H.R. 3606 — Jumpstart Our Business Startups

[112th Congress Public Law 106]
[From the U.S. Government Publishing Office]



[[Page 305]]

                   JUMPSTART OUR BUSINESS STARTUPS ACT

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Public Law 112-106
112th Congress

                                 An Act


 
   To increase American job creation and economic growth by improving 
        access to the public capital markets for emerging growth 
            companies. <<NOTE: Apr. 5, 2012 -  [H.R. 3606]>> 

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled, <<NOTE: Jumpstart Our 
Business Startups Act. 15 USC 78a note.>> 
SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Jumpstart Our Business Startups 
Act''.
SEC. 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--CROWDFUNDING

Sec. 301. Short title.
Sec. 302. Crowdfunding exemption.
Sec. 303. Exclusion of crowdfunding investors from shareholder cap.
Sec. 304. Funding portal regulation.
Sec. 305. Relationship with 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.
Sec. 504. Commission study of enforcement authority under Rule 12g5-1.

                       TITLE VI--CAPITAL EXPANSION

Sec. 601. Shareholder threshold for registration.
Sec. 602. Rulemaking.

                TITLE VII--OUTREACH ON CHANGES TO THE LAW

Sec. 701. Outreach by the Commission.

[[Page 126 STAT. 307]]

TITLE I--REOPENING AMERICAN CAPITAL MARKETS TO EMERGING GROWTH COMPANIES

SEC. 101. DEFINITIONS.

    (a) Securities Act of 1933.--Section 2(a) of the Securities Act of 
1933 (15 U.S.C. 77b(a)) is amended by adding at the end the following:
            ``(19) The term `emerging growth company' means an issuer 
        that had total annual gross revenues of less than $1,000,000,000 
        (as such amount is indexed for inflation every 5 years by the 
        Commission to reflect the change in the Consumer Price Index for 
        All Urban Consumers published by the Bureau of Labor Statistics, 
        setting the threshold to the nearest 1,000,000) 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--
                    ``(A) the last day of the fiscal year of the issuer 
                during which it had total annual gross revenues of 
                $1,000,000,000 (as such amount is indexed for inflation 
                every 5 years by the Commission to reflect the change in 
                the Consumer Price Index for All Urban Consumers 
                published by the Bureau of Labor Statistics, setting the 
                threshold to the nearest 1,000,000) or more;
                    ``(B) 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;
                    ``(C) the date on which such issuer has, during the 
                previous 3-year period, issued more than $1,000,000,000 
                in non-convertible debt; or
                    ``(D) the date on which such issuer is deemed to be 
                a `large accelerated filer', as defined in section 
                240.12b-2 of title 17, Code of Federal Regulations, or 
                any successor thereto.''.

    (b) Securities Exchange Act of 1934.--Section 3(a) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78c(a)) is amended--
            (1) 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
            (2) by adding at the end the following:
            ``(80) Emerging growth company.--The term `emerging growth 
        company' means an issuer that had total annual gross revenues of 
        less than $1,000,000,000 (as such amount is indexed for 
        inflation every 5 years by the Commission to reflect the change 
        in the Consumer Price Index for All Urban Consumers published by 
        the Bureau of Labor Statistics, setting the threshold to the 
        nearest 1,000,000) 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--

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                    ``(A) the last day of the fiscal year of the issuer 
                during which it had total annual gross revenues of 
                $1,000,000,000 (as such amount is indexed for inflation 
                every 5 years by the Commission to reflect the change in 
                the Consumer Price Index for All Urban Consumers 
                published by the Bureau of Labor Statistics, setting the 
                threshold to the nearest 1,000,000) or more;
                    ``(B) 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;
                    ``(C) the date on which such issuer has, during the 
                previous 3-year period, issued more than $1,000,000,000 
                in non-convertible debt; or
                    ``(D) the date on which such issuer is deemed to be 
                a `large accelerated filer', as defined in section 
                240.12b-2 of title 17, Code of Federal Regulations, or 
                any successor thereto.''.

    (c) <<NOTE: Applicability. 15 USC 78c note.>>  Other Definitions.--
As used in this title, the following definitions shall apply:
            (1) Commission.--The term ``Commission'' means the 
        Securities and Exchange Commission.
            (2) Initial public offering date.--The term ``initial public 
        offering date'' 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.

    (d) <<NOTE: 15 USC 77b note.>>  Effective Date.--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.
SEC. 102. DISCLOSURE OBLIGATIONS.

    (a) Executive Compensation.--
            (1) Exemption.--Section 14A(e) of the Securities Exchange 
        Act of 1934 (15 U.S.C. 78n-1(e)) is amended--
                    (A) by striking ``The Commission may'' and inserting 
                the following:
            ``(1) In general.--The Commission may'';
                    (B) by striking ``an issuer'' and inserting ``any 
                other issuer''; and
                    (C) by adding at the end the following:
            ``(2) Treatment of emerging growth companies.--
                    ``(A) In general.--An emerging growth company shall 
                be exempt from the requirements of subsections (a) and 
                (b).
                    ``(B) <<NOTE: Time period.>>  Compliance after 
                termination of emerging growth company treatment.--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--
                          ``(i) in the case of an issuer that was an 
                      emerging growth company for less than 2 years 
                      after the date

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                      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
                          ``(ii) in the case of any other issuer, the 1-
                      year period beginning on the date the issuer is no 
                      longer an emerging growth company.''.
            (2) Proxies.--Section 14(i) of the Securities Exchange Act 
        of 1934 (15 U.S.C. 78n(i)) is amended by inserting ``, for any 
        issuer other than an emerging growth company,'' after 
        ``including''.
            (3) Compensation disclosures.--Section 953(b)(1) of the 
        Investor Protection and Securities Reform Act of 2010 (Public 
        Law 111-203; 124 Stat. 1904) <<NOTE: 15 USC 78l note.>> is 
        amended by inserting ``, other than an emerging growth company, 
        as that term is defined in section 3(a) of the Securities 
        Exchange Act of 1934,'' after ``require each issuer''.

    (b) Financial Disclosures and Accounting Pronouncements.--
            (1) Securities act of 1933.--Section 7(a) of the Securities 
        Act of 1933 (15 U.S.C. 77g(a)) is amended--
                    (A) by striking ``(a) The registration'' and 
                inserting the following:

    ``(a) Information Required in Registration Statement.--
            ``(1) In general.--The registration''; and
                    (B) by adding at the end the following:
            ``(2) Treatment of emerging growth companies.--An emerging 
        growth company--
                    ``(A) 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
                    ``(B) 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.''.
            (2) Securities exchange act of 1934.--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: ``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

[[Page 126 STAT. 310]]

        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.''.

    (c) <<NOTE: 15 USC 77g note.>>  Other Disclosures.--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.
SEC. 103. INTERNAL CONTROLS AUDIT.

    Section 404(b) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7262(b)) 
is amended by inserting ``, other than an issuer that is an emerging 
growth company (as defined in section 3 of the Securities Exchange Act 
of 1934),'' before ``shall attest to''.
SEC. 104. AUDITING STANDARDS.

    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:
                    ``(C) Transition period for emerging growth 
                companies.--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. <<NOTE: Determination.>> 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.''.
SEC. 105. AVAILABILITY OF INFORMATION ABOUT EMERGING GROWTH 
                        COMPANIES.

    (a) Provision of Research.--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: ``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. <<NOTE: Definition.>> As used in this paragraph, the term 
`research report' means a written, electronic, or oral communication

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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.''.

    (b) Securities Analyst Communications.--Section 15D of the 
Securities Exchange Act of 1934 (15 U.S.C. 78o-6) is amended--
            (1) by redesignating subsection (c) as subsection (d); and
            (2) by inserting after subsection (b) the following:

    ``(c) Limitation.--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--
            ``(1) 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
            ``(2) 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.''.

    (c) Expanding Permissible Communications.--Section 5 of the 
Securities Act of 1933 (15 U.S.C. 77e) is amended--
            (1) by redesignating subsection (d) as subsection (e); and
            (2) by inserting after subsection (c) the following:

    ``(d) Limitation.--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).''.
    (d) <<NOTE: 15 USC 78o-6 note.>>  Post Offering Communications.--
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--
            (1) within any prescribed period of time following the 
        initial public offering date of the emerging growth company; or
            (2) 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.

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SEC. 106. OTHER MATTERS.

    (a) Draft Registration Statements.--Section 6 of the Securities Act 
of 1933 (15 U.S.C. 77f) is amended by adding at the end the following:
    ``(e) Emerging Growth Companies.--
            ``(1) <<NOTE: Public information. Deadline.>>  In general.--
        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.
            ``(2) Confidentiality.--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.''.

    (b) Tick Size.--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:
            ``(6) Tick size.--
                    ``(A) Study and report.--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.
                    ``(B) <<NOTE: Determination. Deadline.>>  
                Designation.--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.''.
SEC. 107. <<NOTE: 15 USC 78c note.>> OPT-IN RIGHT FOR EMERGING 
                        GROWTH COMPANIES.

    (a) In General.--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

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forgo such exemption and instead comply with the requirements that apply 
to an issuer that is not an emerging growth company.
    (b) Special Rule.--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--
            (1) <<NOTE: Notification.>>  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;
            (2) 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
            (3) 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.
SEC. 108. REVIEW OF REGULATION S-K.

    (a) Review.--The Securities and Exchange Commission shall conduct a 
review of its Regulation S-K (17 CFR 229.10 et seq.) to--
            (1) comprehensively analyze the current registration 
        requirements of such regulation; and
            (2) 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.

    (b) Report.--Not later than 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.

              TITLE II--ACCESS TO CAPITAL FOR JOB CREATORS

SEC. 201. MODIFICATION OF EXEMPTION.

    (a) <<NOTE: 15 USC 77d note.>>  Modification of Rules.--
            (1) <<NOTE: Deadlines.>>  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

[[Page 126 STAT. 314]]

        that purchasers of the securities are accredited investors, 
        using such methods as determined by the Commission. Section 
        230.506 of title 17, Code of Federal Regulations, as revised 
        pursuant to this section, shall continue to be treated as a 
        regulation issued under section 4(2) of the Securities Act of 
        1933 (15 U.S.C. 77d(2)).
            (2) Not later than 90 days after the date of enactment of 
        this Act, the Securities and Exchange Commission shall revise 
        subsection (d)(1) of section 230.144A of title 17, Code of 
        Federal Regulations, to provide that securities sold under such 
        revised exemption may be offered to persons other than qualified 
        institutional buyers, including by means of general solicitation 
        or general advertising, provided that securities are sold only 
        to persons that the seller and any person acting on behalf of 
        the seller reasonably believe is a qualified institutional 
        buyer.

    (b) Consistency in Interpretation.--Section 4 of the Securities Act 
of 1933 (15 U.S.C. 77d) is amended--
            (1) by striking ``The provisions of section 5'' and 
        inserting ``(a) The provisions of section 5''; and
            (2) by adding at the end the following:

    ``(b) Offers and sales exempt under section 230.506 of title 17, 
Code of Federal Regulations (as revised pursuant to section 201 of the 
Jumpstart Our Business Startups Act) shall not be deemed public 
offerings under the Federal securities laws as a result of general 
advertising or general solicitation.''.
    (c) Explanation of Exemption.--Section 4 of the Securities Act of 
1933 (15 U.S.C. 77d) is amended--
            (1) by striking ``The provisions of section 5'' and 
        inserting ``(a) The provisions of section 5''; and
            (2) by adding at the end the following:

    ``(b)(1) With respect to securities offered and sold in compliance 
with Rule 506 of Regulation D under this Act, no person who meets the 
conditions set forth in paragraph (2) shall be subject to registration 
as a broker or dealer pursuant to section 15(a)(1) of this title, solely 
because--
                    ``(A) that person maintains a platform or mechanism 
                that permits the offer, sale, purchase, or negotiation 
                of or with respect to securities, or permits general 
                solicitations, general advertisements, or similar or 
                related activities by issuers of such securities, 
                whether online, in person, or through any other means;
                    ``(B) that person or any person associated with that 
                person co-invests in such securities; or
                    ``(C) that person or any person associated with that 
                person provides ancillary services with respect to such 
                securities.

    ``(2) <<NOTE: Applicability.>>  The exemption provided in paragraph 
(1) shall apply to any person described in such paragraph if--
            ``(A) such person and each person associated with that 
        person receives no compensation in connection with the purchase 
        or sale of such security;
            ``(B) such person and each person associated with that 
        person does not have possession of customer funds or securities 
        in connection with the purchase or sale of such security; and
            ``(C) such person is not subject to a statutory 
        disqualification as defined in section 3(a)(39) of this title 
        and does not

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        have any person associated with that person subject to such a 
        statutory disqualification.

    ``(3) <<NOTE: Definition.>>  For the purposes of this subsection, 
the term `ancillary services' means--
            ``(A) the provision of due diligence services, in connection 
        with the offer, sale, purchase, or negotiation of such security, 
        so long as such services do not include, for separate 
        compensation, investment advice or recommendations to issuers or 
        investors; and
            ``(B) the provision of standardized documents to the issuers 
        and investors, so long as such person or entity does not 
        negotiate the terms of the issuance for and on behalf of third 
        parties and issuers are not required to use the standardized 
        documents as a condition of using the service.''.

TITLE <<NOTE: Capital Raising Online While Deterring Fraud and Unethical 
Non-Disclosure Act of 2012. 15 USC 77a note.>>  III--CROWDFUNDING
SEC. 301. SHORT TITLE.

    This title may be cited as the ``Capital Raising Online While 
Deterring Fraud and Unethical Non-Disclosure Act of 2012'' or the 
``CROWDFUND Act''.
SEC. 302. CROWDFUNDING EXEMPTION.

    (a) Securities Act of 1933.--Section 4 of the Securities Act of 1933 
(15 U.S.C. 77d) is amended by adding at the end the following:
            ``(6) transactions involving the offer or sale of securities 
        by an issuer (including all entities controlled by or under 
        common control with the issuer), provided that--
                    ``(A) the aggregate amount sold to all investors by 
                the issuer, including any amount sold in reliance on the 
                exemption provided under this paragraph during the 12-
                month period preceding the date of such transaction, is 
                not more than $1,000,000;
                    ``(B) the aggregate amount sold to any investor by 
                an issuer, including any amount sold in reliance on the 
                exemption provided under this paragraph during the 12-
                month period preceding the date of such transaction, 
                does not exceed--
                          ``(i) the greater of $2,000 or 5 percent of 
                      the annual income or net worth of such investor, 
                      as applicable, if either the annual income or the 
                      net worth of the investor is less than $100,000; 
                      and
                          ``(ii) 10 percent of the annual income or net 
                      worth of such investor, as applicable, not to 
                      exceed a maximum aggregate amount sold of 
                      $100,000, if either the annual income or net worth 
                      of the investor is equal to or more than $100,000;
                    ``(C) the transaction is conducted through a broker 
                or funding portal that complies with the requirements of 
                section 4A(a); and
                    ``(D) the issuer complies with the requirements of 
                section 4A(b).''.

    (b) Requirements To Qualify for Crowdfunding Exemption.--The 
Securities Act of 1933 (15 U.S.C. 77a et seq.) is amended by inserting 
after section 4 the following:

[[Page 126 STAT. 316]]

``SEC. 4A. <<NOTE: 15 USC 77d-1.>> REQUIREMENTS WITH RESPECT TO 
                      CERTAIN SMALL TRANSACTIONS.

    ``(a) <<NOTE: Regulations.>>  Requirements on Intermediaries.--A 
person acting as an intermediary in a transaction involving the offer or 
sale of securities for the account of others pursuant to section 4(6) 
shall--
            ``(1) register with the Commission as--
                    ``(A) a broker; or
                    ``(B) a funding portal (as defined in section 
                3(a)(80) of the Securities Exchange Act of 1934);
            ``(2) register with any applicable self-regulatory 
        organization (as defined in section 3(a)(26) of the Securities 
        Exchange Act of 1934);
            ``(3) provide such disclosures, including disclosures 
        related to risks and other investor education materials, as the 
        Commission shall, by rule, determine appropriate;
            ``(4) ensure that each investor--
                    ``(A) reviews investor-education information, in 
                accordance with standards established by the Commission, 
                by rule;
                    ``(B) positively affirms that the investor 
                understands that the investor is risking the loss of the 
                entire investment, and that the investor could bear such 
                a loss; and
                    ``(C) answers questions demonstrating--
                          ``(i) an understanding of the level of risk 
                      generally applicable to investments in startups, 
                      emerging businesses, and small issuers;
                          ``(ii) an understanding of the risk of 
                      illiquidity; and
                          ``(iii) an understanding of such other matters 
                      as the Commission determines appropriate, by rule;
            ``(5) take such measures to reduce the risk of fraud with 
        respect to such transactions, as established by the Commission, 
        by rule, including obtaining a background and securities 
        enforcement regulatory history check on each officer, director, 
        and person holding more than 20 percent of the outstanding 
        equity of every issuer whose securities are offered by such 
        person;
            ``(6) <<NOTE: Deadline.>>  not later than 21 days prior to 
        the first day on which securities are sold to any investor (or 
        such other period as the Commission may establish), make 
        available to the Commission and to potential investors any 
        information provided by the issuer pursuant to subsection (b);
            ``(7) ensure that all offering proceeds are only provided to 
        the issuer when the aggregate capital raised from all investors 
        is equal to or greater than a target offering amount, and allow 
        all investors to cancel their commitments to invest, as the 
        Commission shall, by rule, determine appropriate;
            ``(8) <<NOTE: Time period.>>  make such efforts as the 
        Commission determines appropriate, by rule, to ensure that no 
        investor in a 12-month period has purchased securities offered 
        pursuant to section 4(6) that, in the aggregate, from all 
        issuers, exceed the investment limits set forth in section 
        4(6)(B);
            ``(9) <<NOTE: Confidentiality.>>  take such steps to protect 
        the privacy of information collected from investors as the 
        Commission shall, by rule, determine appropriate;

[[Page 126 STAT. 317]]

            ``(10) not compensate promoters, finders, or lead generators 
        for providing the broker or funding portal with the personal 
        identifying information of any potential investor;
            ``(11) prohibit its directors, officers, or partners (or any 
        person occupying a similar status or performing a similar 
        function) from having any financial interest in an issuer using 
        its services; and
            ``(12) meet such other requirements as the Commission may, 
        by rule, prescribe, for the protection of investors and in the 
        public interest.

    ``(b) Requirements for Issuers.--For purposes of section 4(6), an 
issuer who offers or sells securities shall--
            ``(1) file with the Commission and provide to investors and 
        the relevant broker or funding portal, and make available to 
        potential investors--
                    ``(A) the name, legal status, physical address, and 
                website address of the issuer;
                    ``(B) the names of the directors and officers (and 
                any persons occupying a similar status or performing a 
                similar function), and each person holding more than 20 
                percent of the shares of the issuer;
                    ``(C) a description of the business of the issuer 
                and the anticipated business plan of the issuer;
                    ``(D) <<NOTE: Time period.>>  a description of the 
                financial condition of the issuer, including, for 
                offerings that, together with all other offerings of the 
                issuer under section 4(6) within the preceding 12-month 
                period, have, in the aggregate, target offering amounts 
                of--
                          ``(i) $100,000 or less--
                                    ``(I) the income tax returns filed 
                                by the issuer for the most recently 
                                completed year (if any); and
                                    ``(II) financial statements of the 
                                issuer, which shall be certified by the 
                                principal executive officer of the 
                                issuer to be true and complete in all 
                                material respects;
                          ``(ii) more than $100,000, but not more than 
                      $500,000, financial statements reviewed by a 
                      public accountant who is independent of the 
                      issuer, using professional standards and 
                      procedures for such review or standards and 
                      procedures established by the Commission, by rule, 
                      for such purpose; and
                          ``(iii) more than $500,000 (or such other 
                      amount as the Commission may establish, by rule), 
                      audited financial statements;
                    ``(E) a description of the stated purpose and 
                intended use of the proceeds of the offering sought by 
                the issuer with respect to the target offering amount;
                    ``(F) the target offering amount, the deadline to 
                reach the target offering amount, and regular updates 
                regarding the progress of the issuer in meeting the 
                target offering amount;
                    ``(G) the price to the public of the securities or 
                the method for determining the price, provided that, 
                prior to sale, each investor shall be provided in 
                writing the final price and all required disclosures, 
                with a reasonable opportunity to rescind the commitment 
                to purchase the securities;

[[Page 126 STAT. 318]]

                    ``(H) a description of the ownership and capital 
                structure of the issuer, including--
                          ``(i) terms of the securities of the issuer 
                      being offered and each other class of security of 
                      the issuer, including how such terms may be 
                      modified, and a summary of the differences between 
                      such securities, including how the rights of the 
                      securities being offered may be materially 
                      limited, diluted, or qualified by the rights of 
                      any other class of security of the issuer;
                          ``(ii) a description of how the exercise of 
                      the rights held by the principal shareholders of 
                      the issuer could negatively impact the purchasers 
                      of the securities being offered;
                          ``(iii) the name and ownership level of each 
                      existing shareholder who owns more than 20 percent 
                      of any class of the securities of the issuer;
                          ``(iv) how the securities being offered are 
                      being valued, and examples of methods for how such 
                      securities may be valued by the issuer in the 
                      future, including during subsequent corporate 
                      actions; and
                          ``(v) the risks to purchasers of the 
                      securities relating to minority ownership in the 
                      issuer, the risks associated with corporate 
                      actions, including additional issuances of shares, 
                      a sale of the issuer or of assets of the issuer, 
                      or transactions with related parties; and
                    ``(I) such other information as the Commission may, 
                by rule, prescribe, for the protection of investors and 
                in the public interest;
            ``(2) not advertise the terms of the offering, except for 
        notices which direct investors to the funding portal or broker;
            ``(3) not compensate or commit to compensate, directly or 
        indirectly, any person to promote its offerings through 
        communication channels provided by a broker or funding portal, 
        without taking such steps as the Commission shall, by rule, 
        require to ensure that such person clearly discloses the 
        receipt, past or prospective, of such compensation, upon each 
        instance of such promotional communication;
            ``(4) <<NOTE: Deadline. Reports.>>  not less than annually, 
        file with the Commission and provide to investors reports of the 
        results of operations and financial statements of the issuer, as 
        the Commission shall, by rule, determine appropriate, subject to 
        such exceptions and termination dates as the Commission may 
        establish, by rule; and
            ``(5) comply with such other requirements as the Commission 
        may, by rule, prescribe, for the protection of investors and in 
        the public interest.

    ``(c) Liability for Material Misstatements and Omissions.--
            ``(1) Actions authorized.--
                    ``(A) In general.--Subject to paragraph (2), a 
                person who purchases a security in a transaction 
                exempted by the provisions of section 4(6) may bring an 
                action against an issuer described in paragraph (2), 
                either at law or in equity in any court of competent 
                jurisdiction, to recover the consideration paid for such 
                security with interest thereon, less the amount of any 
                income received thereon, upon the tender of such 
                security, or for damages if such person no longer owns 
                the security.

[[Page 126 STAT. 319]]

                    ``(B) Liability.--An action brought under this 
                paragraph shall be subject to the provisions of section 
                12(b) and section 13, as if the liability were created 
                under section 12(a)(2).
            ``(2) Applicability.--An issuer shall be liable in an action 
        under paragraph (1), if the issuer--
                    ``(A) by the use of any means or instruments of 
                transportation or communication in interstate commerce 
                or of the mails, by any means of any written or oral 
                communication, in the offering or sale of a security in 
                a transaction exempted by the provisions of section 
                4(6), makes an untrue statement of a material fact or 
                omits to state a material fact required to be stated or 
                necessary in order to make the statements, in the light 
                of the circumstances under which they were made, not 
                misleading, provided that the purchaser did not know of 
                such untruth or omission; and
                    ``(B) does not sustain the burden of proof that such 
                issuer did not know, and in the exercise of reasonable 
                care could not have known, of such untruth or omission.
            ``(3) Definition.--As used in this subsection, the term 
        `issuer' includes any person who is a director or partner of the 
        issuer, and the principal executive officer or officers, 
        principal financial officer, and controller or principal 
        accounting officer of the issuer (and any person occupying a 
        similar status or performing a similar function) that offers or 
        sells a security in a transaction exempted by the provisions of 
        section 4(6), and any person who offers or sells the security in 
        such offering.

    ``(d) Information Available to States.--The Commission shall make, 
or shall cause to be made by the relevant broker or funding portal, the 
information described in subsection (b) and such other information as 
the Commission, by rule, determines appropriate, available to the 
securities commission (or any agency or office performing like 
functions) of each State and territory of the United States and the 
District of Columbia.
    ``(e) Restrictions on Sales.--Securities issued pursuant to a 
transaction described in section 4(6)--
            ``(1) <<NOTE: Time period.>>  may not be transferred by the 
        purchaser of such securities during the 1-year period beginning 
        on the date of purchase, unless such securities are 
        transferred--
                    ``(A) to the issuer of the securities;
                    ``(B) to an accredited investor;
                    ``(C) as part of an offering registered with the 
                Commission; or
                    ``(D) to a member of the family of the purchaser or 
                the equivalent, or in connection with the death or 
                divorce of the purchaser or other similar circumstance, 
                in the discretion of the Commission; and
            ``(2) shall be subject to such other limitations as the 
        Commission shall, by rule, establish.

    ``(f) Applicability.--Section 4(6) shall not apply to transactions 
involving the offer or sale of securities by any issuer that--
            ``(1) is not organized under and subject to the laws of a 
        State or territory of the United States or the District of 
        Columbia;

[[Page 126 STAT. 320]]

            ``(2) is subject to the requirement to file reports pursuant 
        to section 13 or section 15(d) of the Securities Exchange Act of 
        1934;
            ``(3) is an investment company, as defined in section 3 of 
        the Investment Company Act of 1940, or is excluded from the 
        definition of investment company by section 3(b) or section 3(c) 
        of that Act; or
            ``(4) the Commission, by rule or regulation, determines 
        appropriate.

    ``(g) Rule of Construction.--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).
    ``(h) Certain Calculations.--
            ``(1) <<NOTE: Time period. Notice. Federal Register, 
        publication.>>  Dollar amounts.--Dollar amounts in section 4(6) 
        and subsection (b) of this section shall be adjusted by the 
        Commission not less frequently than once every 5 years, by 
        notice published in the Federal Register to reflect any change 
        in the Consumer Price Index for All Urban Consumers published by 
        the Bureau of Labor Statistics.
            ``(2) Income and net worth.--The income and net worth of a 
        natural person under section 4(6)(B) shall be calculated in 
        accordance with any rules of the Commission under this title 
        regarding the calculation of the income and net worth, 
        respectively, of an accredited investor.''.

    (c) <<NOTE: Deadline. 15 USC 77d note.>>  Rulemaking.--Not later 
than 270 days after the date of enactment of this Act, the Securities 
and Exchange Commission (in this title referred to as the 
``Commission'') shall issue such rules as the Commission determines may 
be necessary or appropriate for the protection of investors to carry out 
sections 4(6) and section 4A of the Securities Act of 1933, as added by 
this title. <<NOTE: Consultation.>> In carrying out this section, the 
Commission shall consult with any securities commission (or any agency 
or office performing like functions) of the States, any territory of the 
United States, and the District of Columbia, which seeks to consult with 
the Commission, and with any applicable national securities association.

    (d) <<NOTE: 15 USC 77d note.>>  Disqualification.--
            (1) <<NOTE: Deadline.>>  In general.--Not later than 270 
        days after the date of enactment of this Act, the Commission 
        shall, by rule, establish disqualification provisions under 
        which--
                    (A) an issuer shall not be eligible to offer 
                securities pursuant to section 4(6) of the Securities 
                Act of 1933, as added by this title; and
                    (B) a broker or funding portal shall not be eligible 
                to effect or participate in transactions pursuant to 
                that section 4(6).
            (2) Inclusions.--Disqualification provisions required by 
        this subsection shall--
                    (A) be substantially similar to the provisions of 
                section 230.262 of title 17, Code of Federal Regulations 
                (or any successor thereto); and
                    (B) disqualify any offering or sale of securities by 
                a person that--
                          (i) is subject to a final order of a State 
                      securities commission (or an agency or officer of 
                      a State performing like functions), a State 
                      authority that supervises or examines banks, 
                      savings associations, or credit unions, a State 
                      insurance commission (or an agency

[[Page 126 STAT. 321]]

                      or officer of a State performing like functions), 
                      an appropriate Federal banking agency, or the 
                      National Credit Union Administration, that--
                                    (I) bars the person from--
                                            (aa) association with an 
                                        entity regulated by such 
                                        commission, authority, agency, 
                                        or officer;
                                            (bb) engaging in the 
                                        business of securities, 
                                        insurance, or banking; or
                                            (cc) engaging in savings 
                                        association or credit union 
                                        activities; or
                                    (II) constitutes a final order based 
                                on a violation of any law or regulation 
                                that prohibits fraudulent, manipulative, 
                                or deceptive conduct within the 10-year 
                                period ending on the date of the filing 
                                of the offer or sale; or
                          (ii) has been convicted of any felony or 
                      misdemeanor in connection with the purchase or 
                      sale of any security or involving the making of 
                      any false filing with the Commission.
SEC. 303. EXCLUSION OF CROWDFUNDING INVESTORS FROM SHAREHOLDER 
                        CAP.

    (a) Exemption.--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:
            ``(6) Exclusion for persons holding certain securities.--
        The <<NOTE: Regulations.>> Commission shall, by rule, exempt, 
        conditionally or unconditionally, securities acquired pursuant 
        to an offering made under section 4(6) of the Securities Act of 
        1933 from the provisions of this subsection.''.

    (b) Rulemaking.--The Commission shall issue a rule to carry out 
section 12(g)(6) of the Securities Exchange Act of <<NOTE: 15 USC 78l 
note.>> 1934 (15 U.S.C. 78c), as added by this section, not later than 
270 days after the date of enactment of this Act.
SEC. 304. FUNDING PORTAL REGULATION.

    (a) Exemption.--
            (1) In general.--Section 3 of the Securities Exchange Act of 
        1934 (15 U.S.C. 78c) is amended by adding at the end the 
        following:

    ``(h) Limited Exemption for Funding Portals.--
            ``(1) In general.--The Commission shall, by rule, exempt, 
        conditionally or unconditionally, a registered funding portal 
        from the requirement to register as a broker or dealer under 
        section 15(a)(1), provided that such funding portal--
                    ``(A) remains subject to the examination, 
                enforcement, and other rulemaking authority of the 
                Commission;
                    ``(B) is a member of a national securities 
                association registered under section 15A; and
                    ``(C) is subject to such other requirements under 
                this title as the Commission determines appropriate 
                under such rule.
            ``(2) <<NOTE: Definition.>>  National securities association 
        membership.--For purposes of sections 15(b)(8) and 15A, the term 
        `broker or dealer' includes a funding portal and the term 
        `registered broker or dealer' includes a registered funding 
        portal, except to the extent that the Commission, by rule, 
        determines otherwise,

[[Page 126 STAT. 322]]

        provided that a national securities association shall only 
        examine for and enforce against a registered funding portal 
        rules of such national securities association written 
        specifically for registered funding portals.''.
            (2) <<NOTE: Deadline. 15 USC 78c note.>>  Rulemaking.--The 
        Commission shall issue a rule to carry out section 3(h) of the 
        Securities Exchange Act of 1934 (15 U.S.C. 78c), as added by 
        this subsection, not later than 270 days after the date of 
        enactment of this Act.

    (b) Definition.--Section 3(a) of the Securities Exchange Act of 1934 
(15 U.S.C. 78c(a)) is amended by adding at the end the following:
            ``(80) Funding portal.--The term `funding portal' means any 
        person acting as an intermediary in a transaction involving the 
        offer or sale of securities for the account of others, solely 
        pursuant to section 4(6) of the Securities Act of 1933 (15 
        U.S.C. 77d(6)), that does not--
                    ``(A) offer investment advice or recommendations;
                    ``(B) solicit purchases, sales, or offers to buy the 
                securities offered or displayed on its website or 
                portal;
                    ``(C) compensate employees, agents, or other persons 
                for such solicitation or based on the sale of securities 
                displayed or referenced on its website or portal;
                    ``(D) hold, manage, possess, or otherwise handle 
                investor funds or securities; or
                    ``(E) engage in such other activities as the 
                Commission, by rule, determines appropriate.''.
SEC. 305. RELATIONSHIP WITH STATE LAW.

    (a) In General.--Section 18(b)(4) of the Securities Act of 1933 (15 
U.S.C. 77r(b)(4)) is amended--
            (1) by redesignating subparagraphs (C) and (D) as 
        subparagraphs (D) and (E), respectively; and
            (2) by inserting after subparagraph (B) the following:
                    ``(C) section 4(6);''.

    (b) Clarification of the Preservation of State Enforcement 
Authority.--
            (1) <<NOTE: 15 USC 77r note.>>  In general.--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, funding 
        portal, or any other person or entity using the exemption from 
        registration provided by section 4(6) of that Act.
            (2) Clarification of state jurisdiction over unlawful 
        conduct of funding portals and issuers.--Section 18(c)(1) of the 
        Securities Act of 1933 (15 U.S.C. 77r(c)(1)) is amended by 
        striking ``with respect to fraud or deceit, or unlawful conduct 
        by a broker or dealer, in connection with securities or 
        securities transactions.'' and inserting the following: ``, in 
        connection with securities or securities transactions
                    ``(A) with respect to--
                          ``(i) fraud or deceit; or
                          ``(ii) unlawful conduct by a broker or dealer; 
                      and
                    ``(B) in connection to a transaction described under 
                section 4(6), with respect to--
                          ``(i) fraud or deceit; or

[[Page 126 STAT. 323]]

                          ``(ii) unlawful conduct by a broker, dealer, 
                      funding portal, or issuer.''.

    (c) Notice Filings Permitted.--Section 18(c)(2) of the Securities 
Act of 1933 (15 U.S.C. 77r(c)(2)) is amended by adding at the end the 
following:
                    ``(F) Fees not permitted on crowdfunded 
                securities.--Notwithstanding <<NOTE: Definition.>> subpar
                agraphs (A), (B), and (C), no filing or fee may be 
                required with respect to any security that is a covered 
                security pursuant to subsection (b)(4)(B), or will be 
                such a covered security upon completion of the 
                transaction, except for the securities commission (or 
                any agency or office performing like functions) of the 
                State of the principal place of business of the issuer, 
                or any State in which purchasers of 50 percent or 
                greater of the aggregate amount of the issue are 
                residents, provided that for purposes of this 
                subparagraph, the term `State' includes the District of 
                Columbia and the territories of the United States.''.

    (d) Funding Portals.--
            (1) State exemptions and oversight.--Section 15(i) of the 
        Securities Exchange Act of 1934 (15 U.S.C. 78o(i)) is amended--
                    (A) by redesignating paragraphs (2) and (3) as 
                paragraphs (3) and (4), respectively; and
                    (B) by inserting after paragraph (1) the following:
            ``(2) Funding portals.--
                    ``(A) Limitation on state laws.--Except as provided 
                in subparagraph (B), no State or political subdivision 
                thereof may enforce any law, rule, regulation, or other 
                administrative action against a registered funding 
                portal with respect to its business as such.
                    ``(B) Examination and enforcement authority.--
                Subparagraph (A) does not apply with respect to the 
                examination and enforcement of any law, rule, 
                regulation, or administrative action of a State or 
                political subdivision thereof in which the principal 
                place of business of a registered funding portal is 
                located, provided that such law, rule, regulation, or 
                administrative action is not in addition to or different 
                from the requirements for registered funding portals 
                established by the Commission.
                    ``(C) Definition.--For purposes of this paragraph, 
                the term `State' includes the District of Columbia and 
                the territories of the United States.''.
            (2) State fraud authority.--Section 18(c)(1) of the 
        Securities Act of 1933 (15 U.S.C. 77r(c)(1)) is amended by 
        striking ``or dealer'' and inserting ``, dealer, or funding 
        portal''.

                TITLE IV--SMALL COMPANY CAPITAL FORMATION

SEC. 401. AUTHORITY TO EXEMPT CERTAIN SECURITIES.

    (a) In General.--Section 3(b) of the Securities Act of 1933 (15 
U.S.C. 77c(b)) is amended--
            (1) by striking ``(b) The Commission'' and inserting the 
        following:

    ``(b) Additional Exemptions.--

[[Page 126 STAT. 324]]

            ``(1) Small issues exemptive authority.--The Commission''; 
        and
            (2) by adding at the end the following:
            ``(2) <<NOTE: Regulations.>>  Additional issues.--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:
                    ``(A) <<NOTE: Time period.>>  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.
                    ``(B) The securities may be offered and sold 
                publicly.
                    ``(C) The securities shall not be restricted 
                securities within the meaning of the Federal securities 
                laws and the regulations promulgated thereunder.
                    ``(D) <<NOTE: Applicability.>>  The civil liability 
                provision in section 12(a)(2) shall apply to any person 
                offering or selling such securities.
                    ``(E) 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.
                    ``(F) <<NOTE: Records.>>  The Commission shall 
                require the issuer to file audited financial statements 
                with the Commission annually.
                    ``(G) 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--
                          ``(i) 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
                          ``(ii) 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).
            ``(3) Limitation.--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.
            ``(4) Periodic disclosures.--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

[[Page 126 STAT. 325]]

        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.
            ``(5) <<NOTE: Deadlines. Review.>>  Adjustment.--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.''.

    (b) Treatment as Covered Securities for Purposes of NSMIA.--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:
                    ``(D) a rule or regulation adopted pursuant to 
                section 3(b)(2) and such security is--
                          ``(i) offered or sold on a national securities 
                      exchange; or
                          ``(ii) offered or sold to a qualified 
                      purchaser, as defined by the Commission pursuant 
                      to paragraph (3) with respect to that purchase or 
                      sale;''.

    (c) Conforming Amendment.--Section 4(5) of the Securities Act of 
1933 <<NOTE: 15 USC 77d.>> is amended by striking ``section 3(b)'' and 
inserting ``section 3(b)(1)''.
SEC. 402. STUDY ON THE IMPACT OF STATE BLUE SKY LAWS ON REGULATION 
                        A OFFERINGS.

    The Comptroller General shall conduct a study on the impact of State 
laws regulating securities offerings, or ``Blue Sky laws'', on offerings 
made under Regulation A (17 CFR 230.251 et seq.). 
The <<NOTE: Reports. Deadline.>> 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.

             TITLE V--PRIVATE COMPANY FLEXIBILITY AND GROWTH

SEC. 501. THRESHOLD FOR REGISTRATION.

    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:
            ``(A) <<NOTE: Time period.>>  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 either--
            ``(i) 2,000 persons, or
            ``(ii) 500 persons who are not accredited investors (as such 
        term is defined by the Commission), and''.

[[Page 126 STAT. 326]]

SEC. 502. EMPLOYEES.

    Section 12(g)(5) of the Securities Exchange Act of 1934 (15 U.S.C. 
78l(g)(5)), as amended by section 302, is amended in subparagraph (A) by 
adding at the end the following: ``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.''.
SEC. 503. <<NOTE: 15 USC 78l note.>> COMMISSION RULEMAKING.

    The Securities and Exchange Commission shall revise the definition 
of ``held of record'' 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 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.
SEC. 504. COMMISSION STUDY OF ENFORCEMENT AUTHORITY UNDER RULE 
                        12G5-1.

    The <<NOTE: Deadline. Recommenda- tions.>> Securities and Exchange 
Commission shall examine its authority to enforce Rule 12g5-1 to 
determine if new enforcement tools are needed to enforce the anti-
evasion provision contained in subsection (b)(3) of the rule, and shall, 
not later than 120 days after the date of enactment of this Act transmit 
its recommendations to Congress.

                       TITLE VI--CAPITAL EXPANSION

SEC. 601. SHAREHOLDER THRESHOLD FOR REGISTRATION.

    (a) Amendments to Section 12 of the Securities Exchange Act of 
1934.--Section 12(g) of the Securities Exchange Act of 1934 (15 U.S.C. 
78l(g)) is further amended--
            (1) in paragraph (1), by amending subparagraph (B) to read 
        as follows:
            ``(B) <<NOTE: Deadline.>>  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,''; and
            (2) in paragraph (4), by striking ``three hundred'' and 
        inserting ``300 persons, or, in the case of 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), 1,200 
        persons''.

    (b) Amendments to Section 15 of the Securities Exchange Act of 
1934.--Section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 
78o(d)) is amended, in the third sentence, by striking ``three hundred'' 
and inserting ``300 persons, or, in the case of bank or a bank holding 
company, as such term is defined

[[Page 126 STAT. 327]]

in section 2 of the Bank Holding Company Act of 1956 (12 U.S.C. 1841), 
1,200 persons''.
SEC. 602. <<NOTE: Deadline. 15 USC 78l note.>> RULEMAKING.

    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.

                TITLE VII--OUTREACH ON CHANGES TO THE LAW

SEC. 701. <<NOTE: Web posting. Small 
                        business. Women. Veterans. Minorities. 15 
                        USC 78d note.>> OUTREACH BY THE 
                        COMMISSION.

    The Securities and Exchange Commission shall provide online 
information and conduct outreach to inform small and medium sized 
businesses, women owned businesses, veteran owned businesses, and 
minority owned businesses of the changes made by this Act.

    Approved April 5, 2012.

LEGISLATIVE HISTORY--H.R. 3606:
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HOUSE REPORTS: No. 112-406 and Pt. 2 (Comm. on Financial Services).
CONGRESSIONAL RECORD, Vol. 158 (2012):
            Mar. 7, 8, considered and passed House.
            Mar. 15, 19-22, considered and passed Senate, amended.
            Mar. 27, House concurred in Senate amendment.
DAILY COMPILATION OF PRESIDENTIAL DOCUMENTS (2012):
            Apr. 5, Presidential remarks.

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