[House Report 114-661]
[From the U.S. Government Publishing Office]


114th Congress }                                           { Report
                        HOUSE OF REPRESENTATIVES
 2d Session    }                                           { 114-661

======================================================================
 
                          FIX CROWDFUNDING ACT

                                _______
                                

  July 5, 2016.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

Mr. Hensarling, from the Committee on Financial Services, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 4855]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (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, having considered the 
same, report favorably thereon with an amendment and recommend 
that the bill as amended do pass.
    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Fix Crowdfunding Act''.

SEC. 2. 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;
                  ``(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 C.F.R. 227.202);
                  ``(G) the company whose securities it holds is 
                current in its ongoing disclosure obligations under 
                Rule 202 of Regulation Crowdfunding (17 C.F.R. 
                227.202); and
                  ``(H) is advised by an investment adviser registered 
                under the Investment Advisers Act of 1940.''; and
          (2) in section 3(c), by adding at the end the following:
          ``(15) Any crowdfunding vehicle.''.

SEC. 3. 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.''.

                          Purpose and Summary

    Introduced by Representative McHenry on March 23, 2016, 
H.R. 4855, the ``Fix Crowdfunding Act,'' would amend provisions 
in the securities laws governing crowdfunding and would fix 
some of the problematic requirements included in the final 
crowdfunding rule promulgated by the Securities and Exchange 
Commission (SEC) pursuant to Title III of the Jumpstart Our 
Business Startups (JOBS) Act.
    To increase the number and scope of investors that can 
invest in startups, H.R. 4855 defines a Special Purpose Vehicle 
(SPV) and provides that SPVs are authorized investors in 
crowdfunding offerings. SPVs can enable a group of investors to 
unify and pool their resources to invest in startups that want 
to raise capital through crowdfunding. To qualify as a SPV and 
participate in crowdfunding, the SPV must satisfy several legal 
requirements, including:
           The purpose is limited to acquiring, 
        holding, and disposing of securities in a single 
        company for only one class of securities;
           The SPV receives no compensation in 
        connection with the acquisition, holding, or 
        disposition of securities;
           Any associated person to the SPV does not 
        receive any compensation unless the person is ``acting 
        as or on behalf of an investment adviser;''
           The rights and investor protections under 
        Section 4(a)(6) of the Securities Act of 1933 apply to 
        the SPV; and
           The disclosure requirements of Title III of 
        the JOBS Act apply to the SPV.
    H.R. 4855 also amends Title III of the JOBS Act to increase 
the dollar amount thresholds of what a company can raise 
through crowdfunding before triggering the registration and 
reporting obligations contained in Section 12(g) of the 
Securities Exchange Act of 1934 (Exchange Act). Specifically, 
H.R. 4855 amends Section 12(g) of the Exchange Act to raise the 
cap from $25 million to $75 million for entities that have 
reported revenues, and from $25 million to $50 million for 
companies that do not yet have revenue.

                  Background and Need for Legislation

    When the SEC adopted its final rules for Regulation 
Crowdfunding on October 30, 2015, SEC Commissioner Michael 
Piwowar dissented. In his dissenting statement, he noted a 
number of important issues and concerns:

          While crowdfunding was intended to be a treat for the 
        smallest and least sophisticated companies seeking to 
        raise capital, today's rules are full of tricks. The 
        rules will spin a complex web of provisions and 
        requirements for compliance. I fear that many traps for 
        the unwary are hidden in the regulations, creating 
        potential nightmares for small business owners that 
        fail to place regulatory compliance at the top of their 
        business plans. Such burdens will spook many small 
        businesses from pursuing crowdfunding as a viable path 
        to raising capital.
          A number of concerns have already been raised as to 
        whether our rules are too restrictive or too 
        burdensome.

    H.R. 4855 addresses some of the Commissioner's concerns and 
would ensure that capital formation through crowdfunding is a 
viable option for small businesses. In particular, the two 
largest hurdles for entities to use crowdfunding as a viable 
funding source are the SEC's current treatment of SPVs and the 
monetary thresholds maintained in Section 12(g) of the Exchange 
Act that once crossed, trigger SEC reporting.
    Kevin Laws from AngelList noted in his written testimony 
before the Subcommittee on Capital Markets and Government 
Sponsored Enterprises that the SEC's ``final crowdfunding 
regulations contained a provision that required companies to 
register, similar to a public company, within 2 years of 
crossing $25 million in assets if they had 500 or more 
unaccredited investors (the so-called `12g problem'). That 
would dissuade later investors from investing in fast-growing 
companies if doing so would put the company in a 24-month path 
to meeting public company requirements; the very companies 
[that] need money to grow would be dissuaded from raising it 
because of the earlier registration requirements.'' 
Consequently, the Fix Crowdfunding Act addresses this 
significant concern by raising the monetary threshold that 
triggers the onerous SEC registration and reporting 
obligations. This will allow and encourage small businesses to 
use crowdfunding as a way to raise capital and eliminates the 
chilling effect for companies that fear they may hit that 
threshold from participating in a crowdfunding offering.
    Additionally, the current JOBS Act provisions related to 
crowdfunding unfortunately limit the use of ``syndicates'' or 
special purpose vehicles, which closes investment opportunities 
to an ordinary or retail investor. The ``Fix Crowdfunding Act'' 
will enable greater retail investor participation in 
crowdfunding by enabling SPVs to be established and invest in 
startups. SPVs offer the ability for retail investors to invest 
alongside a more experienced lead investor and thereby enjoy 
greater participation. Moreover, by enabling SPVs to 
participate in crowdfunding, companies that are in critical 
need of funding have a greater pool of potential investors.

                                Hearings

    The Committee on Financial Services' Subcommittee on 
Capital Markets and Government Enterprises held a hearing 
examining matters relating to H.R. 4855 on April 14, 2016.

                        Committee Consideration

    The Committee on Financial Services met in open session on 
June 15 and June 16, 2016. An amendment in the nature of a 
substitute offered by Mr. McHenry and Ms. Waters was agreed to 
by voice vote. The Committee ordered H.R. 4854 to be reported 
favorably to the House, as amended, by a recorded vote of 57 
yeas to 2 nays (recorded vote no. FC-111), a quorum being 
present.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. The 
sole record vote in committee was a motion by Chairman 
Hensarling to report the bill favorably to the House as 
amended. That motion was agreed to by a recorded vote of 57 
yeas to 2 nays (Record vote no. FC-111), a quorum being 
present.


                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the findings and recommendations of 
the committee based on oversight activities under clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
are incorporated in the descriptive portions of this report.

                    Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee states that H.R. 4855 
will facilitate capital formation by updating the rules for 
``crowdfunding'' to raise the dollar amount limit on funds that 
can be raised via crowdfunding and clarifying certain 
requirements and exclusions for funding portals.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee adopts as its 
own the estimate of new budget authority, entitlement 
authority, or tax expenditures or revenues contained in the 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to section 402 of the Congressional 
Budget Act of 1974.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                 Congressional Budget Office Estimates

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                      Washington, DC, July 1, 2016.
Hon. Jeb Hensarling,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 4855, the Fix 
Crowdfunding Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Stephen 
Rabent.
            Sincerely,
                                                        Keith Hall.
    Enclosure.

H.R. 4855--Fix Crowdfunding Act

    Under current law, the Securities and Exchange Commission 
(SEC) requires certain issuers of securities to register as an 
investment company and regulates aspects of their operations. 
H.R. 4855 would define the term ``crowdfunding vehicle'' and 
exempt those companies that qualify under that term from 
registering as an investment company. It also would expand a 
current exemption for a particular class of securities from 
registration requirements. Finally, H.R. 4855 would change how 
the total sales of securities by an issuer is calculated when 
determining requirements to register securities with the SEC. 
That total is used to determine whether or not those securities 
are exempt from registration with the SEC.
    On the basis of information from the SEC about the level of 
effort needed to implement the changes in this bill, CBO 
estimates that implementing H.R. 4855 would have no significant 
effect on the agency's costs or operations. Moreover, the SEC 
is authorized to collect fees sufficient to offset its annual 
appropriation; therefore, CBO estimates that the net effect on 
discretionary spending would be negligible, assuming 
appropriations actions consistent with that authority. Enacting 
H.R. 4855 would not affect direct spending or revenues; 
therefore, pay-as-you-go procedures do not apply.
    CBO estimates that enacting H.R. 4855 would not increase 
net direct spending or on-budget deficits in any of the four 
consecutive 10-year periods beginning in 2027.
    H.R. 4855 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would not affect the budgets of state, local, or tribal 
governments.
    The CBO staff contact for this estimate is Stephen Rabent. 
The estimate was approved by H. Samuel Papenfuss, Deputy 
Assistant Director for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of the section 
102(b)(3) of the Congressional Accountability Act.

                         Earmark Identification

    H.R. 4855 does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI.

                    Duplication of Federal Programs

    Pursuant to section 3(g) of H. Res. 5, 114th Cong. (2015), 
the Committee states that no provision of H.R. 4855 establishes 
or reauthorizes a program of the Federal Government known to be 
duplicative of another Federal program, a program that was 
included in any report from the Government Accountability 
Office to Congress pursuant to section 21 of Public Law 111-
139, or a program related to a program identified in the most 
recent Catalog of Federal Domestic Assistance.

                   Disclosure of Directed Rulemaking

    Pursuant to section 3(i) of H. Res. 5, 114th Cong. (2015), 
the Committee states that H.R. 4855 contains no directed 
rulemaking.

             Section-by-Section Analysis of the Legislation


Section 1: Short title

    This section cites H.R. 4855 as the ``Fix Crowdfunding 
Act''.

Section 2: Crowdfunding vehicles

    This section amends The Securities Act of 1933 to clarify 
exemptions for crowdfunding vehicles.
    Additionally, this section amends the Investment Company 
Act of 1940 by defining the term ``crowdfunding vehicle'' to 
include: a company whose purpose is limited to acquiring, 
holding, and disposing securities in a single company for only 
one class of securities; a company who receives no compensation 
in connection with the acquisition, holding, or disposition of 
securities; a company in which any associated person does not 
receive any compensation unless the person is ``acting as or on 
behalf of an investment adviser.'' This section preserves the 
applicability of both 4(a)(6) of the Securities Act of 1933 and 
the disclosure requirements of Title III of the JOBS Act.

Section 3: Crowdfunding exemption from registration

    This section amends section 12(g) of the Securities 
Exchange Act of 1934, to increase the cap from $25 million to 
$75 million for entities that have reported revenues, and from 
$25 million to $50 million for companies that do not yet have 
revenue.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, and existing law in which no 
change is proposed is shown in roman):

                         SECURITIES ACT OF 1933


TITLE I--SHORT TITLE

           *       *       *       *       *       *       *



                         exempted transactions

  Sec. 4. (a) The provisions of section 5 shall not apply to--
          (1) transactions by any person other than an issuer, 
        underwriter, or dealer.
          (2) transactions by an issuer not involving any 
        public offering.
          (3) transactions by a dealer (including an 
        underwriter no longer acting as an underwriter in 
        respect of the security involved in such transaction), 
        except--
                  (A) transactions taking place prior to the 
                expiration of forty days after the first date 
                upon which the security was bona fide offered 
                to the public by the issuer or by or through an 
                underwriter,
                  (B) transactions in a security as to which a 
                registration statement has been filed taking 
                place prior to the expiration of forty days 
                after the effective date of such registration 
                statement or prior to the expiration of forty 
                days after the first date upon which the 
                security was bona fide offered to the public by 
                the issuer or by or through an underwriter 
                after such effective date, whichever is later 
                (excluding in the computation of such forty 
                days any time during which a stop order issued 
                under section 8 is in effect as to the 
                security), or such shorter period as the 
                Commission may specify by rules and regulations 
                or order, and
                  (C) transactions as to securities 
                constituting the whole or a part of an unsold 
                allotment to or subscription by such dealer as 
                a participant in the distribution of such 
                securities by the issuer or by or through an 
                underwriter.
        With respect to transactions referred to in clause (B), 
        if securities of the issuer have not previously been 
        sold pursuant to an earlier effective registration 
        statement the applicable period, instead of forty days, 
        shall be ninety days, or such shorter period as the 
        Commission may specify by rules and regulations or 
        order.
          (4) brokers' transactions executed upon customers' 
        orders on any exchange or in the over-the-counter 
        market but not the solicitation of such orders.
          (5) transactions involving offers or sales by an 
        issuer solely to one or more accredited investors, if 
        the aggregate offering price of an issue of securities 
        offered in reliance on this paragraph does not exceed 
        the amount allowed under section 3(b)(1) of this title, 
        if there is no advertising or public solicitation in 
        connection with the transaction by the issuer or anyone 
        acting on the issuer's behalf, and if the issuer files 
        such notice with the Commission as the Commission shall 
        prescribe.
          (6) transactions involving the offer or sale of 
        securities by an issuer (including all entities 
        controlled by or under common control with the issuer), 
        provided that--
                  (A) the aggregate amount sold to all 
                investors by the issuer, including any amount 
                sold in reliance on the exemption provided 
                under this paragraph during the 12-month period 
                preceding the date of such transaction, is not 
                more than $1,000,000;
                  (B) the aggregate amount sold to any 
                investor, other than a crowdfunding vehicle (as 
                defined in section 2(a) of the Investment 
                Company Act of 1940), by an issuer, including 
                any amount sold in reliance on the exemption 
                provided under this paragraph during the 12-
                month period preceding the date of such 
                transaction, does not exceed--
                          (i) the greater of $2,000 or 5 
                        percent of the annual income or net 
                        worth of such investor, as applicable, 
                        if either the annual income or the net 
                        worth of the investor is less than 
                        $100,000; and
                          (ii) 10 percent of the annual income 
                        or net worth of such investor, as 
                        applicable, not to exceed a maximum 
                        aggregate amount sold of $100,000, if 
                        either the annual income or net worth 
                        of the investor is equal to or more 
                        than $100,000;
                  (C) the transaction is conducted through a 
                broker or funding portal that complies with the 
                requirements of section 4A(a); and
                  (D) the issuer complies with the requirements 
                of section 4A(b).
          (7) transactions meeting the requirements of 
        subsection (d).
  (b) Offers and sales exempt under section 230.506 of title 
17, Code of Federal Regulations (as revised pursuant to section 
201 of the Jumpstart Our Business Startups Act) shall not be 
deemed public offerings under the Federal securities laws as a 
result of general advertising or general solicitation.
  (c)(1) With respect to securities offered and sold in 
compliance with Rule 506 of Regulation D under this Act, no 
person who meets the conditions set forth in paragraph (2) 
shall be subject to registration as a broker or dealer pursuant 
to section 15(a)(1) of this title, solely because--
                  (A) that person maintains a platform or 
                mechanism that permits the offer, sale, 
                purchase, or negotiation of or with respect to 
                securities, or permits general solicitations, 
                general advertisements, or similar or related 
                activities by issuers of such securities, 
                whether online, in person, or through any other 
                means;
                  (B) that person or any person associated with 
                that person co-invests in such securities; or
                  (C) that person or any person associated with 
                that person provides ancillary services with 
                respect to such securities.
  (2) The exemption provided in paragraph (1) shall apply to 
any person described in such paragraph if--
          (A) such person and each person associated with that 
        person receives no compensation in connection with the 
        purchase or sale of such security;
          (B) such person and each person associated with that 
        person does not have possession of customer funds or 
        securities in connection with the purchase or sale of 
        such security; and
          (C) such person is not subject to a statutory 
        disqualification as defined in section 3(a)(39) of this 
        title and does not have any person associated with that 
        person subject to such a statutory disqualification.
  (3) For the purposes of this subsection, the term ``ancillary 
services'' means--
          (A) the provision of due diligence services, in 
        connection with the offer, sale, purchase, or 
        negotiation of such security, so long as such services 
        do not include, for separate compensation, investment 
        advice or recommendations to issuers or investors; and
          (B) the provision of standardized documents to the 
        issuers and investors, so long as such person or entity 
        does not negotiate the terms of the issuance for and on 
        behalf of third parties and issuers are not required to 
        use the standardized documents as a condition of using 
        the service.
  (d) Certain Accredited Investor Transactions.--The 
transactions referred to in subsection (a)(7) are transactions 
meeting the following requirements:
          (1) Accredited investor requirement.--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 regulation).
          (2) Prohibition on general solicitation or 
        advertising.--Neither the seller, nor any person acting 
        on the seller's behalf, offers or sells securities by 
        any form of general solicitation or general 
        advertising.
          (3) Information requirement.--In the case of a 
        transaction involving the securities of an issuer that 
        is neither subject to section 13 or 15(d) of the 
        Securities Exchange Act of 1934 (15 U.S.C. 78m; 
        78o(d)), nor exempt from reporting pursuant to section 
        240.12g3-2(b) of title 17, Code of Federal Regulations, 
        nor a foreign government (as defined in section 230.405 
        of title 17, Code of Federal Regulations) eligible to 
        register securities under Schedule B, the seller and a 
        prospective purchaser designated by the seller obtain 
        from the issuer, upon request of the seller, and the 
        seller in all cases makes available to a prospective 
        purchaser, the following information (which shall be 
        reasonably current in relation to the date of resale 
        under this section):
                  (A) The exact name of the issuer and the 
                issuer's predecessor (if any).
                  (B) The address of the issuer's principal 
                executive offices.
                  (C) The exact title and class of the 
                security.
                  (D) The par or stated value of the security.
                  (E) The number of shares or total amount of 
                the securities outstanding as of the end of the 
                issuer's most recent fiscal year.
                  (F) The name and address of the transfer 
                agent, corporate secretary, or other person 
                responsible for transferring shares and stock 
                certificates.
                  (G) A statement of the nature of the business 
                of the issuer and the products and services it 
                offers, which shall be presumed reasonably 
                current if the statement is as of 12 months 
                before the transaction date.
                  (H) The names of the officers and directors 
                of the issuer.
                  (I) The names of any persons registered as a 
                broker, dealer, or agent that shall be paid or 
                given, directly or indirectly, any commission 
                or remuneration for such person's participation 
                in the offer or sale of the securities.
                  (J) The issuer's most recent balance sheet 
                and profit and loss statement and similar 
                financial statements, which shall--
                          (i) be for such part of the 2 
                        preceding fiscal years as the issuer 
                        has been in operation;
                          (ii) be prepared in accordance with 
                        generally accepted accounting 
                        principles or, in the case of a foreign 
                        private issuer, be prepared in 
                        accordance with generally accepted 
                        accounting principles or the 
                        International Financial Reporting 
                        Standards issued by the International 
                        Accounting Standards Board;
                          (iii) be presumed reasonably current 
                        if--
                                  (I) with respect to the 
                                balance sheet, the balance 
                                sheet is as of a date less than 
                                16 months before the 
                                transaction date; and
                                  (II) with respect to the 
                                profit and loss statement, such 
                                statement is for the 12 months 
                                preceding the date of the 
                                issuer's balance sheet; and
                          (iv) if the balance sheet is not as 
                        of a date less than 6 months before the 
                        transaction date, be accompanied by 
                        additional statements of profit and 
                        loss for the period from the date of 
                        such balance sheet to a date less than 
                        6 months before the transaction date.
                  (K) To the extent that the seller is a 
                control person with respect to the issuer, a 
                brief statement regarding the nature of the 
                affiliation, and a statement certified by such 
                seller that they have no reasonable grounds to 
                believe that the issuer is in violation of the 
                securities laws or regulations.
          (4) Issuers disqualified.--The transaction is not for 
        the sale of a security where the seller is an issuer or 
        a subsidiary, either directly or indirectly, of the 
        issuer.
          (5) Bad actor prohibition.--Neither the seller, nor 
        any person that has been or will be paid (directly or 
        indirectly) remuneration or a commission for their 
        participation in the offer or sale of the securities, 
        including solicitation of purchasers for the seller is 
        subject to an event that would disqualify an issuer or 
        other covered person under Rule 506(d)(1) of Regulation 
        D (17 CFR 230.506(d)(1)) or is subject to a statutory 
        disqualification described under section 3(a)(39) of 
        the Securities Exchange Act of 1934.
          (6) Business requirement.--The issuer is engaged in 
        business, is not in the organizational stage or in 
        bankruptcy or receivership, and is not a blank check, 
        blind pool, or shell company that has no specific 
        business plan or purpose or has indicated that the 
        issuer's primary business plan is to engage in a merger 
        or combination of the business with, or an acquisition 
        of, an unidentified person.
          (7) Underwriter prohibition.--The transaction is not 
        with respect to a security that constitutes the whole 
        or part of an unsold allotment to, or a subscription or 
        participation by, a broker or dealer as an underwriter 
        of the security or a redistribution.
          (8) Outstanding class requirement.--The transaction 
        is with respect to a security of a class that has been 
        authorized and outstanding for at least 90 days prior 
        to the date of the transaction.
  (e) Additional Requirements.--
          (1) In general.--With respect to an exempted 
        transaction described under subsection (a)(7):
                  (A) Securities acquired in such transaction 
                shall be deemed to have been acquired in a 
                transaction not involving any public offering.
                  (B) Such transaction shall be deemed not to 
                be a distribution for purposes of section 
                2(a)(11).
                  (C) Securities involved in such transaction 
                shall be deemed to be restricted securities 
                within the meaning of Rule 144 (17 CFR 
                230.144).
          (2) Rule of construction.--The exemption provided by 
        subsection (a)(7) shall not be the exclusive means for 
        establishing an exemption from the registration 
        requirements of section 5.

SEC. 4A. REQUIREMENTS WITH RESPECT TO CERTAIN SMALL TRANSACTIONS.

  (a) Requirements on Intermediaries.--A person acting as an 
intermediary in a transaction involving the offer or sale of 
securities for the account of others pursuant to section 4(6) 
shall--
          (1) register with the Commission as--
                  (A) a broker; or
                  (B) a funding portal (as defined in section 
                3(a)(80) of the Securities Exchange Act of 
                1934);
          (2) register with any applicable self-regulatory 
        organization (as defined in section 3(a)(26) of the 
        Securities Exchange Act of 1934);
          (3) provide such disclosures, including disclosures 
        related to risks and other investor education 
        materials, as the Commission shall, by rule, determine 
        appropriate;
          (4) ensure that each investor--
                  (A) reviews investor-education information, 
                in accordance with standards established by the 
                Commission, by rule;
                  (B) positively affirms that the investor 
                understands that the investor is risking the 
                loss of the entire investment, and that the 
                investor could bear such a loss; and
                  (C) answers questions demonstrating--
                          (i) an understanding of the level of 
                        risk generally applicable to 
                        investments in startups, emerging 
                        businesses, and small issuers;
                          (ii) an understanding of the risk of 
                        illiquidity; and
                          (iii) an understanding of such other 
                        matters as the Commission determines 
                        appropriate, by rule;
          (5) take such measures to reduce the risk of fraud 
        with respect to such transactions, as established by 
        the Commission, by rule, including obtaining 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;
          (6) not later than 21 days prior to the first day on 
        which securities are sold to any investor (or such 
        other period as the Commission may establish), make 
        available to the Commission and to potential investors 
        any information provided by the issuer pursuant to 
        subsection (b);
          (7) ensure that all offering proceeds are only 
        provided to the issuer when the aggregate capital 
        raised from all investors is equal to or greater than a 
        target offering amount, and allow all investors to 
        cancel their commitments to invest, as the Commission 
        shall, by rule, determine appropriate;
          (8) make such efforts as the Commission determines 
        appropriate, by rule, to ensure that no investor in a 
        12-month period has purchased securities offered 
        pursuant to section 4(6) that, in the aggregate, from 
        all issuers, exceed the investment limits set forth in 
        section 4(6)(B);
          (9) take such steps to protect the privacy of 
        information collected from investors as the Commission 
        shall, by rule, determine appropriate;
          (10) not compensate promoters, finders, or lead 
        generators for providing the broker or funding portal 
        with the personal identifying information of any 
        potential investor;
          (11) prohibit its directors, officers, or partners 
        (or any person occupying a similar status or performing 
        a similar function) from having any financial interest 
        in an issuer using its services; and
          (12) meet such other requirements as the Commission 
        may, by rule, prescribe, for the protection of 
        investors and in the public interest.
  (b) Requirements for Issuers.--For purposes of section 4(6), 
an issuer who offers or sells securities shall--
          (1) file with the Commission and provide to investors 
        and the relevant broker or funding portal, and make 
        available to potential investors--
                  (A) the name, legal status, physical address, 
                and website address of the issuer;
                  (B) the names of the directors and officers 
                (and any persons occupying a similar status or 
                performing a similar function), and each person 
                holding more than 20 percent of the shares of 
                the issuer;
                  (C) a description of the business of the 
                issuer and the anticipated business plan of the 
                issuer;
                  (D) a description of the financial condition 
                of the issuer, including, for offerings that, 
                together with all other offerings of the issuer 
                under section 4(6) within the preceding 12-
                month period, have, in the aggregate, target 
                offering amounts of--
                          (i) $100,000 or less--
                                  (I) the income tax returns 
                                filed by the issuer for the 
                                most recently completed year 
                                (if any); and
                                  (II) financial statements of 
                                the issuer, which shall be 
                                certified by the principal 
                                executive officer of the issuer 
                                to be true and complete in all 
                                material respects;
                          (ii) more than $100,000, but not more 
                        than $500,000, financial statements 
                        reviewed by a public accountant who is 
                        independent of the issuer, using 
                        professional standards and procedures 
                        for such review or standards and 
                        procedures established by the 
                        Commission, by rule, for such purpose; 
                        and
                          (iii) more than $500,000 (or such 
                        other amount as the Commission may 
                        establish, by rule), audited financial 
                        statements;
                  (E) a description of the stated purpose and 
                intended use of the proceeds of the offering 
                sought by the issuer with respect to the target 
                offering amount;
                  (F) the target offering amount, the deadline 
                to reach the target offering amount, and 
                regular updates regarding the progress of the 
                issuer in meeting the target offering amount;
                  (G) the price to the public of the securities 
                or the method for determining the price, 
                provided that, prior to sale, each investor 
                shall be provided in writing the final price 
                and all required disclosures, with a reasonable 
                opportunity to rescind the commitment to 
                purchase the securities;
                  (H) a description of the ownership and 
                capital structure of the issuer, including--
                          (i) terms of the securities of the 
                        issuer being offered and each other 
                        class of security of the issuer, 
                        including how such terms may be 
                        modified, and a summary of the 
                        differences between such securities, 
                        including how the rights of the 
                        securities being offered may be 
                        materially limited, diluted, or 
                        qualified by the rights of any other 
                        class of security of the issuer;
                          (ii) a description of how the 
                        exercise of the rights held by the 
                        principal shareholders of the issuer 
                        could negatively impact the purchasers 
                        of the securities being offered;
                          (iii) the name and ownership level of 
                        each existing shareholder who owns more 
                        than 20 percent of any class of the 
                        securities of the issuer;
                          (iv) how the securities being offered 
                        are being valued, and examples of 
                        methods for how such securities may be 
                        valued by the issuer in the future, 
                        including during subsequent corporate 
                        actions; and
                          (v) the risks to purchasers of the 
                        securities relating to minority 
                        ownership in the issuer, the risks 
                        associated with corporate actions, 
                        including additional issuances of 
                        shares, a sale of the issuer or of 
                        assets of the issuer, or transactions 
                        with related parties; and
                  (I) such other information as the Commission 
                may, by rule, prescribe, for the protection of 
                investors and in the public interest;
          (2) not advertise the terms of the offering, except 
        for notices which direct investors to the funding 
        portal or broker;
          (3) not compensate or commit to compensate, directly 
        or indirectly, any person to promote its offerings 
        through communication channels provided by a broker or 
        funding portal, without taking such steps as the 
        Commission shall, by rule, require to ensure that such 
        person clearly discloses the receipt, past or 
        prospective, of such compensation, upon each instance 
        of such promotional communication;
          (4) not less than annually, file with the Commission 
        and provide to investors reports of the results of 
        operations and financial statements of the issuer, as 
        the Commission shall, by rule, determine appropriate, 
        subject to such exceptions and termination dates as the 
        Commission may establish, by rule; and
          (5) comply with such other requirements as the 
        Commission may, by rule, prescribe, for the protection 
        of investors and in the public interest.
  (c) Liability for Material Misstatements and Omissions.--
          (1) Actions authorized.--
                  (A) In general.--Subject to paragraph (2), a 
                person who purchases a security in a 
                transaction exempted by the provisions of 
                section 4(6) may bring an action against an 
                issuer described in paragraph (2), either at 
                law or in equity in any court of competent 
                jurisdiction, to recover the consideration paid 
                for such security with interest thereon, less 
                the amount of any income received thereon, upon 
                the tender of such security, or for damages if 
                such person no longer owns the security.
                  (B) Liability.--An action brought under this 
                paragraph shall be subject to the provisions of 
                section 12(b) and section 13, as if the 
                liability were created under section 12(a)(2).
          (2) Applicability.--An issuer shall be liable in an 
        action under paragraph (1), if the issuer--
                  (A) by the use of any means or instruments of 
                transportation or communication in interstate 
                commerce or of the mails, by any means of any 
                written or oral communication, in the offering 
                or sale of a security in a transaction exempted 
                by the provisions of section 4(6), makes an 
                untrue statement of a material fact or omits to 
                state a material fact required to be stated or 
                necessary in order to make the statements, in 
                the light of the circumstances under which they 
                were made, not misleading, provided that the 
                purchaser did not know of such untruth or 
                omission; and
                  (B) does not sustain the burden of proof that 
                such issuer did not know, and in the exercise 
                of reasonable care could not have known, of 
                such untruth or omission.
          (3) Definition.--As used in this subsection, the term 
        ``issuer'' includes any person who is a director or 
        partner of the issuer, and the principal executive 
        officer or officers, principal financial officer, and 
        controller or principal accounting officer of the 
        issuer (and any person occupying a similar status or 
        performing a similar function) that offers or sells a 
        security in a transaction exempted by the provisions of 
        section 4(6), and any person who offers or sells the 
        security in such offering.
  (d) Information Available to States.--The Commission shall 
make, or shall cause to be made by the relevant broker or 
funding portal, the information described in subsection (b) and 
such other information as the Commission, by rule, determines 
appropriate, available to the securities commission (or any 
agency or office performing like functions) of each State and 
territory of the United States and the District of Columbia.
  (e) Restrictions on Sales.--Securities issued pursuant to a 
transaction described in section 4(6)--
          (1) may not be transferred by the purchaser of such 
        securities during the 1-year period beginning on the 
        date of purchase, unless such securities are 
        transferred--
                  (A) to the issuer of the securities;
                  (B) to an accredited investor;
                  (C) as part of an offering registered with 
                the Commission; or
                  (D) to a member of the family of the 
                purchaser or the equivalent, or in connection 
                with the death or divorce of the purchaser or 
                other similar circumstance, in the discretion 
                of the Commission; and
          (2) shall be subject to such other limitations as the 
        Commission shall, by rule, establish.
  (f) Applicability.--Section 4(6) shall not apply to 
transactions involving the offer or sale of securities by any 
issuer that--
          (1) is not organized under and subject to the laws of 
        a State or territory of the United States or the 
        District of Columbia;
          (2) is subject to the requirement to file reports 
        pursuant to section 13 or section 15(d) of the 
        Securities Exchange Act of 1934;
          (3) is an investment company, as defined in section 3 
        of the Investment Company Act of 1940, or is excluded 
        from the definition of investment company by section 
        3(b) or by any of paragraphs (1) through (14) of 
        section 3(c) of that Act; or
          (4) the Commission, by rule or regulation, determines 
        appropriate.
  (g) Rule of Construction.--Nothing in this section or section 
4(6) shall be construed as preventing an issuer from raising 
capital through methods not described under section 4(6).
  (h) Certain Calculations.--
          (1) Dollar amounts.--Dollar amounts in section 4(6) 
        and subsection (b) of this section shall be adjusted by 
        the Commission not less frequently than once every 5 
        years, by notice published in the Federal Register to 
        reflect any change in the Consumer Price Index for All 
        Urban Consumers published by the Bureau of Labor 
        Statistics.
          (2) Income and net worth.--The income and net worth 
        of a natural person under section 4(6)(B) shall be 
        calculated in accordance with any rules of the 
        Commission under this title regarding the calculation 
        of the income and net worth, respectively, of an 
        accredited investor.

           *       *       *       *       *       *       *

                              ----------                              


                     INVESTMENT COMPANY ACT OF 1940


TITLE I--INVESTMENT COMPANIES

           *       *       *       *       *       *       *



                          general definitions

  Sec. 2. (a) When used in this title, unless the context 
otherwise requires--
          (1) ``Advisory board'' means a board, whether elected 
        or appointed, which is distinct from the board of 
        directors or board of trustees, of an investment 
        company, and which is composed solely of persons who do 
        not serve such company in any other capacity, whether 
        or not the functions of such board are such as to 
        render its members ``directors'' within the definition 
        of that term, which board has advisory functions as to 
        investments but has no power to determine that any 
        security or other investment shall be purchased or sold 
        by such company.
          (2) ``Affiliated company'' means a company which is 
        an affiliated person.
          (3) ``Affiliated person'' of another person means (A) 
        any person directly or indirectly owning, controlling, 
        or holding with power to vote, 5 per centum or more of 
        the outstanding voting securities of such other person; 
        (B) any person 5 per centum or more of whose 
        outstanding voting securities are directly or 
        indirectly owned, controlled, or held with power to 
        vote, by such other person; (C) any person directly or 
        indirectly controlling, controlled by, or under common 
        control with, such other person; (D) any officer, 
        director, partner, copartner, or employee of such other 
        person; (E) if such other person is an investment 
        company, any investment adviser thereof or any member 
        of an advisory board thereof; and (F) if such other 
        person is an unincorporated investment company not 
        having a board of directors, the depositor thereof.
          (4) ``Assignment'' includes any direct or indirect 
        transfer or hypothecation of a contract or chose in 
        action by the assignor, or of a controlling block of 
        the assignor's outstanding voting securities by a 
        security holder of the assignor; but does not include 
        an assignment of partnership interests incidental to 
        the death or withdrawal of a minority of the members of 
        the partnership having only a minority interest in the 
        partnership business or to the admission to the 
        partnership of one or more members who, after such 
        admission, shall be only a minority of the members and 
        shall have only a minority interest in the business.
          (5) ``Bank'' means (A) a depository institution (as 
        defined in section 3 of the Federal Deposit Insurance 
        Act) or a branch or agency of a foreign bank (as such 
        terms are defined in section 1(b) of the International 
        Banking Act of 1978), (B) a member bank of the Federal 
        Reserve System, (C) any other banking institution or 
        trust company, whether incorporated or not, doing 
        business under the laws of any State or of the United 
        States, a substantial portion of the business of which 
        consists of receiving deposits or exercising fiduciary 
        powers similar to those permitted to national banks 
        under the authority of the Comptroller of the Currency, 
        and which is supervised and examined by State or 
        Federal authority having supervision over banks, and 
        which is not operated for the purpose of evading the 
        provisions of this title, and (D) a receiver, 
        conservator, or other liquidating agent of any 
        institution or firm included in clause (A), (B), or (C) 
        of this paragraph.
          (6) The term ``broker'' has the same meaning as given 
        in section 3 of the Securities Exchange Act of 1934, 
        except that such term does not include any person 
        solely by reason of the fact that such person is an 
        underwriter for one or more investment companies.
          (7) ``Commission'' means the Securities and Exchange 
        Commission.
          (8) ``Company'' means a corporation, a partnership, 
        an association, a joint-stock company, a trust, a fund, 
        or any organized group of persons whether incorporated 
        or not; or any receiver, trustee in a case under title 
        11 of the United States Code or similar official or any 
        liquidating agent for any of the foregoing, in his 
        capacity as such.
          (9) ``Control'' means the power to exercise a 
        controlling influence over the management or policies 
        of a company, unless such power is solely the result of 
        an official position with such company.
          Any person who owns beneficially, either directly or 
        through one or more controlled companies, more than 25 
        per centum of the voting securities of a company shall 
        be presumed to control such company. Any person who 
        does not so own more than 25 per centum of the voting 
        securities of any company shall be presumed not to 
        control such company. A natural person shall be 
        presumed not to be a controlled person within the 
        meaning of this title. Any such presumption may be 
        rebutted by evidence, but except as hereinafter 
        provided, shall continue until a determination to the 
        contrary made by the Commission by order either on its 
        own motion or on application by an interested person. 
        If an application filed hereunder is not granted or 
        denied by the Commission within sixty days after filing 
        thereof, the determination sought by the application 
        shall be deemed to have been temporarily granted 
        pending final determination of the Commission thereon. 
        The Commission, upon its own motion or upon 
        application, may by order revoke or modify any order 
        issued under this paragraph whenever it shall find that 
        the determination embraced in such original order is no 
        longer consistent with the facts.
          (10) ``Convicted'' includes a verdict, judgment, or 
        plea of guilty, or a finding of guilt on a plea of nolo 
        contendere, if such verdict, judgment, plea, or finding 
        has not been reversed, set aside, or withdrawn, whether 
        or not sentence has been imposed.
          (11) The term ``dealer'' has the same meaning as 
        given in the Securities Exchange Act of 1934, but does 
        not include an insurance company or investment company.
          (12) ``Director'' means any director of a corporation 
        or any person performing similar functions with respect 
        to any organization, whether incorporated or 
        unincorporated, including any natural person who is a 
        member of a board of trustees of a management company 
        created as a common-law trust.
          (13) ``Employees' securities company'' means any 
        investment company or similar issuer all of the 
        outstanding securities of which (other than short-term 
        paper) are beneficially owned (A) by the employees or 
        persons on retainer of a single employer or of two or 
        more employers each of which is an affiliated company 
        of the other, (B) by former employees of such employer 
        or employers, (C) by members of the immediate family of 
        such employees, persons on retainer, or former 
        employees, (D) by any two or more of the foregoing 
        classes of persons, or (E) by such employer or 
        employers together with any one or more of the 
        foregoing classes of persons.
          (14) ``Exchange'' means any organization, 
        association, or group of persons, whether incorporated 
        or unincorporated, which constitutes, maintains, or 
        provides a market place or facilities for bringing 
        together purchasers and sellers of securities or for 
        otherwise performing with respect to securities the 
        functions commonly performed by a stock exchange as 
        that term is generally understood, and includes the 
        market place and the market facilities maintained by 
        such exchange.
          (15) ``Face-amount certificate'' means any 
        certificate, investment contract, or other security 
        which represents an obligation on the part of its 
        issuer to pay a stated or determinable sum or sums at a 
        fixed or determinable date or dates more than twenty-
        four months after the date of issuance, in 
        consideration of the payment of periodic installments 
        of a stated or determinable amount (which security 
        shall be known as a face-amount certificate of the 
        ``installment type''); or any security which represents 
        a similar obligation on the part of a face-amount 
        certificate company, the consideration for which is the 
        payment of a single lump sum (which security shall be 
        known as a ``fully paid'' face-amount certificate).
          (16) ``Government security'' means any security 
        issued or guaranteed as to principal or interest by the 
        United States, or by a person controlled or supervised 
        by and acting as an instrumentality of the Government 
        of the United States pursuant to authority granted by 
        the Congress of the United States; or any certificate 
        of deposit for any of the foregoing.
          (17) ``Insurance company'' means a company which is 
        organized as an insurance company, whose primary and 
        predominant business activity is the writing of 
        insurance or the reinsuring of risks underwritten by 
        insurance companies, and which is subject to 
        supervision by the insurance commissioner or a similar 
        official or agency of a State; or any receiver or 
        similar official or any liquidating agent for such a 
        company, in his capacity as such.
          (18) ``Interstate commerce'' means trade, commerce, 
        transportation, or communication among the several 
        States, or between any foreign country and any State, 
        or between any State and any place or ship outside 
        thereof.
          (19) ``Interested person'' of another person means--
                  (A) when used with respect to an investment 
                company--
                          (i) any affiliated person of such 
                        company,
                          (ii) any member of the immediate 
                        family of any natural person who is an 
                        affiliated person of such company,
                          (iii) any interested person of any 
                        investment adviser of or principal 
                        underwriter for such company,
                          (iv) any person or partner or 
                        employee of any person who at any time 
                        since the beginning of the last two 
                        completed fiscal years of such company 
                        has acted as legal counsel for such 
                        company,
                          (v) any person or any affiliated 
                        person of a person (other than a 
                        registered investment company) that, at 
                        any time during the 6-month period 
                        preceding the date of the determination 
                        of whether that person or affiliated 
                        person is an interested person, has 
                        executed any portfolio transactions 
                        for, engaged in any principal 
                        transactions with, or distributed 
                        shares for--
                                  (I) the investment company;
                                  (II) any other investment 
                                company having the same 
                                investment adviser as such 
                                investment company or holding 
                                itself out to investors as a 
                                related company for purposes of 
                                investment or investor 
                                services; or
                                  (III) any account over which 
                                the investment company's 
                                investment adviser has 
                                brokerage placement discretion,
                          (vi) any person or any affiliated 
                        person of a person (other than a 
                        registered investment company) that, at 
                        any time during the 6-month period 
                        preceding the date of the determination 
                        of whether that person or affiliated 
                        person is an interested person, has 
                        loaned money or other property to--
                                  (I) the investment company;
                                  (II) any other investment 
                                company having the same 
                                investment adviser as such 
                                investment company or holding 
                                itself out to investors as a 
                                related company for purposes of 
                                investment or investor 
                                services; or
                                  (III) any account for which 
                                the investment company's 
                                investment adviser has 
                                borrowing authority, and
                          (vii) any natural person whom the 
                        Commission by order shall have 
                        determined to be an interested person 
                        by reason of having had, at any time 
                        since the beginning of the last two 
                        completed fiscal years of such company, 
                        a material business or professional 
                        relationship with such company or with 
                        the principal executive officer of such 
                        company or with any other investment 
                        company having the same investment 
                        adviser or principal underwriter or 
                        with the principal executive officer of 
                        such other investment company:
                 Provided, That no person shall be deemed to be 
                an interested person of an investment company 
                solely by reason of (aa) his being a member of 
                its board of directors or advisory board or an 
                owner of its securities, or (bb) his membership 
                in the immediate family of any person specified 
                in clause (aa) of this proviso; and
                  (B) when used with respect to an investment 
                adviser of or principal underwriter for any 
                investment company--
                          (i) any affiliated person of such 
                        investment adviser or principal 
                        underwriter,
                          (ii) any member of the immediate 
                        family of any natural person who is an 
                        affiliated person of such investment 
                        advisor or principal underwiter,
                          (iii) any person who knowingly has 
                        any direct or indirect beneficial 
                        interest in, or who is designated as 
                        trustee, executor, or guardian of any 
                        legal interest in, any security issued 
                        either by such investment adviser or 
                        principal underwriter or by a 
                        controlling person of such investment 
                        adviser or principal underwriter,
                          (iv) any person or partner or 
                        employee of any person who at any time 
                        since the beginning of the last two 
                        completed fiscal years of such 
                        investment company has acted as legal 
                        counsel for such investment adviser or 
                        principal underwriter,
                          (v) any person or any affiliated 
                        person of a person (other than a 
                        registered investment company) that, at 
                        any time during the 6-month period 
                        preceding the date of the determination 
                        of whether that person or affiliated 
                        person is an interested person, has 
                        executed any portfolio transactions 
                        for, engaged in any principal 
                        transactions with, or distributed 
                        shares for--
                                  (I) any investment company 
                                for which the investment 
                                adviser or principal 
                                underwriter serves as such;
                                  (II) any investment company 
                                holding itself out to 
                                investors, for purposes of 
                                investment or investor 
                                services, as a company related 
                                to any investment company for 
                                which the investment adviser or 
                                principal underwriter serves as 
                                such; or
                                  (III) any account over which 
                                the investment adviser has 
                                brokerage placement discretion,
                          (vi) any person or any affiliated 
                        person of a person (other than a 
                        registered investment company) that, at 
                        any time during the 6-month period 
                        preceding the date of the determination 
                        of whether that person or affiliated 
                        person is an interested person, has 
                        loaned money or other property to--
                                  (I) any investment company 
                                for which the investment 
                                adviser or principal 
                                underwriter serves as such;
                                  (II) any investment company 
                                holding itself out to 
                                investors, for purposes of 
                                investment or investor 
                                services, as a company related 
                                to any investment company for 
                                which the investment adviser or 
                                principal underwriter serves as 
                                such; or
                                  (III) any account for which 
                                the investment adviser has 
                                borrowing authority, and
                          (vii) any natural person whom the 
                        Commission by order shall have 
                        determined to be an interested person 
                        by reason of having had at any time 
                        since the beginning of the last two 
                        completed fiscal years of such 
                        investment company a material business 
                        or professional relationship with such 
                        investment adviser or principal 
                        underwriter or with the principal 
                        executive officer or any controlling 
                        person of such investment adviser or 
                        principal underwriter.
                For the purposes of this paragraph (19), 
                ``member of the immediate family'' means any 
                parent, spouse of a parent, child, spouse of a 
                child, spouse, brother, or sister, and includes 
                step and adoptive relationships. The Commission 
                may modify or revoke any order issued under 
                clause (vii) of subparagaph (A) or (B) of this 
                paragraph whenever it finds that such order is 
                no longer consistent with the facts. No order 
                issued pursuant to clause (vii) of subparagraph 
                (A) or (B) of this paragraph shall become 
                effective until at least sixty days after the 
                entry thereof, and no such order shall affect 
                the status of any person for the purposes of 
                this title or for any other purpose for any 
                period prior to the effective date of such 
                order.
          (20) ``Investment adviser'' of an investment company 
        means (A) any person (other than a bona fide officer, 
        director, trustee, member of an advisory board, or 
        employee of such company, as such) who pursuant to 
        contract with such company regularly furnishes advice 
        to such company with respect to the desirability of 
        investing in, purchasing or selling securities or other 
        property, or is empowered to determine what securities 
        or other property shall be purchased or sold by such 
        company, and (B) any other person who pursuant to 
        contract with a person described in clause (A) 
        regularly performs substantially all of the duties 
        undertaken by such person described in clause (A); but 
        does not include (i) a person whose advice is furnished 
        solely through uniform publications distributed to 
        subscribers thereto, (ii) a person who furnishes only 
        statistical and other factual information, advice 
        regarding economic factors and trends, or advice as to 
        occasional transactions in specific securities, but 
        without generally furnishing advice or making 
        recommendations regarding the purchase or sale of 
        securities, (iii) a company furnishing such services at 
        cost to one or more investment companies, insurance 
        companies, or other financial institutions, (iv) any 
        person the character and amount of whose compensation 
        for such services must be approved by a court, or (v) 
        such other persons as the Commission may by rules and 
        regulations or order determine not to be within the 
        intent of this definition.
          (21) ``Investment banker'' means any person engaged 
        in the business of underwriting securities issued by 
        other persons, but does not include an investment 
        company, any person who acts as an underwriter in 
        isolated transactions but not as a part of a regular 
        business, or any person solely by reason of the fact 
        that such person is an underwriter for one or more 
        investment companies.
          (22) ``Issuer'' means every person who issues or 
        proposes to issue any security, or has outstanding any 
        security which it has issued.
          (23) ``Lend'' includes a purchase coupled with an 
        agreement by the vendor to repurchase; ``borrow'' 
        includes a sale coupled with a similar agreement.
          (24) ``Majority-owned subsidiary'' of a person means 
        a company 50 per centum or more of the outstanding 
        voting securities of which are owned by such person, or 
        by a company which, within the meaning of this 
        paragraph, is a majority-owned subsidiary of such 
        person.
          (25) ``Means or instrumentality of interstate 
        commerce'' includes any facility of a national 
        securities exchange.
          (26) ``National securities exchange'' means an 
        exchange registered under section 6 of the Securities 
        Exchange Act of 1934.
          (27) ``Periodic payment plan certificate'' means (A) 
        any certificate, investment contract, or other security 
        providing for a series of periodic payments by the 
        holder, and representing an undivided interest in 
        certain specified securities or in a unit or fund of 
        securities purchased wholly or partly with the proceeds 
        of such payments, and (B) any security the issuer of 
        which is also issuing securities of the character 
        described in clause (A) and the holder of which has 
        substantially the same rights and privileges as those 
        which holders of securities of the character described 
        in clause (A) have upon completing the periodic 
        payments for which such securities provide.
          (28) ``Person'' means a natural person or a company.
          (29) ``Principal underwriter'' of or for any 
        investment company other than a closed-end company, or 
        of any security issued by such a company, means any 
        underwriter who as principal purchases from such 
        company, or pursuant to contract has the right (whether 
        absolute or conditional) from time to time to purchase 
        from such company, any such security for distribution, 
        or who as agent for such company sells or has the right 
        to sell any such security to a dealer or to the public 
        or both, but does not include a dealer who purchases 
        from such company through a principal underwriter 
        acting as agent for such company. ``Principal 
        underwriter'' of or for a closed-end company or any 
        issuer which is not an investment company, or of any 
        security issued by such a company or issuer, means any 
        underwriter who, in connection with a primary 
        distribution of securities, (A) is in privity of 
        contract with the issuer or an affiliated person of the 
        issuer; (B) acting alone or in concert with one or more 
        other persons, initiates or directs the formation of an 
        underwriting syndicate; or (C) is allowed a rate of 
        gross commission, spread, or other profit greater than 
        the rate allowed another underwriter participating in 
        the distribution.
          (30) ``Promoter'' of a company or a proposed company 
        means a person who, acting alone or in concert with 
        other persons, is initiating or directing, or has 
        within one year initiated or directed, the organization 
        of such company.
          (31) ``Prospectus'', as used in section 22, means a 
        written prospectus intended to meet the requirements of 
        section 10(a) of the Securities Act of 1933 and 
        currently in use. As used elsewhere, ``prospectus'' 
        means a prospectus as defined in the Securities Act of 
        1933.
          (32) ``Redeemable security'' means any security, 
        other than short-term paper, under the terms of which 
        the holder, upon its presentation to the issuer or to a 
        person designated by the issuer, is entitled (whether 
        absolutely or only out of surplus) to receive 
        approximately his proportionate share of the issuer's 
        current net assets, or the cash equivalent thereof.
          (33) ``Reorganization'' means (A) a reorganization 
        under the supervision of a court of competent 
        jurisdiction; (B) a merger or consolidation; (C) a sale 
        of 75 per centum or more in value of the assets of a 
        company; (D) a restatement of the capital of a company, 
        or an exchange of securities issued by a company for 
        any of its own outstanding securities; (E) a voluntary 
        dissolution or liquidation of a company; (F) a 
        recapitalization or other procedure or transaction 
        which has for its purpose the alteration, modification, 
        or elimination of any of the rights, preferences, or 
        privileges of any class of securities issued by a 
        company, as provided in its charter or other instrument 
        creating or defining such rights, preferences, and 
        privileges; (G) an exchange of securities issued by a 
        company for outstanding securities issued by another 
        company or companies, preliminary to and for the 
        purpose of effecting or consummating any of the 
        foregoing; or (H) any exchange of securities by a 
        company which is not an investment company for 
        securities issued by a registered investment company.
          (34) ``Sale'', ``sell'', ``offer to sell'', or 
        ``offer for sale'' includes every contract of sale or 
        disposition of, attempt or offer to dispose of, or 
        solicitation of an offer to buy, a security or interest 
        in a security, for value. Any security given or 
        delivered with, or as a bonus on account of, any 
        purchase of securities or any other thing, shall be 
        conclusively presumed to constitute a part of the 
        subject of such purchase and to have been sold for 
        value.
          (35) ``Sales load'' means the difference between the 
        price of a security to the public and that portion of 
        the proceeds from its sale which is received and 
        invested or held for investment by the issuer (or in 
        the case of a unit investment trust, by the depositor 
        or trustee), less any portion of such difference 
        deducted for trustee's or custodian's fee, insurance 
        premiums, issue taxes, or administrative expenses or 
        fees which are not properly chargeable to sales or 
        promotional activities. In the case of a periodic 
        payment plan certificate, ``sales load'' includes the 
        sales load on any investment company securities in 
        which the payments made on such certificate are 
        invested, as well as the sales load on the certificate 
        itself.
          (36) ``Security'' means any note, stock, treasury 
        stock, security future, bond, debenture, evidence of 
        indebtedness, certificate of interest or participation 
        in any profit-sharing agreement, collateral-trust 
        certificate, preorganization certificate or 
        subsciption, transferable share, investment contract, 
        voting-trust certificate, certificate of deposit for a 
        security, fractional undivided interest in oil, gas, or 
        other mineral rights, any put, call, straddle, option, 
        or privilege on any security (including a certificate 
        of deposit) or on any group or index of securities 
        (including any interest therein or based on the value 
        thereof), or any put, call, straddle, option, or 
        privilege entered into on a national securities 
        exchange relating to foreign currency, or, in general, 
        any interest or instrument commonly known as a 
        ``security'', or any certificate of interest or 
        participation in, temporary or interim certificate for, 
        receipt for, guarantee of, or warrant or right to 
        subscribe to or purchase, any of the foregoing.
          (37) ``Separate account'' means an account 
        established and maintained by an insurance company 
        pursuant to the laws of any State or territory of the 
        United States, or of Canada or any province thereof, 
        under which income, gains and losses, whether or not 
        realized, from assets allocated to such account, are, 
        in accordance with the applicable contract, credited to 
        or charged against such account without regard to other 
        income, gains, or losses of the insurance company.
          (38) ``Short-term paper'' means any note, draft, bill 
        of exchange, or banker's acceptance payable on demand 
        or having a maturity at the time of issuance of not 
        exceeding nine months, exclusive of days of grace, or 
        any renewal thereof payable on demand or having a 
        maturity likewise limited; and such other classes of 
        securities, of a commercial rather than an investment 
        character, as the Commission may designate by rules and 
        regulations.
          (39) ``State'' means any State of the United States, 
        the District of Columbia, Puerto Rico, the Virgin 
        Islands, or any other possession of the United States.
          (40) ``Underwriter'' means any person who has 
        purchased from an issuer with a view to, or sells for 
        an issuer in connection with, the distribution of any 
        security, or participates or has a direct or indirect 
        participation in any such undertaking, or participates 
        or has a participation in the direct or indirect 
        underwriting of any such undertaking; but such term 
        shall not include a person whose interest is limited to 
        a commission from an underwriter or dealer not in 
        excess of the usual and customary distributor's or 
        seller's commission. As used in this paragraph the term 
        ``issuer'' shall include, in addition to an issuer, any 
        person directly or indirectly controlling or controlled 
        by the issuer, or any person under direct or indirect 
        common control with the issuer. When the distribution 
        of the securities in respect of which any person is an 
        underwriter is completed such person shall cease to be 
        an underwriter in respect of such securities or the 
        issuer thereof.
          (41) ``Value'', with respect to assets of registered 
        investment companies, except as provided in subsection 
        (b) of section 28 of this title, means--
                  (A) as used in sections 3, 5, and 12 of this 
                title, (i) with respect to securities owned at 
                the end of the last preceding fiscal quarter 
                for which market quotations are readily 
                available, the market value at the end of such 
                quarter; (ii) with respect to other securities 
                and assets owned at the end of the last 
                preceding fiscal quarter, fair value at the end 
                of such quarter, as determined in good faith by 
                the board of directors; and (iii) with respect 
                to securities and other assets acquired after 
                the end of the last preceding fiscal quarter, 
                the cost thereof; and
                  (B) as used elsewhere in this title, (i) with 
                respect to securities for which market 
                quotations are readily available, the market 
                value of such securities; and (ii) with respect 
                to other securities and assets, fair value as 
                determined in good faith by the board of 
                directors;
        in each case as of such time or times as determined 
        pursuant to this title, and the rules and regulations 
        issued by the Commission hereunder. Notwithstanding the 
        fact that market quotations for securities issued by 
        controlled companies are available, the board of 
        directors may in good faith determine the value of such 
        securities: Provided, That the value so determined is 
        not in excess of the higher of market value or asset 
        value of such securities in the case of majority-owned 
        subsidiaries, and is not in excess of market value in 
        the case of other controlled companies.
  For purposes of the valuation of those assets of a registered 
diversified company which are not subject to the limitations 
provided for in section 5(b)(1), the Commission may, by rules 
and regulations or orders, permit any security to be carried at 
cost, if it shall determine that such procedure is consistent 
with the general intent and purposes of this title. For 
purposes of sections 5 and 12, in lieu of values determined as 
provided in clause (A) above, the Commission shall by rules and 
regulations permit valuation of securities at cost or other 
basis in cases where it may be more convenient for such company 
to make its computations on such basis by reason of the 
necessity or desirability of complying with the provisions of 
any United States revenue laws or rules and regulations issued 
thereunder, or the laws or the rules and regulations issued 
thereunder of any State in which the securities of such company 
may be qualified for sale.
  The foregoing definition shall not derogate from the 
authority of the Commission with respect to the reports, 
information, and documents to be filed with the Commission by 
any registered company, or with respect to the accounting 
policies and principles to be following by any such company, as 
provided in sections 8, 30, and 31.
          (42) ``Voting security'' means any security presently 
        entitling the owner or holder thereof to vote for the 
        election of directors of a company. A specified 
        percentage of the outstanding voting securities of a 
        company means such amount of its outstanding voting 
        securities as entitles the holder or holders thereof to 
        cast said specified percentage of the aggregate votes 
        which the holders of all the outstanding voting 
        securities of such company are entitled to cast. The 
        vote of a majority of the outstanding voting securities 
        of a company means the vote, at the annual or a special 
        meeting of the security holders of such company duly 
        called, (A) of 67 per centum or more of the voting 
        securities present at such meeting, if the holders of 
        more than 50 per centum of the outstanding voting 
        securities of such company are present or represented 
        by proxy; or (B) of more than 50 per centum of the 
        outstanding voting securities of such company, 
        whichever is the less.
          (43) ``Wholly-owned subsidiary'' of a person means a 
        company 95 per centum or more of the outstanding voting 
        securities of which are owned by such person, or by a 
        company which, within the meaning of this paragraph, is 
        a wholly-owned subsidiary of such person.
          (44) ``Securities Act of 1933'', ``Securities 
        Exchange Act of 1934'', and ``Trust Indenture Act of 
        1939'' means those Acts, respectively, as heretofore or 
        hereafter amended.
          (45) ``Savings and loan association'' means a savings 
        and loan association, building and loan association, 
        cooperative bank, homestead association, or similar 
        institution, which is supervised and examined by State 
        or Federal authority having supervision over any such 
        institution, and a receiver, conservator, or other 
        liquidating agent of any such institution.
          (46) ``Eligible portfolio company'' means any issuer 
        which--
                  (A) is organized under the laws of, and has 
                its principal place of business in, any State 
                or States;
                  (B) is neither an investment company as 
                defined in section 3 (other than a small 
                business investment company which is licensed 
                by the Small Business Administration to operate 
                under the Small Business Investment Act of 1958 
                and which is a wholly-owned subsidiary of the 
                business development company) nor a company 
                which would be an investment company except for 
                the exclusion from the definition of investment 
                company in section 3(c); and
                  (C) satisfies one of the following:
                          (i) it does not have any class of 
                        securities with respect to which a 
                        member of a national securities 
                        exchange, broker, or dealer may extend 
                        or maintain credit to or for a customer 
                        pursuant to rules or regulations 
                        adopted by the Board of Governors of 
                        the Federal Reserve System under 
                        section 7 of the Securities Exchange 
                        Act of 1934;
                          (ii) it is controlled by a business 
                        development company, either alone or as 
                        part of a group acting together, and 
                        such business development company in 
                        fact exercises a controlling influence 
                        over the management or policies of such 
                        eligible portfolio company and, as a 
                        result of such control, has an 
                        affiliated person who is a director of 
                        such eligible portfolio company;
                          (iii) it has total assets of not more 
                        than $4,000,000, and capital and 
                        surplus (shareholders' equity less 
                        retained earnings) of not less than 
                        $2,000,000, except that the Commission 
                        may adjust such amounts by rule, 
                        regulation, or order to reflect changes 
                        in 1 or more generally accepted indices 
                        or other indicators for small 
                        businesses; or
                          (iv) it meets such other criteria as 
                        the Commission may, by rule, establish 
                        as consistent with the public interest, 
                        the protection of investors, and the 
                        purposes fairly intended by the policy 
                        and provisions of this title.
          (47) ``Making available significant managerial 
        assistance'' by a business development company means--
                  (A) any arrangement whereby a business 
                development company, through its directors, 
                officers, employees, or general partners, 
                offers to provide, and, if accepted, does so 
                provide, significant guidance and counsel 
                concerning the management, operations, or 
                business objectives and policies of a portfolio 
                company;
                  (B) the exercise by a business development 
                company of a controlling influence over the 
                management or policies of a portfolio company 
                by the business development company acting 
                individually or as part of a group acting 
                together which controls such portfolio company; 
                or
                  (C) with respect to a small business 
                investment company licensed by the Small 
                Business Administration to operate under the 
                Small Business Investment Act of 1958, the 
                making of loans to a portfolio company.
        For purposes of subparagraph (A), the requirement that 
        a business development company make available 
        significant managerial assistance shall be deemed to be 
        satisfied with respect to any particular portfolio 
        company where the business development company 
        purchases securities of such portfolio company in 
        conjunction with one or more other persons acting 
        together, and at least one of the persons in the group 
        makes available significant managerial assistance to 
        such portfolio company, except that such requirement 
        will not be deemed to be satisfied if the business 
        development company, in all cases, makes available 
        significant managerial assistance solely in the manner 
        described in this sentence.
          (48) ``Business development company'' means any 
        closed-end company which--
                  (A) is organized under the laws of, and has 
                its principal place of business in, any State 
                or States;
                  (B) is operated for the purpose of making 
                investments in securities described in 
                paragraphs (1) through (3) of section 55(a), 
                and makes available significant managerial 
                assistance with respect to the issuers of such 
                securities, provided that a business 
                development company must make available 
                significant managerial assistance only with 
                respect to the companies which are treated by 
                such business development company as satisfying 
                the 70 per centum of the value of its total 
                assets condition of section 55; and provided 
                further that a business development company 
                need not make available significant managerial 
                assistance with respect to any company 
                described in paragraph (46)(C)(iii), or with 
                respect to any other company that meets such 
                criteria as the Commission may by rule, 
                regulation, or order permit, as consistent with 
                the public interest, the protection of 
                investors, and the purposes of this title; and
                  (C) has elected pursuant to section 54(a) to 
                be subject to the provisions of sections 55 
                through 65.
          (49) ``Foreign securities authority'' means any 
        foreign government or any governmental body or 
        regulatory organization empowered by a foreign 
        government to administer or enforce its laws as they 
        relate to securities matters.
          (50) ``Foreign financial regulatory authority'' means 
        any (A) foreign securities authority, (B) other 
        governmental body or foreign equivalent of a self-
        regulatory organization empowered by a foreign 
        government to administer or enforce its laws relating 
        to the regulation of fiduciaries, trusts, commercial 
        lending, insurance, trading in contracts of sale of a 
        commodity for future delivery, or other instruments 
        traded on or subject to the rules of a contract market, 
        board of trade or foreign equivalent, or other 
        financial activities, or (C) membership organization a 
        function of which is to regulate the participation of 
        its members in activities listed above.
          (51)(A) ``Qualified purchaser'' means--
                  (i) any natural person (including any person 
                who holds a joint, community property, or other 
                similar shared ownership interest in an issuer 
                that is excepted under section 3(c)(7) with 
                that person's qualified purchaser spouse) who 
                owns not less than $5,000,000 in investments, 
                as defined by the Commission;
                  (ii) any company that owns not less than 
                $5,000,000 in investments and that is owned 
                directly or indirectly by or for 2 or more 
                natural persons who are related as siblings or 
                spouse (including former spouses), or direct 
                lineal descendants by birth or adoption, 
                spouses of such persons, the estates of such 
                persons, or foundations, charitable 
                organizations, or trusts established by or for 
                the benefit of such persons;
                  (iii) any trust that is not covered by clause 
                (ii) and that was not formed for the specific 
                purpose of acquiring the securities offered, as 
                to which the trustee or other person authorized 
                to make decisions with respect to the trust, 
                and each settlor or other person who has 
                contributed assets to the trust, is a person 
                described in clause (i), (ii), or (iv); or
                  (iv) any person, acting for its own account 
                or the accounts of other qualified purchasers, 
                who in the aggregate owns and invests on a 
                discretionary basis, not less than $25,000,000 
                in investments.
          (B) The Commission may adopt such rules and 
        regulations applicable to the persons and trusts 
        specified in clauses (i) through (iv) of subparagraph 
        (A) as it determines are necessary or appropriate in 
        the public interest or for the protection of investors.
          (C) The term ``qualified purchaser'' does not include 
        a company that, but for the exceptions provided for in 
        paragraph (1) or (7) of section 3(c), would be an 
        investment company (hereafter in this paragraph 
        referred to as an ``excepted investment company''), 
        unless all beneficial owners of its outstanding 
        securities (other than short-term paper), determined in 
        accordance with section 3(c)(1)(A), that acquired such 
        securities on or before April 30, 1996 (hereafter in 
        this paragraph referred to as ``pre-amendment 
        beneficial owners''), and all pre-amendment beneficial 
        owners of the outstanding securities (other than short-
        term paper) of any excepted investment company that, 
        directly or indirectly, owns any outstanding securities 
        of such excepted investment company, have consented to 
        its treatment as a qualified purchaser. Unanimous 
        consent of all trustees, directors, or general partners 
        of a company or trust referred to in clause (ii) or 
        (iii) of subparagraph (A) shall constitute consent for 
        purposes of this subparagraph.
          (52) The terms ``security future'' and ``narrow-based 
        security index'' have the same meanings as provided in 
        section 3(a)(55) of the Securities Exchange Act of 
        1934.
          (53) The term ``credit rating agency'' has the same 
        meaning as in section 3 of the Securities Exchange Act 
        of 1934.
          (54) The terms ``commodity pool'', ``commodity pool 
        operator'', ``commodity trading advisor'', ``major swap 
        participant'', ``swap'', ``swap dealer'', and ``swap 
        execution facility'' have the same meanings as in 
        section 1a of the Commodity Exchange Act (7 U.S.C. 
        1a).''.
          (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;
                  (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 C.F.R. 227.202);
                  (G) the company whose securities it holds is 
                current in its ongoing disclosure obligations 
                under Rule 202 of Regulation Crowdfunding (17 
                C.F.R. 227.202); and
                  (H) is advised by an investment adviser 
                registered under the Investment Advisers Act of 
                1940.
  (b) No provision in this title shall apply to, or be deemed 
to include, the United States, a State, or any political 
subdivision of a State, or any agency, authority, or 
instrumentality of any one or more of the foregoing, or any 
corporation which is wholly owned directly or indirectly by any 
one or more of the foregoing, or any officer, agent, or 
employee of any of the foregoing acting as such in the course 
of his official duty, unless such provision makes specific 
reference thereto.
  (c) Consideration of Promotion of Efficiency, Competition, 
and Capital Formation.--Whenever pursuant to this title the 
Commission is engaged in rulemaking and is required to consider 
or determine whether an action is consistent with the public 
interest, the Commission shall also consider, in addition to 
the protection of investors, whether the action will promote 
efficiency, competition, and capital formation.

                    definition of investment company

  Sec. 3. (a)(1) When used in this title, ``investment 
company'' means any issuer which--
          (A) is or holds itself out as being engaged 
        primarily, or proposes to engage primarily, in the 
        business of investing, reinvesting, or trading in 
        securities;
          (B) is engaged or proposes to engage in the business 
        of issuing face-amount certificates of the installment 
        type, or has been engaged in such business and has any 
        such certificate outstanding; or
          (C) is engaged or proposes to engage in the business 
        of investing, reinvesting, owning, holding, or trading 
        in securities, and owns or proposes to acquire 
        investment securities having a value exceeding 40 per 
        centum of the value of such issuer's total assets 
        (exclusive of Government securities and cash items) on 
        an unconsolidated basis.
  (2) As used in this section, ``investment securities'' 
includes all securities except (A) Government securities, (B) 
securities issued by employees' securities companies, and (C) 
securities issued by majority-owned subsidiaries of the owner 
which (i) are not investment companies, and (ii) are not 
relying on the exception from the definition of investment 
company in paragraph (1) or (7) of subsection (c).
  (b) Notwithstanding paragraph (1)(C) of subsection (a), none 
of the following persons is an investment company within the 
meaning of this title:
          (1) Any issuer primarily engaged, directly or through 
        a wholly-owned subsidiary or subsidiaries, in a 
        business or businesses other than that of investing, 
        reinvesting, owning, holding, or trading in securities.
          (2) Any issuer which the Commission, upon application 
        by such issuer, finds and by order declares to be 
        primarily engaged in a business or businesses other 
        than that of investing, reinvesting, owning, holding, 
        or trading in securities either directly or (A) through 
        majority-owned subsidiaries or (B) through controlled 
        companies conducting similar types of businesses. The 
        filing of an application under this paragraph in good 
        faith by an issuer other than a registered investment 
        company shall exempt the applicant for a period of 
        sixty days from all provisions of this title applicable 
        to investment companies as such. For cause shown, the 
        Commission by order may extend such period of exemption 
        for an additional period or periods. Whenever the 
        Commission, upon its own motion or upon application, 
        finds that the circumstances which gave rise to the 
        issuance of an order granting an application under this 
        paragraph no longer exist, the Commission shall by 
        order revoke such order.
          (3) Any issuer all the outstanding securities of 
        which (other than short-term paper and directors' 
        qualifying shares) are directly or indirectly owned by 
        a company excepted from the definition of investment 
        company by paragraph (1) or (2) of this subsection.
  (c) Notwithstanding subsection (a), none of the following 
persons is an investment company within the meaning of this 
title:
          (1) Any issuer whose outstanding securities (other 
        than short-term paper) are beneficially owned by not 
        more than one hundred persons and which is not making 
        and does not presently propose to make a public 
        offering of its securities. Such issuer shall be deemed 
        to be an investment company for purposes of the 
        limitations set forth in subparagraphs (A)(i) and 
        (B)(i) of section 12(d)(1) governing the purchase or 
        other acquisition by such issuer of any security issued 
        by any registered investment company and the sale of 
        any security issued by any registered open-end 
        investment company to any such issuer. For purposes of 
        this paragraph:
                  (A) Beneficial ownership by a company shall 
                be deemed to be beneficial ownership by one 
                person, except that, if the company owns 10 per 
                centum or more of the outstanding voting 
                securities of the issuer, and is or, but for 
                the exception provided for in this paragraph or 
                paragraph (7), would be an investment company, 
                the beneficial ownership shall be deemed to be 
                that of the holders of such company's 
                outstanding securities (other than short-term 
                paper).
                  (B) Beneficial ownership by any person who 
                acquires securities or interests in securities 
                of an issuer described in the first sentence of 
                this paragraph shall be deemed to be beneficial 
                ownership by the person from whom such transfer 
                was made, pursuant to such rules and 
                regulations as the Commission shall prescribe 
                as necessary or appropriate in the public 
                interest and consistent with the protection of 
                investors and the purposes fairly intended by 
                the policy and provisions of this title, where 
                the transfer was caused by legal separation, 
                divorce, death, or other involuntary event.
          (2)(A) Any person primarily engaged in the business 
        of underwriting and distributing securities issued by 
        other persons, selling securities to customers, acting 
        as broker, and acting as market intermediary, or any 
        one or more of such activities, whose gross income 
        normally is derived principally from such business and 
        related activities.
          (B) For purposes of this paragraph--
                  (i) the term ``market intermediary'' means 
                any person that regularly holds itself out as 
                being willing contemporaneously to engage in, 
                and that is regularly engaged in, the business 
                of entering into transactions on both sides of 
                the market for a financial contract or one or 
                more such financial contracts; and
                  (ii) the term ``financial contract'' means 
                any arrangement that--
                          (I) takes the form of an individually 
                        negotiated contract, agreement, or 
                        option to buy, sell, lend, swap, or 
                        repurchase, or other similar 
                        individually negotiated transaction 
                        commonly entered into by participants 
                        in the financial markets;
                          (II) is in respect of securities, 
                        commodities, currencies, interest or 
                        other rates, other measures of value, 
                        or any other financial or economic 
                        interest similar in purpose or function 
                        to any of the foregoing; and
                          (III) is entered into in response to 
                        a request from a counter party for a 
                        quotation, or is otherwise entered into 
                        and structured to accommodate the 
                        objectives of the counter party to such 
                        arrangement.
          (3) Any bank or insurance company; any savings and 
        loan association, building and loan association, 
        cooperative bank, homestead association, or similar 
        institution, or any receiver, conservator, liquidator, 
        liquidating agent, or similar official or person 
        thereof or therefor; or any common trust fund or 
        similar fund maintained by a bank exclusively for the 
        collective investment and reinvestment of moneys 
        contributed thereto by the bank in its capacity as a 
        trustee, executor, administrator, or guardian, if--
                  (A) such fund is employed by the bank solely 
                as an aid to the administration of trusts, 
                estates, or other accounts created and 
                maintained for a fiduciary purpose;
                  (B) except in connection with the ordinary 
                advertising of the bank's fiduciary services, 
                interests in such fund are not--
                          (i) advertised; or
                          (ii) offered for sale to the general 
                        public; and
                  (C) fees and expenses charged by such fund 
                are not in contravention of fiduciary 
                principles established under applicable Federal 
                or State law.
          (4) Any person substantially all of whose business is 
        confined to making small loans, industrial banking, or 
        similar businesses.
          (5) Any person who is not engaged in the business of 
        issuing redeemable securities, face-amount certificates 
        of the installment type or periodic payment plan 
        certificates, and who is primarily engaged in one or 
        more of the following businesses: (A) Purchasing or 
        otherwise acquiring notes, drafts, acceptances, open 
        accounts receivable, and other obligations representing 
        part or all of the sales price of merchandise, 
        insurance, and services; (B) making loans to 
        manufacturers, wholesalers, and retailers of, and to 
        prospective purchasers of, specified merchandise, 
        insurance, and services; and (C) purchasing or 
        otherwise acquiring mortgages and other liens on and 
        interests in real estate.
          (6) Any company primarily engaged, directly or 
        through majority-owned subsidiaries, in one or more of 
        the businesses described in paragraphs (3), (4), and 
        (5), or in one or more of such businesses (from which 
        not less than 25 centum of such company's gross income 
        during its last fiscal year was derived) together with 
        an additional business or businesses other than 
        investing, reinvesting, owning, holding, or trading in 
        securities.
          (7)(A) Any issuer, the outstanding securities of 
        which are owned exclusively by persons who, at the time 
        of acquisition of such securities, are qualified 
        purchasers, and which is not making and does not at 
        that time propose to make a public offering of such 
        securities. Securities that are owned by persons who 
        received the securities from a qualified purchaser as a 
        gift or bequest, or in a case in which the transfer was 
        caused by legal separation, divorce, death, or other 
        involuntary event, shall be deemed to be owned by a 
        qualified purchaser, subject to such rules, 
        regulations, and orders as the Commission may prescribe 
        as necessary or appropriate in the public interest or 
        for the protection of investors.
          (B) Notwithstanding subparagraph (A), an issuer is 
        within the exception provided by this paragraph if--
                  (i) in addition to qualified purchasers, 
                outstanding securities of that issuer are 
                beneficially owned by not more than 100 persons 
                who are not qualified purchasers, if--
                          (I) such persons acquired any portion 
                        of the securities of such issuer on or 
                        before September 1, 1996; and
                          (II) at the time at which such 
                        persons initially acquired the 
                        securities of such issuer, the issuer 
                        was excepted by paragraph (1); and
                  (ii) prior to availing itself of the 
                exception provided by this paragraph--
                          (I) such issuer has disclosed to each 
                        beneficial owner, as determined under 
                        paragraph (1), that future investors 
                        will be limited to qualified 
                        purchasers, and that ownership in such 
                        issuer is no longer limited to not more 
                        than 100 persons; and
                          (II) concurrently with or after such 
                        disclosure, such issuer has provided 
                        each beneficial owner, as determined 
                        under paragraph (1), with a reasonable 
                        opportunity to redeem any part or all 
                        of their interests in the issuer, 
                        notwithstanding any agreement to the 
                        contrary between the issuer and such 
                        persons, for that person's 
                        proportionate share of the issuer's net 
                        assets.
          (C) Each person that elects to redeem under 
        subparagraph (B)(ii)(II) shall receive an amount in 
        cash equal to that person's proportionate share of the 
        issuer's net assets, unless the issuer elects to 
        provide such person with the option of receiving, and 
        such person agrees to receive, all or a portion of such 
        person's share in assets of the issuer. If the issuer 
        elects to provide such persons with such an 
        opportunity, disclosure concerning such opportunity 
        shall be made in the disclosure required by 
        subparagraph (B)(ii)(I).
          (D) An issuer that is excepted under this paragraph 
        shall nonetheless be deemed to be an investment company 
        for purposes of the limitations set forth in 
        subparagraphs (A)(i) and (B)(i) of section 12(d)(1) 
        relating to the purchase or other acquisition by such 
        issuer of any security issued by any registered 
        investment company and the sale of any security issued 
        by any registered open-end investment company to any 
        such issuer.
          (E) For purposes of determining compliance with this 
        paragraph and paragraph (1), an issuer that is 
        otherwise excepted under this paragraph and an issuer 
        that is otherwise excepted under paragraph (1) shall 
        not be treated by the Commission as being a single 
        issuer for purposes of determining whether the 
        outstanding securities of the issuer excepted under 
        paragraph (1) are beneficially owned by not more than 
        100 persons or whether the outstanding securities of 
        the issuer excepted under this paragraph are owned by 
        persons that are not qualified purchasers. Nothing in 
        this subparagraph shall be construed to establish that 
        a person is a bona fide qualified purchaser for 
        purposes of this paragraph or a bona fide beneficial 
        owner for purposes of paragraph (1).
          (9) Any person substantially all of whose business 
        consists of owning or holding oil, gas, or other 
        mineral royalties or leases, or fractional interests 
        therein, or certificates of interest or participation 
        in or investment contracts relative to such royalties, 
        leases, or fractional interests.
          (10)(A) Any company organized and operated 
        exclusively for religious, educational, benevolent, 
        fraternal, charitable, or reformatory purposes--
                  (i) no part of the net earnings of which 
                inures to the benefit of any private 
                shareholder or individual; or
                  (ii) which is or maintains a fund described 
                in subparagraph (B).
          (B) For the purposes of subparagraph (A)(ii), a fund 
        is described in this subparagraph if such fund is a 
        pooled income fund, collective trust fund, collective 
        investment fund, or similar fund maintained by a 
        charitable organization exclusively for the collective 
        investment and reinvestment of one or more of the 
        following:
                  (i) assets of the general endowment fund or 
                other funds of one or more charitable 
                organizations;
                  (ii) assets of a pooled income fund;
                  (iii) assets contributed to a charitable 
                organization in exchange for the issuance of 
                charitable gift annuities;
                  (iv) assets of a charitable remainder trust 
                or of any other trust, the remainder interests 
                of which are irrevocably dedicated to any 
                charitable organization;
                  (v) assets of a charitable lead trust;
                  (vi) assets of a trust, the remainder 
                interests of which are revocably dedicated to 
                or for the benefit of 1 or more charitable 
                organizations, if the ability to revoke the 
                dedication is limited to circumstances 
                involving--
                          (I) an adverse change in the 
                        financial circumstances of a settlor or 
                        an income beneficiary of the trust;
                          (II) a change in the identity of the 
                        charitable organization or 
                        organizations having the remainder 
                        interest, provided that the new 
                        beneficiary is also a charitable 
                        organization; or
                          (III) both the changes described in 
                        subclauses (I) and (II);
                  (vii) assets of a trust not described in 
                clauses (i) through (v), the remainder 
                interests of which are revocably dedicated to a 
                charitable organization, subject to 
                subparagraph (C); or
                  (viii) such assets as the Commission may 
                prescribe by rule, regulation, or order in 
                accordance with section 6(c).
          (C) A fund that contains assets described in clause 
        (vii) of subparagraph (B) shall be excluded from the 
        definition of an investment company for a period of 3 
        years after the date of enactment of this subparagraph, 
        but only if--
                  (i) such assets were contributed before the 
                date which is 60 days after the date of 
                enactment of this subparagraph; and
                  (ii) such assets are commingled in the fund 
                with assets described in one or more of clauses 
                (i) through (vi) and (viii) of subparagraph 
                (B).
          (D) For purposes of this paragraph--
                  (i) a trust or fund is ``maintained'' by a 
                charitable organization if the organization 
                serves as a trustee or administrator of the 
                trust or fund or has the power to remove the 
                trustees or administrators of the trust or fund 
                and to designate new trustees or 
                administrators;
                  (ii) the term ``pooled income fund'' has the 
                same meaning as in section 642(c)(5) of the 
                Internal Revenue Code of 1986;
                  (iii) the term ``charitable organization'' 
                means an organization described in paragraphs 
                (1) through (5) of section 170(c) or section 
                501(c)(3) of the Internal Revenue Code of 1986;
                  (iv) the term ``charitable lead trust'' means 
                a trust described in section 170(f)(2)(B), 
                2055(e)(2)(B), or 2522(c)(2)(B) of the Internal 
                Revenue Code of 1986;
                  (v) the term ``charitable remainder trust'' 
                means a charitable remainder annuity trust or a 
                charitable remainder unitrust, as those terms 
                are defined in section 664(d) of the Internal 
                Revenue Code of 1986; and
                  (vi) the term ``charitable gift annuity'' 
                means an annuity issued by a charitable 
                organization that is described in section 
                501(m)(5) of the Internal Revenue Code of 1986.
          (11) Any 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; or any governmental plan described in 
        section 3(a)(2)(C) of the Securities Act of 1933; or 
        any collective trust fund maintained by a bank 
        consisting solely of assets of one or more of such 
        trusts, government plans, or church plans, companies or 
        accounts that are excluded from the definition of an 
        investment company under paragraph (14) of this 
        subsection; or any separate account the assets of which 
        are derived solely from (A) 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, (B) 
        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, and (C) advances made by an insurance company 
        in connection with the operation of such separate 
        account.
          (12) Any voting trust the assets of which consist 
        exclusively of securities of a single issuer which is 
        not an investment company.
          (13) Any security holders' protective committee or 
        similar issuer having outstanding and issuing no 
        securities other than certificates of deposit and 
        short-term paper.
          (14) Any church plan described in section 414(e) of 
        the Internal Revenue Code of 1986, if, under any such 
        plan, no part of the assets may be used for, or 
        diverted to, purposes other than the exclusive benefit 
        of plan participants or beneficiaries, or any company 
        or account that is--
                  (A) established by a person that is eligible 
                to establish and maintain such a plan under 
                section 414(e) of the Internal Revenue Code of 
                1986; and
                  (B) substantially all of the activities of 
                which consist of--
                          (i) managing or holding assets 
                        contributed to such church plans or 
                        other assets which are permitted to be 
                        commingled with the assets of church 
                        plans under the Internal Revenue Code 
                        of 1986; or
                          (ii) administering or providing 
                        benefits pursuant to church plans.
          (15) Any crowdfunding vehicle.

           *       *       *       *       *       *       *

                              ----------                              


                    SECURITIES EXCHANGE ACT OF 1934


TITLE I--REGULATION OF SECURITIES EXCHANGES

           *       *       *       *       *       *       *



                registration requirements for securities

  Sec. 12. (a) It shall be unlawful for any member, broker, or 
dealer to effect any transaction in any security (other than an 
exempted security) on a national securities exchange unless a 
registration is effective as to such security for such exchange 
in accordance with the provisions of this title and the rules 
and regulations thereunder. The provisions of this subsection 
shall not apply in respect of a security futures product traded 
on a national securities exchange.
  (b) A security may be registered on a national securities 
exchange by the issuer filing an application with the exchange 
(and filing with the Commission such duplicate originals 
thereof as the Commission may require), which application shall 
contain--
          (1) Such information, in such detail, as to the 
        issuer and any person directly or indirectly 
        controlling or controlled by, or under direct or 
        indirect common control with, the issuer, and any 
        guarantor of the security as to principal or interest 
        or both, as the Commission may by rules and regulations 
        require, as necessary or appropriate in the public 
        interest or for the protection of investors, in respect 
        of the following:
                  (A) the organization, financial structures, 
                and nature of the business;
                  (B) the terms, position, rights, and 
                privileges of the different classes of 
                securities outstanding;
                  (C) the terms on which their securities are 
                to be, and during the preceding three years 
                have been, offered to the public or otherwise;
                  (D) the directors, officers, and 
                underwriters, and each security holder of 
                record holding more than 10 per centum of any 
                class of any equity security of the issuer 
                (other than an exempted security), their 
                remuneration and their interests in the 
                securities of, and their material contracts 
                with, the issuer and any person directly or 
                indirectly controlling or controlled by, or 
                under direct or indirect common control with, 
                the issuer;
                  (E) remuneration to others than directors and 
                officers exceeding $20,000 per annum;
                  (F) bonus and profit-sharing arrangements;
                  (G) management and service contracts;
                  (H) options existing or to be created in 
                respect of their securities;
                  (I) material contracts, not made in the 
                ordinary course of business, which are to be 
                executed in whole or in part at or after the 
                filing of the application or which were made 
                not more than two years before such filing, and 
                every material patent or contract for a 
                material patent right shall be deemed a 
                material contract;
                  (J) balance sheets for not more than the 
                three preceding fiscal years, certified if 
                required by the rules and regulations of the 
                Commission by a registered public accounting 
                firm;
                  (K) profit and loss statements for not more 
                than the three preceding fiscal years, 
                certified if required by the rules and 
                regulations of the Commission by a registered 
                public accounting firm; and
                  (L) any further financial statements which 
                the Commission may deem necessary or 
                appropriate for the protection of investors.
          (2) Such copies of articles of incorporation, bylaws, 
        trust indentures, or corresponding documents by 
        whatever name known, underwriting arrangements, and 
        other similar documents of, and voting trust agreements 
        with respect to, the issuer and any person directly or 
        indirectly controlling or controlled by, or under 
        direct or indirect common control with, the issuer as 
        the Commission may require as necessary or appropriate 
        for the proper protection of investors and to insure 
        fair dealing in the security.
          (3) Such copies of material contracts, referred to in 
        paragraph (1)(I) above, as the Commission may require 
        as necessary or appropriate for the proper protection 
        of investors and to insure fair dealing in the 
        security.
  (c) If in the judgment of the Commission any information 
required under subsection (b) of this section is inapplicable 
to any specified class or classes of issuers, the Commission 
shall require in lieu thereof the submission of such other 
information of comparable character as it may deem applicable 
to such class of issuers.
  (d) If the exchange authorities certify to the Commission 
that the security has been approved by the exchange for listing 
and registration, the registration shall become effective 
thirty days after the receipt of such certification by the 
Commission or within such shorter period of time as the 
Commission may determine. A security registered with a national 
securities exchange may be withdrawn or stricken from listing 
and registration in accordance with the rules of the exchange 
and, upon such terms as the Commission may deem necessary to 
impose for the protection of investors, upon application by the 
issuer or the exchange to the Commission; whereupon the issuer 
shall be relieved from further compliance with the provisions 
of this section and section 13 of this title and any rules or 
regulations under such sections as to the securities so 
withdrawn or stricken. An unissued security may be registered 
only in accordance with such rules and regulations as the 
Commission may prescribe as necessary or appropriate in the 
public interest or for the protection of investors.
  (e) Notwithstanding the foregoing provisions of this section, 
the Commission may by such rules and regulations as it deems 
necessary or appropriate in the public interest or for the 
protection of investors permit securities listed on any 
exchange at the time the registration of such exchange as a 
national securities exchange becomes effective, to be 
registered for a period ending not later than July 1, 1935, 
without complying with the provisions of this section.
  (f)(1)(A) Notwithstanding the preceding subsections of this 
section, any national securities exchange, in accordance with 
the requirements of this subsection and the rules hereunder, 
may extend unlisted trading privileges to--
          (i) any security that is listed and registered on a 
        national securities exchange, subject to subparagraph 
        (B); and
          (ii) any security that is otherwise registered 
        pursuant to this section, or that would be required to 
        be so registered except for the exemption from 
        registration provided in subparagraph (B) or (G) of 
        subsection (g)(2), subject to subparagraph (E) of this 
        paragraph.
  (B) A national securities exchange may not extend unlisted 
trading privileges to a security described in subparagraph 
(A)(i) during such interval, if any, after the commencement of 
an initial public offering of such security, as is or may be 
required pursuant to subparagraph (C).
  (C) Not later than 180 days after the date of enactment of 
the Unlisted Trading Privileges Act of 1994, the Commission 
shall prescribe, by rule or regulation, the duration of the 
interval referred to in subparagraph (B), if any, as the 
Commission determines to be necessary or appropriate for the 
maintenance of fair and orderly markets, the protection of 
investors and the public interest, or otherwise in furtherance 
of the purposes of this title. Until the earlier of the 
effective date of such rule or regulation or 240 days after 
such date of enactment, such interval shall begin at the 
opening of trading on the day on which such security commences 
trading on the national securities exchange with which such 
security is registered and end at the conclusion of the next 
day of trading.
  (D) The Commission may prescribe, by rule or regulation such 
additional procedures or requirements for extending unlisted 
trading privileges to any security as the Commission deems 
necessary or appropriate for the maintenance of fair and 
orderly markets, the protection of investors and the public 
interest, or otherwise in furtherance of the purposes of this 
title.
  (E) No extension of unlisted trading privileges to securities 
described in subparagraph (A)(ii) may occur except pursuant to 
a rule, regulation, or order of the Commission approving such 
extension or extensions. In promulgating such rule or 
regulation or in issuing such order, the Commission--
          (i) shall find that such extension or extensions of 
        unlisted trading privileges is consistent with the 
        maintenance of fair and orderly markets, the protection 
        of investors and the public interest, and otherwise in 
        furtherance of the purposes of this title;
          (ii) shall take account of the public trading 
        activity in such securities, the character of such 
        trading, the impact of such extension on the existing 
        markets for such securities, and the desirability of 
        removing impediments to and the progress that has been 
        made toward the development of a national market 
        system; and
          (iii) shall not permit a national securities exchange 
        to extend unlisted trading privileges to such 
        securities if any rule of such national securities 
        exchange would unreasonably impair the ability of a 
        dealer to solicit or effect transactions in such 
        securities for its own account, or would unreasonably 
        restrict competition among dealers in such securities 
        or between such dealers acting in the capacity of 
        market makers who are specialists and such dealers who 
        are not specialists.
  (F) An exchange may continue to extend unlisted trading 
privileges in accordance with this paragraph only if the 
exchange and the subject security continue to satisfy the 
requirements for eligibility under this paragraph, including 
any rules and regulations issued by the Commission pursuant to 
this paragraph, except that unlisted trading privileges may 
continue with regard to securities which had been admitted on 
such exchange prior to July 1, 1964, notwithstanding the 
failure to satisfy such requirements. If unlisted trading 
privileges in a security are discontinued pursuant to this 
subparagraph, the exchange shall cease trading in that 
security, unless the exchange and the subject security 
thereafter satisfy the requirements of this paragraph and the 
rules issued hereunder.
  (G) For purposes of this paragraph--
          (i) a security is the subject of an initial public 
        offering if--
                  (I) the offering of the subject security is 
                registered under the Securities Act of 1933; 
                and
                  (II) the issuer of the security, immediately 
                prior to filing the registration statement with 
                respect to the offering, was not subject to the 
                reporting requirements of section 13 or 15(d) 
                of this title; and
          (ii) an initial public offering of such security 
        commences at the opening of trading on the day on which 
        such security commences trading on the national 
        securities exchange with which such security is 
        registered.
  (2)(A) At any time within 60 days of commencement of trading 
on an exchange of a security pursuant to unlisted trading 
privileges, the Commission may summarily suspend such unlisted 
trading privileges on the exchange. Such suspension shall not 
be reviewable under section 25 of this title and shall not be 
deemed to be a final agency action for purposes of section 704 
of title 5, United States Code. Upon such suspension--
          (i) the exchange shall cease trading in the security 
        by the close of business on the date of such 
        suspension, or at such time as the Commission may 
        prescribe by rule or order for the maintenance of fair 
        and orderly markets, the protection of investors and 
        the public interest, or otherwise in furtherance of the 
        purposes of this title; and
          (ii) if the exchange seeks to extend unlisted trading 
        privileges to the security, the exchange shall file an 
        application to reinstate its ability to do so with the 
        Commission pursuant to such procedures as the 
        Commission may prescribe by rule or order for the 
        maintenance of fair and orderly markets, the protection 
        of investors and the public interest, or otherwise in 
        furtherance of the purposes of this title.
  (B) A suspension under subparagraph (A) shall remain in 
effect until the Commission, by order, grants approval of an 
application to reinstate, as described in subparagraph (A)(ii).
  (C) A suspension under subparagraph (A) shall not affect the 
validity or force of an extension of unlisted trading 
privileges in effect prior to such suspension.
  (D) The Commission shall not approve an application by a 
national securities exchange to reinstate its ability to extend 
unlisted trading privileges to a security unless the Commission 
finds, after notice and opportunity for hearing, that the 
extension of unlisted trading privileges pursuant to such 
application is consistent with the maintenance of fair and 
orderly markets, the protection of investors and the public 
interest, and otherwise in furtherance of the purposes of this 
title. If the application is made to reinstate unlisted trading 
privileges to a security described in paragraph (1)(A)(ii), the 
Commission--
          (i) shall take account of the public trading activity 
        in such security, the character of such trading, the 
        impact of such extension on the existing markets for 
        such a security, and the desirability of removing 
        impediments to and the progress that has been made 
        toward the development of a national market system; and
          (ii) shall not grant any such application if any rule 
        of the national securities exchange making application 
        under this subsection would unreasonably impair the 
        ability of a dealer to solicit or effect transactions 
        in such security for its own account, or would 
        unreasonably restrict competition among dealers in such 
        security or between such dealers acting in the capacity 
        of marketmakers who are specialists and such dealers 
        who are not specialists.
  (3) Notwithstanding paragraph (2), the Commission shall by 
rules and regulations suspend unlisted trading privileges in 
whole or in part for any or all classes of securities for a 
period not exceeding twelve months, if it deems such suspension 
necessary or appropriate in the public interest or for the 
protection of investors or to prevent evasion of the purposes 
of this title.
  (4) On the application of the issuer of any security for 
which unlisted trading privileges on any exchange have been 
continued or extended pursuant to this subsection, or of any 
broker or dealer who makes or creates a market for such 
security, or of any other person having a bona fide interest in 
the question of termination or suspension of such unlisted 
trading privileges, or on its own motion, the Commission shall 
by order terminate, or suspend for a period not exceeding 
twelve months, such unlisted trading privileges for such 
security if the Commission finds, after appropriate notice and 
opportunity for hearing, that such termination or suspension is 
necessary or appropriate in the public interest or for the 
protection of investors.
  (5) In any proceeding under this subsection in which 
appropriate notice and opportunity for hearing are required, 
notice of not less than ten days to the applicant in such 
proceeding, to the issuer of the security involved, to the 
exchange which is seeking to continue or extend or has 
continued or extended unlisted trading privileges for such 
security, and to the exchange, if any, on which such security 
is listed and registered, shall be deemed adequate notice, and 
any broker or dealer who makes or creates a market for such 
security, and any other person having a bona fide interest in 
such proceeding, shall upon application be entitled to be 
heard.
  (6) Any security for which unlisted trading privileges are 
continued or extended pursuant to this subsection shall be 
deemed to be registered on a national securities exchange 
within the meaning of this title. The powers and duties of the 
Commission under this title shall be applicable to the rules of 
an exchange in respect to any such security. The Commission 
may, by such rules and regulations as it deems necessary or 
appropriate in the public interest or for the protection of 
investors, either unconditionally or upon specified terms and 
conditions, or for stated periods, exempt such securities from 
the operation of any provision of section 13, 14, or 16 of this 
title.
  (g)(1) Every issuer which is engaged in interstate commerce, 
or in a business affecting interstate commerce, or whose 
securities are traded by use of the mails or any means or 
instrumentality of interstate commerce shall--
          (A) within 120 days after the last day of its first 
        fiscal year ended on which the issuer has total assets 
        exceeding $10,000,000 and a class of equity security 
        (other than an exempted security) held of record by 
        either--
          (i) 2,000 persons, or
          (ii) 500 persons who are not accredited investors (as 
        such term is defined by the Commission), and
          (B) in the case of an issuer that is a bank, a 
        savings and loan holding company (as defined in section 
        10 of the Home Owners' Loan Act), or a bank holding 
        company, as such term is defined in section 2 of the 
        Bank Holding Company Act of 1956 (12 U.S.C. 1841), not 
        later than 120 days after the last day of its first 
        fiscal year ended after the effective date of this 
        subsection, on which the issuer has total assets 
        exceeding $10,000,000 and a class of equity security 
        (other than an exempted security) held of record by 
        2,000 or more persons,
register such security by filing with the Commission a 
registration statement (and such copies thereof as the 
Commission may require) with respect to such security 
containing such information and documents as the Commission may 
specify comparable to that which is required in an application 
to register a security pursuant to subsection (b) of this 
section. Each such registration statement shall become 
effective sixty days after filing with the Commission or within 
such shorter period as the Commission may direct. Until such 
registration statement becomes effective it shall not be deemed 
filed for the purposes of section 18 of this title. Any issuer 
may register any class of equity security not required to be 
registered by filing a registration statement pursuant to the 
provisions of this paragraph. The Commission is authorized to 
extend the date upon which any issuer or class of issuers is 
required to register a security pursuant to the provisions of 
this paragraph.
  (2) The provisions of this subsection shall not apply in 
respect of--
          (A) any security listed and registered on a national 
        securities exchange.
          (B) any security issued by an investment company 
        registered pursuant to section 8 of the Investment 
        Company Act of 1940.
          (C) any security, other than permanent stock, 
        guaranty stock, permanent reserve stock, or any similar 
        certificate evidencing nonwithdrawable capital, issued 
        by a savings and loan association, building and loan 
        association, cooperative bank, homestead association, 
        or similar institution, which is supervised and 
        examined by State or Federal authority having 
        supervision over any such institution.
          (D) any security of an issuer organized and operated 
        exclusively for religious, educational, benevolent, 
        fraternal, charitable, or reformatory purposes and not 
        for pecuniary profit, and no part of the net earnings 
        of which inures to the benefit of any private 
        shareholder or individual; or any security of a fund 
        that is excluded from the definition of an investment 
        company under section 3(c)(10)(B) of the Investment 
        Company Act of 1940.
          (E) any security of an issuer which is a 
        ``cooperative association'' as defined in the 
        Agricultural Marketing Act, approved June 15, 1929, as 
        amended, or a federation of such cooperative 
        associations, if such federation possesses no greater 
        powers or purposes than cooperative associations so 
        defined.
          (F) any security issued by a mutual or cooperative 
        organization which supplies a commodity or service 
        primarily for the benefit of its members and operates 
        not for pecuniary profit, but only if the security is 
        part of a class issuable only to persons who purchase 
        commodities or services from the issuer, the security 
        is transferable only to a successor in interest or 
        occupancy of premises serviced or to be served by the 
        issuer, and no dividends are payable to the holder of 
        the security.
          (G) any security issued by an insurance company if 
        all of the following conditions are met:
                  (i) Such insurance company is required to and 
                does file an annual statement with the 
                Commissioner of Insurance (or other officer or 
                agency performing a similar function) of its 
                domiciliary State, and such annual statement 
                conforms to that prescribed by the National 
                Association of Insurance Commissioners or in 
                the determination of such State commissioner, 
                officer or agency substantially conforms to 
                that so prescribed.
                  (ii) Such insurance company is subject to 
                regulation by its domiciliary State of proxies, 
                consents, or authorizations in respect of 
                securities issued by such company and such 
                regulation conforms to that prescribed by the 
                National Association of Insurance 
                Commissioners.
                  (iii) After July 1, 1966, the purchase and 
                sales of securities issued by such insurance 
                company by beneficial owners, directors, or 
                officers of such company are subject to 
                regulation (including reporting) by its 
                domiciliary State substantially in the manner 
                provided in section 16 of this title.
          (H) any interest or participation in any collective 
        trust funds maintained by a bank or in a separate 
        account maintained by an insurance company which 
        interest or participation is issued in connection with 
        (i) a stock-bonus, pension, or profit-sharing plan 
        which meets the requirements for qualification under 
        section 401 of the Internal Revenue Code of 1954, (ii) 
        an annuity plan which meets the requirements for 
        deduction of the employer's contribution under section 
        404(a)(2) of such Code, or (iii) a church plan, 
        company, or account that is excluded from the 
        definition of an investment company under section 
        3(c)(14) of the Investment Company Act of 1940.
  (3) The Commission may by rules or regulations or, on its own 
motion, after notice and opportunity for hearing, by order, 
exempt from this subsection any security of a foreign issuer, 
including any certificate of deposit for such a security, if 
the Commission finds that such exemption is in the public 
interest and is consistent with the protection of investors.
  (4) Registration of any class of security pursuant to this 
subsection shall be terminated ninety days, or such shorter 
period as the Commission may determine, after the issuer files 
a certification with the Commission that the number of holders 
of record of such class of security is reduced to less than 300 
persons, or, in the case of a bank, a savings and loan holding 
company (as defined in section 10 of the Home Owners' Loan 
Act), or a bank holding company, as such term is defined in 
section 2 of the Bank Holding Company Act of 1956 (12 U.S.C. 
1841), 1,200 persons persons. The Commission shall after notice 
and opportunity for hearing deny termination of registration if 
it finds that the certification is untrue. Termination of 
registration shall be deferred pending final determination on 
the question of denial.
  (5) For the purposes of this subsection the term ``class'' 
shall include all securities of an issuer which are of 
substantially similar character and the holders of which enjoy 
substantially similar rights and privileges. The Commission may 
for the purpose of this subsection define by rules and 
regulations the terms ``total assets'' and ``held of record'' 
as it deems necessary or appropriate in the public interest or 
for the protection of investors in order to prevent 
circumvention of the provisions of this subsection. For 
purposes of this subsection, a security futures product shall 
not be considered a class of equity security of the issuer of 
the securities underlying the security futures product. For 
purposes of determining whether an issuer is required to 
register a security with the Commission pursuant to paragraph 
(1), the definition of ``held of record'' shall not include 
securities held by persons who received the securities pursuant 
to an employee compensation plan in transactions exempted from 
the registration requirements of section 5 of the Securities 
Act of 1933.
          (6) Exclusion for persons holding certain 
        securities.--[The Commission]
                  (A) In general._The Commission shall, by 
                rule, exempt, conditionally or unconditionally, 
                securities acquired pursuant to an offering 
                made under [section 4(6)] section 4(a)(6) of 
                the Securities Act of 1933 from the provisions 
                of this subsection.
                  (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.
  (h) The Commission may by rules and regulations, or upon 
application of an interested person, by order, after notice and 
opportunity for hearing, exempt in whole or in part any issuer 
or class of issuers from the provisions of subsection (g) of 
this section or from section 13, 14, or 15(d) or may exempt 
from section 16 any officer, director, or beneficial owner of 
securities of any issuer, any security of which is required to 
be registered pursuant to subsection (g) hereof, upon such 
terms and conditions and for such period as it deems necessary 
or appropriate, if the Commission finds, by reason of the 
number of public investors, amount of trading interest in the 
securities, the nature and extent of the activities of the 
issuer, income or assets of the issuer, or otherwise, that such 
action is not inconsistent with the public interest or the 
protection of investors. The Commission may, for the purposes 
of any of the above-mentioned sections or subsections of this 
title, classify issuers and prescribe requirements appropriate 
for each such class.
  (i) In respect of any securities issued by banks and savings 
associations the deposits of which are insured in accordance 
with the Federal Deposit Insurance Act, the powers, functions, 
and duties vested in the Commission to administer and enforce 
sections 10A(m), 12, 13, 14(a), 14(c), 14(d), 14(f), and 16 of 
this Act, and sections 302, 303, 304, 306, 401(b), 404, 406, 
and 407 of the Sarbanes-Oxley Act of 2002, (1) with respect to 
national banks and Federal savings associations, the accounts 
of which are insured by the Federal Deposit Insurance 
Corporation are vested in the Comptroller of the Currency, (2) 
with respect to all other member banks of the Federal Reserve 
System are vested in the Board of Governors of the Federal 
Reserve System, and (3) with respect to all other insured banks 
and State savings associations, the accounts of which are 
insured by the Federal Deposit Insurance Corporation, are 
vested in the Federal Deposit Insurance Corporation. The 
Comptroller of the Currency, the Board of Governors of the 
Federal Reserve System, and the Federal Deposit Insurance 
Corporation shall have the power to make such rules and 
regulations as may be necessary for the execution of the 
functions vested in them as provided in this subsection. In 
carrying out their responsibilities under this subsection, the 
agencies named in the first sentence of this subsection shall 
issue substantially similar regulations to regulations and 
rules issued by the Commission under sections 10A(m), 12, 13, 
14(a), 14(c), 14(d), 14(f) and 16 of this Act, and sections 
302, 303, 304, 306, 401(b), 404, 406, and 407 of the Sarbanes-
Oxley Act of 2002, unless they find that implementation of 
substantially similar regulations with respect to insured banks 
and insured institutions are not necessary or appropriate in 
the public interest or for protection of investors, and publish 
such findings, and the detailed reasons therefor, in the 
Federal Register. Such regulations of the above-named agencies, 
or the reasons for failure to publish such substantially 
similar regulations to those of the Commission, shall be 
published in the Federal Register within 120 days of the date 
of enactment of this subsection, and, thereafter, within 60 
days of any changes made by the Commission in its relevant 
regulations and rules.
  (j) The Commission is authorized, by order, as it deems 
necessary or appropriate for the protection of investors to 
deny, to suspend the effective date of, to suspend for a period 
not exceeding twelve months, or to revoke the registration of a 
security, if the Commission finds, on the record after notice 
and opportunity for hearing, that the issuer of such security 
has failed to comply with any provision of this title or the 
rules and regulations thereunder. No member of a national 
securities exchange, broker, or dealer shall make use of the 
mails or any means or instrumentality of interstate commerce to 
effect any transaction in, or to induce the purchase or sale 
of, any security the registration of which has been and is 
suspended or revoked pursuant to the preceding sentence.
  (k) Trading Suspensions; Emergency Authority.--
          (1) Trading suspensions.--If in its opinion the 
        public interest and the protection of investors so 
        require, the Commission is authorized by order--
                  (A) summarily to suspend trading in any 
                security (other than an exempted security) for 
                a period not exceeding 10 business days, and
                  (B) summarily to suspend all trading on any 
                national securities exchange or otherwise, in 
                securities other than exempted securities, for 
                a period not exceeding 90 calendar days.
        The action described in subparagraph (B) shall not take 
        effect unless the Commission notifies the President of 
        its decision and the President notifies the Commission 
        that the President does not disapprove of such 
        decision. If the actions described in subparagraph (A) 
        or (B) involve a security futures product, the 
        Commission shall consult with and consider the views of 
        the Commodity Futures Trading Commission.
          (2) Emergency orders.--
                  (A) In general.--The Commission, in an 
                emergency, may by order summarily take such 
                action to alter, supplement, suspend, or impose 
                requirements or restrictions with respect to 
                any matter or action subject to regulation by 
                the Commission or a self-regulatory 
                organization under the securities laws, as the 
                Commission determines is necessary in the 
                public interest and for the protection of 
                investors--
                          (i) to maintain or restore fair and 
                        orderly securities markets (other than 
                        markets in exempted securities);
                          (ii) to ensure prompt, accurate, and 
                        safe clearance and settlement of 
                        transactions in securities (other than 
                        exempted securities); or
                          (iii) to reduce, eliminate, or 
                        prevent the substantial disruption by 
                        the emergency of--
                                  (I) securities markets (other 
                                than markets in exempted 
                                securities), investment 
                                companies, or any other 
                                significant portion or segment 
                                of such markets; or
                                  (II) the transmission or 
                                processing of securities 
                                transactions (other than 
                                transactions in exempted 
                                securities).
                  (B) Effective period.--An order of the 
                Commission under this paragraph shall continue 
                in effect for the period specified by the 
                Commission, and may be extended. Except as 
                provided in subparagraph (C), an order of the 
                Commission under this paragraph may not 
                continue in effect for more than 10 business 
                days, including extensions.
                  (C) Extension.--An order of the Commission 
                under this paragraph may be extended to 
                continue in effect for more than 10 business 
                days if, at the time of the extension, the 
                Commission finds that the emergency still 
                exists and determines that the continuation of 
                the order beyond 10 business days is necessary 
                in the public interest and for the protection 
                of investors to attain an objective described 
                in clause (i), (ii), or (iii) of subparagraph 
                (A). In no event shall an order of the 
                Commission under this paragraph continue in 
                effect for more than 30 calendar days.
                  (D) Security futures.--If the actions 
                described in subparagraph (A) involve a 
                security futures product, the Commission shall 
                consult with and consider the views of the 
                Commodity Futures Trading Commission.
                  (E) Exemption.--In exercising its authority 
                under this paragraph, the Commission shall not 
                be required to comply with the provisions of--
                          (i) section 19(c); or
                          (ii) section 553 of title 5, United 
                        States Code.
          (3) Termination of emergency actions by president.--
        The President may direct that action taken by the 
        Commission under paragraph (1)(B) or paragraph (2) of 
        this subsection shall not continue in effect.
          (4) Compliance with orders.--No member of a national 
        securities exchange, broker, or dealer shall make use 
        of the mails or any means or instrumentality of 
        interstate commerce to effect any transaction in, or to 
        induce the purchase or sale of, any security in 
        contravention of an order of the Commission under this 
        subsection unless such order has been stayed, modified, 
        or set aside as provided in paragraph (5) of this 
        subsection or has ceased to be effective upon direction 
        of the President as provided in paragraph (3).
          (5) Limitations on review of orders.--An order of the 
        Commission pursuant to this subsection shall be subject 
        to review only as provided in section 25(a) of this 
        title. Review shall be based on an examination of all 
        the information before the Commission at the time such 
        order was issued. The reviewing court shall not enter a 
        stay, writ of mandamus, or similar relief unless the 
        court finds, after notice and hearing before a panel of 
        the court, that the Commission's action is arbitrary, 
        capricious, an abuse of discretion, or otherwise not in 
        accordance with law.
          (6) Consultation.--Prior to taking any action 
        described in paragraph (1)(B), the Commission shall 
        consult with and consider the views of the Secretary of 
        the Treasury, the Board of Governors of the Federal 
        Reserve System, and the Commodity Futures Trading 
        Commission, unless such consultation is impracticable 
        in light of the emergency.
          (7) Definition.--For purposes of this subsection, the 
        term ``emergency'' means--
                  (A) a major market disturbance characterized 
                by or constituting--
                          (i) sudden and excessive fluctuations 
                        of securities prices generally, or a 
                        substantial threat thereof, that 
                        threaten fair and orderly markets; or
                          (ii) a substantial disruption of the 
                        safe or efficient operation of the 
                        national system for clearance and 
                        settlement of transactions in 
                        securities, or a substantial threat 
                        thereof; or
                  (B) a major disturbance that substantially 
                disrupts, or threatens to substantially 
                disrupt--
                          (i) the functioning of securities 
                        markets, investment companies, or any 
                        other significant portion or segment of 
                        the securities markets; or
                          (ii) the transmission or processing 
                        of securities transactions.
  (l) It shall be unlawful for an issuer, any class of whose 
securities is registered pursuant to this section or would be 
required to be so registered except for the exemption from 
registration provided by subsection (g)(2)(B) or (g)(2)(G) of 
this section, by the use of any means or instrumentality of 
interstate commerce, or of the mails, to issue, either 
originally or upon transfer, any of such securities in a form 
or with a format which contravenes such rules and regulations 
as the Commission may prescribe as necessary or appropriate for 
the prompt and accurate clearance and settlement of 
transactions in securities. The provisions of this subsection 
shall not apply to variable annuity contracts or variable life 
policies issued by an insurance company or its separate 
accounts.

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