[Congressional Bills 114th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4855 Introduced in House (IH)]

<DOC>






114th CONGRESS
  2d Session
                                H. R. 4855

   To amend provisions in the securities laws relating to regulation 
 crowdfunding to raise the dollar amount limit and to clarify certain 
  requirements and exclusions for funding portals established by such 
                                  Act.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             March 23, 2016

 Mr. McHenry introduced the following bill; which was referred to the 
                    Committee on Financial Services

_______________________________________________________________________

                                 A BILL


 
   To amend provisions in the securities laws relating to regulation 
 crowdfunding to raise the dollar amount limit and to clarify certain 
  requirements and exclusions for funding portals established by such 
                                  Act.

    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 ``Fix Crowdfunding Act''.

SEC. 2. QUALIFICATION FOR CROWDFUNDING EXEMPTION.

            (1) Increase in limit of amount sold in reliance on the 
        crowdfunding exemption.--Section 4(a)(6)(A) of the Securities 
        Act of 1933 (15 U.S.C. 77d(6)(A)) is amended by striking 
        ``$1,000,000'' and inserting ``$5,000,000''.
            (2) Clarification of transaction caps.--Section 4(a)(6)(B) 
        of such Act is amended--
                    (A) in clause (i), by inserting ``the greater of'' 
                after ``5 percent of''; and
                    (B) in clause (ii), by inserting ``the greater of'' 
                after ``10 percent of''.

SEC. 3. CLARIFICATION OF CERTAIN FUNDING PORTAL REQUIREMENTS AND 
              EXCLUSIONS FOR REGULATION CROWDFUNDING.

    (a) Exclusion of Issuers From Funding Portals.--
            (1) Clarification of certain exclusion requirements.--
        Section 302 of the Jumpstart Our Business Startups Act is 
        amended by adding at the end the following:
    ``(e) Clarification of Certain Exclusion Requirements for Funding 
Portals.--Under the rules issued pursuant to subsection (d), a funding 
portal shall have a reasonable basis for disqualifying an issuer from 
offering securities through such funding portal pursuant to section 
4(a)(6) of the Securities Act of 1933 if the funding portal, through a 
background check of the issuer or other means, has found that such 
issuer, in connection with the offer, purchase, or sale of securities, 
has knowingly--
            ``(1) made any untrue statement of a material fact or to 
        omit to state a material fact necessary in order to make the 
        statements made, in the light of the circumstances under which 
        they were made, not misleading; or
            ``(2) engaged in any act, practice, or course of business 
        which operates or would operate as a fraud or deceit upon any 
        person.''.
            (2) Clarification of other obligations to reduce the risk 
        of fraud.--Section 4A(a)(5) of the Securities Act of 1933 (15 
        U.S.C. 77d-1(a)(5)) is amended to read as follows:
            ``(5) as a minimum to reduce the risk of fraud with respect 
        to such transactions obtain 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;''.
            (3) Clarification of liability of funding portals for 
        material misstatements and omissions.--Section 4A(c) of such 
        Act (15 U.S.C. 77d-1(c)) is amended by adding the end the 
        following:
            ``(4) Liability of funding portals.--For purposes of this 
        subsection, an intermediary shall not be considered an issuer 
        unless, in connection with the offer or sale of a security, it 
        knowingly--
                    ``(A) made any untrue statement of a material fact 
                or omitted to state a material fact necessary in order 
                to make the statements made, in the light of the 
                circumstances under which they were made, not 
                misleading; or
                    ``(B) engaged in any act, practice, or course of 
                business which operates or would operate as a fraud or 
                deceit upon any person.''.
    (b) Exemption From Registration.--Section 12(g)(6) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78l(g)(6)) is amended--
            (1) by striking ``The Commission'' and all that follows 
        through ``securities'' and inserting ``Securities''; and
            (2) by inserting ``shall be exempt'' after ``Securities Act 
        of 1933''.
    (c) Allowing Single-Purpose Funds.--
            (1) Amendment to the securities act of 1933.--Section 4A(f) 
        of the Securities Act of 1933 (15 U.S.C. 77d-1(f)) is amended--
                    (A) by striking paragraph (2); and
                    (B) by redesignating paragraph (3) as paragraph (2) 
                and in such paragraph, by inserting ``paragraphs (1) to 
                (14) of'' after ``section 3(b) or''.
            (2) Amendment to the investment company act of 1940.--
        Section 3(c) of the Investment Company Act of 1940 (15 U.S.C. 
        80a-3(c)) is amended by adding at the end the following:
            ``(15) any issuer that holds, for the purpose of making an 
        offering pursuant to section 4(a)(6) of the Securities Act of 
        1933 and the rules issued pursuant to such section, the 
        securities of not more than one issuer eligible to offer 
        securities pursuant to such section and such rules.''.
            (3) Application of rules.--Single-purpose funds that are 
        excluded from the definition of investment company under 
        paragraph (15) of section 3(c) of the Investment Company Act 
        (15 U.S.C. 80a-3(c))--
                    (A) shall be allowed to sell and offer for sale 
                securities under section 4(a)(6) of the Securities Act 
                of 1933 (15 U.S.C. 77d(a)(6)) under the rules adopted 
                on October 30, 2015, pursuant to title III of the JOBS 
                Act (Public Law 112-106); and
                    (B) shall be considered venture capital funds for 
                purposes of section 275.203(l)-1 of title 17, Code of 
                Federal Regulations.
    (d) Solicitation of Interest.--Section 4A of the Securities Act of 
1933 (15 U.S.C. 77d-1) is further amended--
            (1) by redesignating subsections (f) (as amended by 
        subsection (c)(1)), (g), and (h) as subsections (g), (h), and 
        (i), respectively; and
            (2) by inserting after subsection (e) the following:
    ``(f) Solicitation of Interest.--
            ``(1) In general.--At any time prior to the filing of 
        information with the Commission and the commencement of an 
        offering made in reliance on section 4(a)(6), an issuer may 
        solicit non-binding indications of interest from potential 
        investors in a prospective offering using the same means and 
        pursuant to the same regulations (other than the filing of 
        information with the Commission) as if conducting an offering 
        pursuant to such section if--
                    ``(A) no investor funds are accepted by such 
                issuer; and
                    ``(B) any material change in the information 
                provided to potential investors during the actual 
                offering pursuant to such section from the information 
                provided to potential investors during such 
                solicitation of interest are highlighted to potential 
                investors in the information filed with the Commission.
            ``(2) Status.--Such solicitation of interest shall not be 
        considered an offer or sale of securities under this Act or the 
        Securities Exchange Act of 1934, regardless of whether or not 
        the issuer actually conducts an offering pursuant to such 
        section 4(a)(6).''.
    (e) Grace Period.--Consistent with the effective date of the final 
rules on regulation crowdfunding adopted by the Securities and Exchange 
Commission on October 30, 2015, pursuant to title III of the JOBS Act 
(Public Law 112-106), funding portals established under such Act shall 
make a good faith effort to comply with all such rules. Notwithstanding 
such effective date, no enforcement action may be brought against a 
funding portal before May 16, 2021.
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