118 HR 2799 EH: Expanding Access to Capital Act of 2023 U.S. House of Representatives text/xml EN Pursuant to Title 17 Section 105 of the United States Code, this file is not subject to copyright protection and is in the public domain.

IB 118th CONGRESS2d Session H. R. 2799 IN THE HOUSE OF REPRESENTATIVES AN ACT To make reforms to the capital markets of the United States, and for other purposes.

1.

Short title; table of contents

(a)

Short title

This Act may be cited as the Expanding Access to Capital Act of 2023. (b)

Table of contents

The table of contents for this Act is as follows: Sec. 1. Short title; table of contents. Division A—Strengthening Public Markets Title I—Remove Aberrations in the Market Cap Test for Target Company Financial Statements Sec. 1101. Avoiding aberrational results in requirements for acquisition and disposition financial statements. Title II—Helping Startups Continue To Grow Sec. 1201. Short title. Sec. 1202. Emerging growth company criteria. Title III—SEC and PCAOB Auditor Requirements for Newly Public Companies Sec. 1301. Auditor independence for certain past audits occurring before an issuer is a public company. Title IV—Expand the Protection for Research Reports to Cover All Securities of All Issuers Sec. 1401. Provision of research. Title V—Exclude QIBs and IAAs from the Record Holder Count for Mandatory Registration Sec. 1501. Exclusions from mandatory registration threshold. Title VI—Expand WKSI Eligibility Sec. 1601. Definition of well-known seasoned issuer. Division B—Helping Small Businesses and Entrepreneurs Title I—Unlocking Capital for Small Businesses Sec. 2101. Short title. Sec. 2102. Safe harbors for private placement brokers and finders. Sec. 2103. Limitations on State law. Title II—Small Business Investor Capital Access Sec. 2201. Short title. Sec. 2202. Inflation adjustment for the exemption threshold for certain investment advisers of private funds. Title III—Improving Capital Allocation for Newcomers Sec. 2301. Short title. Sec. 2302. Qualifying venture capital funds. Title IV—Small Entrepreneurs’ Empowerment and Development Sec. 2401. Short title. Sec. 2402. Micro-offering exemption. Title V—Regulation A+ Improvement Sec. 2501. Short title. Sec. 2502. JOBS Act-related exemption. Title VI—Developing and Empowering our Aspiring Leaders Sec. 2601. Short title. Sec. 2602. Definitions. Sec. 2603. Reports. Title VII—Improving Crowdfunding Opportunities Sec. 2701. Short title. Sec. 2702. Crowdfunding revisions. Title VIII—Restoring the Secondary Trading Market Sec. 2801. Short title. Sec. 2802. Exemption from State regulation. Division C—Increasing Access to Private Markets Title I—Gig Worker Equity Compensation Sec. 3101. Short title. Sec. 3102. Extension of Rule 701. Sec. 3103. GAO study. Title II—Investment Opportunity Expansion Sec. 3201. Short title. Sec. 3202. Investment thresholds to qualify as an accredited investor. Title III—Risk Disclosure and Investor Attestation Sec. 3301. Short title. Sec. 3302. Investor attestation. Title IV—Accredited investors include individuals receiving advice from certain professionals Sec. 3401. Accredited investors include individuals receiving advice from certain professionals. Division D—Helping Angels Lead Our Startups Sec. 4001. Clarification of general solicitation. Division E—Improving Disclosure for Investors Sec. 5001. Short title. Sec. 5002. Electronic delivery. Division F—Enhancement of 403(b) plans Sec. 6101. Short title. Sec. 6102. Enhancement of 403(b) plans. Division G—Increasing Investor Opportunities Sec. 7001. Closed-end company authority to invest in private funds.

A

Strengthening Public Markets

B

Helping Small Businesses and Entrepreneurs

C

Increasing Access to Private Markets

D

Helping Angels Lead Our Startups

4001.

Clarification of general solicitation

(a)

Definitions

For purposes of this section and the revision of rules required under this section: (1)

Angel investor group

The term angel investor group means any group that— (A)is composed of accredited investors interested in investing personal capital in early-stage companies; (B)holds regular meetings and has defined processes and procedures for making investment decisions, either individually or among the membership of the group as a whole; and (C)is neither associated nor affiliated with brokers, dealers, or investment advisers. (2)

Issuer

The term issuer means an issuer that is a business, is not in bankruptcy or receivership, is not an investment company, and is not a blank check, blind pool, or shell company. (b)

In general

Not later than 6 months after the date of enactment of this Act, the Securities and Exchange Commission shall revise Regulation D (17 CFR 230.500 et seq.) to require that in carrying out the prohibition against general solicitation or general advertising contained in section 230.502(c) of title 17, Code of Federal Regulations, the prohibition shall not apply to a presentation or other communication made by or on behalf of an issuer which is made at an event— (1)sponsored by— (A)the United States or any territory thereof, the District of Columbia, any State, a political subdivision of any State or territory, or any agency or public instrumentality of any of the foregoing; (B)a college, university, or other institution of higher education; (C)a nonprofit organization; (D)an angel investor group; (E)a venture forum, venture capital association, or trade association; or (F)any other group, person, or entity as the Securities and Exchange Commission may determine by rule; (2)where any advertising for the event does not reference any specific offering of securities by the issuer; (3)the sponsor of which— (A)does not make investment recommendations or provide investment advice to event attendees; (B)does not engage in an active role in any investment negotiations between the issuer and investors attending the event; (C)does not charge event attendees any fees other than reasonable administrative fees; (D)does not receive any compensation for making introductions between investors attending the event and issuers, or for investment negotiations between such parties; (E)makes readily available to attendees a disclosure not longer than one page in length, as prescribed by the Securities and Exchange Commission, describing the nature of the event and the risks of investing in the issuers presenting at the event; and (F)does not receive any compensation with respect to such event that would require registration of the sponsor as a broker or a dealer under the Securities Exchange Act of 1934, or as an investment advisor under the Investment Advisers Act of 1940; and (4)where no specific information regarding an offering of securities by the issuer is communicated or distributed by or on behalf of the issuer, other than— (A)that the issuer is in the process of offering securities or planning to offer securities; (B)the type and amount of securities being offered; (C)the amount of securities being offered that have already been subscribed for; and (D)the intended use of proceeds of the offering. (c)

Rule of construction

Subsection (b) may only be construed as requiring the Securities and Exchange Commission to amend the requirements of Regulation D with respect to presentations and communications, and not with respect to purchases or sales. (d)

No pre-existing substantive relationship by reason of event

Attendance at an event described under subsection (b) shall not qualify, by itself, as establishing a pre-existing substantive relationship between an issuer and a purchaser, for purposes of Rule 506(b).

E

Improving Disclosure for Investors

5001.

Short title

This division may be cited as the Improving Disclosure for Investors Act of 2024.

5002.

Electronic delivery

(a)

Promulgation of rules

Not later than 180 days after the date of the enactment of this section, the Securities and Exchange Commission shall propose and, not later than 1 year after the date of the enactment of this section, the Commission shall finalize, rules, regulations, amendments, or interpretations, as appropriate, to allow a covered entity to satisfy the entity’s obligation to deliver regulatory documents required under the securities laws to investors using electronic delivery. (b)

Required provisions

Rules, regulations, amendments, or interpretations the Commission promulgates pursuant to subsection (a) shall: (1)With respect to investors that do not receive all regulatory documents by electronic delivery, provide for— (A)delivery of an initial communication in paper form regarding electronic delivery; (B)a transition period not to exceed 180 days until such regulatory documents are delivered to such investors by electronic delivery; and (C)during a period not to exceed 2 years following the transition period set forth in subparagraph (B), delivery of an annual notice in paper form solely reminding such investors of the ability to opt out of electronic delivery at any time and receive paper versions of regulatory documents. (2)Set forth requirements for the content of the initial communication described in paragraph (1)(A). (3)Set forth requirements for the timing of delivery of a notice of website availability of regulatory documents and the content of the appropriate notice described in subsection (h)(3)(B). (4)Provide a mechanism for investors to opt out of electronic delivery at any time and receive paper versions of regulatory documents. (5)Require measures reasonably designed to identify and remediate failed electronic deliveries of regulatory documents. (6)Set forth minimum requirements regarding readability and retainability for regulatory documents that are delivered electronically. (7)For covered entities other than brokers, dealers, investment advisers registered with the Commission, and investment companies, require measures reasonably designed to ensure the confidentiality of personal information in regulatory documents that are delivered to investors electronically. (c)

Rule of construction

Nothing in this section shall be construed as altering the substance or timing of any regulatory document obligation under the securities laws or regulations of a self-regulatory organization. (d)

Treatment of revisions not completed in a timely manner

If the Commission fails to finalize the rules, regulations, amendments, or interpretations required under subsection (a) before the date specified in such subsection— (1)a covered entity may deliver regulatory documents using electronic delivery in accordance with subsections (b) and (c); and (2)such electronic delivery shall be deemed to satisfy the obligation of the covered entity to deliver regulatory documents required under the securities laws. (e)

Other required actions

(1)

Review of rules

The Commission shall— (A)within 180 days of the date of enactment of this Act, conduct a review of the rules and regulations of the Commission to determine whether any such rules or regulations require delivery of written documents to investors; and (B)within 1 year of the date of enactment of this Act, promulgate amendments to such rules or regulations to provide that any requirement to deliver a regulatory document in writing may be satisfied by electronic delivery. (2)

Actions by self-regulatory organizations

Each self-regulatory organization shall adopt rules and regulations, or amend the rules and regulations of the self-regulatory organization, consistent with this Act and consistent with rules, regulations, amendments, or interpretations finalized by the Commission pursuant to subsection (a). (3)

Rule of application

This subsection shall not apply to a rule or regulation issued pursuant to a Federal statute if that Federal statute specifically requires delivery of written documents to investors. (f)

Definitions

In this section: (1)

Commission

The term Commission means the Securities and Exchange Commission. (2)

Covered entity

The term covered entity means— (A)an investment company (as defined in section 3(a)(1) of the Investment Company Act of 1940 (15 U.S.C. 80a–3(a)(1))) that is registered under such Act; (B)a business development company (as defined in section 2(a) the Investment Company Act of 1940 (15 U.S.C. 80a–2(a))) that has elected to be regulated as such under such Act; (C)a registered broker or dealer (as defined in section 3(a)(4) and section 3(a)(5) of the Securities Exchange Act of 1934) (15 U.S.C. 78c(a)(4) & 78c(a)(5)); (D)a registered municipal securities dealer (as defined in section 3(a)(30) of the Securities Exchange Act of 1934) (15 U.S.C. 78c(a)(30)); (E)a registered government securities broker or government securities dealer (as defined in section 3(a)(43) and section 3(a)(44) of the Securities Exchange Act of 1934) (15 U.S.C. 78c(a)(43) & 78c(a)(44)); (F)a registered investment adviser (as defined in section 202(a)(11) of the Investment Advisers Act of 1940) (15 U.S.C. 80b–1(a)(11)); (G)a registered transfer agent (as defined in section 3(a)(25) of the Securities Exchange Act of 1934) (15 U.S.C. 78c(a)(25)); or (H)a registered funding portal (as defined in the second paragraph (80) of section 3(a) of the Securities Exchange Act of 1934) (15 U.S.C. 78c(a)(80)). (3)

Electronic delivery

The term electronic delivery, with respect to regulatory documents, includes— (A)the direct delivery of such regulatory document to an electronic address of an investor; (B)the posting of such regulatory document to a website and direct electronic delivery of an appropriate notice of the availability of the regulatory document to the investor; and (C)an electronic method reasonably designed to ensure receipt of such regulatory document by the investor. (4)

Regulatory documents

The term regulatory documents includes— (A)prospectuses meeting the requirements of section 10(a) of the Securities Act of 1933 (15 U.S.C. 77j(a)); (B)summary prospectuses meeting the requirements of— (i)section 230.498 of title 17, Code of Federal Regulations; or (ii)section 230.498A of title 17, Code of Federal Regulations; (C)statements of additional information, as described under section 270.30e–3(h)(3) of title 17, Code of Federal Regulations; (D)annual and semi-annual reports to investors meeting the requirements of section 30(e) of the Investment Company Act of 1940 (15 U.S.C. 80a–29(e)); (E)notices meeting the requirements under section 270.19a–1 of title 17, Code of Federal Regulations; (F)confirmations and account statements meeting the requirements under section 240.10b–10 of title 17, Code of Federal Regulations; (G)proxy statements meeting the requirements under section 240.14a–3 of title 17, Code of Federal Regulations; (H)privacy notices meeting the requirements of Regulation S–P under subpart A of part 248 of title 17, Code of Federal Regulations; (I)affiliate marketing notices meeting the requirements of Regulation S–AM under subpart B of part 248 of title 17, Code of Federal Regulations; and (J)all other regulatory documents required to be delivered by covered entities to investors under the securities laws and the rules and regulations of the Commission and the self-regulatory organizations. (5)

Securities laws

The term securities laws has the meaning given the term in section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)). (6)

Self-regulatory organization

The term self-regulatory organization means— (A)a self-regulatory organization, as defined in section 2(a)(26) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(26)); and (B)the Municipal Securities Rulemaking Board. (7)

Website

The term website means an internet website or other digital, internet, or electronic-based information repository, such as a mobile application, to which an investor of a covered entity has been provided reasonable access.

F

Enhancement of 403(b) plans

6101.

Short title

This division may be cited as the Retirement Fairness for Charities and Educational Institutions Act of 2024.

6102.

Enhancement of 403(b) plans

(a)

Amendments to the Investment Company Act of 1940

Section 3(c)(11) of the Investment Company Act of 1940 (15 U.S.C. 80a–3(c)(11)) is amended to read as follows: (11)Any— (A)employee’s stock bonus, pension, or profit-sharing trust which meets the requirements for qualification under section 401 of the Internal Revenue Code of 1986; (B)custodial account meeting the requirements of section 403(b)(7) of such Code; (C)governmental plan described in section 3(a)(2)(C) of the Securities Act of 1933; (D)collective trust fund maintained by a bank consisting solely of assets of one or more— (i)trusts described in subparagraph (A); (ii)government plans described in subparagraph (C); (iii)church plans, companies, or accounts that are excluded from the definition of an investment company under paragraph (14) of this subsection; or (iv)plans which meet the requirements of section 403(b) of the Internal Revenue Code of 1986— (I)if— (aa)such plan is subject to title I of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1001 et seq.); (bb)any employer making such plan available agrees to serve as a fiduciary for the plan with respect to the selection of the plan’s investments among which participants can choose; or (cc)such plan is a governmental plan (as defined in section 414(d) of such Code); and (II)if the employer, a fiduciary of the plan, or another person acting on behalf of the employer reviews and approves each investment alternative offered under such plan described under subclause (I)(cc) prior to the investment being offered to participants in the plan; or (E)separate account the assets of which are derived solely from— (i)contributions under pension or profit-sharing plans which meet the requirements of section 401 of the Internal Revenue Code of 1986 or the requirements for deduction of the employer’s contribution under section 404(a)(2) of such Code; (ii)contributions under governmental plans in connection with which interests, participations, or securities are exempted from the registration provisions of section 5 of the Securities Act of 1933 by section 3(a)(2)(C) of such Act; (iii)advances made by an insurance company in connection with the operation of such separate account; and (iv)contributions to a plan described in clause (iii) or (iv) of subparagraph (D).. (b)

Amendments to the Securities Act of 1933

Section 3(a)(2) of the Securities Act of 1933 (15 U.S.C. 77c(a)(2)) is amended— (1)by striking beneficiaries, or (D) and inserting beneficiaries, (D) a plan which meets the requirements of section 403(b) of such Code (i) if (I) such plan is subject to title I of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1001 et seq.), (II) any employer making such plan available agrees to serve as a fiduciary for the plan with respect to the selection of the plan’s investments among which participants can choose, or (III) such plan is a governmental plan (as defined in section 414(d) of such Code), and (ii) if the employer, a fiduciary of the plan, or another person acting on behalf of the employer reviews and approves each investment alternative offered under any plan described under clause (i)(III) prior to the investment being offered to participants in the plan, or (E); (2)by striking (C), or (D) and inserting (C), (D), or (E); and (3)by striking (iii) which is a plan funded and all that follows through retirement income account). and inserting (iii) in the case of a plan not described in subparagraph (D) or (E), which is a plan funded by an annuity contract described in section 403(b) of such Code. (c)

Amendments to the Securities Exchange Act of 1934

Section 3(a)(12)(C) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(12)(C)) is amended— (1)by striking or (iv) and inserting (iv) a plan which meets the requirements of section 403(b) of such Code (I) if (aa) such plan is subject to title I of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1001 et seq.), (bb) any employer making such plan available agrees to serve as a fiduciary for the plan with respect to the selection of the plan’s investments among which participants can choose, or (cc) such plan is a governmental plan (as defined in section 414(d) of such Code), and (II) if the employer, a fiduciary of the plan, or another person acting on behalf of the employer reviews and approves each investment alternative offered under any plan described under subclause (I)(cc) prior to the investment being offered to participants in the plan, or (v); (2)by striking (ii), or (iii) and inserting (ii), (iii), or (iv); and (3)by striking (II) is a plan funded and inserting (II) in the case of a plan not described in clause (iv), is a plan funded. (d)

Conforming Amendment to the Securities Exchange Act of 1934

Section 12(g)(2)(H) of the Securities Exchange Act of 1934 (15 U.S.C. 78l(g)(2)(H)) is amended by striking or (iii) and inserting (iii) a plan described in section 3(a)(12)(C)(iv) of this Act, or (iv).

G

Increasing Investor Opportunities

7001.

Closed-end company authority to invest in private funds

(a)

In general

Section 5 of the Investment Company Act of 1940 (15 U.S.C. 80a–5) is amended by adding at the end the following: (d)

Closed-End company authority to invest in private funds

(1)

In general

Except as otherwise prohibited or restricted by this Act (or any rule issued under this Act), the Commission may not prohibit or otherwise limit a closed-end company from investing any or all of the assets of the closed-end company in securities issued by private funds. (2)

Other restrictions on Commission authority

(A)

In general

Except as otherwise prohibited or restricted by this Act (or any rule issued under this Act) or to the extent permitted by subparagraph (B), the Commission may not impose any condition on, restrict, or otherwise limit— (i)the offer to sell, or the sale of, securities issued by a closed-end company that invests, or proposes to invest, in securities issued by private funds; or (ii)the listing of the securities of a closed-end company described in clause (i) on a national securities exchange. (B)

Unrelated restrictions

The Commission may impose a condition on, restrict, or otherwise limit an activity described in clause (i) or (ii) of subparagraph (A) if that condition, restriction or limitation is unrelated to the underlying characteristics of a private fund or the status of a private fund as a private fund. (3)

Application

Notwithstanding section 6(f), this subsection shall also apply to a closed-end company that elects to be treated as a business development company pursuant to section 54.. (b)

Definition of private fund

Section 2(a) of the Investment Company Act of 1940 (15 U.S.C. 80a–2(a)) is amended by adding at the end the following: (55)The term private fund has the meaning given in section 202(a) of the Investment Advisers Act of 1940 (15 U.S.C. 80b–2(a)).. (c)

Treatment by national securities exchanges

Section 6 of the Securities Exchange Act of 1934 (15 U.S.C. 78f) is amended by adding at the end the following: (m) (1)Except as otherwise prohibited or restricted by rules of the exchange that are consistent with section 5(d) of the Investment Company Act of 1940 (15 U.S.C. 80a–5(d)), an exchange may not prohibit, condition, restrict, or impose any other limitation on the listing or trading of the securities of a closed-end company when the closed-end company invests, or may invest, some or all of the assets of the closed-end company in securities issued by private funds. (2)In this subsection— (A)the term closed-end company— (i)has the meaning given the term in section 5(a) of the Investment Company Act of 1940 (15 U.S.C. 80a–5(a)); and (ii)includes a closed-end company that elects to be treated as a business development company pursuant to section 54 of the Investment Company Act of 1940 (15 U.S.C. 80a–53); and (B)the term private fund has the meaning given the term in section 2(a) of the Investment Company Act of 1940 (15 U.S.C. 80a–2(a))).. (d)

Investment limitation

Section 3(c) of the Investment Company Act of 1940 (15 U.S.C. 80a–3(c)) is amended— (1)in paragraph (1), in the matter preceding subparagraph (A), in the second sentence, by striking subparagraphs (A)(i) and (B)(i) and inserting subparagraphs (A)(i), (B)(i), and (C); and (2)in paragraph (7)(D), by striking subparagraphs (A)(i) and (B)(i) and inserting subparagraphs (A)(i), (B)(i), and (C). (e)

Rules of construction

(1)Nothing in this section or the amendments made by this section may be construed to limit or amend any fiduciary duty owed to a closed-end company (as defined in section 5(a)(2) of the Investment Company Act of 1940 (15 U.S.C. 80a-5(a)(2))) or by an investment adviser (as defined under section 2(a) of the Investment Company Act of 1940 (15 U.S.C. 80a–2(a))) to a closed-end company. (2)Nothing in this section or the amendments made by this section may be construed to limit or amend the valuation, liquidity, or redemption requirements or obligations of a closed-end company (as defined in section 5(a)(2) of the Investment Company Act of 1940 (15 U.S.C. 80a-5(a)(2))) as required by the Investment Company Act of 1940.

Passed the House of Representatives March 8, 2024.Cheryl L. Johnson,Clerk.