To amend the securities laws to provide for registration exemptions for certain crowdfunded securities, and for other purposes.
Committees
House Financial Services; Senate Banking, Housing, and Urban Affairs
Bill Summary
Entrepreneur Access to Capital Act - (Sec. 2) Amends the Securities Act of 1933 to exempt from its registration requirements and prohibitions any transactions involving the offer or sale of (crowdfunded) securities by an issuer if the aggregate amount sold within the previous 12-month period in reliance upon the exemption is: (1) $1 million, adjusted for inflation, or less; or (2) $2 million, adjusted for inflation, or less if the issuer provides potential investors with audited financial statements. Requires the aggregate amount sold to any investor in reliance on this exemption within the previous 12-month period, in either case, not to exceed the lesser of $10,000, adjusted for inflation, or 10% of the investor's annual income. (Crowdfunding is a method of capital formation where groups of people pool money, typically composed of very small individual contributions, and often via internet platforms, to invest in a company or otherwise support an effort by others to accomplish a specific goal.) Requires an intermediary between the issuer and the investor, if there is one, and an issuer, if there is no intermediary, to meet specified requirements. Requires both intermediaries and issuers (if there is no intermediary) with respect to such exempted transactions to: (1) warn investors of the speculative nature generally applicable to investments in startups, emerging businesses, and small issuers; (2) warn investors that there are restrictions on the re-sale of the securities; (3) take reasonable measures to reduce the risk of fraud with respect to the transaction; (4) provide the Securities and Exchange Commission (SEC) with information about the intermediary or about the issuer and the offering, as the case may be; (5) provide the SEC with continuous investor-level access to the intermediary's or the issuer's website; (6) require each investor to answer questions demonstrating a basic understanding of the nature of the securities offered, including the risk of illiquidity; (7) outsource cash-management functions to a qualified third party custodian; (8) maintain books and records the SEC deems appropriate; (9) allow for communication between the issuer and investors via the intermediary's or the issuer's website; (10) not offer investment advice; and (11) notify the SEC upon completion of the offering. Requires the issuer (and requires an intermediary to require the issuer) to state a target offering amount as well as a deadline to reach it, and ensure that the third party custodian withholds offering proceeds until the aggregate capital raised from investors other than the issuer is no less than 60 % of the target offering amount. Requires an intermediary, in addition, to: (1) carry out background checks on the issuer's principals, and (2) provide the SEC and potential investors with information about the issuer and the offering. Requires an issuer to disclose its interest in the issuance to investors. Authorizes an issuer or intermediary to rely upon certifications as to annual income provided by the person to whom the securities are sold to verify the investor's income. Directs the SEC to make available to the states information it receives about the intermediary, issuer, and offering. Restricts investor sales of certain securities during the one-year period beginning on the date of purchase, unless such securities are sold to either the issuer of the securities or to an accredited investor. Declares that an intermediary shall not be treated as a broker under the securities laws solely by reason of participation in a crowdfunded transaction. States that this Act does not preclude an issuer from raising capital through other means. Directs the SEC to establish disqualification criteria that render either an issuer or intermediary ineligible to utilize a specified exemption under the Securities Act of 1933 based upon the disciplinary history of the issuer or its predecessors, affiliates, officers, directors, or persons fulfilling similar roles. Requires such criteria to be substantially similar to rules adopted for disqualifying felons from Regulation D offerings in accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act. (Sec. 3) Amends the Securities Exchange Act of 1934 to exclude securities held by persons who purchase them in crowdfunded transactions under this Act from application of the 500-to-750 shareholder "held of record" criterion for a class of equity security subject to mandatory registration. (Sec. 4) Amends the Securities Act of 1933 to exempt such crowdfunded securities from state regulation of securities offerings; but retains state jurisdiction over fraud, deceit, or the unlawful conduct of intermediaries, issuers, and custodians.
To amend the securities laws to provide for registration exemptions for certain crowdfunded securities, and for other purposes.
Entrepreneur Access to Capital Act - (Sec. 2) Amends the Securities Act of 1933 to exempt from its registration requirements and prohibitions any transactions involving the offer or sale of (crowdfunded) securities by an issuer if the aggregate amount sold within the previous 12-month period in reliance upon the exemption is: (1) $1 million, adjusted for inflation, or less; or (2) $2 million, adjusted for inflation, or less if the issuer provides potential investors with audited financial statements. Requires the aggregate amount sold to any investor in reliance on this exemption within the previous 12-month period, in either case, not to exceed the lesser of $10,000, adjusted for inflation, or 10% of the investor's annual income. (Crowdfunding is a method of capital formation where groups of people pool money, typically composed of very small individual contributions, and often via internet platforms, to invest in a company or otherwise support an effort by others to accomplish a specific goal.) Requires an intermediary between the issuer and the investor, if there is one, and an issuer, if there is no intermediary, to meet specified requirements. Requires both intermediaries and issuers (if there is no intermediary) with respect to such exempted transactions to: (1) warn investors of the speculative nature generally applicable to investments in startups, emerging businesses, and small issuers; (2) warn investors that there are restrictions on the re-sale of the securities; (3) take reasonable measures to reduce the risk of fraud with respect to the transaction; (4) provide the Securities and Exchange Commission (SEC) with information about the intermediary or about the issuer and the offering, as the case may be; (5) provide the SEC with continuous investor-level access to the intermediary's or the issuer's website; (6) require each investor to answer questions demonstrating a basic understanding of the nature of the securities offered, including the risk of illiquidity; (7) outsource cash-management functions to a qualified third party custodian; (8) maintain books and records the SEC deems appropriate; (9) allow for communication between the issuer and investors via the intermediary's or the issuer's website; (10) not offer investment advice; and (11) notify the SEC upon completion of the offering. Requires the issuer (and requires an intermediary to require the issuer) to state a target offering amount as well as a deadline to reach it, and ensure that the third party custodian withholds offering proceeds until the aggregate capital raised from investors other than the issuer is no less than 60 % of the target offering amount. Requires an intermediary, in addition, to: (1) carry out background checks on the issuer's principals, and (2) provide the SEC and potential investors with information about the issuer and the offering. Requires an issuer to disclose its interest in the issuance to investors. Authorizes an issuer or intermediary to rely upon certifications as to annual income provided by the person to whom the securities are sold to verify the investor's income. Directs the SEC to make available to the states information it receives about the intermediary, issuer, and offering. Restricts investor sales of certain securities during the one-year period beginning on the date of purchase, unless such securities are sold to either the issuer of the securities or to an accredited investor. Declares that an intermediary shall not be treated as a broker under the securities laws solely by reason of participation in a crowdfunded transaction. States that this Act does not preclude an issuer from raising capital through other means. Directs the SEC to establish disqualification criteria that render either an issuer or intermediary ineligible to utilize a specified exemption under the Securities Act of 1933 based upon the disciplinary history of the issuer or its predecessors, affiliates, officers, directors, or persons fulfilling similar roles. Requires such criteria to be substantially similar to rules adopted for disqualifying felons from Regulation D offerings in accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act. (Sec. 3) Amends the Securities Exchange Act of 1934 to exclude securities held by persons who purchase them in crowdfunded transactions under this Act from application of the 500-to-750 shareholder "held of record" criterion for a class of equity security subject to mandatory registration. (Sec. 4) Amends the Securities Act of 1933 to exempt such crowdfunded securities from state regulation of securities offerings; but retains state jurisdiction over fraud, deceit, or the unlawful conduct of intermediaries, issuers, and custodians.