[Congressional Bills 114th Congress]
[From the U.S. Government Publishing Office]
[H.R. 6427 Engrossed in House (EH)]

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114th CONGRESS
  2d Session
                                H. R. 6427

_______________________________________________________________________

                                 AN ACT


 
  To improve the operation of United States capital markets, 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; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Creating Financial 
Prosperity for Businesses and Investors Act''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.
         TITLE I--SMALL BUSINESS CAPITAL FORMATION ENHANCEMENT

Sec. 101. Annual review of government-business forum on capital 
                            formation.
                 TITLE II--SEC SMALL BUSINESS ADVOCATE

Sec. 201. Establishment of Office of the Advocate for Small Business 
                            Capital Formation and Small Business 
                            Capital Formation Advisory Committee.
               TITLE III--SUPPORTING AMERICA'S INNOVATORS

Sec. 301. Investor limitation for qualifying venture capital funds.
                       TITLE IV--FIX CROWDFUNDING

Sec. 401. Crowdfunding vehicles.
Sec. 402. Crowdfunding exemption from registration.
    TITLE V--FAIR INVESTMENT OPPORTUNITIES FOR PROFESSIONAL EXPERTS

Sec. 501. Definition of accredited investor.
             TITLE VI--U.S. TERRITORIES INVESTOR PROTECTION

Sec. 601. Termination of exemption.

         TITLE I--SMALL BUSINESS CAPITAL FORMATION ENHANCEMENT

SEC. 101. ANNUAL REVIEW OF GOVERNMENT-BUSINESS FORUM ON CAPITAL 
              FORMATION.

    Section 503 of the Small Business Investment Incentive Act of 1980 
(15 U.S.C. 80c-1) is amended by adding at the end the following:
    ``(e) The Commission shall--
            ``(1) review the findings and recommendations of the forum; 
        and
            ``(2) each time the forum submits a finding or 
        recommendation to the Commission, promptly issue a public 
        statement--
                    ``(A) assessing the finding or recommendation of 
                the forum; and
                    ``(B) disclosing the action, if any, the Commission 
                intends to take with respect to the finding or 
                recommendation.''.

                 TITLE II--SEC SMALL BUSINESS ADVOCATE

SEC. 201. ESTABLISHMENT OF OFFICE OF THE ADVOCATE FOR SMALL BUSINESS 
              CAPITAL FORMATION AND SMALL BUSINESS CAPITAL FORMATION 
              ADVISORY COMMITTEE.

    (a) Office of the Advocate for Small Business Capital Formation.--
Section 4 of the Securities Exchange Act of 1934 (15 U.S.C. 78d) is 
amended by adding at the end the following:
    ``(j) Office of the Advocate for Small Business Capital 
Formation.--
            ``(1) Office established.--There is established within the 
        Commission the Office of the Advocate for Small Business 
        Capital Formation (hereafter in this subsection referred to as 
        the `Office').
            ``(2) Advocate for small business capital formation.--
                    ``(A) In general.--The head of the Office shall be 
                the Advocate for Small Business Capital Formation, who 
                shall--
                            ``(i) report directly to the Commission; 
                        and
                            ``(ii) be appointed by the Commission, from 
                        among individuals having experience in 
                        advocating for the interests of small 
                        businesses and encouraging small business 
                        capital formation.
                    ``(B) Compensation.--The annual rate of pay for the 
                Advocate for Small Business Capital Formation shall be 
                equal to the highest rate of annual pay for other 
                senior executives who report directly to the 
                Commission.
                    ``(C) No current employee of the commission.--An 
                individual may not be appointed as the Advocate for 
                Small Business Capital Formation if the individual is 
                currently employed by the Commission.
            ``(3) Staff of office.--The Advocate for Small Business 
        Capital Formation, after consultation with the Commission, may 
        retain or employ independent counsel, research staff, and 
        service staff, as the Advocate for Small Business Capital 
        Formation determines to be necessary to carry out the functions 
        of the Office.
            ``(4) Functions of the advocate for small business capital 
        formation.--The Advocate for Small Business Capital Formation 
        shall--
                    ``(A) assist small businesses and small business 
                investors in resolving significant problems such 
                businesses and investors may have with the Commission 
                or with self-regulatory organizations;
                    ``(B) identify areas in which small businesses and 
                small business investors would benefit from changes in 
                the regulations of the Commission or the rules of self-
                regulatory organizations;
                    ``(C) identify problems that small businesses have 
                with securing access to capital, including any unique 
                challenges to minority-owned and women-owned small 
                businesses;
                    ``(D) analyze the potential impact on small 
                businesses and small business investors of--
                            ``(i) proposed regulations of the 
                        Commission that are likely to have a 
                        significant economic impact on small businesses 
                        and small business capital formation; and
                            ``(ii) proposed rules that are likely to 
                        have a significant economic impact on small 
                        businesses and small business capital formation 
                        of self-regulatory organizations registered 
                        under this title;
                    ``(E) conduct outreach to small businesses and 
                small business investors, including through regional 
                roundtables, in order to solicit views on relevant 
                capital formation issues;
                    ``(F) to the extent practicable, propose to the 
                Commission changes in the regulations or orders of the 
                Commission and to Congress any legislative, 
                administrative, or personnel changes that may be 
                appropriate to mitigate problems identified under this 
                paragraph and to promote the interests of small 
                businesses and small business investors;
                    ``(G) consult with the Investor Advocate on 
                proposed recommendations made under subparagraph (F); 
                and
                    ``(H) advise the Investor Advocate on issues 
                related to small businesses and small business 
                investors.
            ``(5) Access to documents.--The Commission shall ensure 
        that the Advocate for Small Business Capital Formation has full 
        access to the documents and information of the Commission and 
        any self-regulatory organization, as necessary to carry out the 
        functions of the Office.
            ``(6) Annual report on activities.--
                    ``(A) In general.--Not later than December 31 of 
                each year after 2016, the Advocate for Small Business 
                Capital Formation shall submit to the Committee on 
                Banking, Housing, and Urban Affairs of the Senate and 
                the Committee on Financial Services of the House of 
                Representatives a report on the activities of the 
                Advocate for Small Business Capital Formation during 
                the immediately preceding fiscal year.
                    ``(B) Contents.--Each report required under 
                subparagraph (A) shall include--
                            ``(i) appropriate statistical information 
                        and full and substantive analysis;
                            ``(ii) information on steps that the 
                        Advocate for Small Business Capital Formation 
                        has taken during the reporting period to 
                        improve small business services and the 
                        responsiveness of the Commission and self-
                        regulatory organizations to small business and 
                        small business investor concerns;
                            ``(iii) a summary of the most serious 
                        issues encountered by small businesses and 
                        small business investors, including any unique 
                        issues encountered by minority-owned and women-
                        owned small businesses and their investors, 
                        during the reporting period;
                            ``(iv) an inventory of the items summarized 
                        under clause (iii) (including items summarized 
                        under such clause for any prior reporting 
                        period on which no action has been taken or 
                        that have not been resolved to the satisfaction 
                        of the Advocate for Small Business Capital 
                        Formation as of the beginning of the reporting 
                        period covered by the report) that includes--
                                    ``(I) identification of any action 
                                taken by the Commission or the self-
                                regulatory organization and the result 
                                of such action;
                                    ``(II) the length of time that each 
                                item has remained on such inventory; 
                                and
                                    ``(III) for items on which no 
                                action has been taken, the reasons for 
                                inaction, and an identification of any 
                                official who is responsible for such 
                                action;
                            ``(v) recommendations for such changes to 
                        the regulations, guidance and orders of the 
                        Commission and such legislative actions as may 
                        be appropriate to resolve problems with the 
                        Commission and self-regulatory organizations 
                        encountered by small businesses and small 
                        business investors and to encourage small 
                        business capital formation; and
                            ``(vi) any other information, as determined 
                        appropriate by the Advocate for Small Business 
                        Capital Formation.
                    ``(C) Confidentiality.--No report required by 
                subparagraph (A) may contain confidential information.
                    ``(D) Independence.--Each report required under 
                subparagraph (A) shall be provided directly to the 
                committees of Congress listed in such subparagraph 
                without any prior review or comment from the 
                Commission, any commissioner, any other officer or 
                employee of the Commission, or the Office of Management 
                and Budget.
            ``(7) Regulations.--The Commission shall establish 
        procedures requiring a formal response to all recommendations 
        submitted to the Commission by the Advocate for Small Business 
        Capital Formation, not later than 3 months after the date of 
        such submission.
            ``(8) Government-business forum on small business capital 
        formation.--The Advocate for Small Business Capital Formation 
        shall be responsible for planning, organizing, and executing 
        the annual Government-Business Forum on Small Business Capital 
        Formation described in section 503 of the Small Business 
        Investment Incentive Act of 1980 (15 U.S.C. 80c-1).
            ``(9) Rule of construction.--Nothing in this subsection may 
        be construed as replacing or reducing the responsibilities of 
        the Investor Advocate with respect to small business 
        investors.''.
    (b) Small Business Capital Formation Advisory Committee.--Title I 
of the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is 
amended by adding at the end the following:

``SEC. 40. SMALL BUSINESS CAPITAL FORMATION ADVISORY COMMITTEE.

    ``(a) Establishment and Purpose.--
            ``(1) Establishment.--There is established within the 
        Commission the Small Business Capital Formation Advisory 
        Committee (hereafter in this section referred to as the 
        `Committee').
            ``(2) Functions.--
                    ``(A) In general.--The Committee shall provide the 
                Commission with advice on the Commission's rules, 
                regulations, and policies with regard to the 
                Commission's mission of protecting investors, 
                maintaining fair, orderly, and efficient markets, and 
                facilitating capital formation, as such rules, 
                regulations, and policies relate to--
                            ``(i) capital raising by emerging, 
                        privately held small businesses (`emerging 
                        companies') and publicly traded companies with 
                        less than $250,000,000 in public market 
                        capitalization (`smaller public companies') 
                        through securities offerings, including private 
                        and limited offerings and initial and other 
                        public offerings;
                            ``(ii) trading in the securities of 
                        emerging companies and smaller public 
                        companies; and
                            ``(iii) public reporting and corporate 
                        governance requirements of emerging companies 
                        and smaller public companies.
                    ``(B) Limitation.--The Committee shall not provide 
                any advice with respect to any policies, practices, 
                actions, or decisions concerning the Commission's 
                enforcement program.
    ``(b) Membership.--
            ``(1) In general.--The members of the Committee shall be--
                    ``(A) the Advocate for Small Business Capital 
                Formation;
                    ``(B) not fewer than 10, and not more than 20, 
                members appointed by the Commission, from among 
                individuals--
                            ``(i) who represent--
                                    ``(I) emerging companies engaging 
                                in private and limited securities 
                                offerings or considering initial public 
                                offerings (`IPO') (including the 
                                companies' officers and directors);
                                    ``(II) the professional advisors of 
                                such companies (including attorneys, 
                                accountants, investment bankers, and 
                                financial advisors); and
                                    ``(III) the investors in such 
                                companies (including angel investors, 
                                venture capital funds, and family 
                                offices);
                            ``(ii) who are officers or directors of 
                        minority-owned small businesses or women-owned 
                        small businesses;
                            ``(iii) who represent--
                                    ``(I) smaller public companies 
                                (including the companies' officers and 
                                directors);
                                    ``(II) the professional advisors of 
                                such companies (including attorneys, 
                                auditors, underwriters, and financial 
                                advisors); and
                                    ``(III) the pre-IPO and post-IPO 
                                investors in such companies (both 
                                institutional, such as venture capital 
                                funds, and individual, such as angel 
                                investors); and
                            ``(iv) who represent participants in the 
                        marketplace for the securities of emerging 
                        companies and smaller public companies, such as 
                        securities exchanges, alternative trading 
                        systems, analysts, information processors, and 
                        transfer agents; and
                    ``(C) three non-voting members--
                            ``(i) one of whom shall be appointed by the 
                        Investor Advocate;
                            ``(ii) one of whom shall be appointed by 
                        the North American Securities Administrators 
                        Association; and
                            ``(iii) one of whom shall be appointed by 
                        the Administrator of the Small Business 
                        Administration.
            ``(2) Term.--Each member of the Committee appointed under 
        subparagraph (B), (C)(ii), or (C)(iii) of paragraph (1) shall 
        serve for a term of 4 years.
            ``(3) Members not commission employees.--Members appointed 
        under subparagraph (B), (C)(ii), or (C)(iii) of paragraph (1) 
        shall not be treated as employees or agents of the Commission 
        solely because of membership on the Committee.
    ``(c) Chairman; Vice Chairman; Secretary; Assistant Secretary.--
            ``(1) In general.--The members of the Committee shall 
        elect, from among the members of the Committee--
                    ``(A) a chairman;
                    ``(B) a vice chairman;
                    ``(C) a secretary; and
                    ``(D) an assistant secretary.
            ``(2) Term.--Each member elected under paragraph (1) shall 
        serve for a term of 3 years in the capacity for which the 
        member was elected under paragraph (1).
    ``(d) Meetings.--
            ``(1) Frequency of meetings.--The Committee shall meet--
                    ``(A) not less frequently than four times annually, 
                at the call of the chairman of the Committee; and
                    ``(B) from time to time, at the call of the 
                Commission.
            ``(2) Notice.--The chairman of the Committee shall give the 
        members of the Committee written notice of each meeting, not 
        later than 2 weeks before the date of the meeting.
    ``(e) Compensation and Travel Expenses.--Each member of the 
Committee who is not a full-time employee of the United States shall--
            ``(1) be entitled to receive compensation at a rate not to 
        exceed the daily equivalent of the annual rate of basic pay in 
        effect for a position at level V of the Executive Schedule 
        under section 5316 of title 5, United States Code, for each day 
        during which the member is engaged in the actual performance of 
        the duties of the Committee; and
            ``(2) while away from the home or regular place of business 
        of the member in the performance of services for the Committee, 
        be allowed travel expenses, including per diem in lieu of 
        subsistence, in the same manner as persons employed 
        intermittently in the Government service are allowed expenses 
        under section 5703 of title 5, United States Code.
    ``(f) Staff.--The Commission shall make available to the Committee 
such staff as the chairman of the Committee determines are necessary to 
carry out this section.
    ``(g) Review by Commission.--The Commission shall--
            ``(1) review the findings and recommendations of the 
        Committee; and
            ``(2) each time the Committee submits a finding or 
        recommendation to the Commission, promptly issue a public 
        statement--
                    ``(A) assessing the finding or recommendation of 
                the Committee; and
                    ``(B) disclosing the action, if any, the Commission 
                intends to take with respect to the finding or 
                recommendation.
    ``(h) Federal Advisory Committee Act.--The Federal Advisory 
Committee Act (5 U.S.C. App.) shall not apply with respect to the 
Committee and its activities.''.
    (c) Annual Government-Business Forum on Small Business Capital 
Formation.--Section 503(a) of the Small Business Investment Incentive 
Act of 1980 (15 U.S.C. 80c-1(a)) is amended by inserting ``(acting 
through the Office of the Advocate for Small Business Capital Formation 
and in consultation with the Small Business Capital Formation Advisory 
Committee)'' after ``Securities and Exchange Commission''.

               TITLE III--SUPPORTING AMERICA'S INNOVATORS

SEC. 301. INVESTOR LIMITATION FOR QUALIFYING VENTURE CAPITAL FUNDS.

    Section 3(c)(1) of the Investment Company Act of 1940 (15 U.S.C. 
80a-3(c)(1)) is amended--
            (1) by inserting after ``one hundred persons'' the 
        following: ``(or, with respect to a qualifying venture capital 
        fund, 250 persons)''; and
            (2) by adding at the end the following:
                    ``(C) The term `qualifying venture capital fund' 
                means any venture capital fund (as defined pursuant to 
                section 203(l)(1) of the Investment Advisers Act of 
                1940 (15 U.S.C. 80b-3(l)(1)) with no more than 
                $10,000,000 in invested capital, as such dollar amount 
                is annually adjusted by the Commission to reflect the 
                change in the Consumer Price Index for All Urban 
                Consumers published by the Bureau of Labor Statistics 
                of the Department of Labor.''.

                       TITLE IV--FIX CROWDFUNDING

SEC. 401. CROWDFUNDING VEHICLES.

    (a) Amendments to the Securities Act of 1933.--The Securities Act 
of 1933 (15 U.S.C. 77a et seq.) is amended--
            (1) in section 4A(f)(3), by inserting ``by any of 
        paragraphs (1) through (14) of'' before ``section 3(c)''; and
            (2) in section 4(a)(6)(B), by inserting after ``any 
        investor'' the following: ``, other than a crowdfunding vehicle 
        (as defined in section 2(a) of the Investment Company Act of 
        1940),''.
    (b) Amendments to the Investment Company Act of 1940.--The 
Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.) is amended--
            (1) in section 2(a), by adding at the end the following:
            ``(55) The term `crowdfunding vehicle' means a company--
                    ``(A) whose purpose (as set forth in its 
                organizational documents) is limited to acquiring, 
                holding, and disposing securities issued by a single 
                company in one or more transactions and made pursuant 
                to section 4(a)(6) of the Securities Act of 1933;
                    ``(B) which issues only one class of securities;
                    ``(C) which receives no compensation in connection 
                with such acquisition, holding, or disposition of 
                securities;
                    ``(D) no associated person of which receives any 
                compensation in connection with such acquisition, 
                holding or disposition of securities unless such person 
                is acting as or on behalf of an investment adviser 
                registered under the Investment Advisers Act of 1940 or 
                registered as an investment adviser in the State in 
                which the investment adviser maintains its principal 
                office and place of business;
                    ``(E) the securities of which have been issued in a 
                transaction made pursuant to section 4(a)(6) of the 
                Securities Act of 1933, where both the crowdfunding 
                vehicle and the company whose securities it holds are 
                co-issuers;
                    ``(F) which is current in its ongoing disclosure 
                obligations under Rule 202 of Regulation Crowdfunding 
                (17 CFR 227.202);
                    ``(G) the company whose securities it holds is 
                current in its ongoing disclosure obligations under 
                Rule 202 of Regulation Crowdfunding (17 CFR 227.202); 
                and
                    ``(H) is advised by an investment adviser 
                registered under the Investment Advisers Act of 1940 or 
                registered as an investment adviser in the State in 
                which the investment adviser maintains its principal 
                office and place of business.''; and
            (2) in section 3(c), by adding at the end the following:
            ``(15) Any crowdfunding vehicle.''.

SEC. 402. CROWDFUNDING 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 inserting the 
        following:
                    ``(A) In general.--The Commission'';
            (2) by striking ``section 4(6)'' and inserting ``section 
        4(a)(6)''; and
            (3) by adding at the end the following:
                    ``(B) Treatment of securities issued by certain 
                issuers.--An exemption under subparagraph (A) shall be 
                unconditional for securities offered by an issuer that 
                had a public float of less than $75,000,000 as of the 
                last business day of the issuer's most recently 
                completed semiannual period, computed by multiplying 
                the aggregate worldwide number of shares of the 
                issuer's common equity securities held by non-
                affiliates by the price at which such securities were 
                last sold (or the average bid and asked prices of such 
                securities) in the principal market for such securities 
                or, in the event the result of such public float 
                calculation is zero, had annual revenues of less than 
                $50,000,000 as of the issuer's most recently completed 
                fiscal year.''.

    TITLE V--FAIR INVESTMENT OPPORTUNITIES FOR PROFESSIONAL EXPERTS

SEC. 501. DEFINITION OF ACCREDITED INVESTOR.

    Section 2(a)(15) of the Securities Act of 1933 (15 U.S.C. 
77b(a)(15)) is amended--
            (1) by redesignating clauses (i) and (ii) as subparagraphs 
        (A) and (F), respectively; and
            (2) in subparagraph (A) (as so redesignated), by striking 
        ``; or'' and inserting a semicolon, and inserting after such 
        subparagraph the following:
                    ``(B) any natural person whose individual net 
                worth, or joint net worth with that person's spouse, 
                exceeds $1,000,000 (which amount, along with the 
                amounts set forth in subparagraph (C), shall be 
                adjusted for inflation by the Commission every 5 years 
                to the nearest $10,000 to reflect the change in the 
                Consumer Price Index for All Urban Consumers published 
                by the Bureau of Labor Statistics) where, for purposes 
                of calculating net worth under this subparagraph--
                            ``(i) the person's primary residence shall 
                        not be included as an asset;
                            ``(ii) indebtedness that is secured by the 
                        person's primary residence, up to the estimated 
                        fair market value of the primary residence at 
                        the time of the sale of securities, shall not 
                        be included as a liability (except that if the 
                        amount of such indebtedness outstanding at the 
                        time of sale of securities exceeds the amount 
                        outstanding 60 days before such time, other 
                        than as a result of the acquisition of the 
                        primary residence, the amount of such excess 
                        shall be included as a liability); and
                            ``(iii) indebtedness that is secured by the 
                        person's primary residence in excess of the 
                        estimated fair market value of the primary 
                        residence at the time of the sale of securities 
                        shall be included as a liability;
                    ``(C) any natural person who had an individual 
                income in excess of $200,000 in each of the two most 
                recent years or joint income with that person's spouse 
                in excess of $300,000 in each of those years and has a 
                reasonable expectation of reaching the same income 
                level in the current year;
                    ``(D) any natural person who is currently licensed 
                or registered as a broker or investment adviser by the 
                Commission, the Financial Industry Regulatory 
                Authority, or an equivalent self-regulatory 
                organization (as defined in section 3(a)(26) of the 
                Securities Exchange Act of 1934), or the securities 
                division of a State or the equivalent State division 
                responsible for licensing or registration of 
                individuals in connection with securities activities;
                    ``(E) any natural person the Commission determines, 
                by regulation, to have demonstrable education or job 
                experience to qualify such person as having 
                professional knowledge of a subject related to a 
                particular investment, and whose education or job 
                experience is verified by the Financial Industry 
                Regulatory Authority or an equivalent self-regulatory 
                organization (as defined in section 3(a)(26) of the 
                Securities Exchange Act of 1934); or''.

             TITLE VI--U.S. TERRITORIES INVESTOR PROTECTION

SEC. 601. TERMINATION OF EXEMPTION.

    (a) In General.--Section 6(a) of the Investment Company Act of 1940 
(15 U.S.C. 80a-6(a)) is amended by striking paragraph (1).
    (b) Effective Date and Safe Harbor.--
            (1) Effective date.--Except as provided in paragraph (2), 
        the amendment made by subsection (a) shall take effect on the 
        date of the enactment of this Act.
            (2) Safe harbor.--With respect to a company that is exempt 
        under section 6(a)(1) of the Investment Company Act of 1940 (15 
        U.S.C. 80a-6(a)(1)) on the day before the date of the enactment 
        of this Act, the amendment made by subsection (a) shall take 
        effect on the date that is 3 years after the date of the 
        enactment of this Act.
            (3) Extension of safe harbor.--The Securities and Exchange 
        Commission, by rule and regulation upon its own motion, or by 
        order upon application, may conditionally or unconditionally, 
        under section 6(c) of the Investment Company Act of 1940 (15 
        U.S.C. 80a-6(c)), further delay the effective date for a 
        company described in paragraph (2) for a maximum of 3 years 
        following the initial 3-year period if, before the end of the 
        initial 3-year period, the Commission determines that such a 
        rule, regulation, motion, or order is necessary or appropriate 
        in the public interest and for the protection of investors.

            Passed the House of Representatives December 5, 2016.

            Attest:

                                                                 Clerk.
114th CONGRESS

  2d Session

                               H. R. 6427

_______________________________________________________________________

                                 AN ACT

  To improve the operation of United States capital markets, and for 
                            other purposes.