<enum>III</enum><header>Entrepreneur Access to Capital</header> <section id="H6E80C52F6E5B4399B8A1955FA7866CEA"><enum>301.</enum><header>Crowdfunding exemption</header> <subsection id="HB2D7FAF235044DAB8785FE5662AA5900"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 4(a) of the Securities Act of 1933 (<external-xref legal-doc="usc" parsable-cite="usc/15/77d">15 U.S.C. 77d(a)(6)</external-xref>) is amended by adding at the end the following:</text> <quoted-block display-inline="no-display-inline" id="H20AE985388E74CC0B55BA54BF2CAB192" style="OLC"> <paragraph id="H4A83C7BCA0EB47608B407E6ED9C3FF40"><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="H0E83367ACEA443C2AC97AEEA9942627B"><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="HB9B8A059F5F24A848D6E67CCE5807B28"><enum>(i)</enum><text display-inline="yes-display-inline">$3,000,000, 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="HB0375FF87EC24E588720F9CD4661DA3C"><enum>(ii)</enum><text>if the issuer provides potential investors with audited financial statements, $5,000,000, 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="HDD0367616CE7441997A85607744F4052"><enum>(B)</enum><text display-inline="yes-display-inline">the aggregate amount sold to any investor who is not an accredited investor in reliance on this exemption within the previous 12-month period does not exceed the greater of—</text> <clause id="H02D4DEA176464D58A86E249C0F746C64"><enum>(i)</enum><text>$5,000, 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;</text> </clause><clause id="H8DA102A796864F528CDB5E799F04F7A7"><enum>(ii)</enum><text>10 percent of the investor’s annual income; or</text> </clause><clause id="H40A7EEEC6BDF4EF3988657AE3F4D8882"><enum>(iii)</enum><text>10 percent of the investor’s net worth;</text> </clause></subparagraph><subparagraph id="H957FA13EB79B4909A589774A09B0110B"><enum>(C)</enum><text display-inline="yes-display-inline">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);</text> </subparagraph><subparagraph id="H09BEEDD4B70C4753BB0316E2B1B40C6B"><enum>(D)</enum><text display-inline="yes-display-inline">if the aggregate amount sold within the previous 12-month period in reliance upon this exemption is—</text> <clause id="HB345F5C60EA04DC5B8551722712BC81E"><enum>(i)</enum><text>$500,000 or less, the issuer provides potential investors with financial statements that have been certified by the principal executive officer of the issuer to be true and complete in all material respects; and</text> </clause><clause id="HA2367E2214594898BC862C347985D007"><enum>(ii)</enum><text display-inline="yes-display-inline">more than $500,000 and less than $3,000,000, the issuer provides potential investors with financial statements that have been reviewed by a public accountant who is independent of the issuer, using professional standards and procedures for such review; and</text> </clause></subparagraph><subparagraph id="H50A9F00BC79D4B728AEAE54644976059"><enum>(E)</enum><text>at the time such securities are issued, the issuer is a corporation.</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="H587B2F3199C34CC9A673FCDC7F2351C9"><enum>(b)</enum><header>Requirement on intermediaries</header><text display-inline="yes-display-inline">The Securities Act of 1933 (<external-xref legal-doc="usc" parsable-cite="usc/15/77a">15 U.S.C. 77a et seq.</external-xref>) is amended by inserting after section 4 the following:</text> <quoted-block display-inline="no-display-inline" id="HB885C744F86B47C0AC1EDDC08DAA50CC" style="OLC"> <section id="HBD9CB96AE1A245F7BEF08135B98048CE"><enum>4A.</enum><header>Requirements on intermediaries with respect to crowdfunding transactions</header> <subsection id="H797EA20C0F69412D988CF860110BDED8"><enum>(a)</enum><header>Requirements on intermediaries</header><text display-inline="yes-display-inline">For purposes of section 4(a)(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="H66CB679BB970481289A5555AE1831262"><enum>(1)</enum><text display-inline="yes-display-inline">registers with the Commission as—</text> <subparagraph id="H7DCF2B923831481792E155AD102A38DB"><enum>(A)</enum><text>a broker; or</text> </subparagraph><subparagraph id="H6BCD829C746C4F2987B0964A025E8D09"><enum>(B)</enum><text>a person acting as an intermediary who does not—</text> <clause id="H7B75D93CA3664F3B9871B70F63A69A0D"><enum>(i)</enum><text display-inline="yes-display-inline">offer investment advice or recommendations;</text> </clause><clause id="H18991EB6062443F8921C680D209AD8BA"><enum>(ii)</enum><text>explicitly solicit purchases, sales, or offers to buy particular securities offered or displayed on its website or portal;</text> </clause><clause id="H2CCDAB250CF744B8BDB605830925599C"><enum>(iii)</enum><text>directly compensate employees, agents, or other persons for direct sale of securities displayed or referenced on its website or portal; or</text> </clause><clause id="HF86C351418774B808DB4C1B0F4FEA6D8"><enum>(iv)</enum><text>manage, possess, or otherwise handle investor funds or securities;</text> </clause></subparagraph></paragraph><paragraph id="H0B23BB6E644B4C659DE3C73E44131C8A"><enum>(2)</enum><text>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="H9B70BCDEC92B488788DF3721E00CCE81"><enum>(3)</enum><text>warns investors that they are subject to the restriction on sales requirement described under subsection (d);</text> </paragraph><paragraph id="H9417A83EF678484793AFCF00E734DC0E"><enum>(4)</enum><text>takes reasonable measures to reduce the risk of fraud with respect to such transaction;</text> </paragraph><paragraph id="HAF9EA35A01064B9C999B173BF5B0C8C5"><enum>(5)</enum><text display-inline="yes-display-inline">provides the Commission with the intermediary's physical address, website address, and the names of the intermediary, the chief officer of the intermediary (or person fulfilling a similar role), and any employee of the intermediary responsible for the intermediary’s direct compliance with the securities laws (as defined under section 3 of the Securities Exchange Act of 1934), and updates such information with the Commission within 6 business days of such information changing;</text> </paragraph><paragraph id="H2968C5A72F734CC9B9EA3B2D369030C1"><enum>(6)</enum><text>provides the Commission with continuous investor-level access to the intermediary's website;</text> </paragraph><paragraph id="H830ACCE085AB4A059D862683E64F5A48"><enum>(7)</enum><text>requires each potential investor to answer questions demonstrating—</text> <subparagraph id="H134B57494C0B4CA19F54F60EDD09ED08"><enum>(A)</enum><text>an understanding of the level of risk generally applicable to investments in startups, emerging businesses, and small issuers;</text> </subparagraph><subparagraph id="H5443FCE97AAF4F2085D8055E210F2E13"><enum>(B)</enum><text>an understanding of the risk of illiquidity; and</text> </subparagraph><subparagraph id="HEC0F4915ED8A48C2BBEBDF2C69592B8D"><enum>(C)</enum><text display-inline="yes-display-inline">such other areas as the Commission, in consultation with self-regulatory organizations (as defined in section 3 of the Securities Exchange Act of 1934), may determine appropriate by rule or regulation;</text> </subparagraph></paragraph><paragraph id="H5730F54F9DF6459C9CE43A766265B0B3"><enum>(8)</enum><text>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 (11) withholds offering proceeds until—</text> <subparagraph id="HDCF109C28172427DB7789C379D9AB470"><enum>(A)</enum><text>aggregate capital raised from investors other than the issuer is no less than 100 percent of the target offering amount; and</text> </subparagraph><subparagraph id="HB637D3441DAF4ABFA67155F5E176F3A0"><enum>(B)</enum><text>the issuer has complied with all requirements under this section;</text> </subparagraph></paragraph><paragraph id="HC974FF2514604118AC6A69783311F0E2"><enum>(9)</enum><text display-inline="yes-display-inline">carries out a background check on the executive officers, directors, and shareholders with 15 percent or more voting control of the issuer (or persons fulfilling similar roles) to ensure such persons would not meet the disqualification provisions adopted in accordance with section 926 of the Dodd-Frank Wall Street Reform and Consumer Protection Act;</text> </paragraph><paragraph id="HE1604E495D1B42099D685BF8FB93B769"><enum>(10)</enum><text>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="HFEFFD1582A4D40198F840F5142C6F8F0"><enum>(A)</enum><text>the issuer's name, legal status, physical address, and website address;</text> </subparagraph><subparagraph id="HB95E671457C14CAAA1D1A3FD0A89F50D"><enum>(B)</enum><text display-inline="yes-display-inline">the names of the executive officers, directors, and shareholders with 15 percent or more voting control of the issuer (or persons fulfilling similar roles);</text> </subparagraph><subparagraph id="HF33C871BDF7B4A0289B857AAA9505539"><enum>(C)</enum><text>the intended use of the proceeds of the offering; and</text> </subparagraph><subparagraph id="H418F12493F024053942E4FC84AF315B6"><enum>(D)</enum><text>the target offering amount and the deadline to reach the target offering amount;</text> </subparagraph></paragraph><paragraph id="H5F94AD7548B1463BA1B44CADF20DB668"><enum>(11)</enum><text>outsources cash 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="H1E70992B9D034D95A8F7572F3A7746EB"><enum>(12)</enum><text>maintains such books and records as the Commission determines appropriate;</text> </paragraph><paragraph id="H2BCA109E2AC44CE78B895EFD35FB9A5C"><enum>(13)</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="HDF7AD690AA0C483899BD5964C3D9A568"><enum>(14)</enum><text>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="H2485AC0A6A1C4201A96F10DF6F5BCC6E"><enum>(15)</enum><text>does not offer investment advice.</text> </paragraph></subsection><subsection id="HAAD46D18EECC4D34B1D8467E9BF902DE"><enum>(b)</enum><header>Verification of investor information</header><text display-inline="yes-display-inline">For purposes of section 4(a), an intermediary may rely on a certification by an investor as to—</text> <paragraph id="HA02227E3CC0140B6BA847514D3924ACF"><enum>(1)</enum><text>the investor’s status as an accredited investor; and</text> </paragraph><paragraph id="H69AAB064BF7C482FAA9EFA2F29D647F1"><enum>(2)</enum><text display-inline="yes-display-inline">with respect to an unaccredited investor, the investor’s annual income, net worth, and the aggregate amount of securities sold to the investor in reliance on the exemption provided by section 4(a) within the previous 12-month period.</text> </paragraph></subsection><subsection id="H44205FBF6EDE4EF3AECBBC31EE173AC8"><enum>(c)</enum><header>Information Available to States</header><text display-inline="yes-display-inline">The Commission shall make the notices described under subsections (a)(10) and (a)(14) and the information described under subsection (a)(5) available to the States.</text> </subsection><subsection id="HC6601730F3434B7BAD242980BC6F75F0"><enum>(d)</enum><header>Restriction on Sales</header><text display-inline="yes-display-inline">Newly issued securities purchased in a transaction made in reliance on section 4(a)(6) may not be resold by any person during the 1-year period beginning on the date of original purchase, unless such securities are sold to—</text> <paragraph id="H9AAEDE0C36F5419EB7AFC2BB1715386E"><enum>(1)</enum><text>the issuer of such securities; or</text> </paragraph><paragraph id="H86249E9EA38F430A8D5BEDF46A49D149"><enum>(2)</enum><text>an accredited investor.</text> </paragraph></subsection><subsection id="H6B2DC5DA1D49461A8F3C97B347F8D82F"><enum>(e)</enum><header>Requirement for use of intermediaries when selling to unaccredited investors</header><text display-inline="yes-display-inline">With respect to a transaction described under section 4(a)(6), an issuer may only enter into a transaction with an unaccredited investor through the use of an intermediary, and any resale of a security originally issued in reliance on section 4(a)(6) may only be made with an unaccredited investor through the use of an intermediary.</text> </subsection><subsection id="H1FFFC1D4D73946BAA2694BBD9F7374E8"><enum>(f)</enum><header>Rules of construction</header> <paragraph id="H3FAC88972E294FB58AF1FA61361A1F47"><enum>(1)</enum><header>No registration as broker</header><text>With respect to a transaction either made pursuant to section 4(a)(6) or involving the resale of a security originally issued pursuant to section 4(a)(6) and 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="H38CA4BBE01FC489F8C959DC41A87FAF7"><enum>(2)</enum><header>Right to select transactions</header><text display-inline="yes-display-inline">An intermediary may select in which transactions to serve as an intermediary, and such selection shall not be considered investment advice or subject the intermediary to regulation under the Investment Advisers Act of 1940.</text> </paragraph><paragraph id="H9B28F39586D146ABAF6EAA0852E2ADA2"><enum>(3)</enum><header>Right to terminate transaction</header><text>An intermediary may review the transaction and terminate the transaction at any time if—</text> <subparagraph id="HCDA076A3F53C407185EE5BE81456D61C"><enum>(A)</enum><text>in carrying out the intermediary’s due diligence under the transaction, the intermediary determines that termination is appropriate;</text> </subparagraph><subparagraph id="HF409B75BA4CD42BBA43EB2F24222DE8B"><enum>(B)</enum><text>the intermediary is able to return all funds provided by potential investors; and</text> </subparagraph><subparagraph id="H150049E4FB1048928974E6470F611DCE"><enum>(C)</enum><text>the custodian has not transferred the offering proceeds to the issuer.</text> </subparagraph></paragraph><paragraph id="HFBB440E2333F44D2BC6FCE285D9F627F"><enum>(4)</enum><header>No preclusion of other capital raising</header><text display-inline="yes-display-inline">Nothing in this section or section 4(a)(6) shall be construed as preventing an issuer from raising capital through securities offerings made in reliance on other exemptions from registration.</text> </paragraph></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="HD47519F02ECB4E84A9E8471CB1A7BA03"><enum>(c)</enum><header>Rulemaking</header><text display-inline="yes-display-inline">Not later than 120 days after the date of the enactment of this title, 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="HB06E41730D1841E58CB09B93E56B9FD5"><enum>(d)</enum><header>Disqualification</header><text>Not later than 120 days after the date of the enactment of this title, 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(a)(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(a)(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 (<external-xref legal-doc="usc" parsable-cite="usc/15/77d">15 U.S.C. 77d</external-xref> note).</text> </subsection><subsection id="HD4F4F56C889C4518AD11B2DA778368E8"><enum>(e)</enum><header>Treatment of crowdfunding investment companies</header><text display-inline="yes-display-inline">Section 3(c) of the Investment Company Act of 1940 (<external-xref legal-doc="usc" parsable-cite="usc/15/80a-3">15 U.S.C. 80a–3(c)</external-xref>) is amended by adding at the end the following:</text> <quoted-block display-inline="no-display-inline" id="H8657D4B6AFAA4532A7FB7E844BC4B831" style="OLC"> <paragraph id="HEDCBAAFB07B546218388801F81B0D64D"><enum>(15)</enum><text display-inline="yes-display-inline">Any person substantially all of whose business is confined to investing in securities purchased in a transaction made in reliance on section 4(a)(6) of the Securities Act of 1933.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection></section><section id="H783DD6C944E14ED599A2D20D227C13BF"><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 (<external-xref legal-doc="usc" parsable-cite="usc/15/78l">15 U.S.C. 78l(g)(5)</external-xref>) is amended—</text> <paragraph id="HEEB9899226A14103AB8767A5C44B3E85"><enum>(1)</enum><text>by striking <quote>(5) For the purposes</quote>; and inserting the following:</text> <quoted-block display-inline="no-display-inline" id="H110E0AF7A28A4E808608A853B218A01E" style="OLC"> <paragraph id="HA73AFE169EC94F028A5A58BD7357F6DA"><enum>(5)</enum><header>Definitions</header> <subparagraph id="H280C0BF7EF6E47BD9373E0EC85D16099"><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="H55194CF654F345C6B1F3020331F6FE99"><enum>(2)</enum><text>by adding at the end the following:</text> <quoted-block display-inline="no-display-inline" id="H2D433113444C458D8F5A5F679B66FD11" style="OLC"> <subparagraph id="H3B29B477419544C090B5A2A86075B14C"><enum>(B)</enum><header>Exclusion for persons holding certain securities</header><text display-inline="yes-display-inline">For purposes of this subsection, securities originally issued in transactions described under section 4(a)(6) of the Securities Act of 1933 shall neither be deemed to be nor counted towards the definition of <quote>held of record</quote>.</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph></section><section id="HBBACBD8275FD4A9B9B9D554F03C25EDE"><enum>303.</enum><header>Preemption of State law</header> <subsection id="H3CD2DB1B67B84550B3434E75E7F161C8"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 18(b)(4) of the Securities Act of 1933 (<external-xref legal-doc="usc" parsable-cite="usc/15/77r">15 U.S.C. 77r(b)(4)</external-xref>) is amended—</text> <paragraph id="H5F7EF0CAEA644B4685878412E89F37BA"><enum>(1)</enum><text>by redesignating subparagraphs (C) and (D) as subparagraphs (D) and (E), respectively; and</text> </paragraph><paragraph id="H813E8EF2072F46299B131E4E7458FBA8"><enum>(2)</enum><text>by inserting after subparagraph (B) the following:</text> <quoted-block display-inline="no-display-inline" id="H3B2918455E6B4607B2BDFC9F768B0734" style="OLC"> <subparagraph id="HB104ED0F29B04919B1110D23DCA42FBA"><enum>(C)</enum><text display-inline="yes-display-inline">section 4(a)(6);</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph></subsection><subsection id="H177EDF9C865B4405A225E19FC1D14978"><enum>(b)</enum><header>Clarification of the Preservation of State Enforcement Authority</header> <paragraph id="H1109BEA033FA4B9189DFDC5E151A5037"><enum>(1)</enum><header>In general</header><text>The amendments made by subsection (a) relate solely to State registration, documentation, and offering requirements, as described under section 18(a) of the Securities Act of 1933 (<external-xref legal-doc="usc" parsable-cite="usc/15/77r">15 U.S.C. 77r(a)</external-xref>), 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(a)(6) of such Act.</text> </paragraph><paragraph id="HA7874BE9C4CD4B22AE83E889B8576345"><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 display-inline="yes-display-inline" id="H038387C3AE4B4A018BB484FA232C4675" style="OLC"><text>, in connection with securities or securities transactions, with respect to—</text><subparagraph id="HCEC1372D343647D9B2B3FAA303FD7214"><enum>(A)</enum><text display-inline="yes-display-inline">fraud or deceit;</text> </subparagraph><subparagraph id="HA9E69B0ECC81499B94F9ED9A8AFCE3D2"><enum>(B)</enum><text>unlawful conduct by a broker or dealer; and</text> </subparagraph><subparagraph id="H26A7FC1CA49F49CAB36AD8CB2A4B8B0E"><enum>(C)</enum><text>with respect to a transaction described under section 4(a)(6), unlawful conduct by an intermediary, issuer, or custodian.</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph></subsection></section>

Crowdfunding

(a)

Repeal of existing law

The CROWDFUND Act is hereby repealed and the provisions of law amended by such Act are revived or restored as if such Act had not been enacted. (b)

New crowdfunding law

The Jumpstart Our Business Startups Act is amended— (1)by inserting after title II the following:

<enum>III</enum><header>Entrepreneur Access to Capital</header> <section id="H6E80C52F6E5B4399B8A1955FA7866CEA"><enum>301.</enum><header>Crowdfunding exemption</header> <subsection id="HB2D7FAF235044DAB8785FE5662AA5900"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 4(a) of the Securities Act of 1933 (<external-xref legal-doc="usc" parsable-cite="usc/15/77d">15 U.S.C. 77d(a)(6)</external-xref>) is amended by adding at the end the following:</text> <quoted-block display-inline="no-display-inline" id="H20AE985388E74CC0B55BA54BF2CAB192" style="OLC"> <paragraph id="H4A83C7BCA0EB47608B407E6ED9C3FF40"><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="H0E83367ACEA443C2AC97AEEA9942627B"><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="HB9B8A059F5F24A848D6E67CCE5807B28"><enum>(i)</enum><text display-inline="yes-display-inline">$3,000,000, 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="HB0375FF87EC24E588720F9CD4661DA3C"><enum>(ii)</enum><text>if the issuer provides potential investors with audited financial statements, $5,000,000, 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="HDD0367616CE7441997A85607744F4052"><enum>(B)</enum><text display-inline="yes-display-inline">the aggregate amount sold to any investor who is not an accredited investor in reliance on this exemption within the previous 12-month period does not exceed the greater of—</text> <clause id="H02D4DEA176464D58A86E249C0F746C64"><enum>(i)</enum><text>$5,000, 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;</text> </clause><clause id="H8DA102A796864F528CDB5E799F04F7A7"><enum>(ii)</enum><text>10 percent of the investor’s annual income; or</text> </clause><clause id="H40A7EEEC6BDF4EF3988657AE3F4D8882"><enum>(iii)</enum><text>10 percent of the investor’s net worth;</text> </clause></subparagraph><subparagraph id="H957FA13EB79B4909A589774A09B0110B"><enum>(C)</enum><text display-inline="yes-display-inline">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);</text> </subparagraph><subparagraph id="H09BEEDD4B70C4753BB0316E2B1B40C6B"><enum>(D)</enum><text display-inline="yes-display-inline">if the aggregate amount sold within the previous 12-month period in reliance upon this exemption is—</text> <clause id="HB345F5C60EA04DC5B8551722712BC81E"><enum>(i)</enum><text>$500,000 or less, the issuer provides potential investors with financial statements that have been certified by the principal executive officer of the issuer to be true and complete in all material respects; and</text> </clause><clause id="HA2367E2214594898BC862C347985D007"><enum>(ii)</enum><text display-inline="yes-display-inline">more than $500,000 and less than $3,000,000, the issuer provides potential investors with financial statements that have been reviewed by a public accountant who is independent of the issuer, using professional standards and procedures for such review; and</text> </clause></subparagraph><subparagraph id="H50A9F00BC79D4B728AEAE54644976059"><enum>(E)</enum><text>at the time such securities are issued, the issuer is a corporation.</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="H587B2F3199C34CC9A673FCDC7F2351C9"><enum>(b)</enum><header>Requirement on intermediaries</header><text display-inline="yes-display-inline">The Securities Act of 1933 (<external-xref legal-doc="usc" parsable-cite="usc/15/77a">15 U.S.C. 77a et seq.</external-xref>) is amended by inserting after section 4 the following:</text> <quoted-block display-inline="no-display-inline" id="HB885C744F86B47C0AC1EDDC08DAA50CC" style="OLC"> <section id="HBD9CB96AE1A245F7BEF08135B98048CE"><enum>4A.</enum><header>Requirements on intermediaries with respect to crowdfunding transactions</header> <subsection id="H797EA20C0F69412D988CF860110BDED8"><enum>(a)</enum><header>Requirements on intermediaries</header><text display-inline="yes-display-inline">For purposes of section 4(a)(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="H66CB679BB970481289A5555AE1831262"><enum>(1)</enum><text display-inline="yes-display-inline">registers with the Commission as—</text> <subparagraph id="H7DCF2B923831481792E155AD102A38DB"><enum>(A)</enum><text>a broker; or</text> </subparagraph><subparagraph id="H6BCD829C746C4F2987B0964A025E8D09"><enum>(B)</enum><text>a person acting as an intermediary who does not—</text> <clause id="H7B75D93CA3664F3B9871B70F63A69A0D"><enum>(i)</enum><text display-inline="yes-display-inline">offer investment advice or recommendations;</text> </clause><clause id="H18991EB6062443F8921C680D209AD8BA"><enum>(ii)</enum><text>explicitly solicit purchases, sales, or offers to buy particular securities offered or displayed on its website or portal;</text> </clause><clause id="H2CCDAB250CF744B8BDB605830925599C"><enum>(iii)</enum><text>directly compensate employees, agents, or other persons for direct sale of securities displayed or referenced on its website or portal; or</text> </clause><clause id="HF86C351418774B808DB4C1B0F4FEA6D8"><enum>(iv)</enum><text>manage, possess, or otherwise handle investor funds or securities;</text> </clause></subparagraph></paragraph><paragraph id="H0B23BB6E644B4C659DE3C73E44131C8A"><enum>(2)</enum><text>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="H9B70BCDEC92B488788DF3721E00CCE81"><enum>(3)</enum><text>warns investors that they are subject to the restriction on sales requirement described under subsection (d);</text> </paragraph><paragraph id="H9417A83EF678484793AFCF00E734DC0E"><enum>(4)</enum><text>takes reasonable measures to reduce the risk of fraud with respect to such transaction;</text> </paragraph><paragraph id="HAF9EA35A01064B9C999B173BF5B0C8C5"><enum>(5)</enum><text display-inline="yes-display-inline">provides the Commission with the intermediary's physical address, website address, and the names of the intermediary, the chief officer of the intermediary (or person fulfilling a similar role), and any employee of the intermediary responsible for the intermediary’s direct compliance with the securities laws (as defined under section 3 of the Securities Exchange Act of 1934), and updates such information with the Commission within 6 business days of such information changing;</text> </paragraph><paragraph id="H2968C5A72F734CC9B9EA3B2D369030C1"><enum>(6)</enum><text>provides the Commission with continuous investor-level access to the intermediary's website;</text> </paragraph><paragraph id="H830ACCE085AB4A059D862683E64F5A48"><enum>(7)</enum><text>requires each potential investor to answer questions demonstrating—</text> <subparagraph id="H134B57494C0B4CA19F54F60EDD09ED08"><enum>(A)</enum><text>an understanding of the level of risk generally applicable to investments in startups, emerging businesses, and small issuers;</text> </subparagraph><subparagraph id="H5443FCE97AAF4F2085D8055E210F2E13"><enum>(B)</enum><text>an understanding of the risk of illiquidity; and</text> </subparagraph><subparagraph id="HEC0F4915ED8A48C2BBEBDF2C69592B8D"><enum>(C)</enum><text display-inline="yes-display-inline">such other areas as the Commission, in consultation with self-regulatory organizations (as defined in section 3 of the Securities Exchange Act of 1934), may determine appropriate by rule or regulation;</text> </subparagraph></paragraph><paragraph id="H5730F54F9DF6459C9CE43A766265B0B3"><enum>(8)</enum><text>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 (11) withholds offering proceeds until—</text> <subparagraph id="HDCF109C28172427DB7789C379D9AB470"><enum>(A)</enum><text>aggregate capital raised from investors other than the issuer is no less than 100 percent of the target offering amount; and</text> </subparagraph><subparagraph id="HB637D3441DAF4ABFA67155F5E176F3A0"><enum>(B)</enum><text>the issuer has complied with all requirements under this section;</text> </subparagraph></paragraph><paragraph id="HC974FF2514604118AC6A69783311F0E2"><enum>(9)</enum><text display-inline="yes-display-inline">carries out a background check on the executive officers, directors, and shareholders with 15 percent or more voting control of the issuer (or persons fulfilling similar roles) to ensure such persons would not meet the disqualification provisions adopted in accordance with section 926 of the Dodd-Frank Wall Street Reform and Consumer Protection Act;</text> </paragraph><paragraph id="HE1604E495D1B42099D685BF8FB93B769"><enum>(10)</enum><text>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="HFEFFD1582A4D40198F840F5142C6F8F0"><enum>(A)</enum><text>the issuer's name, legal status, physical address, and website address;</text> </subparagraph><subparagraph id="HB95E671457C14CAAA1D1A3FD0A89F50D"><enum>(B)</enum><text display-inline="yes-display-inline">the names of the executive officers, directors, and shareholders with 15 percent or more voting control of the issuer (or persons fulfilling similar roles);</text> </subparagraph><subparagraph id="HF33C871BDF7B4A0289B857AAA9505539"><enum>(C)</enum><text>the intended use of the proceeds of the offering; and</text> </subparagraph><subparagraph id="H418F12493F024053942E4FC84AF315B6"><enum>(D)</enum><text>the target offering amount and the deadline to reach the target offering amount;</text> </subparagraph></paragraph><paragraph id="H5F94AD7548B1463BA1B44CADF20DB668"><enum>(11)</enum><text>outsources cash 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="H1E70992B9D034D95A8F7572F3A7746EB"><enum>(12)</enum><text>maintains such books and records as the Commission determines appropriate;</text> </paragraph><paragraph id="H2BCA109E2AC44CE78B895EFD35FB9A5C"><enum>(13)</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="HDF7AD690AA0C483899BD5964C3D9A568"><enum>(14)</enum><text>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="H2485AC0A6A1C4201A96F10DF6F5BCC6E"><enum>(15)</enum><text>does not offer investment advice.</text> </paragraph></subsection><subsection id="HAAD46D18EECC4D34B1D8467E9BF902DE"><enum>(b)</enum><header>Verification of investor information</header><text display-inline="yes-display-inline">For purposes of section 4(a), an intermediary may rely on a certification by an investor as to—</text> <paragraph id="HA02227E3CC0140B6BA847514D3924ACF"><enum>(1)</enum><text>the investor’s status as an accredited investor; and</text> </paragraph><paragraph id="H69AAB064BF7C482FAA9EFA2F29D647F1"><enum>(2)</enum><text display-inline="yes-display-inline">with respect to an unaccredited investor, the investor’s annual income, net worth, and the aggregate amount of securities sold to the investor in reliance on the exemption provided by section 4(a) within the previous 12-month period.</text> </paragraph></subsection><subsection id="H44205FBF6EDE4EF3AECBBC31EE173AC8"><enum>(c)</enum><header>Information Available to States</header><text display-inline="yes-display-inline">The Commission shall make the notices described under subsections (a)(10) and (a)(14) and the information described under subsection (a)(5) available to the States.</text> </subsection><subsection id="HC6601730F3434B7BAD242980BC6F75F0"><enum>(d)</enum><header>Restriction on Sales</header><text display-inline="yes-display-inline">Newly issued securities purchased in a transaction made in reliance on section 4(a)(6) may not be resold by any person during the 1-year period beginning on the date of original purchase, unless such securities are sold to—</text> <paragraph id="H9AAEDE0C36F5419EB7AFC2BB1715386E"><enum>(1)</enum><text>the issuer of such securities; or</text> </paragraph><paragraph id="H86249E9EA38F430A8D5BEDF46A49D149"><enum>(2)</enum><text>an accredited investor.</text> </paragraph></subsection><subsection id="H6B2DC5DA1D49461A8F3C97B347F8D82F"><enum>(e)</enum><header>Requirement for use of intermediaries when selling to unaccredited investors</header><text display-inline="yes-display-inline">With respect to a transaction described under section 4(a)(6), an issuer may only enter into a transaction with an unaccredited investor through the use of an intermediary, and any resale of a security originally issued in reliance on section 4(a)(6) may only be made with an unaccredited investor through the use of an intermediary.</text> </subsection><subsection id="H1FFFC1D4D73946BAA2694BBD9F7374E8"><enum>(f)</enum><header>Rules of construction</header> <paragraph id="H3FAC88972E294FB58AF1FA61361A1F47"><enum>(1)</enum><header>No registration as broker</header><text>With respect to a transaction either made pursuant to section 4(a)(6) or involving the resale of a security originally issued pursuant to section 4(a)(6) and 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="H38CA4BBE01FC489F8C959DC41A87FAF7"><enum>(2)</enum><header>Right to select transactions</header><text display-inline="yes-display-inline">An intermediary may select in which transactions to serve as an intermediary, and such selection shall not be considered investment advice or subject the intermediary to regulation under the Investment Advisers Act of 1940.</text> </paragraph><paragraph id="H9B28F39586D146ABAF6EAA0852E2ADA2"><enum>(3)</enum><header>Right to terminate transaction</header><text>An intermediary may review the transaction and terminate the transaction at any time if—</text> <subparagraph id="HCDA076A3F53C407185EE5BE81456D61C"><enum>(A)</enum><text>in carrying out the intermediary’s due diligence under the transaction, the intermediary determines that termination is appropriate;</text> </subparagraph><subparagraph id="HF409B75BA4CD42BBA43EB2F24222DE8B"><enum>(B)</enum><text>the intermediary is able to return all funds provided by potential investors; and</text> </subparagraph><subparagraph id="H150049E4FB1048928974E6470F611DCE"><enum>(C)</enum><text>the custodian has not transferred the offering proceeds to the issuer.</text> </subparagraph></paragraph><paragraph id="HFBB440E2333F44D2BC6FCE285D9F627F"><enum>(4)</enum><header>No preclusion of other capital raising</header><text display-inline="yes-display-inline">Nothing in this section or section 4(a)(6) shall be construed as preventing an issuer from raising capital through securities offerings made in reliance on other exemptions from registration.</text> </paragraph></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="HD47519F02ECB4E84A9E8471CB1A7BA03"><enum>(c)</enum><header>Rulemaking</header><text display-inline="yes-display-inline">Not later than 120 days after the date of the enactment of this title, 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="HB06E41730D1841E58CB09B93E56B9FD5"><enum>(d)</enum><header>Disqualification</header><text>Not later than 120 days after the date of the enactment of this title, 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(a)(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(a)(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 (<external-xref legal-doc="usc" parsable-cite="usc/15/77d">15 U.S.C. 77d</external-xref> note).</text> </subsection><subsection id="HD4F4F56C889C4518AD11B2DA778368E8"><enum>(e)</enum><header>Treatment of crowdfunding investment companies</header><text display-inline="yes-display-inline">Section 3(c) of the Investment Company Act of 1940 (<external-xref legal-doc="usc" parsable-cite="usc/15/80a-3">15 U.S.C. 80a–3(c)</external-xref>) is amended by adding at the end the following:</text> <quoted-block display-inline="no-display-inline" id="H8657D4B6AFAA4532A7FB7E844BC4B831" style="OLC"> <paragraph id="HEDCBAAFB07B546218388801F81B0D64D"><enum>(15)</enum><text display-inline="yes-display-inline">Any person substantially all of whose business is confined to investing in securities purchased in a transaction made in reliance on section 4(a)(6) of the Securities Act of 1933.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection></section><section id="H783DD6C944E14ED599A2D20D227C13BF"><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 (<external-xref legal-doc="usc" parsable-cite="usc/15/78l">15 U.S.C. 78l(g)(5)</external-xref>) is amended—</text> <paragraph id="HEEB9899226A14103AB8767A5C44B3E85"><enum>(1)</enum><text>by striking <quote>(5) For the purposes</quote>; and inserting the following:</text> <quoted-block display-inline="no-display-inline" id="H110E0AF7A28A4E808608A853B218A01E" style="OLC"> <paragraph id="HA73AFE169EC94F028A5A58BD7357F6DA"><enum>(5)</enum><header>Definitions</header> <subparagraph id="H280C0BF7EF6E47BD9373E0EC85D16099"><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="H55194CF654F345C6B1F3020331F6FE99"><enum>(2)</enum><text>by adding at the end the following:</text> <quoted-block display-inline="no-display-inline" id="H2D433113444C458D8F5A5F679B66FD11" style="OLC"> <subparagraph id="H3B29B477419544C090B5A2A86075B14C"><enum>(B)</enum><header>Exclusion for persons holding certain securities</header><text display-inline="yes-display-inline">For purposes of this subsection, securities originally issued in transactions described under section 4(a)(6) of the Securities Act of 1933 shall neither be deemed to be nor counted towards the definition of <quote>held of record</quote>.</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph></section><section id="HBBACBD8275FD4A9B9B9D554F03C25EDE"><enum>303.</enum><header>Preemption of State law</header> <subsection id="H3CD2DB1B67B84550B3434E75E7F161C8"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">Section 18(b)(4) of the Securities Act of 1933 (<external-xref legal-doc="usc" parsable-cite="usc/15/77r">15 U.S.C. 77r(b)(4)</external-xref>) is amended—</text> <paragraph id="H5F7EF0CAEA644B4685878412E89F37BA"><enum>(1)</enum><text>by redesignating subparagraphs (C) and (D) as subparagraphs (D) and (E), respectively; and</text> </paragraph><paragraph id="H813E8EF2072F46299B131E4E7458FBA8"><enum>(2)</enum><text>by inserting after subparagraph (B) the following:</text> <quoted-block display-inline="no-display-inline" id="H3B2918455E6B4607B2BDFC9F768B0734" style="OLC"> <subparagraph id="HB104ED0F29B04919B1110D23DCA42FBA"><enum>(C)</enum><text display-inline="yes-display-inline">section 4(a)(6);</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph></subsection><subsection id="H177EDF9C865B4405A225E19FC1D14978"><enum>(b)</enum><header>Clarification of the Preservation of State Enforcement Authority</header> <paragraph id="H1109BEA033FA4B9189DFDC5E151A5037"><enum>(1)</enum><header>In general</header><text>The amendments made by subsection (a) relate solely to State registration, documentation, and offering requirements, as described under section 18(a) of the Securities Act of 1933 (<external-xref legal-doc="usc" parsable-cite="usc/15/77r">15 U.S.C. 77r(a)</external-xref>), 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(a)(6) of such Act.</text> </paragraph><paragraph id="HA7874BE9C4CD4B22AE83E889B8576345"><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 display-inline="yes-display-inline" id="H038387C3AE4B4A018BB484FA232C4675" style="OLC"><text>, in connection with securities or securities transactions, with respect to—</text><subparagraph id="HCEC1372D343647D9B2B3FAA303FD7214"><enum>(A)</enum><text display-inline="yes-display-inline">fraud or deceit;</text> </subparagraph><subparagraph id="HA9E69B0ECC81499B94F9ED9A8AFCE3D2"><enum>(B)</enum><text>unlawful conduct by a broker or dealer; and</text> </subparagraph><subparagraph id="H26A7FC1CA49F49CAB36AD8CB2A4B8B0E"><enum>(C)</enum><text>with respect to a transaction described under section 4(a)(6), unlawful conduct by an intermediary, issuer, or custodian.</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph></subsection></section>

; and

(2)in the table of contents for such Act by amending the items relating to title III to read as follows:

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.