) is amended by inserting <quote>, other than an issuer that is an emerging growth company (as defined in section 3 of the Securities Exchange Act of 1934),</quote> before <quote>shall attest to</quote>.</text> </section> <section id="HDEFE7797BF6B42BE97812B0F338FADED"> <enum>104.</enum> <header>Auditing standards</header> <text display-inline="no-display-inline">Section 103(a)(3) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7213(a)(3)) is amended by adding at the end the following:</text> <quoted-block display-inline="no-display-inline" id="HE2AF8F4E3E4D4EB0B3B6973F8FF62D3A" style="OLC"> <subparagraph id="H2D5AA2C7A173457A8AB38AEF432E851C"> <enum>(C)</enum> <header>Transition period for emerging growth companies</header> <text display-inline="yes-display-inline">Any rules of the Board requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer (auditor discussion and analysis) shall not apply to an audit of an emerging growth company, as defined in section 3 of the Securities Exchange Act of 1934. Any additional rules adopted by the Board after the date of enactment of this subparagraph shall not apply to an audit of any emerging growth company, unless the Commission determines that the application of such additional requirements is necessary or appropriate in the public interest, after considering the protection of investors and whether the action will promote efficiency, competition, and capital formation.</text> </subparagraph> <after-quoted-block>.</after-quoted-block> </quoted-block> </section> <section id="H5EC6B9A2A2DF46E08488B7D9BDA8F87F"> <enum>105.</enum> <header>Availability of information about emerging growth companies</header> <subsection id="HD7869CC4FD3B46EEA1AE6717E366A2C8"> <enum>(a)</enum> <header>Provision of research</header> <text>Section 2(a)(3) of the Securities Act of 1933 (15 U.S.C. 77b(a)(3)) is amended by adding at the end the following: <quote>The publication or distribution by a broker or dealer of a research report about an emerging growth company that is the subject of a proposed public offering of the common equity securities of such emerging growth company pursuant to a registration statement that the issuer proposes to file, or has filed, or that is effective shall be deemed for purposes of paragraph (10) of this subsection and section 5(c) not to constitute an offer for sale or offer to sell a security, even if the broker or dealer is participating or will participate in the registered offering of the securities of the issuer. As used in this paragraph, the term <term>research report</term> means a written, electronic, or oral communication that includes information, opinions, or recommendations with respect to securities of an issuer or an analysis of a security or an issuer, whether or not it provides information reasonably sufficient upon which to base an investment decision.</quote>.</text> </subsection> <subsection id="HC5DC63697740417989A22BA410700A67"> <enum>(b)</enum> <header>Securities analyst communications</header> <text>Section 15D of the Securities Exchange Act of 1934 (15 U.S.C. 78o–6) is amended—</text> <paragraph id="H6661EFDE72584F618D3275D28059FF9F"> <enum>(1)</enum> <text>by redesignating subsection (c) as subsection (d); and</text> </paragraph> <paragraph id="H2C8D001EDBF24D628BC6D474DB2E3BC3"> <enum>(2)</enum> <text>by inserting after subsection (b) the following:</text> <quoted-block display-inline="no-display-inline" id="H530E8D2F49204FBBB14833CD00011132" style="OLC"> <subsection id="HA91D5672236D4844B09A5F074BE9A49D"> <enum>(c)</enum> <header>Limitation</header> <text>Notwithstanding subsection (a) or any other provision of law, neither the Commission nor any national securities association registered under section 15A may adopt or maintain any rule or regulation in connection with an initial public offering of the common equity of an emerging growth company—</text> <paragraph id="HC89754F22B724138A23D473953A40086"> <enum>(1)</enum> <text>restricting, based on functional role, which associated persons of a broker, dealer, or member of a national securities association, may arrange for communications between a securities analyst and a potential investor; or</text> </paragraph> <paragraph id="HEC39B34850734AE295EDBD0DCA9ECC6D"> <enum>(2)</enum> <text>restricting a securities analyst from participating in any communications with the management of an emerging growth company that is also attended by any other associated person of a broker, dealer, or member of a national securities association whose functional role is other than as a securities analyst.</text> </paragraph> </subsection> <after-quoted-block>.</after-quoted-block> </quoted-block> </paragraph> </subsection> <subsection id="H92544023E494472096FD4080196BBAD2"> <enum>(c)</enum> <header>Expanding permissible communications</header> <text>Section 5 of the Securities Act of 1933 (15 U.S.C. 77e) is amended—</text> <paragraph id="H7363F32E5C584811974073F4A952208E"> <enum>(1)</enum> <text>by redesignating subsection (d) as subsection (e); and</text> </paragraph> <paragraph id="H58A2E8B6039246B0B38E01A6F27E3BC6"> <enum>(2)</enum> <text>by inserting after subsection (c) the following:</text> <quoted-block display-inline="no-display-inline" id="H1E73C355C2C946A387AEA8F79D4C6990" style="OLC"> <subsection id="H2B809707656B4DA2A3D9323F17C03584"> <enum>(d)</enum> <header>Limitation</header> <text>Notwithstanding any other provision of this section, an emerging growth company or any person authorized to act on behalf of an emerging growth company may engage in oral or written communications with potential investors that are qualified institutional buyers or institutions that are accredited investors, as such terms are respectively defined in section 230.144A and section 230.501(a) of title 17, Code of Federal Regulations, or any successor thereto, to determine whether such investors might have an interest in a contemplated securities offering, either prior to or following the date of filing of a registration statement with respect to such securities with the Commission, subject to the requirement of subsection (b)(2).</text> </subsection> <after-quoted-block>.</after-quoted-block> </quoted-block> </paragraph> </subsection> <subsection id="H6F4CA82C65AD47BFAA5E4BC0FB8AA4DF"> <enum>(d)</enum> <header>Post offering communications</header> <text>Neither the Commission nor any national securities association registered under section 15A of the Securities Exchange Act of 1934 may adopt or maintain any rule or regulation prohibiting any broker, dealer, or member of a national securities association from publishing or distributing any research report or making a public appearance, with respect to the securities of an emerging growth company, either—</text> <paragraph id="HEB8EA945B74B49B8B59CFF1515F8EE63"> <enum>(1)</enum> <text>within any prescribed period of time following the initial public offering date of the emerging growth company; or</text> </paragraph> <paragraph id="H1E60DF656D6D4A98A3B4F428BD8E4E22"> <enum>(2)</enum> <text>within any prescribed period of time prior to the expiration date of any agreement between the broker, dealer, or member of a national securities association and the emerging growth company or its shareholders that restricts or prohibits the sale of securities held by the emerging growth company or its shareholders after the initial public offering date.</text> </paragraph> </subsection> </section> <section id="H60D9B50A27A94B7C897E79FE729F37DE"> <enum>106.</enum> <header>Other matters</header> <subsection id="H8E8AEF212371467B8E19459CC618ECD5"> <enum>(a)</enum> <header>Draft registration statements</header> <text display-inline="yes-display-inline">Section 6 of the Securities Act of 1933 (15 U.S.C. 77f) is amended by adding at the end the following:</text> <quoted-block display-inline="no-display-inline" id="HA0C65513193A4BD2B502DD5EC051CD60" style="OLC"> <subsection id="H2CE30B3E5EE04BDA9F9877A701708381"> <enum>(e)</enum> <header>Emerging growth companies</header> <paragraph id="H511F6FA89B8643B696341974FCA758C2"> <enum>(1)</enum> <header>In general</header> <text>Any emerging growth company, prior to its initial public offering date, may confidentially submit to the Commission a draft registration statement, for confidential nonpublic review by the staff of the Commission prior to public filing, provided that the initial confidential submission and all amendments thereto shall be publicly filed with the Commission not later than 21 days before the date on which the issuer conducts a road show, as such term is defined in section 230.433(h)(4) of title 17, Code of Federal Regulations, or any successor thereto.</text> </paragraph> <paragraph id="HFFE12C7A29E049E2A121922C5410E95C"> <enum>(2)</enum> <header>Confidentiality</header> <text>Notwithstanding any other provision of this title, the Commission shall not be compelled to disclose any information provided to or obtained by the Commission pursuant to this subsection. For purposes of section 552 of title 5, United States Code, this subsection shall be considered a statute described in subsection (b)(3)(B) of such section 552. Information described in or obtained pursuant to this subsection shall be deemed to constitute confidential information for purposes of section 24(b)(2) of the Securities Exchange Act of 1934.</text> </paragraph> </subsection> <after-quoted-block>.</after-quoted-block> </quoted-block> </subsection> <subsection id="H9477CAA738364D649F8825C75AD5D5C5"> <enum>(b)</enum> <header>Tick size</header> <text display-inline="yes-display-inline">Section 11A(c) of the Securities Exchange Act of 1934 (15 U.S.C. 78k-1(c)) is amended by adding at the end the following new paragraph: </text> <quoted-block style="OLC" id="HA4AB212CB8A44CDC8048E834D5E6E5DE" display-inline="no-display-inline"> <paragraph id="HEA64178F24C04FA585E1F5DAAC6C64A4"> <enum>(6)</enum> <header>Tick size</header> <subparagraph id="H02ACA56A70F04A248533FE5B72CDA957"> <enum>(A)</enum> <header>Study and report</header> <text>The Commission shall conduct a study examining the transition to trading and quoting securities in one penny increments, also known as decimalization. The study shall examine the impact that decimalization has had on the number of initial public offerings since its implementation relative to the period before its implementation. The study shall also examine the impact that this change has had on liquidity for small and middle capitalization company securities and whether there is sufficient economic incentive to support trading operations in these securities in penny increments. Not later than 90 days after the date of enactment of this paragraph, the Commission shall submit to Congress a report on the findings of the study.</text> </subparagraph> <subparagraph id="H72E001C8DFA54F649CC3A79E2539E5B5"> <enum>(B)</enum> <header>Designation</header> <text display-inline="yes-display-inline">If the Commission determines that the securities of emerging growth companies should be quoted and traded using a minimum increment of greater than $0.01, the Commission may, by rule not later than 180 days after the date of enactment of this paragraph, designate a minimum increment for the securities of emerging growth companies that is greater than $0.01 but less than $0.10 for use in all quoting and trading of securities in any exchange or other execution venue.</text> </subparagraph> </paragraph> <after-quoted-block>.</after-quoted-block> </quoted-block> </subsection> </section> <section id="H6A64C143DBCB424A9C31351A45E1BF3B"> <enum>107.</enum> <header>Opt-in right for emerging growth companies</header> <subsection id="HE0D28638835E46E981EED1A2FAB2EE2D"> <enum>(a)</enum> <header>In general</header> <text display-inline="yes-display-inline">With respect to an exemption provided to emerging growth companies under this title, or an amendment made by this title, an emerging growth company may choose to forgo such exemption and instead comply with the requirements that apply to an issuer that is not an emerging growth company.</text> </subsection> <subsection id="H6AABE93F12964C5A8BA845062415ED1F"> <enum>(b)</enum> <header>Special rule</header> <text>Notwithstanding subsection (a), with respect to the extension of time to comply with new or revised financial accounting standards provided under section 7(a)(2)(B) of the Securities Act of 1933 and section 13(a) of the Securities Exchange Act of 1934, as added by section 102(b), if an emerging growth company chooses to comply with such standards to the same extent that a non-emerging growth company is required to comply with such standards, the emerging growth company—</text> <paragraph id="HF3059539B1AF42B7BF97E545CFC4B8F8"> <enum>(1)</enum> <text>must make such choice at the time the company is first required to file a registration statement, periodic report, or other report with the Commission under section 13 of the Securities Exchange Act of 1934 and notify the Securities and Exchange Commission of such choice;</text> </paragraph> <paragraph id="H80F03DD74E0144809B5F7AC3E79CE90F"> <enum>(2)</enum> <text display-inline="yes-display-inline">may not select some standards to comply with in such manner and not others, but must comply with all such standards to the same extent that a non-emerging growth company is required to comply with such standards; and</text> </paragraph> <paragraph id="H784A0EB4678C4E3697821441D2E78B23"> <enum>(3)</enum> <text display-inline="yes-display-inline">must continue to comply with such standards to the same extent that a non-emerging growth company is required to comply with such standards for as long as the company remains an emerging growth company.</text> </paragraph> </subsection> </section> <section id="H1A2966C5FD634F928235D895115DC6CF"> <enum>108.</enum> <header>Review of Regulation S-K</header> <subsection id="H0EE993053507473294BAC5DB79F3E813"> <enum>(a)</enum> <header>Review</header> <text>The Securities and Exchange Commission shall conduct a review of its Regulation S-K (17 C.F.R. 229.10 et seq.) to—</text> <paragraph id="HCA6FFD2E6525489BBCD9E3BF21CCD088"> <enum>(1)</enum> <text display-inline="yes-display-inline">comprehensively analyze the current registration requirements of such regulation; and </text> </paragraph> <paragraph id="H93BB2232230F456D84A5F8FB41A2C355"> <enum>(2)</enum> <text>determine how such requirements can be updated to modernize and simplify the registration process and reduce the costs and other burdens associated with these requirements for issuers who are emerging growth companies.</text> </paragraph> </subsection> <subsection id="HA5D4C6D0E9CD41F1897C3DF3EC231F85"> <enum>(b)</enum> <header>Report</header> <text display-inline="yes-display-inline">Not later the 180 days after the date of enactment of this title, the Commission shall transmit to Congress a report of the review conducted under subsection (a). The report shall include the specific recommendations of the Commission on how to streamline the registration process in order to make it more efficient and less burdensome for the Commission and for prospective issuers who are emerging growth companies.</text> </subsection> </section> <enum>II</enum> <header>Access to Capital for Job Creators</header> <section id="H09E759A40FFC40AB82D4FC8AE0BE6DE0"> <enum>201.</enum> <header>Modification of exemption</header> <subsection id="H13164C9E96BF4710A15D736D16900D12"> <enum>(a)</enum> <header>Removal of restriction</header> <text display-inline="yes-display-inline">Section 4(2) of the Securities Act of 1933 (15 U.S.C. 77d(2)) is amended by adding before the period the following: <quote>, whether or not such transactions involve general solicitation or general advertising</quote>.</text> </subsection> <subsection id="H8A992417170F4E91BC27FC8ADE618AD5"> <enum>(b)</enum> <header>Modification of rules</header> <text display-inline="yes-display-inline">Not later than 90 days after the date of the enactment of this Act, the Securities and Exchange Commission shall revise its rules issued in section 230.506 of title 17, Code of Federal Regulations, to provide that the prohibition against general solicitation or general advertising contained in section 230.502(c) of such title shall not apply to offers and sales of securities made pursuant to section 230.506, provided that all purchasers of the securities are accredited investors. Such rules shall require the issuer to take reasonable steps to verify that purchasers of the securities are accredited investors, using such methods as determined by the Commission.</text> </subsection> </section> <enum>III</enum> <header>Entrepreneur Access to Capital</header> <section id="H09AF0E240AB84CEA9B780254329F9EE7"> <enum>301.</enum> <header>Crowdfunding exemption</header> <subsection id="HAF5E2F83C2DC4B6B9BEDA886C3C21540"> <enum>(a)</enum> <header>Securities Act of 1933</header> <text display-inline="yes-display-inline">Section 4 of the Securities Act of 1933 (15 U.S.C. 77d) (as amended by section 201) is further amended by adding at the end the following:</text> <quoted-block display-inline="no-display-inline" id="HD00209C7C2364BBBAE3FB9FE90DFE083" style="OLC"> <paragraph id="HDA0C20D35813400A965E76B026EF22F9"> <enum>(6)</enum> <text display-inline="yes-display-inline">transactions involving the offer or sale of securities by an issuer, provided that—</text> <subparagraph id="H2833DE8CFF75404BA909A855B8B26882"> <enum>(A)</enum> <text display-inline="yes-display-inline">the aggregate amount sold within the previous 12-month period in reliance upon this exemption is—</text> <clause id="HE78E8C3325724D43A6B96B6C8266B15B"> <enum>(i)</enum> <text display-inline="yes-display-inline">$1,000,000, as such amount is adjusted by the Commission to reflect the annual change in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics, or less; or </text> </clause> <clause id="HE197E23893CE47C58CE6D391BE6BAD13"> <enum>(ii)</enum> <text display-inline="yes-display-inline">if the issuer provides potential investors with audited financial statements, $2,000,000, as such amount is adjusted by the Commission to reflect the annual change in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics, or less;</text> </clause> </subparagraph> <subparagraph id="HA321CDAFB52141EA85521DA103C4ACB0"> <enum>(B)</enum> <text display-inline="yes-display-inline">the aggregate amount sold to any investor in reliance on this exemption within the previous 12-month period does not exceed the lesser of—</text> <clause id="HDF035FF0997C461F98396F120ECD8908"> <enum>(i)</enum> <text display-inline="yes-display-inline">$10,000, as such amount is adjusted by the Commission to reflect the annual change in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics; and</text> </clause> <clause id="H323F2F7DE1854D3FB4BC0EAEDE07718E"> <enum>(ii)</enum> <text display-inline="yes-display-inline">10 percent of such investor’s annual income;</text> </clause> </subparagraph> <subparagraph id="HC7CB7E383A4349F09DCF3935F55C18D4"> <enum>(C)</enum> <text>in the case of a transaction involving an intermediary between the issuer and the investor, such intermediary complies with the requirements under section 4A(a); and</text> </subparagraph> <subparagraph id="H05F5BF6120384CCCA9AF6F43E22933B6"> <enum>(D)</enum> <text>in the case of a transaction not involving an intermediary between the issuer and the investor, the issuer complies with the requirements under section 4A(b).</text> </subparagraph> </paragraph> <after-quoted-block>.</after-quoted-block> </quoted-block> </subsection> <subsection id="H8BC5B7FC0A8948DFB16EED70E16CEAF3"> <enum>(b)</enum> <header>Requirements to qualify for crowdfunding exemption</header> <text>The Securities Act of 1933 is amended by inserting after section 4 the following:</text> <quoted-block style="OLC" id="H71690DBF2B734E7D91742BC541EBF721" display-inline="no-display-inline"> <section id="HFF22A88DB3074E518054C3590F698650"> <enum>4A.</enum> <header>Requirements with respect to certain small transactions</header> <subsection id="H829973B425FA4CBD80C42861CB29512E"> <enum>(a)</enum> <header>Requirements on intermediaries</header> <text display-inline="yes-display-inline">For purposes of section 4(6), a person acting as an intermediary in a transaction involving the offer or sale of securities shall comply with the requirements of this subsection if the intermediary—</text> <paragraph id="H07900C37DEF6494EA9A9F126B574F7BA"> <enum>(1)</enum> <text display-inline="yes-display-inline">warns investors, including on the intermediary’s website used for the offer and sale of such securities, of the speculative nature generally applicable to investments in startups, emerging businesses, and small issuers, including risks in the secondary market related to illiquidity;</text> </paragraph> <paragraph id="HB688E54C7EB548F8A9B697B1E2C8913F"> <enum>(2)</enum> <text>warns investors that they are subject to the restriction on sales requirement described under subsection (e);</text> </paragraph> <paragraph id="H46C035CB7329490CA831089EDD62E002"> <enum>(3)</enum> <text>takes reasonable measures to reduce the risk of fraud with respect to such transaction;</text> </paragraph> <paragraph id="HE9C431ACBEE74767ABB8249504DBF0D0"> <enum>(4)</enum> <text display-inline="yes-display-inline">provides the Commission with the intermediary’s physical address, website address, and the names of the intermediary and employees of the intermediary, and keep such information up-to-date;</text> </paragraph> <paragraph id="H172CC0CD40944288891B56995BFD73A7"> <enum>(5)</enum> <text display-inline="yes-display-inline">provides the Commission with continuous investor-level access to the intermediary’s website;</text> </paragraph> <paragraph id="H3A03A494ABEB45088CED9305F26233A5"> <enum>(6)</enum> <text>requires each potential investor to answer questions demonstrating—</text> <subparagraph id="H9203386F5EE3411DA96246BB0559B2E8"> <enum>(A)</enum> <text display-inline="yes-display-inline">an understanding of the level of risk generally applicable to investments in startups, emerging businesses, and small issuers;</text> </subparagraph> <subparagraph id="H41EA4C54C3DC46008CD93ACF88E759FD"> <enum>(B)</enum> <text display-inline="yes-display-inline">an understanding of the risk of illiquidity; and</text> </subparagraph> <subparagraph id="H9678B23F5E5B43578DA2C92CF3B8E485"> <enum>(C)</enum> <text display-inline="yes-display-inline">such other areas as the Commission may determine appropriate by rule or regulation;</text> </subparagraph> </paragraph> <paragraph id="H406E7540C2CA4EB591458EFC3DB23CEC"> <enum>(7)</enum> <text display-inline="yes-display-inline">requires the issuer to state a target offering amount and a deadline to reach the target offering amount and ensure the third party custodian described under paragraph (10) withholds offering proceeds until aggregate capital raised from investors other than the issuer is no less than 60 percent of the target offering amount;</text> </paragraph> <paragraph id="H9ECCFC41517948C395762F7D575A7B97"> <enum>(8)</enum> <text display-inline="yes-display-inline">carries out a background check on the issuer’s principals;</text> </paragraph> <paragraph id="H1C53FEE6468C4D4FB717CDADC1FA974B"> <enum>(9)</enum> <text display-inline="yes-display-inline">provides the Commission and potential investors with notice of the offering, not later than the first day securities are offered to potential investors, including—</text> <subparagraph id="HC6680B8C2F6B4F94924F4BB116FC8825"> <enum>(A)</enum> <text>the issuer’s name, legal status, physical address, and website address;</text> </subparagraph> <subparagraph id="H8588519B3DAF46CDB9528A6D380E8751"> <enum>(B)</enum> <text>the names of the issuer’s principals;</text> </subparagraph> <subparagraph id="HE57F9A80B1834D7093810873506D39F1"> <enum>(C)</enum> <text display-inline="yes-display-inline">the stated purpose and intended use of the proceeds of the offering sought by the issuer; and</text> </subparagraph> <subparagraph id="H4F01456CBE4149F4B5D6771C04C45463"> <enum>(D)</enum> <text display-inline="yes-display-inline">the target offering amount and the deadline to reach the target offering amount;</text> </subparagraph> </paragraph> <paragraph id="HF4AC76F20BEC4A538B1847FE0667E524"> <enum>(10)</enum> <text display-inline="yes-display-inline">outsources cash-management functions to a qualified third party custodian, such as a broker or dealer registered under section 15(b)(1) of the Securities Exchange Act of 1934 or an insured depository institution;</text> </paragraph> <paragraph id="H022366D6ECC74390815D555216C81798"> <enum>(11)</enum> <text>maintains such books and records as the Commission determines appropriate;</text> </paragraph> <paragraph id="HF9C0115EC1BC4C1496C54E67D86B53D0"> <enum>(12)</enum> <text>makes available on the intermediary’s website a method of communication that permits the issuer and investors to communicate with one another; </text> </paragraph> <paragraph id="H0A379A2AF7E5410AB7DDEF80105BBF11"> <enum>(13)</enum> <text display-inline="yes-display-inline">provides the Commission with a notice upon completion of the offering, which shall include the aggregate offering amount and the number of purchasers; and</text> </paragraph> <paragraph id="H6127C1E01447417FA9A108B886B1E34F"> <enum>(14)</enum> <text>does not offer investment advice.</text> </paragraph> </subsection> <subsection id="H61D9B926D2084DD3AB2D415D92C50D2A"> <enum>(b)</enum> <header>Requirements on issuers if no intermediary</header> <text display-inline="yes-display-inline">For purposes of section 4(6), an issuer who offers or sells securities without an intermediary shall comply with the requirements of this subsection if the issuer—</text> <paragraph id="H8A9B7E96006B4ECF9062684E3BB13E84"> <enum>(1)</enum> <text>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;</text> </paragraph> <paragraph id="H700EB95B59F0492C8F5240361366D564"> <enum>(2)</enum> <text>warns investors that they are subject to the restriction on sales requirement described under subsection (e);</text> </paragraph> <paragraph id="H1A87A0537B6F429787D36CD04F53E345"> <enum>(3)</enum> <text>takes reasonable measures to reduce the risk of fraud with respect to such transaction;</text> </paragraph> <paragraph id="H8597760EEC994374A23B476621549D9F"> <enum>(4)</enum> <text>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;</text> </paragraph> <paragraph id="H2F199C1E955C40F89C626571C0D14724"> <enum>(5)</enum> <text>provides the Commission with continuous investor-level access to the issuer’s website;</text> </paragraph> <paragraph id="H79A9B6555BD247C3A8274AABAC27F36D"> <enum>(6)</enum> <text>requires each potential investor to answer questions demonstrating—</text> <subparagraph id="H598B040076E949B69DC40800EA7A40BD"> <enum>(A)</enum> <text display-inline="yes-display-inline">an understanding of the level of risk generally applicable to investments in startups, emerging businesses, and small issuers;</text> </subparagraph> <subparagraph id="H2B70E15788BF4AEDA8EE704AA04DC16C"> <enum>(B)</enum> <text display-inline="yes-display-inline">an understanding of the risk of illiquidity; and</text> </subparagraph> <subparagraph id="HDFD27B31B3E14BC1B1472A9CDE4ED79D"> <enum>(C)</enum> <text display-inline="yes-display-inline">such other areas as the Commission may determine appropriate by rule or regulation;</text> </subparagraph> </paragraph> <paragraph id="HEC0A69696B1248EDB692405BB697C06D"> <enum>(7)</enum> <text display-inline="yes-display-inline">states a target offering amount and ensures that the third party custodian described under paragraph (9) withholds offering proceeds until the aggregate capital raised from investors other than the issuer is no less than 60 percent of the target offering amount;</text> </paragraph> <paragraph id="HE91BD451ED6E461586933231F5FF63C8"> <enum>(8)</enum> <text display-inline="yes-display-inline">provides the Commission with notice of the offering, not later than the first day securities are offered to potential investors, including—</text> <subparagraph id="H6F38922D98CC44588F4479AEC2A93A71"> <enum>(A)</enum> <text display-inline="yes-display-inline">the stated purpose and intended use of the proceeds of the offering sought by the issuer; and</text> </subparagraph> <subparagraph id="H157B51042ADA403E945A5DD1A60A1FFE"> <enum>(B)</enum> <text display-inline="yes-display-inline">the target offering amount and the deadline to reach the target offering amount;</text> </subparagraph> </paragraph> <paragraph id="HFDFDB6335DF5484E974026309C43FF2E"> <enum>(9)</enum> <text display-inline="yes-display-inline">outsources cash-management functions to a qualified third party custodian, such as a broker or dealer registered under section 15(b)(1) of the Securities Exchange Act of 1934 or an insured depository institution;</text> </paragraph> <paragraph id="H9505672C47D44670A0F3518CB74AC9F3"> <enum>(10)</enum> <text>maintains such books and records as the Commission determines appropriate;</text> </paragraph> <paragraph id="HEECDF8D704D9441CAF07C815BACD1729"> <enum>(11)</enum> <text>makes available on the issuer’s website a method of communication that permits the issuer and investors to communicate with one another;</text> </paragraph> <paragraph id="H44A1781CCC564AB7A9F7ADC0564EBE35"> <enum>(12)</enum> <text>does not offer investment advice; </text> </paragraph> <paragraph id="H6EA560FDB0C34561811D407850CA14D3"> <enum>(13)</enum> <text display-inline="yes-display-inline">provides the Commission with a notice upon completion of the offering, which shall include the aggregate offering amount and the number of purchasers; and</text> </paragraph> <paragraph id="H0133EC94B1C445539445E2420E5F6182"> <enum>(14)</enum> <text>discloses to potential investors, on the issuer’s website, that the issuer has an interest in the issuance.</text> </paragraph> </subsection> <subsection id="HE3952AE5310D4A808F1F9846C0544EFD"> <enum>(c)</enum> <header>Verification of income</header> <text display-inline="yes-display-inline">For purposes of section 4(6), an issuer or intermediary may rely on certifications as to annual income provided by the person to whom the securities are sold to verify the investor’s income.</text> </subsection> <subsection id="H6BEAB067259344E09AD4ACBDCBB1B05C"> <enum>(d)</enum> <header>Information Available to States</header> <text display-inline="yes-display-inline">The Commission shall make the notices described under subsections (a)(9), (a)(13), (b)(8), and (b)(13) and the information described under subsections (a)(4) and (b)(4) available to the States.</text> </subsection> <subsection id="H6A62A119BB864DD1972F141F520EE6F7"> <enum>(e)</enum> <header>Restriction on sales</header> <text display-inline="yes-display-inline">With respect to a transaction involving the issuance of securities described under section 4(6), a purchaser may not transfer such securities during the 1-year period beginning on the date of purchase, unless such securities are sold to—</text> <paragraph id="HFC4011DCB21144EA89B9D2017158C4DE"> <enum>(1)</enum> <text>the issuer of such securities; or</text> </paragraph> <paragraph id="HA69A82B071194B90A9398E010729DB54"> <enum>(2)</enum> <text>an accredited investor.</text> </paragraph> </subsection> <subsection id="HF223DE926F824ACAB0CD2EF919658823"> <enum>(f)</enum> <header>Construction</header> <paragraph id="H0C312580EB6B4353B041D933921325A1"> <enum>(1)</enum> <header>No registration as broker</header> <text display-inline="yes-display-inline">With respect to a transaction described under section 4(6) involving an intermediary, such intermediary shall not be required to register as a broker under section 15(a)(1) of the Securities Exchange Act of 1934 solely by reason of participation in such transaction.</text> </paragraph> <paragraph id="H4A9819FB0394485ABB2F5834707AA62A"> <enum>(2)</enum> <header>No preclusion of other capital raising</header> <text>Nothing in this section or section 4(6) shall be construed as preventing an issuer from raising capital through methods not described under section 4(6).</text> </paragraph> </subsection> </section> <after-quoted-block>.</after-quoted-block> </quoted-block> </subsection> <subsection id="H13729A6BD17C4825B243CBC79FD51FFB" commented="no"> <enum>(c)</enum> <header>Rulemaking</header> <text display-inline="yes-display-inline">Not later than 180 days after the date of the enactment of this Act, the Securities and Exchange Commission shall issue such rules as may be necessary to carry out section 4A of the Securities Act of 1933. In issuing such rules, the Commission shall consider the costs and benefits of the action.</text> </subsection> <subsection id="H824146E36B9C43F09F98C428DF05AC18"> <enum>(d)</enum> <header>Disqualification</header> <text display-inline="yes-display-inline">Not later than 180 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 an issuer shall not be eligible to utilize the exemption under section 4(6) of the Securities Act of 1933 based on the disciplinary history of the issuer or its predecessors, affiliates, officers, directors, or persons fulfilling similar roles. The Commission shall also establish disqualification provisions under which an intermediary shall not be eligible to act as an intermediary in connection with an offering utilizing the exemption under section 4(6) of the Securities Act of 1933 based on the disciplinary history of the intermediary or its predecessors, affiliates, officers, directors, or persons fulfilling similar roles. Such provisions shall be substantially similar to the disqualification provisions contained in the regulations adopted in accordance with section 926 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (15 U.S.C. 77d note).</text> </subsection> </section> <section id="H5FB563935ABD4FE5B2D38626FD92A11A" commented="no"> <enum>302.</enum> <header>Exclusion of crowdfunding investors from shareholder cap</header> <text display-inline="no-display-inline">Section 12(g)(5) of the Securities Exchange Act of 1934 (15 U.S.C. 78l(g)(5)) is amended—</text> <paragraph id="H73B0748728B84C72BFCDB0713D1A9E87" commented="no"> <enum>(1)</enum> <text>by striking <quote>(5) For the purposes</quote> and inserting:</text> <quoted-block style="OLC" id="H1FAC74EEF21D47388E18C291E63E5B83" display-inline="no-display-inline"> <paragraph id="H9F672815E0FB4682A84693EA9E9BB850" commented="no"> <enum>(5)</enum> <header>Definitions</header> <subparagraph id="HFDABA881F22E4693964D872F2976BE72" commented="no"> <enum>(A)</enum> <header>In general</header> <text display-inline="yes-display-inline">For the purposes</text> </subparagraph> </paragraph> <after-quoted-block>; and</after-quoted-block> </quoted-block> </paragraph> <paragraph id="H4236679B962C427D9FA68965A01448A9" commented="no"> <enum>(2)</enum> <text>by adding at the end the following:</text> <quoted-block display-inline="no-display-inline" id="HB9C0BDDF183F4E42B07D81BEE33AE800" style="OLC"> <subparagraph id="HC79A34A59ED240399C734F2CE615E0BF" commented="no"> <enum>(B)</enum> <header>Exclusion for persons holding certain securities</header> <text display-inline="yes-display-inline">For purposes of this subsection, securities held by persons who purchase such securities in transactions described under section 4(6) of the Securities Act of 1933 shall not be deemed to be <quote>held of record</quote>.</text> </subparagraph> <after-quoted-block>.</after-quoted-block> </quoted-block> </paragraph> </section> <section id="H4E0DA81150494ED8AF4C3C187FADB0C8"> <enum>303.</enum> <header>Preemption of State law</header> <subsection id="HAD920F23AF044352AD1CBC16E5E11B3F"> <enum>(a)</enum> <header>In general</header> <text display-inline="yes-display-inline">Section 18(b)(4) of the Securities Act of 1933 (15 U.S.C. 77r(b)(4)) is amended—</text> <paragraph id="HE16248EF9B7D44EEBC42779A6CDD5C44"> <enum>(1)</enum> <text>by redesignating subparagraphs (C) and (D) as subparagraphs (E) and (F), respectively; and</text> </paragraph> <paragraph id="H835A9B072B514E53960F222FCCED3A9E"> <enum>(2)</enum> <text>by inserting after subparagraph (B) the following:</text> <quoted-block display-inline="no-display-inline" id="HF635217C127B43848D6628825227F1F2" style="OLC"> <subparagraph id="HD51EDC8CC29A43BBB94BCF14D4E08B64"> <enum>(C)</enum> <text display-inline="yes-display-inline">section 4(6);</text> </subparagraph> <after-quoted-block>.</after-quoted-block> </quoted-block> </paragraph> </subsection> <subsection id="H555C6988009F4826B378C640FAC8061E"> <enum>(b)</enum> <header>Clarification of the preservation of State enforcement authority</header> <paragraph id="H1962473A31044C93ABDD307A8BBE71DC"> <enum>(1)</enum> <header>In general</header> <text display-inline="yes-display-inline">The amendments made by subsection (a) relate solely to State registration, documentation, and offering requirements, as described under section 18(a) of 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 4(6) of such Act.</text> </paragraph> <paragraph id="H52833A05DD66469DAF6605BD00432792"> <enum>(2)</enum> <header>Clarification of State jurisdiction over unlawful conduct of intermediaries, issuers, and custodians</header> <text>Section 18(c)(1) of the Securities Act of 1933 is amended by striking <quote>with respect to fraud or deceit, or unlawful conduct by a broker or dealer, in connection with securities or securities transactions.</quote> and inserting the following: </text> <quoted-block style="OLC" id="H39CDE222F15642708CB688D08B9CEAC2" display-inline="yes-display-inline"> <text display-inline="yes-display-inline">, in connection with securities or securities transactions, with respect to—</text> <subparagraph id="H8CE111B2D8174499A42B34AC4FA8B399"> <enum>(A)</enum> <text display-inline="yes-display-inline">fraud or deceit;</text> </subparagraph> <subparagraph id="HC533A2039AC24DD5856B26F52DA8BA64"> <enum>(B)</enum> <text>unlawful conduct by a broker or dealer; and</text> </subparagraph> <subparagraph id="HC99BA76C83954BFDB2FAADB367BAC0C6"> <enum>(C)</enum> <text>with respect to a transaction described under section 4(6), unlawful conduct by an intermediary, issuer, or custodian.</text> </subparagraph> <after-quoted-block>.</after-quoted-block> </quoted-block> </paragraph> </subsection> </section> <enum>IV</enum> <header>Small Company Capital Formation</header> <section id="HFB7D25449F834050A065A9C22FABDD90" section-type="subsequent-section"> <enum>401.</enum> <header>Authority to exempt certain securities</header> <subsection id="HD508D7CBAAE744B681E9D368C00DAAC2"> <enum>(a)</enum> <header>In general</header> <text display-inline="yes-display-inline">Section 3(b) of the Securities Act of 1933 (15 U.S.C. 77c(b)) is amended—</text> <paragraph id="H637AC27C53AA40B1818D779CFB336E35"> <enum>(1)</enum> <text>by striking <quote>(b) The Commission</quote> and inserting the following:</text> <quoted-block display-inline="no-display-inline" id="H0F17821569654FF3B52C6E4C644A151F" style="OLC"> <subsection id="HE6E8692B2AE4426F861121EEAFDDF4BA"> <enum>(b)</enum> <header>Additional exemptions</header> <paragraph id="H594004D1BE3A4F4D9FAC4CA9EE89F9E9"> <enum>(1)</enum> <header>Small issues exemptive authority</header> <text display-inline="yes-display-inline">The Commission</text> </paragraph> </subsection> <after-quoted-block>; and</after-quoted-block> </quoted-block> </paragraph> <paragraph id="H7288E2665ED447AAB167DEDFADF5FC75"> <enum>(2)</enum> <text>by adding at the end the following:</text> <quoted-block display-inline="no-display-inline" id="HDE70B56CA9B949DEB616C6B98EDA0397" style="OLC"> <paragraph id="HD64BFEF79BCE4F5A8FE6863095F82653"> <enum>(2)</enum> <header>Additional issues</header> <text display-inline="yes-display-inline">The Commission shall by rule or regulation add a class of securities to the securities exempted pursuant to this section in accordance with the following terms and conditions:</text> <subparagraph id="H1F8436CC3FBC4114B4451F4AAB5B700F"> <enum>(A)</enum> <text display-inline="yes-display-inline">The aggregate offering amount of all securities offered and sold within the prior 12-month period in reliance on the exemption added in accordance with this paragraph shall not exceed $50,000,000.</text> </subparagraph> <subparagraph id="H735CE6476E60472B85F4FD67AF160A47"> <enum>(B)</enum> <text>The securities may be offered and sold publicly.</text> </subparagraph> <subparagraph id="H929D4E4C20514D66951CD54DF87E6F97"> <enum>(C)</enum> <text>The securities shall not be restricted securities within the meaning of the Federal securities laws and the regulations promulgated thereunder.</text> </subparagraph> <subparagraph id="H7D1809A08749448BAD50CD4EB9C4C74C"> <enum>(D)</enum> <text display-inline="yes-display-inline">The civil liability provision in section 12(a)(2) shall apply to any person offering or selling such securities.</text> </subparagraph> <subparagraph id="H7AE39E045A104F39B35C2162E19358C6"> <enum>(E)</enum> <text>The issuer may solicit interest in the offering prior to filing any offering statement, on such terms and conditions as the Commission may prescribe in the public interest or for the protection of investors.</text> </subparagraph> <subparagraph id="H1EEF90AB48804FE8AB812D4C2EE05F1F"> <enum>(F)</enum> <text>The Commission shall require the issuer to file audited financial statements with the Commission annually.</text> </subparagraph> <subparagraph id="HC019F26AA6FF43CBA920E05160C49BC9"> <enum>(G)</enum> <text>Such other terms, conditions, or requirements as the Commission may determine necessary in the public interest and for the protection of investors, which may include—</text> <clause id="H73015461DA4D410FBAC2B19FA28BB257"> <enum>(i)</enum> <text>a requirement that the issuer prepare and electronically file with the Commission and distribute to prospective investors an offering statement, and any related documents, in such form and with such content as prescribed by the Commission, including audited financial statements, a description of the issuer’s business operations, its financial condition, its corporate governance principles, its use of investor funds, and other appropriate matters; and</text> </clause> <clause id="H2BE17BA4A7D44B159ABB17B21BB6000C"> <enum>(ii)</enum> <text>disqualification provisions under which the exemption shall not be available to the issuer or its predecessors, affiliates, officers, directors, underwriters, or other related persons, which shall be substantially similar to the disqualification provisions contained in the regulations adopted in accordance with section 926 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (15 U.S.C. 77d note).</text> </clause> </subparagraph> </paragraph> <paragraph id="HFDEE18A7B1EF40C2A3989966E3EEE405"> <enum>(3)</enum> <header>Limitation</header> <text display-inline="yes-display-inline">Only the following types of securities may be exempted under a rule or regulation adopted pursuant to paragraph (2): equity securities, debt securities, and debt securities convertible or exchangeable to equity interests, including any guarantees of such securities.</text> </paragraph> <paragraph id="HA6E3DEC6CF8C4EACA3B42AE9554659DF"> <enum>(4)</enum> <header>Periodic disclosures</header> <text display-inline="yes-display-inline">Upon such terms and conditions as the Commission determines necessary in the public interest and for the protection of investors, the Commission by rule or regulation may require an issuer of a class of securities exempted under paragraph (2) to make available to investors and file with the Commission periodic disclosures regarding the issuer, its business operations, its financial condition, its corporate governance principles, its use of investor funds, and other appropriate matters, and also may provide for the suspension and termination of such a requirement with respect to that issuer.</text> </paragraph> <paragraph id="H6A014343B60D4D47AF1AB473DC8D29DC"> <enum>(5)</enum> <header>Adjustment</header> <text>Not later than 2 years after the date of enactment of the Small Company Capital Formation Act of 2011 and every 2 years thereafter, the Commission shall review the offering amount limitation described in paragraph (2)(A) and shall increase such amount as the Commission determines appropriate. If the Commission determines not to increase such amount, it shall report to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate on its reasons for not increasing the amount.</text> </paragraph> <after-quoted-block>.</after-quoted-block> </quoted-block> </paragraph> </subsection> <subsection id="HEB7FEDB9C4A34CCEAC2D76BDA6D3AEBF" commented="no"> <enum>(b)</enum> <header>Treatment as covered securities for purposes of NSMIA</header> <text>Section 18(b)(4) of the Securities Act of 1933 (as amended by section 303) (15 U.S.C. 77r(b)(4)) is further amended by inserting after subparagraph (C) (as added by such section) the following:</text> <quoted-block style="OLC" id="HF0C78794ACE14235BCABD05CBDF8DFE7" display-inline="no-display-inline"> <subparagraph id="HD6D9CAE192904F8F8AD02B063CD0E4D9" commented="no"> <enum>(D)</enum> <text display-inline="yes-display-inline">a rule or regulation adopted pursuant to section 3(b)(2) and such security is—</text> <clause id="H6E79BC80968A419F98DE9171345C321B" commented="no"> <enum>(i)</enum> <text display-inline="yes-display-inline">offered or sold on a national securities exchange; or</text> </clause> <clause id="H285480EECAE246B1A36B6786F5A21E37" commented="no"> <enum>(ii)</enum> <text>offered or sold to a qualified purchaser, as defined by the Commission pursuant to paragraph (3) with respect to that purchase or sale;</text> </clause> </subparagraph> <after-quoted-block>.</after-quoted-block> </quoted-block> </subsection> <subsection id="H5304B0DBDFC94E9DB924B11C78E5213B"> <enum>(c)</enum> <header>Conforming amendment</header> <text>Section 4(5) of the Securities Act of 1933 is amended by striking <quote>section 3(b)</quote> and inserting <quote>section 3(b)(1)</quote>. </text> </subsection> </section> <section id="H2269A511C3084F2A8BD26EABB2D15580"> <enum>402.</enum> <header>Study on the impact of State Blue Sky laws on Regulation A offerings</header> <text display-inline="no-display-inline">The Comptroller General shall conduct a study on the impact of State laws regulating securities offerings, or <quote>Blue Sky laws</quote>, on offerings made under Regulation A (17 C.F.R. 230.251 et seq.). The Comptroller General shall transmit a report on the findings of the study to the Committee on Financial Services of the House of Representatives, and the Committee on Banking, Housing, and Urban Affairs of the Senate not later than 3 months after the date of enactment of this Act.</text> </section> <enum>V</enum> <header>Private Company Flexibility and Growth</header> <section id="HB142312327E94B11BA4A570E7FE058CE" commented="no"> <enum>501.</enum> <header>Threshold for registration</header> <text display-inline="no-display-inline">Section 12(g)(1)(A) of the Securities Exchange Act of 1934 (15 U.S.C. 78l(g)(1)(A)) is amended to read as follows:</text> <quoted-block style="OLC" id="H0AF41F07E5674F5EADBF5E13C3118D3E" display-inline="no-display-inline"> <subparagraph id="H1C60309A5E3F46D986B82A236E67239F" indent="up1" commented="no"> <enum>(A)</enum> <text display-inline="yes-display-inline">within 120 days after the last day of its first fiscal year ended on which the issuer has total assets exceeding $10,000,000 and a class of equity security (other than an exempted security) held of record by 1,000 persons, and</text> </subparagraph> <after-quoted-block>.</after-quoted-block> </quoted-block> </section> <section id="H72D461515CCB49098B5AF8DF63D82600"> <enum>502.</enum> <header>Employees</header> <text display-inline="no-display-inline">Section 12(g)(5) of the Securities Exchange Act of 1934 (15 U.S.C. 78l(g)(5)) is amended by adding at the end the following: <quote>For purposes of determining whether an issuer is required to register a security with the Commission pursuant to paragraph (1), the definition of `held of record' shall not include securities held by persons who received the securities pursuant to an employee compensation plan in transactions exempted from the registration requirements of section 5 of the Securities Act of 1933.</quote>.</text> </section> <section id="H1F487A194E7B45619A5D7D908114733C" commented="no"> <enum>503.</enum> <header>Commission rulemaking</header> <text display-inline="no-display-inline">The Securities and Exchange Commission shall revise the definition of <quote>held of record</quote> pursuant to section 12(g)(5) of the Securities Exchange Act of 1934 (15 U.S.C. 78l(g)(5)) to implement the amendment made by section 502. The Commission shall also adopt safe harbor provisions that issuers can follow when determining whether holders of their securities are accredited investors or that holders of their securities received the securities pursuant to an employee compensation plan in transactions that were exempt from the registration requirements of section 5 of the Securities Act of 1933.</text> </section> <enum>VI</enum> <header>Capital Expansion</header> <section id="H6B1AF26E979E447B8FCA439175967828" section-type="subsequent-section" commented="no"> <enum>601.</enum> <header>Shareholder threshold for registration</header> <subsection id="H09AF71C2A62C47EEAE2C85D0D1AF82EC" commented="no"> <enum>(a)</enum> <header>Amendments to section 12 of the Securities Exchange Act of 1934</header> <text>Section 12(g) of the Securities Exchange Act of 1934 (15 U.S.C. 78<italic>l</italic> (g)) is further amended—</text> <paragraph id="HDAB3772DA5D845379605179ED363ACCC" commented="no"> <enum>(1)</enum> <text>in paragraph (1), by amending subparagraph (B) to read as follows:</text> <quoted-block style="OLC" id="H65297506D03843969DB573307F88A892" display-inline="no-display-inline"> <subparagraph id="HACCF922C84734273AE3B623F909C6C0B" indent="up1" commented="no"> <enum>(B)</enum> <text display-inline="yes-display-inline">in the case of an issuer that is a bank or a bank holding company, as such term is defined in section 2 of the Bank Holding Company Act of 1956 (12 U.S.C. 1841), not later than 120 days after the last day of its first fiscal year ended after the effective date of this subsection, on which the issuer has total assets exceeding $10,000,000 and a class of equity security (other than an exempted security) held of record by 2,000 or more persons,</text> </subparagraph> <after-quoted-block>; and</after-quoted-block> </quoted-block> </paragraph> <paragraph id="H961F2E3D15954D5CA0C654105880A38A" commented="no"> <enum>(2)</enum> <text>in paragraph (4), by striking <quote>three hundred</quote> and inserting <quote>300 persons, or, in the case of a bank, as such term is defined in section 3(a)(6), or a bank holding company, as such term is defined in section (2) of the Bank Holding Company Act of 1956 (12 U.S.C. 1841), 1,200 persons</quote>.</text> </paragraph> </subsection> <subsection id="H3E5123620F754F8DBA607149D683C72C" commented="no"> <enum>(b)</enum> <header>Amendments to section 15 of the Securities Exchange Act of 1934</header> <text>Section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(d)) is amended, in the third sentence, by striking <quote>three hundred</quote> and inserting <quote>300 persons, or, in the case of bank or a bank holding company, as such term is defined in section 2 of the Bank Holding Company Act of 1956 (12 U.S.C. 1841), 1,200 persons</quote>.</text> </subsection> </section> <section id="HB7EC113E92F24FC393425F7369AEE9DE" commented="no"> <enum>602.</enum> <header>Rulemaking</header> <text display-inline="no-display-inline">Not later than 1 year after the date of enactment of this Act, the Securities and Exchange Commission shall issue final regulations to implement this title and the amendments made by this title.</text> </section>