JUMPSTART OUR BUSINESS STARTUPS ACT

PUBLIC LAW 112–106—APR. 5, 2012

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126 STAT. 306 PUBLIC LAW 112–106—APR. 5, 2012

Public Law 112–106

112th Congress

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.

Jumpstart Our

Business

Startups Act.

15 USC 78a note.

Apr. 5, 2012

[H.R. 3606]

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126 STAT. 307 PUBLIC LAW 112–106—APR. 5, 2012

TITLE I—REOPENING AMERICAN CAP-

ITAL MARKETS TO EMERGING

GROWTH COMPANIES

SEC. 101. DEFINITIONS.

(a) S

ECURITIES

CT 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 Con-

sumer 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 fol-

lowing 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) S

ECURITIES

XCHANGE

CT 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) E

MERGING 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—

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126 STAT. 308 PUBLIC LAW 112–106—APR. 5, 2012

‘‘(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 fol-

lowing 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.’’.

THER

EFINITIONS

.—As used in this title, the following

definitions shall apply:

(1) C

OMMISSION

.—The term ‘‘Commission’’ means the Secu-

rities and Exchange Commission.

(2) I

NITIAL 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 registra-

tion statement under the Securities Act of 1933.

(d) E

FFECTIVE

ATE

.—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) E

XECUTIVE

OMPENSATION

.—

(1) E

XEMPTION

.—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) I

N GENERAL

.—The Commission may’’;

(B) by striking ‘‘an issuer’’ and inserting ‘‘any other

issuer’’; and

‘‘(2) T

REATMENT OF EMERGING GROWTH COMPANIES

.—

‘‘(A) I

N GENERAL

.—An emerging growth company shall

be exempt from the requirements of subsections (a) and

(b).

‘‘(B) C

OMPLIANCE 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

Time period.

15 USC 77b note.

Applicability.

15 USC 78c note.

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126 STAT. 309 PUBLIC LAW 112–106—APR. 5, 2012

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) P

ROXIES

.—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) C

OMPENSATION 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) F

INANCIAL

ISCLOSURES AND

CCOUNTING

RONOUNCE

MENTS

.—

(1) S

ECURITIES 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) I

NFORMATION

EQUIRED IN

EGISTRATION

TATEMENT

.—

‘‘(1) I

N GENERAL

.—The registration’’; and

(B) by adding at the end the following:

‘‘(2) T

REATMENT 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 effec-

tive, 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 sec-

tion 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) S

ECURITIES 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 registra-

tion 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

15 USC 78l note.

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126 STAT. 310 PUBLIC LAW 112–106—APR. 5, 2012

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.’’.

THER

ISCLOSURES

.—An emerging growth company may

comply with section 229.303(a) of title 17, Code of Federal Regula-

tions, 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) T

RANSITION PERIOD FOR EMERGING GROWTH COMPA

NIES

.—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 addi-

tional 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) P

ROVISION OF

ESEARCH

.—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

Definition.

Determination.

15 USC 77g note.

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126 STAT. 311 PUBLIC LAW 112–106—APR. 5, 2012

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 suffi-

cient upon which to base an investment decision.’’.

(b) S

ECURITIES

NALYST

OMMUNICATIONS

.—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) L

IMITATION

.—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 securi-

ties 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.’’.

XPANDING

ERMISSIBLE

OMMUNICATIONS

.—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) L

IMITATION

.—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) P

OST

FFERING

OMMUNICATIONS

.—Neither the Commis-

sion 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 expira-

tion 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.

15 USC 78o–6

note.

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126 STAT. 312 PUBLIC LAW 112–106—APR. 5, 2012

SEC. 106. OTHER MATTERS.

(a) D

RAFT

EGISTRATION

TATEMENTS

.—Section 6 of the Securi-

ties Act of 1933 (15 U.S.C. 77f) is amended by adding at the

end the following:

‘‘(e) E

MERGING

ROWTH

OMPANIES

.—

‘‘(1) I

N GENERAL

.—Any emerging growth company, prior

to its initial public offering date, may confidentially submit

to the Commission a draft registration statement, for confiden-

tial 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) C

ONFIDENTIALITY

.—Notwithstanding any other provi-

sion of this title, the Commission shall not be compelled to

disclose any information provided to or obtained by the Commis-

sion pursuant to this subsection. For purposes of section 552

of title 5, United States Code, this subsection shall be consid-

ered 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 informa-

tion for purposes of section 24(b)(2) of the Securities Exchange

Act of 1934.’’.

(b) T

ICK

IZE

.—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) T

ICK SIZE

.—

‘‘(A) S

TUDY AND REPORT

.—The Commission shall con-

duct 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) D

ESIGNATION

.—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) I

ENERAL

.—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

15 USC 78c note.

Determination.

Deadline.

Public

information.

Deadline.

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126 STAT. 313 PUBLIC LAW 112–106—APR. 5, 2012

forgo such exemption and instead comply with the requirements

that apply to an issuer that is not an emerging growth company.

(b) S

PECIAL

ULE

.—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 stand-

ards 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) R

EVIEW

.—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) R

EPORT

.—Not later than 180 days after the date of enact-

ment 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) M

ODIFICATION OF

ULES

.—

(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

Deadlines.

15 USC 77d note.

Notification.

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126 STAT. 314 PUBLIC LAW 112–106—APR. 5, 2012

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 institu-

tional buyer.

(b) C

ONSISTENCY IN

NTERPRETATION

.—Section 4 of the Securi-

ties 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.’’.

XPLANATION OF

XEMPTION

.—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 solicita-

tions, general advertisements, or similar or related activi-

ties 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 secu-

rities.

‘‘(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 pur-

chase 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 disqualifica-

tion as defined in section 3(a)(39) of this title and does not

Applicability.

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126 STAT. 315 PUBLIC LAW 112–106—APR. 5, 2012

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 compensa-

tion, investment advice or recommendations to issuers or inves-

tors; and

‘‘(B) the provision of standardized documents to the issuers

and investors, so long as such person or entity does not nego-

tiate 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) S

ECURITIES

CT 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 max-

imum 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 sec-

tion 4A(b).’’.

(b) R

EQUIREMENTS

UALIFY FOR

ROWDFUNDING

XEMP

TION

.—The Securities Act of 1933 (15 U.S.C. 77a et seq.) is amended

by inserting after section 4 the following:

Capital Raising

Online While

Deterring Fraud

and Unethical

Non-Disclosure

Act of 2012.

15 USC 77a note.

Definition.

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126 STAT. 316 PUBLIC LAW 112–106—APR. 5, 2012

‘‘SEC. 4A. REQUIREMENTS WITH RESPECT TO CERTAIN SMALL TRANS-

ACTIONS.

‘‘(a) R

EQUIREMENTS ON

NTERMEDIARIES

.—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 organiza-

tion (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 Commis-

sion shall, by rule, determine appropriate;

‘‘(4) ensure that each investor—

‘‘(A) reviews investor-education information, in accord-

ance 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 invest-

ment, 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 Commis-

sion 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 inves-

tors 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 appro-

priate, 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, deter-

mine appropriate;

Confidentiality.

Time period.

Deadline.

Regulations.

15 USC 77d–1.

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126 STAT. 317 PUBLIC LAW 112–106—APR. 5, 2012

‘‘(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 func-

tion) 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) R

EQUIREMENTS FOR

SSUERS

.—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 pre-

ceding 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 oppor-

tunity to rescind the commitment to purchase the securi-

ties;

Time period.

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126 STAT. 318 PUBLIC LAW 112–106—APR. 5, 2012

‘‘(H) a description of the ownership and capital struc-

ture 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 securi-

ties 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 commu-

nication channels provided by a broker or funding portal, with-

out 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 Commis-

sion may, by rule, prescribe, for the protection of investors

and in the public interest.

‘‘(c) L

IABILITY FOR

ATERIAL

ISSTATEMENTS AND

MISSIONS

.—

‘‘(1) A

CTIONS AUTHORIZED

.—

‘‘(A) I

N 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.

Deadline.

Reports.

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126 STAT. 319 PUBLIC LAW 112–106—APR. 5, 2012

‘‘(B) L

IABILITY

.—An action brought under this para-

graph 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) A

PPLICABILITY

.—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 cir-

cumstances 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) D

EFINITION

.—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, prin-

cipal 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) I

NFORMATION

VAILABLE TO

TATES

.—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) R

ESTRICTIONS ON

ALES

.—Securities issued pursuant to

a transaction described in section 4(6)—

‘‘(1) may not be transferred by the purchaser of such securi-

ties 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 Commis-

sion; 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) A

PPLICABILITY

.—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;

Time period.

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126 STAT. 320 PUBLIC LAW 112–106—APR. 5, 2012

‘‘(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) R

ULE OF

ONSTRUCTION

.—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) C

ERTAIN

ALCULATIONS

.—

‘‘(1) D

OLLAR AMOUNTS

.—Dollar amounts in section 4(6) and

subsection (b) of this section shall be adjusted by the Commis-

sion 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) I

NCOME 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.’’.

ULEMAKING

.—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 appro-

priate 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) D

ISQUALIFICATION

.—

(1) I

N GENERAL

.—Not later than 270 days after the date

of enactment of this Act, the Commission shall, by rule, estab-

lish 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) I

NCLUSIONS

.—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 per-

forming like functions), a State authority that super-

vises or examines banks, savings associations, or credit

unions, a State insurance commission (or an agency

Deadline.

15 USC 77d note.

Consultation.

Deadline.

15 USC 77d note.

Time period.

Notice.

Federal Register,

publication.

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126 STAT. 321 PUBLIC LAW 112–106—APR. 5, 2012

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 viola-

tion of any law or regulation that prohibits fraudu-

lent, 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 mis-

demeanor 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 SHARE-

HOLDER CAP.

(a) E

XEMPTION

.—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) E

XCLUSION FOR PERSONS HOLDING CERTAIN SECURI

TIES

.—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) R

ULEMAKING

.—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) E

XEMPTION

.—

(1) I

N 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) L

IMITED

XEMPTION FOR

UNDING

ORTALS

.—

‘‘(1) I

N 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) N

ATIONAL 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,

Definition.

15 USC 78l note.

Regulations.

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126 STAT. 322 PUBLIC LAW 112–106—APR. 5, 2012

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) R

ULEMAKING

.—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) D

EFINITION

.—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) F

UNDING 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 securi-

ties 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 dis-

played 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) I

ENERAL

.—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 subpara-

graphs (D) and (E), respectively; and

(2) by inserting after subparagraph (B) the following:

‘‘(C) section 4(6);’’.

(b) C

LARIFICATION OF THE

RESERVATION OF

TATE

NFORCE

MENT

UTHORITY

.—

(1) I

N GENERAL

.—The amendments made by subsection

(a) relate solely to State registration, documentation, and

offering requirements, as described under section 18(a) of Secu-

rities 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) C

LARIFICATION 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

15 USC 77r note.

Deadline.

15 USC 78c note.

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126 STAT. 323 PUBLIC LAW 112–106—APR. 5, 2012

‘‘(ii) unlawful conduct by a broker, dealer, funding

portal, or issuer.’’.

OTICE

ILINGS

ERMITTED

.—Section 18(c)(2) of the Securi-

ties Act of 1933 (15 U.S.C. 77r(c)(2)) is amended by adding at

the end the following:

‘‘(F) F

EES NOT PERMITTED ON CROWDFUNDED SECURI

TIES

.—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) F

UNDING

ORTALS

.—

(1) S

TATE 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 para-

graphs (3) and (4), respectively; and

(B) by inserting after paragraph (1) the following:

‘‘(2) F

UNDING PORTALS

.—

‘‘(A) L

IMITATION 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) E

XAMINATION AND ENFORCEMENT AUTHORITY

.—

Subparagraph (A) does not apply with respect to the exam-

ination 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 reg-

istered 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) D

EFINITION

.—For purposes of this paragraph, the

term ‘State’ includes the District of Columbia and the terri-

tories of the United States.’’.

(2) S

TATE FRAUD AUTHORITY

.—Section 18(c)(1) of the Securi-

ties 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) I

ENERAL

.—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) A

DDITIONAL

XEMPTIONS

.—

Definition.

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126 STAT. 324 PUBLIC LAW 112–106—APR. 5, 2012

‘‘(1) S

MALL ISSUES EXEMPTIVE AUTHORITY

.—The Commis-

sion’’; and

(2) by adding at the end the following:

‘‘(2) A

DDITIONAL 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 reli-

ance on the exemption added in accordance with this para-

graph 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 busi-

ness 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, under-

writers, 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) L

IMITATION

.—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) P

ERIODIC DISCLOSURES

.—Upon such terms and condi-

tions 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 securi-

ties exempted under paragraph (2) to make available to inves-

tors and file with the Commission periodic disclosures regarding

the issuer, its business operations, its financial condition, its

Records.

Applicability.

Time period.

Regulations.

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126 STAT. 325 PUBLIC LAW 112–106—APR. 5, 2012

corporate governance principles, its use of investor funds, and

other appropriate matters, and also may provide for the suspen-

sion and termination of such a requirement with respect to

that issuer.

‘‘(5) A

DJUSTMENT

.—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 deter-

mines 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) T

REATMENT AS

OVERED

ECURITIES FOR

URPOSES 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;’’.

ONFORMING

MENDMENT

.—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 REGU-

LATION 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’’.

Time period.

Reports.

Deadline.

15 USC 77d.

Deadlines.

Review.

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126 STAT. 326 PUBLIC LAW 112–106—APR. 5, 2012

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 subpara-

graph (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 defi-

nition of ‘‘held of record’’ pursuant to section 12(g)(5) of the Securi-

ties 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) A

MENDMENTS TO

ECTION

OF THE

ECURITIES

XCHANGE

CT 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) A

MENDMENTS TO

ECTION

OF THE

ECURITIES

XCHANGE

CT 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

Deadline.

Recommenda-

tions.

15 USC 78l note.

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126 STAT. 327 PUBLIC LAW 112–106—APR. 5, 2012

LEGISLATIVE HISTORY—H.R. 3606:

HOUSE REPORTS: No. 112–406 and Pt. 2 (Comm. on Financial Services).

CONGRESSIONAL RECORD, Vol. 158 (2012):

Mar. 7, 8, considered and passed House.

Mar. 15, 19–22, considered and passed Senate, amended.

Mar. 27, House concurred in Senate amendment.

DAILY COMPILATION OF PRESIDENTIAL DOCUMENTS (2012):

Apr. 5, Presidential remarks.

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.

Approved April 5, 2012.

Web posting.

Small business.

Women.

Veterans.

Minorities.

15 USC 78d note.

Deadline.

15 USC 78l note.

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