[Congressional Bills 112th Congress]
[From the U.S. Government Printing Office]
[H.R. 3606 Enrolled Bill (ENR)]

        H.R.3606

                      One Hundred Twelfth Congress

                                 of the

                        United States of America


                          AT THE SECOND SESSION

          Begun and held at the City of Washington on Tuesday,
            the third day of January, two thousand and twelve


                                 An Act


 
   To increase American job creation and economic growth by improving 
   access to the public capital markets for emerging growth companies.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
    This Act may be cited as the ``Jumpstart Our Business Startups 
Act''.
SEC. 2. TABLE OF CONTENTS.
    The table of contents of this Act is as follows:

Sec. 1. Short title.
Sec. 2. Table of contents.

TITLE I--REOPENING AMERICAN CAPITAL MARKETS TO EMERGING GROWTH COMPANIES

Sec. 101. Definitions.
Sec. 102. Disclosure obligations.
Sec. 103. Internal controls audit.
Sec. 104. Auditing standards.
Sec. 105. Availability of information about emerging growth companies.
Sec. 106. Other matters.
Sec. 107. Opt-in right for emerging growth companies.
Sec. 108. Review of Regulation S-K.

              TITLE II--ACCESS TO CAPITAL FOR JOB CREATORS

Sec. 201. Modification of exemption.

                         TITLE III--CROWDFUNDING

Sec. 301. Short title.
Sec. 302. Crowdfunding exemption.
Sec. 303. Exclusion of crowdfunding investors from shareholder cap.
Sec. 304. Funding portal regulation.
Sec. 305. Relationship with State law.

                TITLE IV--SMALL COMPANY CAPITAL FORMATION

Sec. 401. Authority to exempt certain securities.
Sec. 402. Study on the impact of State Blue Sky laws on Regulation A 
          offerings.

             TITLE V--PRIVATE COMPANY FLEXIBILITY AND GROWTH

Sec. 501. Threshold for registration.
Sec. 502. Employees.
Sec. 503. Commission rulemaking.
Sec. 504. Commission study of enforcement authority under Rule 12g5-1.

                       TITLE VI--CAPITAL EXPANSION

Sec. 601. Shareholder threshold for registration.
Sec. 602. Rulemaking.

                TITLE VII--OUTREACH ON CHANGES TO THE LAW

Sec. 701. Outreach by the Commission.

    TITLE I--REOPENING AMERICAN CAPITAL MARKETS TO EMERGING GROWTH 
                               COMPANIES

    SEC. 101. DEFINITIONS.
    (a) Securities Act of 1933.--Section 2(a) of the Securities Act of 
1933 (15 U.S.C. 77b(a)) is amended by adding at the end the following:
        ``(19) The term `emerging growth company' means an issuer that 
    had total annual gross revenues of less than $1,000,000,000 (as 
    such amount is indexed for inflation every 5 years by the 
    Commission to reflect the change in the Consumer Price Index for 
    All Urban Consumers published by the Bureau of Labor Statistics, 
    setting the threshold to the nearest 1,000,000) during its most 
    recently completed fiscal year. An issuer that is an emerging 
    growth company as of the first day of that fiscal year shall 
    continue to be deemed an emerging growth company until the earliest 
    of--
            ``(A) the last day of the fiscal year of the issuer during 
        which it had total annual gross revenues of $1,000,000,000 (as 
        such amount is indexed for inflation every 5 years by the 
        Commission to reflect the change in the Consumer Price Index 
        for All Urban Consumers published by the Bureau of Labor 
        Statistics, setting the threshold to the nearest 1,000,000) or 
        more;
            ``(B) the last day of the fiscal year of the issuer 
        following the fifth anniversary of the date of the first sale 
        of common equity securities of the issuer pursuant to an 
        effective registration statement under this title;
            ``(C) the date on which such issuer has, during the 
        previous 3-year period, issued more than $1,000,000,000 in non-
        convertible debt; or
            ``(D) the date on which such issuer is deemed to be a 
        `large accelerated filer', as defined in section 240.12b-2 of 
        title 17, Code of Federal Regulations, or any successor 
        thereto.''.
    (b) Securities Exchange Act of 1934.--Section 3(a) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78c(a)) is amended--
        (1) by redesignating paragraph (77), as added by section 941(a) 
    of the Investor Protection and Securities Reform Act of 2010 
    (Public Law 111-203, 124 Stat. 1890), as paragraph (79); and
        (2) by adding at the end the following:
        ``(80) Emerging growth company.--The term `emerging growth 
    company' means an issuer that had total annual gross revenues of 
    less than $1,000,000,000 (as such amount is indexed for inflation 
    every 5 years by the Commission to reflect the change in the 
    Consumer Price Index for All Urban Consumers published by the 
    Bureau of Labor Statistics, setting the threshold to the nearest 
    1,000,000) during its most recently completed fiscal year. An 
    issuer that is an emerging growth company as of the first day of 
    that fiscal year shall continue to be deemed an emerging growth 
    company until the earliest of--
            ``(A) the last day of the fiscal year of the issuer during 
        which it had total annual gross revenues of $1,000,000,000 (as 
        such amount is indexed for inflation every 5 years by the 
        Commission to reflect the change in the Consumer Price Index 
        for All Urban Consumers published by the Bureau of Labor 
        Statistics, setting the threshold to the nearest 1,000,000) or 
        more;
            ``(B) the last day of the fiscal year of the issuer 
        following the fifth anniversary of the date of the first sale 
        of common equity securities of the issuer pursuant to an 
        effective registration statement under the Securities Act of 
        1933;
            ``(C) the date on which such issuer has, during the 
        previous 3-year period, issued more than $1,000,000,000 in non-
        convertible debt; or
            ``(D) the date on which such issuer is deemed to be a 
        `large accelerated filer', as defined in section 240.12b-2 of 
        title 17, Code of Federal Regulations, or any successor 
        thereto.''.
    (c) Other Definitions.--As used in this title, the following 
definitions shall apply:
        (1) Commission.--The term ``Commission'' means the Securities 
    and Exchange Commission.
        (2) Initial public offering date.--The term ``initial public 
    offering date'' means the date of the first sale of common equity 
    securities of an issuer pursuant to an effective registration 
    statement under the Securities Act of 1933.
    (d) Effective Date.--Notwithstanding section 2(a)(19) of the 
Securities Act of 1933 and section 3(a)(80) of the Securities Exchange 
Act of 1934, an issuer shall not be an emerging growth company for 
purposes of such Acts if the first sale of common equity securities of 
such issuer pursuant to an effective registration statement under the 
Securities Act of 1933 occurred on or before December 8, 2011.
    SEC. 102. DISCLOSURE OBLIGATIONS.
    (a) Executive Compensation.--
        (1) Exemption.--Section 14A(e) of the Securities Exchange Act 
    of 1934 (15 U.S.C. 78n-1(e)) is amended--
            (A) by striking ``The Commission may'' and inserting the 
        following:
        ``(1) In general.--The Commission may'';
            (B) by striking ``an issuer'' and inserting ``any other 
        issuer''; and
            (C) by adding at the end the following:
        ``(2) Treatment of emerging growth companies.--
            ``(A) In general.--An emerging growth company shall be 
        exempt from the requirements of subsections (a) and (b).
            ``(B) Compliance after termination of emerging growth 
        company treatment.--An issuer that was an emerging growth 
        company but is no longer an emerging growth company shall 
        include the first separate resolution described under 
        subsection (a)(1) not later than the end of--
                ``(i) in the case of an issuer that was an emerging 
            growth company for less than 2 years after the date of 
            first sale of common equity securities of the issuer 
            pursuant to an effective registration statement under the 
            Securities Act of 1933, the 3-year period beginning on such 
            date; and
                ``(ii) in the case of any other issuer, the 1-year 
            period beginning on the date the issuer is no longer an 
            emerging growth company.''.
        (2) Proxies.--Section 14(i) of the Securities Exchange Act of 
    1934 (15 U.S.C. 78n(i)) is amended by inserting ``, for any issuer 
    other than an emerging growth company,'' after ``including''.
        (3) Compensation disclosures.--Section 953(b)(1) of the 
    Investor Protection and Securities Reform Act of 2010 (Public Law 
    111-203; 124 Stat. 1904) is amended by inserting ``, other than an 
    emerging growth company, as that term is defined in section 3(a) of 
    the Securities Exchange Act of 1934,'' after ``require each 
    issuer''.
    (b) Financial Disclosures and Accounting Pronouncements.--
        (1) Securities act of 1933.--Section 7(a) of the Securities Act 
    of 1933 (15 U.S.C. 77g(a)) is amended--
            (A) by striking ``(a) The registration'' and inserting the 
        following:
    ``(a) Information Required in Registration Statement.--
        ``(1) In general.--The registration''; and
            (B) by adding at the end the following:
        ``(2) Treatment of emerging growth companies.--An emerging 
    growth company--
            ``(A) need not present more than 2 years of audited 
        financial statements in order for the registration statement of 
        such emerging growth company with respect to an initial public 
        offering of its common equity securities to be effective, and 
        in any other registration statement to be filed with the 
        Commission, an emerging growth company need not present 
        selected financial data in accordance with section 229.301 of 
        title 17, Code of Federal Regulations, for any period prior to 
        the earliest audited period presented in connection with its 
        initial public offering; and
            ``(B) may not be required to comply with any new or revised 
        financial accounting standard until such date that a company 
        that is not an issuer (as defined under section 2(a) of the 
        Sarbanes-Oxley Act of 2002 (15 U.S.C. 7201(a))) is required to 
        comply with such new or revised accounting standard, if such 
        standard applies to companies that are not issuers.''.
        (2) Securities exchange act of 1934.--Section 13(a) of the 
    Securities Exchange Act of 1934 (15 U.S.C. 78m(a)) is amended by 
    adding at the end the following: ``In any registration statement, 
    periodic report, or other reports to be filed with the Commission, 
    an emerging growth company need not present selected financial data 
    in accordance with section 229.301 of title 17, Code of Federal 
    Regulations, for any period prior to the earliest audited period 
    presented in connection with its first registration statement that 
    became effective under this Act or the Securities Act of 1933 and, 
    with respect to any such statement or reports, an emerging growth 
    company may not be required to comply with any new or revised 
    financial accounting standard until such date that a company that 
    is not an issuer (as defined under section 2(a) of the Sarbanes-
    Oxley Act of 2002 (15 U.S.C. 7201(a))) is required to comply with 
    such new or revised accounting standard, if such standard applies 
    to companies that are not issuers.''.
    (c) Other Disclosures.--An emerging growth company may comply with 
section 229.303(a) of title 17, Code of Federal Regulations, or any 
successor thereto, by providing information required by such section 
with respect to the financial statements of the emerging growth company 
for each period presented pursuant to section 7(a) of the Securities 
Act of 1933 (15 U.S.C. 77g(a)). An emerging growth company may comply 
with section 229.402 of title 17, Code of Federal Regulations, or any 
successor thereto, by disclosing the same information as any issuer 
with a market value of outstanding voting and nonvoting common equity 
held by non-affiliates of less than $75,000,000.
    SEC. 103. INTERNAL CONTROLS AUDIT.
    Section 404(b) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 
7262(b)) is amended by inserting ``, other than an issuer that is an 
emerging growth company (as defined in section 3 of the Securities 
Exchange Act of 1934),'' before ``shall attest to''.
    SEC. 104. AUDITING STANDARDS.
    Section 103(a)(3) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 
7213(a)(3)) is amended by adding at the end the following:
            ``(C) Transition period for emerging growth companies.--Any 
        rules of the Board requiring mandatory audit firm rotation or a 
        supplement to the auditor's report in which the auditor would 
        be required to provide additional information about the audit 
        and the financial statements of the issuer (auditor discussion 
        and analysis) shall not apply to an audit of an emerging growth 
        company, as defined in section 3 of the Securities Exchange Act 
        of 1934. Any additional rules adopted by the Board after the 
        date of enactment of this subparagraph shall not apply to an 
        audit of any emerging growth company, unless the Commission 
        determines that the application of such additional requirements 
        is necessary or appropriate in the public interest, after 
        considering the protection of investors and whether the action 
        will promote efficiency, competition, and capital formation.''.
    SEC. 105. AVAILABILITY OF INFORMATION ABOUT EMERGING GROWTH 
      COMPANIES.
    (a) Provision of Research.--Section 2(a)(3) of the Securities Act 
of 1933 (15 U.S.C. 77b(a)(3)) is amended by adding at the end the 
following: ``The publication or distribution by a broker or dealer of a 
research report about an emerging growth company that is the subject of 
a proposed public offering of the common equity securities of such 
emerging growth company pursuant to a registration statement that the 
issuer proposes to file, or has filed, or that is effective shall be 
deemed for purposes of paragraph (10) of this subsection and section 
5(c) not to constitute an offer for sale or offer to sell a security, 
even if the broker or dealer is participating or will participate in 
the registered offering of the securities of the issuer. As used in 
this paragraph, the term `research report' means a written, electronic, 
or oral communication that includes information, opinions, or 
recommendations with respect to securities of an issuer or an analysis 
of a security or an issuer, whether or not it provides information 
reasonably sufficient upon which to base an investment decision.''.
    (b) Securities Analyst Communications.--Section 15D of the 
Securities Exchange Act of 1934 (15 U.S.C. 78o-6) is amended--
        (1) by redesignating subsection (c) as subsection (d); and
        (2) by inserting after subsection (b) the following:
    ``(c) Limitation.--Notwithstanding subsection (a) or any other 
provision of law, neither the Commission nor any national securities 
association registered under section 15A may adopt or maintain any rule 
or regulation in connection with an initial public offering of the 
common equity of an emerging growth company--
        ``(1) restricting, based on functional role, which associated 
    persons of a broker, dealer, or member of a national securities 
    association, may arrange for communications between a securities 
    analyst and a potential investor; or
        ``(2) restricting a securities analyst from participating in 
    any communications with the management of an emerging growth 
    company that is also attended by any other associated person of a 
    broker, dealer, or member of a national securities association 
    whose functional role is other than as a securities analyst.''.
    (c) Expanding Permissible Communications.--Section 5 of the 
Securities Act of 1933 (15 U.S.C. 77e) is amended--
        (1) by redesignating subsection (d) as subsection (e); and
        (2) by inserting after subsection (c) the following:
    ``(d) Limitation.--Notwithstanding any other provision of this 
section, an emerging growth company or any person authorized to act on 
behalf of an emerging growth company may engage in oral or written 
communications with potential investors that are qualified 
institutional buyers or institutions that are accredited investors, as 
such terms are respectively defined in section 230.144A and section 
230.501(a) of title 17, Code of Federal Regulations, or any successor 
thereto, to determine whether such investors might have an interest in 
a contemplated securities offering, either prior to or following the 
date of filing of a registration statement with respect to such 
securities with the Commission, subject to the requirement of 
subsection (b)(2).''.
    (d) Post Offering Communications.--Neither the Commission nor any 
national securities association registered under section 15A of the 
Securities Exchange Act of 1934 may adopt or maintain any rule or 
regulation prohibiting any broker, dealer, or member of a national 
securities association from publishing or distributing any research 
report or making a public appearance, with respect to the securities of 
an emerging growth company, either--
        (1) within any prescribed period of time following the initial 
    public offering date of the emerging growth company; or
        (2) within any prescribed period of time prior to the 
    expiration date of any agreement between the broker, dealer, or 
    member of a national securities association and the emerging growth 
    company or its shareholders that restricts or prohibits the sale of 
    securities held by the emerging growth company or its shareholders 
    after the initial public offering date.
    SEC. 106. OTHER MATTERS.
    (a) Draft Registration Statements.--Section 6 of the Securities Act 
of 1933 (15 U.S.C. 77f) is amended by adding at the end the following:
    ``(e) Emerging Growth Companies.--
        ``(1) In general.--Any emerging growth company, prior to its 
    initial public offering date, may confidentially submit to the 
    Commission a draft registration statement, for confidential 
    nonpublic review by the staff of the Commission prior to public 
    filing, provided that the initial confidential submission and all 
    amendments thereto shall be publicly filed with the Commission not 
    later than 21 days before the date on which the issuer conducts a 
    road show, as such term is defined in section 230.433(h)(4) of 
    title 17, Code of Federal Regulations, or any successor thereto.
        ``(2) Confidentiality.--Notwithstanding any other provision of 
    this title, the Commission shall not be compelled to disclose any 
    information provided to or obtained by the Commission pursuant to 
    this subsection. For purposes of section 552 of title 5, United 
    States Code, this subsection shall be considered a statute 
    described in subsection (b)(3)(B) of such section 552. Information 
    described in or obtained pursuant to this subsection shall be 
    deemed to constitute confidential information for purposes of 
    section 24(b)(2) of the Securities Exchange Act of 1934.''.
    (b) Tick Size.--Section 11A(c) of the Securities Exchange Act of 
1934 (15 U.S.C. 78k-1(c)) is amended by adding at the end the following 
new paragraph:
        ``(6) Tick size.--
            ``(A) Study and report.--The Commission shall conduct a 
        study examining the transition to trading and quoting 
        securities in one penny increments, also known as 
        decimalization. The study shall examine the impact that 
        decimalization has had on the number of initial public 
        offerings since its implementation relative to the period 
        before its implementation. The study shall also examine the 
        impact that this change has had on liquidity for small and 
        middle capitalization company securities and whether there is 
        sufficient economic incentive to support trading operations in 
        these securities in penny increments. Not later than 90 days 
        after the date of enactment of this paragraph, the Commission 
        shall submit to Congress a report on the findings of the study.
            ``(B) Designation.--If the Commission determines that the 
        securities of emerging growth companies should be quoted and 
        traded using a minimum increment of greater than $0.01, the 
        Commission may, by rule not later than 180 days after the date 
        of enactment of this paragraph, designate a minimum increment 
        for the securities of emerging growth companies that is greater 
        than $0.01 but less than $0.10 for use in all quoting and 
        trading of securities in any exchange or other execution 
        venue.''.
    SEC. 107. OPT-IN RIGHT FOR EMERGING GROWTH COMPANIES.
    (a) In General.--With respect to an exemption provided to emerging 
growth companies under this title, or an amendment made by this title, 
an emerging growth company may choose to forgo such exemption and 
instead comply with the requirements that apply to an issuer that is 
not an emerging growth company.
    (b) Special Rule.--Notwithstanding subsection (a), with respect to 
the extension of time to comply with new or revised financial 
accounting standards provided under section 7(a)(2)(B) of the 
Securities Act of 1933 and section 13(a) of the Securities Exchange Act 
of 1934, as added by section 102(b), if an emerging growth company 
chooses to comply with such standards to the same extent that a non-
emerging growth company is required to comply with such standards, the 
emerging growth company--
        (1) must make such choice at the time the company is first 
    required to file a registration statement, periodic report, or 
    other report with the Commission under section 13 of the Securities 
    Exchange Act of 1934 and notify the Securities and Exchange 
    Commission of such choice;
        (2) may not select some standards to comply with in such manner 
    and not others, but must comply with all such standards to the same 
    extent that a non-emerging growth company is required to comply 
    with such standards; and
        (3) must continue to comply with such standards to the same 
    extent that a non-emerging growth company is required to comply 
    with such standards for as long as the company remains an emerging 
    growth company.
    SEC. 108. REVIEW OF REGULATION S-K.
    (a) Review.--The Securities and Exchange Commission shall conduct a 
review of its Regulation S-K (17 CFR 229.10 et seq.) to--
        (1) comprehensively analyze the current registration 
    requirements of such regulation; and
        (2) determine how such requirements can be updated to modernize 
    and simplify the registration process and reduce the costs and 
    other burdens associated with these requirements for issuers who 
    are emerging growth companies.
    (b) Report.--Not later than 180 days after the date of enactment of 
this title, the Commission shall transmit to Congress a report of the 
review conducted under subsection (a). The report shall include the 
specific recommendations of the Commission on how to streamline the 
registration process in order to make it more efficient and less 
burdensome for the Commission and for prospective issuers who are 
emerging growth companies.

              TITLE II--ACCESS TO CAPITAL FOR JOB CREATORS

    SEC. 201. MODIFICATION OF EXEMPTION.
    (a) Modification of Rules.--
        (1) Not later than 90 days after the date of the enactment of 
    this Act, the Securities and Exchange Commission shall revise its 
    rules issued in section 230.506 of title 17, Code of Federal 
    Regulations, to provide that the prohibition against general 
    solicitation or general advertising contained in section 230.502(c) 
    of such title shall not apply to offers and sales of securities 
    made pursuant to section 230.506, provided that all purchasers of 
    the securities are accredited investors. Such rules shall require 
    the issuer to take reasonable steps to verify that purchasers of 
    the securities are accredited investors, using such methods as 
    determined by the Commission. Section 230.506 of title 17, Code of 
    Federal Regulations, as revised pursuant to this section, shall 
    continue to be treated as a regulation issued under section 4(2) of 
    the Securities Act of 1933 (15 U.S.C. 77d(2)).
        (2) Not later than 90 days after the date of enactment of this 
    Act, the Securities and Exchange Commission shall revise subsection 
    (d)(1) of section 230.144A of title 17, Code of Federal 
    Regulations, to provide that securities sold under such revised 
    exemption may be offered to persons other than qualified 
    institutional buyers, including by means of general solicitation or 
    general advertising, provided that securities are sold only to 
    persons that the seller and any person acting on behalf of the 
    seller reasonably believe is a qualified institutional buyer.
    (b) Consistency in Interpretation.--Section 4 of the Securities Act 
of 1933 (15 U.S.C. 77d) is amended--
        (1) by striking ``The provisions of section 5'' and inserting 
    ``(a) The provisions of section 5''; and
        (2) by adding at the end the following:
    ``(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) Explanation of Exemption.--Section 4 of the Securities Act of 
1933 (15 U.S.C. 77d) is amended--
        (1) by striking ``The provisions of section 5'' and inserting 
    ``(a) The provisions of section 5''; and
        (2) by adding at the end the following:
    ``(b)(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.''.

                        TITLE III--CROWDFUNDING

    SEC. 301. SHORT TITLE.
    This title may be cited as the ``Capital Raising Online While 
Deterring Fraud and Unethical Non-Disclosure Act of 2012'' or the 
``CROWDFUND Act''.
    SEC. 302. CROWDFUNDING EXEMPTION.
    (a) Securities Act of 1933.--Section 4 of the Securities Act of 
1933 (15 U.S.C. 77d) is amended by adding at the end the following:
        ``(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 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).''.
    (b) Requirements To Qualify for Crowdfunding Exemption.--The 
Securities Act of 1933 (15 U.S.C. 77a et seq.) is amended by inserting 
after section 4 the following:
  ``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 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.''.
    (c) Rulemaking.--Not later than 270 days after the date of 
enactment of this Act, the Securities and Exchange Commission (in this 
title referred to as the ``Commission'') shall issue such rules as the 
Commission determines may be necessary or appropriate for the 
protection of investors to carry out sections 4(6) and section 4A of 
the Securities Act of 1933, as added by this title. In carrying out 
this section, the Commission shall consult with any securities 
commission (or any agency or office performing like functions) of the 
States, any territory of the United States, and the District of 
Columbia, which seeks to consult with the Commission, and with any 
applicable national securities association.
    (d) Disqualification.--
        (1) In general.--Not later than 270 days after the date of 
    enactment of this Act, the Commission shall, by rule, establish 
    disqualification provisions under which--
            (A) an issuer shall not be eligible to offer securities 
        pursuant to section 4(6) of the Securities Act of 1933, as 
        added by this title; and
            (B) a broker or funding portal shall not be eligible to 
        effect or participate in transactions pursuant to that section 
        4(6).
        (2) Inclusions.--Disqualification provisions required by this 
    subsection shall--
            (A) be substantially similar to the provisions of section 
        230.262 of title 17, Code of Federal Regulations (or any 
        successor thereto); and
            (B) disqualify any offering or sale of securities by a 
        person that--
                (i) is subject to a final order of a State securities 
            commission (or an agency or officer of a State performing 
            like functions), a State authority that supervises or 
            examines banks, savings associations, or credit unions, a 
            State insurance commission (or an agency or officer of a 
            State performing like functions), an appropriate Federal 
            banking agency, or the National Credit Union 
            Administration, that--

                    (I) bars the person from--

                        (aa) association with an entity regulated by 
                    such commission, authority, agency, or officer;
                        (bb) engaging in the business of securities, 
                    insurance, or banking; or
                        (cc) engaging in savings association or credit 
                    union activities; or

                    (II) constitutes a final order based on a violation 
                of any law or regulation that prohibits fraudulent, 
                manipulative, or deceptive conduct within the 10-year 
                period ending on the date of the filing of the offer or 
                sale; or

                (ii) has been convicted of any felony or misdemeanor in 
            connection with the purchase or sale of any security or 
            involving the making of any false filing with the 
            Commission.
    SEC. 303. EXCLUSION OF CROWDFUNDING INVESTORS FROM SHAREHOLDER CAP.
    (a) Exemption.--Section 12(g) of the Securities Exchange Act of 
1934 (15 U.S.C. 78l(g)) is amended by adding at the end the following:
        ``(6) Exclusion for persons holding certain securities.--The 
    Commission shall, by rule, exempt, conditionally or 
    unconditionally, securities acquired pursuant to an offering made 
    under section 4(6) of the Securities Act of 1933 from the 
    provisions of this subsection.''.
    (b) Rulemaking.--The Commission shall issue a rule to carry out 
section 12(g)(6) of the Securities Exchange Act of 1934 (15 U.S.C. 
78c), as added by this section, not later than 270 days after the date 
of enactment of this Act.
    SEC. 304. FUNDING PORTAL REGULATION.
    (a) Exemption.--
        (1) In general.--Section 3 of the Securities Exchange Act of 
    1934 (15 U.S.C. 78c) is amended by adding at the end the following:
    ``(h) Limited Exemption for Funding Portals.--
        ``(1) In general.--The Commission shall, by rule, exempt, 
    conditionally or unconditionally, a registered funding portal from 
    the requirement to register as a broker or dealer under section 
    15(a)(1), provided that such funding portal--
            ``(A) remains subject to the examination, enforcement, and 
        other rulemaking authority of the Commission;
            ``(B) is a member of a national securities association 
        registered under section 15A; and
            ``(C) is subject to such other requirements under this 
        title as the Commission determines appropriate under such rule.
        ``(2) National securities association membership.--For purposes 
    of sections 15(b)(8) and 15A, the term `broker or dealer' includes 
    a funding portal and the term `registered broker or dealer' 
    includes a registered funding portal, except to the extent that the 
    Commission, by rule, determines otherwise, provided that a national 
    securities association shall only examine for and enforce against a 
    registered funding portal rules of such national securities 
    association written specifically for registered funding portals.''.
        (2) Rulemaking.--The Commission shall issue a rule to carry out 
    section 3(h) of the Securities Exchange Act of 1934 (15 U.S.C. 
    78c), as added by this subsection, not later than 270 days after 
    the date of enactment of this Act.
    (b) Definition.--Section 3(a) of the Securities Exchange Act of 
1934 (15 U.S.C. 78c(a)) is amended by adding at the end the following:
        ``(80) Funding portal.--The term `funding portal' means any 
    person acting as an intermediary in a transaction involving the 
    offer or sale of securities for the account of others, solely 
    pursuant to section 4(6) of the Securities Act of 1933 (15 U.S.C. 
    77d(6)), that does not--
            ``(A) offer investment advice or recommendations;
            ``(B) solicit purchases, sales, or offers to buy the 
        securities offered or displayed on its website or portal;
            ``(C) compensate employees, agents, or other persons for 
        such solicitation or based on the sale of securities displayed 
        or referenced on its website or portal;
            ``(D) hold, manage, possess, or otherwise handle investor 
        funds or securities; or
            ``(E) engage in such other activities as the Commission, by 
        rule, determines appropriate.''.
    SEC. 305. RELATIONSHIP WITH STATE LAW.
    (a) In General.--Section 18(b)(4) of the Securities Act of 1933 (15 
U.S.C. 77r(b)(4)) is amended--
        (1) by redesignating subparagraphs (C) and (D) as subparagraphs 
    (D) and (E), respectively; and
        (2) by inserting after subparagraph (B) the following:
            ``(C) section 4(6);''.
    (b) Clarification of the Preservation of State Enforcement 
Authority.--
        (1) In general.--The amendments made by subsection (a) relate 
    solely to State registration, documentation, and offering 
    requirements, as described under section 18(a) of Securities Act of 
    1933 (15 U.S.C. 77r(a)), and shall have no impact or limitation on 
    other State authority to take enforcement action with regard to an 
    issuer, funding portal, or any other person or entity using the 
    exemption from registration provided by section 4(6) of that Act.
        (2) Clarification of state jurisdiction over unlawful conduct 
    of funding portals and issuers.--Section 18(c)(1) of the Securities 
    Act of 1933 (15 U.S.C. 77r(c)(1)) is amended by striking ``with 
    respect to fraud or deceit, or unlawful conduct by a broker or 
    dealer, in connection with securities or securities transactions.'' 
    and inserting the following: ``, in connection with securities or 
    securities transactions
            ``(A) with respect to--
                ``(i) fraud or deceit; or
                ``(ii) unlawful conduct by a broker or dealer; and
            ``(B) in connection to a transaction described under 
        section 4(6), with respect to--
                ``(i) fraud or deceit; or
                ``(ii) unlawful conduct by a broker, dealer, funding 
            portal, or issuer.''.
    (c) Notice Filings Permitted.--Section 18(c)(2) of the Securities 
Act of 1933 (15 U.S.C. 77r(c)(2)) is amended by adding at the end the 
following:
            ``(F) Fees not permitted on crowdfunded securities.--
        Notwithstanding subparagraphs (A), (B), and (C), no filing or 
        fee may be required with respect to any security that is a 
        covered security pursuant to subsection (b)(4)(B), or will be 
        such a covered security upon completion of the transaction, 
        except for the securities commission (or any agency or office 
        performing like functions) of the State of the principal place 
        of business of the issuer, or any State in which purchasers of 
        50 percent or greater of the aggregate amount of the issue are 
        residents, provided that for purposes of this subparagraph, the 
        term `State' includes the District of Columbia and the 
        territories of the United States.''.
    (d) Funding Portals.--
        (1) State exemptions and oversight.--Section 15(i) of the 
    Securities Exchange Act of 1934 (15 U.S.C. 78o(i)) is amended--
            (A) by redesignating paragraphs (2) and (3) as paragraphs 
        (3) and (4), respectively; and
            (B) by inserting after paragraph (1) the following:
        ``(2) Funding portals.--
            ``(A) Limitation on state laws.--Except as provided in 
        subparagraph (B), no State or political subdivision thereof may 
        enforce any law, rule, regulation, or other administrative 
        action against a registered funding portal with respect to its 
        business as such.
            ``(B) Examination and enforcement authority.--Subparagraph 
        (A) does not apply with respect to the examination and 
        enforcement of any law, rule, regulation, or administrative 
        action of a State or political subdivision thereof in which the 
        principal place of business of a registered funding portal is 
        located, provided that such law, rule, regulation, or 
        administrative action is not in addition to or different from 
        the requirements for registered funding portals established by 
        the Commission.
            ``(C) Definition.--For purposes of this paragraph, the term 
        `State' includes the District of Columbia and the territories 
        of the United States.''.
        (2) State fraud authority.--Section 18(c)(1) of the Securities 
    Act of 1933 (15 U.S.C. 77r(c)(1)) is amended by striking ``or 
    dealer'' and inserting ``, dealer, or funding portal''.

               TITLE IV--SMALL COMPANY CAPITAL FORMATION

    SEC. 401. AUTHORITY TO EXEMPT CERTAIN SECURITIES.
    (a) In General.--Section 3(b) of the Securities Act of 1933 (15 
U.S.C. 77c(b)) is amended--
        (1) by striking ``(b) The Commission'' and inserting the 
    following:
    ``(b) Additional Exemptions.--
        ``(1) Small issues exemptive authority.--The Commission''; and
        (2) by adding at the end the following:
        ``(2) Additional issues.--The Commission shall by rule or 
    regulation add a class of securities to the securities exempted 
    pursuant to this section in accordance with the following terms and 
    conditions:
            ``(A) The aggregate offering amount of all securities 
        offered and sold within the prior 12-month period in reliance 
        on the exemption added in accordance with this paragraph shall 
        not exceed $50,000,000.
            ``(B) The securities may be offered and sold publicly.
            ``(C) The securities shall not be restricted securities 
        within the meaning of the Federal securities laws and the 
        regulations promulgated thereunder.
            ``(D) The civil liability provision in section 12(a)(2) 
        shall apply to any person offering or selling such securities.
            ``(E) The issuer may solicit interest in the offering prior 
        to filing any offering statement, on such terms and conditions 
        as the Commission may prescribe in the public interest or for 
        the protection of investors.
            ``(F) The Commission shall require the issuer to file 
        audited financial statements with the Commission annually.
            ``(G) Such other terms, conditions, or requirements as the 
        Commission may determine necessary in the public interest and 
        for the protection of investors, which may include--
                ``(i) a requirement that the issuer prepare and 
            electronically file with the Commission and distribute to 
            prospective investors an offering statement, and any 
            related documents, in such form and with such content as 
            prescribed by the Commission, including audited financial 
            statements, a description of the issuer's business 
            operations, its financial condition, its corporate 
            governance principles, its use of investor funds, and other 
            appropriate matters; and
                ``(ii) disqualification provisions under which the 
            exemption shall not be available to the issuer or its 
            predecessors, affiliates, officers, directors, 
            underwriters, or other related persons, which shall be 
            substantially similar to the disqualification provisions 
            contained in the regulations adopted in accordance with 
            section 926 of the Dodd-Frank Wall Street Reform and 
            Consumer Protection Act (15 U.S.C. 77d note).
        ``(3) Limitation.--Only the following types of securities may 
    be exempted under a rule or regulation adopted pursuant to 
    paragraph (2): equity securities, debt securities, and debt 
    securities convertible or exchangeable to equity interests, 
    including any guarantees of such securities.
        ``(4) Periodic disclosures.--Upon such terms and conditions as 
    the Commission determines necessary in the public interest and for 
    the protection of investors, the Commission by rule or regulation 
    may require an issuer of a class of securities exempted under 
    paragraph (2) to make available to investors and file with the 
    Commission periodic disclosures regarding the issuer, its business 
    operations, its financial condition, its corporate governance 
    principles, its use of investor funds, and other appropriate 
    matters, and also may provide for the suspension and termination of 
    such a requirement with respect to that issuer.
        ``(5) Adjustment.--Not later than 2 years after the date of 
    enactment of the Small Company Capital Formation Act of 2011 and 
    every 2 years thereafter, the Commission shall review the offering 
    amount limitation described in paragraph (2)(A) and shall increase 
    such amount as the Commission determines appropriate. If the 
    Commission determines not to increase such amount, it shall report 
    to the Committee on Financial Services of the House of 
    Representatives and the Committee on Banking, Housing, and Urban 
    Affairs of the Senate on its reasons for not increasing the 
    amount.''.
    (b) Treatment as Covered Securities for Purposes of NSMIA.--Section 
18(b)(4) of the Securities Act of 1933 (as amended by section 303) (15 
U.S.C. 77r(b)(4)) is further amended by inserting after subparagraph 
(C) (as added by such section) the following:
            ``(D) a rule or regulation adopted pursuant to section 
        3(b)(2) and such security is--
                ``(i) offered or sold on a national securities 
            exchange; or
                ``(ii) offered or sold to a qualified purchaser, as 
            defined by the Commission pursuant to paragraph (3) with 
            respect to that purchase or sale;''.
    (c) Conforming Amendment.--Section 4(5) of the Securities Act of 
1933 is amended by striking ``section 3(b)'' and inserting ``section 
3(b)(1)''.
    SEC. 402. STUDY ON THE IMPACT OF STATE BLUE SKY LAWS ON REGULATION 
      A OFFERINGS.
    The Comptroller General shall conduct a study on the impact of 
State laws regulating securities offerings, or ``Blue Sky laws'', on 
offerings made under Regulation A (17 CFR 230.251 et seq.). The 
Comptroller General shall transmit a report on the findings of the 
study to the Committee on Financial Services of the House of 
Representatives, and the Committee on Banking, Housing, and Urban 
Affairs of the Senate not later than 3 months after the date of 
enactment of this Act.

            TITLE V--PRIVATE COMPANY FLEXIBILITY AND GROWTH

    SEC. 501. THRESHOLD FOR REGISTRATION.
    Section 12(g)(1)(A) of the Securities Exchange Act of 1934 (15 
U.S.C. 78l(g)(1)(A)) is amended to read as follows:
        ``(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''.
    SEC. 502. EMPLOYEES.
    Section 12(g)(5) of the Securities Exchange Act of 1934 (15 U.S.C. 
78l(g)(5)), as amended by section 302, is amended in subparagraph (A) 
by adding at the end the following: ``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.''.
    SEC. 503. COMMISSION RULEMAKING.
    The Securities and Exchange Commission shall revise the definition 
of ``held of record'' pursuant to section 12(g)(5) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78l(g)(5)) to implement the amendment 
made by section 502. The Commission shall also adopt safe harbor 
provisions that issuers can follow when determining whether holders of 
their securities received the securities pursuant to an employee 
compensation plan in transactions that were exempt from the 
registration requirements of section 5 of the Securities Act of 1933.
    SEC. 504. COMMISSION STUDY OF ENFORCEMENT AUTHORITY UNDER RULE 
      12G5-1.
    The Securities and Exchange Commission shall examine its authority 
to enforce Rule 12g5-1 to determine if new enforcement tools are needed 
to enforce the anti-evasion provision contained in subsection (b)(3) of 
the rule, and shall, not later than 120 days after the date of 
enactment of this Act transmit its recommendations to Congress.

                      TITLE VI--CAPITAL EXPANSION

    SEC. 601. SHAREHOLDER THRESHOLD FOR REGISTRATION.
    (a) Amendments to Section 12 of the Securities Exchange Act of 
1934.--Section 12(g) of the Securities Exchange Act of 1934 (15 U.S.C. 
78l(g)) is further amended--
        (1) in paragraph (1), by amending subparagraph (B) to read as 
    follows:
        ``(B) in the case of an issuer that is a bank 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,''; and
        (2) in paragraph (4), by striking ``three hundred'' and 
    inserting ``300 persons, or, in the case of a bank 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''.
    (b) Amendments to Section 15 of the Securities Exchange Act of 
1934.--Section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 
78o(d)) is amended, in the third sentence, by striking ``three 
hundred'' and inserting ``300 persons, or, in the case of bank 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''.
    SEC. 602. RULEMAKING.
    Not later than 1 year after the date of enactment of this Act, the 
Securities and Exchange Commission shall issue final regulations to 
implement this title and the amendments made by this title.

               TITLE VII--OUTREACH ON CHANGES TO THE LAW

    SEC. 701. OUTREACH BY THE COMMISSION.
    The Securities and Exchange Commission shall provide online 
information and conduct outreach to inform small and medium sized 
businesses, women owned businesses, veteran owned businesses, and 
minority owned businesses of the changes made by this Act.

                               Speaker of the House of Representatives.

                            Vice President of the United States and    
                                               President of the Senate.