[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4565 Introduced in House (IH)]

113th CONGRESS
  2d Session
                                H. R. 4565

   To amend the securities laws to improve the small company capital 
             formation provisions, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              May 6, 2014

  Mr. McHenry (for himself and Mr. Garrett) introduced the following 
    bill; which was referred to the Committee on Financial Services

_______________________________________________________________________

                                 A BILL


 
   To amend the securities laws to improve the small company capital 
             formation provisions, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Startup Capital Modernization Act of 
2014''.

SEC. 2. INCREASE IN SMALL ISSUES EXEMPTIVE AUTHORITY.

    Section 3(b)(1) of the Securities Act of 1933 (15 U.S.C. 77c(b)(1)) 
is amended by striking ``$5,000,000'' and inserting ``$10,000,000''.

SEC. 3. PREEMPTION OF STATE LAWS.

    (a) In General.--The first subparagraph (D) of section 18(b)(4) of 
the Securities Act of 1933 (15 U.S.C. 77r(b)(4)) (relating to a rule or 
regulation adopted pursuant to section 3(b)(2)) is amended by inserting 
``section 3(b)(1) or'' before ``section 3(b)(2)''.
    (b) Clarification of the Preservation of State Enforcement 
Authority.--
            (1) In general.--The amendment made by subsection (a) 
        relates solely to State registration, documentation, and 
        offering requirements, as described under section 18(a) of the 
        Securities Act of 1933 (15 U.S.C. 77r(a)), and shall have no 
        impact or limitation on other State authority to take 
        enforcement action with regard to an issuer, intermediary, or 
        any other person or entity using the exemption from 
        registration provided by section 3(b)(1) of such Act.
            (2) Clarification of state jurisdiction over unlawful 
        conduct of intermediaries, issuers, and custodians.--Section 
        18(c)(1) of the Securities Act of 1933 is amended--
                    (A) in subparagraph (A), by striking ``and'' at the 
                end;
                    (B) in subparagraph (B), by striking the period at 
                the end and inserting ``; and''; and
                    (C) by adding at the end the following:
                    ``(C) with respect to a transaction described under 
                section 3(b), unlawful conduct by an issuer or 
                custodian.''.

SEC. 4. EXCLUSION FROM SHAREHOLDER CAP.

    (a) In General.--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:
            ``(7) Exclusion for securities issued under regulation a 
        pursuant to section 3(b) of the securities act of 1933.--All 
        securities issued under Regulation A (17 C.F.R. 230.251 et 
        seq.) pursuant to section 3(b) of the Securities Act of 1933 
        shall be exempt from the provisions of this subsection if the 
        issuer has filed audited financial statements with the 
        Commission and the issuer is in compliance with all periodic 
        disclosures required by the Commission pursuant to section 
        3(b)(4) of the Securities Act of 1933.''.
    (b) Rulemaking.--The Securities and Exchange Commission shall issue 
a rule to carry out section 12(g)(7) of the Securities Exchange Act of 
1934 (15 U.S.C. 78c), as added by this section, not later than 180 days 
after the date of enactment of this section.
    (c) Rule of Applicability.--The exclusion provided under section 
12(g)(7) of the Securities Exchange Act of 1934 (15 U.S.C. 78c), as 
added by this section, shall apply to securities issued before, on, or 
after the date of the enactment of this Act.

SEC. 5. EXEMPTED TRANSACTIONS.

    (a) Exempted Transactions.--Section 4 of the Securities Act of 1933 
(15 U.S.C. 77d) is amended--
            (1) in subsection (a), by adding at the end the following 
        new paragraph:
            ``(7) transactions meeting the requirements of subsection 
        (d).'';
            (2) by redesignating the second subsection (b) (relating to 
        securities offered and sold in compliance with Rule 506 of 
        Regulation D) as subsection (c); and
            (3) by adding at the end the following:
    ``(d)(1) The transactions referred to in subsection (a)(7) are 
transactions where--
                    ``(A) each purchaser is an accredited investor, as 
                that term is defined in section 230.501(a) of title 17, 
                Code of Federal Regulations (or any successor thereto); 
                and
                    ``(B) if any securities sold in reliance on 
                subsection (a)(7) are offered by means of any general 
                solicitation or general advertising, the seller takes 
                reasonable steps to verify, in the manner set forth in 
                section 230.506(c)(ii) of title 17, Code of Federal 
                Regulations (or any successor regulation), that each 
                purchaser is an accredited investor.
    ``(2) Securities sold in reliance on subsection (a)(7) shall be 
deemed to have been acquired in a transaction not involving any public 
offering.
    ``(3) The exemption provided by this subsection shall not be 
available for a transaction where the seller is--
            ``(A) an issuer, its subsidiaries or parent;
            ``(B) an underwriter acting on behalf of the issuer, its 
        subsidiaries or parent, which receives compensation from the 
        issuer with respect to such sale; or
            ``(C) a dealer.
    ``(4) A transaction meeting the requirements of this subsection 
shall be deemed not to be a distribution for purposes of section 
2(a)(11).''.
    (b) Exemption in Connection With Certain Exempt Offerings.--Section 
18(b)(4) of the Securities Act of 1933 (15 U.S.C. 77r(b)(4)) is 
amended--
            (1) by redesignating the second subparagraph (D) and 
        subparagraph (E) as subparagraphs (E) and (F), respectively;
            (2) in subparagraph (E), as so redesignated, by striking 
        ``; or'' and inserting a semicolon;
            (3) in subparagraph (F), as so redesignated, by striking 
        the period and inserting ``; or''; and
            (4) by adding at the end the following new subparagraph:
                    ``(G) section 4(a)(7).''.
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