[Congressional Bills 114th Congress]
[From the U.S. Government Publishing Office]
[H.R. 6427 Received in Senate (RDS)]
<DOC>
114th CONGRESS
2d Session
H. R. 6427
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
December 6, 2016
Received
_______________________________________________________________________
AN ACT
To improve the operation of United States capital markets, and for
other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Creating Financial
Prosperity for Businesses and Investors Act''.
(b) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title; table of contents.
TITLE I--SMALL BUSINESS CAPITAL FORMATION ENHANCEMENT
Sec. 101. Annual review of government-business forum on capital
formation.
TITLE II--SEC SMALL BUSINESS ADVOCATE
Sec. 201. Establishment of Office of the Advocate for Small Business
Capital Formation and Small Business
Capital Formation Advisory Committee.
TITLE III--SUPPORTING AMERICA'S INNOVATORS
Sec. 301. Investor limitation for qualifying venture capital funds.
TITLE IV--FIX CROWDFUNDING
Sec. 401. Crowdfunding vehicles.
Sec. 402. Crowdfunding exemption from registration.
TITLE V--FAIR INVESTMENT OPPORTUNITIES FOR PROFESSIONAL EXPERTS
Sec. 501. Definition of accredited investor.
TITLE VI--U.S. TERRITORIES INVESTOR PROTECTION
Sec. 601. Termination of exemption.
TITLE I--SMALL BUSINESS CAPITAL FORMATION ENHANCEMENT
SEC. 101. ANNUAL REVIEW OF GOVERNMENT-BUSINESS FORUM ON CAPITAL
FORMATION.
Section 503 of the Small Business Investment Incentive Act of 1980
(15 U.S.C. 80c-1) is amended by adding at the end the following:
``(e) The Commission shall--
``(1) review the findings and recommendations of the forum;
and
``(2) each time the forum submits a finding or
recommendation to the Commission, promptly issue a public
statement--
``(A) assessing the finding or recommendation of
the forum; and
``(B) disclosing the action, if any, the Commission
intends to take with respect to the finding or
recommendation.''.
TITLE II--SEC SMALL BUSINESS ADVOCATE
SEC. 201. ESTABLISHMENT OF OFFICE OF THE ADVOCATE FOR SMALL BUSINESS
CAPITAL FORMATION AND SMALL BUSINESS CAPITAL FORMATION
ADVISORY COMMITTEE.
(a) Office of the Advocate for Small Business Capital Formation.--
Section 4 of the Securities Exchange Act of 1934 (15 U.S.C. 78d) is
amended by adding at the end the following:
``(j) Office of the Advocate for Small Business Capital
Formation.--
``(1) Office established.--There is established within the
Commission the Office of the Advocate for Small Business
Capital Formation (hereafter in this subsection referred to as
the `Office').
``(2) Advocate for small business capital formation.--
``(A) In general.--The head of the Office shall be
the Advocate for Small Business Capital Formation, who
shall--
``(i) report directly to the Commission;
and
``(ii) be appointed by the Commission, from
among individuals having experience in
advocating for the interests of small
businesses and encouraging small business
capital formation.
``(B) Compensation.--The annual rate of pay for the
Advocate for Small Business Capital Formation shall be
equal to the highest rate of annual pay for other
senior executives who report directly to the
Commission.
``(C) No current employee of the commission.--An
individual may not be appointed as the Advocate for
Small Business Capital Formation if the individual is
currently employed by the Commission.
``(3) Staff of office.--The Advocate for Small Business
Capital Formation, after consultation with the Commission, may
retain or employ independent counsel, research staff, and
service staff, as the Advocate for Small Business Capital
Formation determines to be necessary to carry out the functions
of the Office.
``(4) Functions of the advocate for small business capital
formation.--The Advocate for Small Business Capital Formation
shall--
``(A) assist small businesses and small business
investors in resolving significant problems such
businesses and investors may have with the Commission
or with self-regulatory organizations;
``(B) identify areas in which small businesses and
small business investors would benefit from changes in
the regulations of the Commission or the rules of self-
regulatory organizations;
``(C) identify problems that small businesses have
with securing access to capital, including any unique
challenges to minority-owned and women-owned small
businesses;
``(D) analyze the potential impact on small
businesses and small business investors of--
``(i) proposed regulations of the
Commission that are likely to have a
significant economic impact on small businesses
and small business capital formation; and
``(ii) proposed rules that are likely to
have a significant economic impact on small
businesses and small business capital formation
of self-regulatory organizations registered
under this title;
``(E) conduct outreach to small businesses and
small business investors, including through regional
roundtables, in order to solicit views on relevant
capital formation issues;
``(F) to the extent practicable, propose to the
Commission changes in the regulations or orders of the
Commission and to Congress any legislative,
administrative, or personnel changes that may be
appropriate to mitigate problems identified under this
paragraph and to promote the interests of small
businesses and small business investors;
``(G) consult with the Investor Advocate on
proposed recommendations made under subparagraph (F);
and
``(H) advise the Investor Advocate on issues
related to small businesses and small business
investors.
``(5) Access to documents.--The Commission shall ensure
that the Advocate for Small Business Capital Formation has full
access to the documents and information of the Commission and
any self-regulatory organization, as necessary to carry out the
functions of the Office.
``(6) Annual report on activities.--
``(A) In general.--Not later than December 31 of
each year after 2016, the Advocate for Small Business
Capital Formation shall submit to the Committee on
Banking, Housing, and Urban Affairs of the Senate and
the Committee on Financial Services of the House of
Representatives a report on the activities of the
Advocate for Small Business Capital Formation during
the immediately preceding fiscal year.
``(B) Contents.--Each report required under
subparagraph (A) shall include--
``(i) appropriate statistical information
and full and substantive analysis;
``(ii) information on steps that the
Advocate for Small Business Capital Formation
has taken during the reporting period to
improve small business services and the
responsiveness of the Commission and self-
regulatory organizations to small business and
small business investor concerns;
``(iii) a summary of the most serious
issues encountered by small businesses and
small business investors, including any unique
issues encountered by minority-owned and women-
owned small businesses and their investors,
during the reporting period;
``(iv) an inventory of the items summarized
under clause (iii) (including items summarized
under such clause for any prior reporting
period on which no action has been taken or
that have not been resolved to the satisfaction
of the Advocate for Small Business Capital
Formation as of the beginning of the reporting
period covered by the report) that includes--
``(I) identification of any action
taken by the Commission or the self-
regulatory organization and the result
of such action;
``(II) the length of time that each
item has remained on such inventory;
and
``(III) for items on which no
action has been taken, the reasons for
inaction, and an identification of any
official who is responsible for such
action;
``(v) recommendations for such changes to
the regulations, guidance and orders of the
Commission and such legislative actions as may
be appropriate to resolve problems with the
Commission and self-regulatory organizations
encountered by small businesses and small
business investors and to encourage small
business capital formation; and
``(vi) any other information, as determined
appropriate by the Advocate for Small Business
Capital Formation.
``(C) Confidentiality.--No report required by
subparagraph (A) may contain confidential information.
``(D) Independence.--Each report required under
subparagraph (A) shall be provided directly to the
committees of Congress listed in such subparagraph
without any prior review or comment from the
Commission, any commissioner, any other officer or
employee of the Commission, or the Office of Management
and Budget.
``(7) Regulations.--The Commission shall establish
procedures requiring a formal response to all recommendations
submitted to the Commission by the Advocate for Small Business
Capital Formation, not later than 3 months after the date of
such submission.
``(8) Government-business forum on small business capital
formation.--The Advocate for Small Business Capital Formation
shall be responsible for planning, organizing, and executing
the annual Government-Business Forum on Small Business Capital
Formation described in section 503 of the Small Business
Investment Incentive Act of 1980 (15 U.S.C. 80c-1).
``(9) Rule of construction.--Nothing in this subsection may
be construed as replacing or reducing the responsibilities of
the Investor Advocate with respect to small business
investors.''.
(b) Small Business Capital Formation Advisory Committee.--Title I
of the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is
amended by adding at the end the following:
``SEC. 40. SMALL BUSINESS CAPITAL FORMATION ADVISORY COMMITTEE.
``(a) Establishment and Purpose.--
``(1) Establishment.--There is established within the
Commission the Small Business Capital Formation Advisory
Committee (hereafter in this section referred to as the
`Committee').
``(2) Functions.--
``(A) In general.--The Committee shall provide the
Commission with advice on the Commission's rules,
regulations, and policies with regard to the
Commission's mission of protecting investors,
maintaining fair, orderly, and efficient markets, and
facilitating capital formation, as such rules,
regulations, and policies relate to--
``(i) capital raising by emerging,
privately held small businesses (`emerging
companies') and publicly traded companies with
less than $250,000,000 in public market
capitalization (`smaller public companies')
through securities offerings, including private
and limited offerings and initial and other
public offerings;
``(ii) trading in the securities of
emerging companies and smaller public
companies; and
``(iii) public reporting and corporate
governance requirements of emerging companies
and smaller public companies.
``(B) Limitation.--The Committee shall not provide
any advice with respect to any policies, practices,
actions, or decisions concerning the Commission's
enforcement program.
``(b) Membership.--
``(1) In general.--The members of the Committee shall be--
``(A) the Advocate for Small Business Capital
Formation;
``(B) not fewer than 10, and not more than 20,
members appointed by the Commission, from among
individuals--
``(i) who represent--
``(I) emerging companies engaging
in private and limited securities
offerings or considering initial public
offerings (`IPO') (including the
companies' officers and directors);
``(II) the professional advisors of
such companies (including attorneys,
accountants, investment bankers, and
financial advisors); and
``(III) the investors in such
companies (including angel investors,
venture capital funds, and family
offices);
``(ii) who are officers or directors of
minority-owned small businesses or women-owned
small businesses;
``(iii) who represent--
``(I) smaller public companies
(including the companies' officers and
directors);
``(II) the professional advisors of
such companies (including attorneys,
auditors, underwriters, and financial
advisors); and
``(III) the pre-IPO and post-IPO
investors in such companies (both
institutional, such as venture capital
funds, and individual, such as angel
investors); and
``(iv) who represent participants in the
marketplace for the securities of emerging
companies and smaller public companies, such as
securities exchanges, alternative trading
systems, analysts, information processors, and
transfer agents; and
``(C) three non-voting members--
``(i) one of whom shall be appointed by the
Investor Advocate;
``(ii) one of whom shall be appointed by
the North American Securities Administrators
Association; and
``(iii) one of whom shall be appointed by
the Administrator of the Small Business
Administration.
``(2) Term.--Each member of the Committee appointed under
subparagraph (B), (C)(ii), or (C)(iii) of paragraph (1) shall
serve for a term of 4 years.
``(3) Members not commission employees.--Members appointed
under subparagraph (B), (C)(ii), or (C)(iii) of paragraph (1)
shall not be treated as employees or agents of the Commission
solely because of membership on the Committee.
``(c) Chairman; Vice Chairman; Secretary; Assistant Secretary.--
``(1) In general.--The members of the Committee shall
elect, from among the members of the Committee--
``(A) a chairman;
``(B) a vice chairman;
``(C) a secretary; and
``(D) an assistant secretary.
``(2) Term.--Each member elected under paragraph (1) shall
serve for a term of 3 years in the capacity for which the
member was elected under paragraph (1).
``(d) Meetings.--
``(1) Frequency of meetings.--The Committee shall meet--
``(A) not less frequently than four times annually,
at the call of the chairman of the Committee; and
``(B) from time to time, at the call of the
Commission.
``(2) Notice.--The chairman of the Committee shall give the
members of the Committee written notice of each meeting, not
later than 2 weeks before the date of the meeting.
``(e) Compensation and Travel Expenses.--Each member of the
Committee who is not a full-time employee of the United States shall--
``(1) be entitled to receive compensation at a rate not to
exceed the daily equivalent of the annual rate of basic pay in
effect for a position at level V of the Executive Schedule
under section 5316 of title 5, United States Code, for each day
during which the member is engaged in the actual performance of
the duties of the Committee; and
``(2) while away from the home or regular place of business
of the member in the performance of services for the Committee,
be allowed travel expenses, including per diem in lieu of
subsistence, in the same manner as persons employed
intermittently in the Government service are allowed expenses
under section 5703 of title 5, United States Code.
``(f) Staff.--The Commission shall make available to the Committee
such staff as the chairman of the Committee determines are necessary to
carry out this section.
``(g) Review by Commission.--The Commission shall--
``(1) review the findings and recommendations of the
Committee; and
``(2) each time the Committee submits a finding or
recommendation to the Commission, promptly issue a public
statement--
``(A) assessing the finding or recommendation of
the Committee; and
``(B) disclosing the action, if any, the Commission
intends to take with respect to the finding or
recommendation.
``(h) Federal Advisory Committee Act.--The Federal Advisory
Committee Act (5 U.S.C. App.) shall not apply with respect to the
Committee and its activities.''.
(c) Annual Government-Business Forum on Small Business Capital
Formation.--Section 503(a) of the Small Business Investment Incentive
Act of 1980 (15 U.S.C. 80c-1(a)) is amended by inserting ``(acting
through the Office of the Advocate for Small Business Capital Formation
and in consultation with the Small Business Capital Formation Advisory
Committee)'' after ``Securities and Exchange Commission''.
TITLE III--SUPPORTING AMERICA'S INNOVATORS
SEC. 301. INVESTOR LIMITATION FOR QUALIFYING VENTURE CAPITAL FUNDS.
Section 3(c)(1) of the Investment Company Act of 1940 (15 U.S.C.
80a-3(c)(1)) is amended--
(1) by inserting after ``one hundred persons'' the
following: ``(or, with respect to a qualifying venture capital
fund, 250 persons)''; and
(2) by adding at the end the following:
``(C) The term `qualifying venture capital fund'
means any venture capital fund (as defined pursuant to
section 203(l)(1) of the Investment Advisers Act of
1940 (15 U.S.C. 80b-3(l)(1)) with no more than
$10,000,000 in invested capital, as such dollar amount
is annually adjusted by the Commission to reflect the
change in the Consumer Price Index for All Urban
Consumers published by the Bureau of Labor Statistics
of the Department of Labor.''.
TITLE IV--FIX CROWDFUNDING
SEC. 401. CROWDFUNDING VEHICLES.
(a) Amendments to the Securities Act of 1933.--The Securities Act
of 1933 (15 U.S.C. 77a et seq.) is amended--
(1) in section 4A(f)(3), by inserting ``by any of
paragraphs (1) through (14) of'' before ``section 3(c)''; and
(2) in section 4(a)(6)(B), by inserting after ``any
investor'' the following: ``, other than a crowdfunding vehicle
(as defined in section 2(a) of the Investment Company Act of
1940),''.
(b) Amendments to the Investment Company Act of 1940.--The
Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.) is amended--
(1) in section 2(a), by adding at the end the following:
``(55) The term `crowdfunding vehicle' means a company--
``(A) whose purpose (as set forth in its
organizational documents) is limited to acquiring,
holding, and disposing securities issued by a single
company in one or more transactions and made pursuant
to section 4(a)(6) of the Securities Act of 1933;
``(B) which issues only one class of securities;
``(C) which receives no compensation in connection
with such acquisition, holding, or disposition of
securities;
``(D) no associated person of which receives any
compensation in connection with such acquisition,
holding or disposition of securities unless such person
is acting as or on behalf of an investment adviser
registered under the Investment Advisers Act of 1940 or
registered as an investment adviser in the State in
which the investment adviser maintains its principal
office and place of business;
``(E) the securities of which have been issued in a
transaction made pursuant to section 4(a)(6) of the
Securities Act of 1933, where both the crowdfunding
vehicle and the company whose securities it holds are
co-issuers;
``(F) which is current in its ongoing disclosure
obligations under Rule 202 of Regulation Crowdfunding
(17 CFR 227.202);
``(G) the company whose securities it holds is
current in its ongoing disclosure obligations under
Rule 202 of Regulation Crowdfunding (17 CFR 227.202);
and
``(H) is advised by an investment adviser
registered under the Investment Advisers Act of 1940 or
registered as an investment adviser in the State in
which the investment adviser maintains its principal
office and place of business.''; and
(2) in section 3(c), by adding at the end the following:
``(15) Any crowdfunding vehicle.''.
SEC. 402. CROWDFUNDING EXEMPTION FROM REGISTRATION.
Section 12(g)(6) of the Securities Exchange Act of 1934 (15 U.S.C.
78l(g)(6)) is amended--
(1) by striking ``The Commission'' and inserting the
following:
``(A) In general.--The Commission'';
(2) by striking ``section 4(6)'' and inserting ``section
4(a)(6)''; and
(3) by adding at the end the following:
``(B) Treatment of securities issued by certain
issuers.--An exemption under subparagraph (A) shall be
unconditional for securities offered by an issuer that
had a public float of less than $75,000,000 as of the
last business day of the issuer's most recently
completed semiannual period, computed by multiplying
the aggregate worldwide number of shares of the
issuer's common equity securities held by non-
affiliates by the price at which such securities were
last sold (or the average bid and asked prices of such
securities) in the principal market for such securities
or, in the event the result of such public float
calculation is zero, had annual revenues of less than
$50,000,000 as of the issuer's most recently completed
fiscal year.''.
TITLE V--FAIR INVESTMENT OPPORTUNITIES FOR PROFESSIONAL EXPERTS
SEC. 501. DEFINITION OF ACCREDITED INVESTOR.
Section 2(a)(15) of the Securities Act of 1933 (15 U.S.C.
77b(a)(15)) is amended--
(1) by redesignating clauses (i) and (ii) as subparagraphs
(A) and (F), respectively; and
(2) in subparagraph (A) (as so redesignated), by striking
``; or'' and inserting a semicolon, and inserting after such
subparagraph the following:
``(B) any natural person whose individual net
worth, or joint net worth with that person's spouse,
exceeds $1,000,000 (which amount, along with the
amounts set forth in subparagraph (C), shall be
adjusted for inflation by the Commission every 5 years
to the nearest $10,000 to reflect the change in the
Consumer Price Index for All Urban Consumers published
by the Bureau of Labor Statistics) where, for purposes
of calculating net worth under this subparagraph--
``(i) the person's primary residence shall
not be included as an asset;
``(ii) indebtedness that is secured by the
person's primary residence, up to the estimated
fair market value of the primary residence at
the time of the sale of securities, shall not
be included as a liability (except that if the
amount of such indebtedness outstanding at the
time of sale of securities exceeds the amount
outstanding 60 days before such time, other
than as a result of the acquisition of the
primary residence, the amount of such excess
shall be included as a liability); and
``(iii) indebtedness that is secured by the
person's primary residence in excess of the
estimated fair market value of the primary
residence at the time of the sale of securities
shall be included as a liability;
``(C) any natural person who had an individual
income in excess of $200,000 in each of the two most
recent years or joint income with that person's spouse
in excess of $300,000 in each of those years and has a
reasonable expectation of reaching the same income
level in the current year;
``(D) any natural person who is currently licensed
or registered as a broker or investment adviser by the
Commission, the Financial Industry Regulatory
Authority, or an equivalent self-regulatory
organization (as defined in section 3(a)(26) of the
Securities Exchange Act of 1934), or the securities
division of a State or the equivalent State division
responsible for licensing or registration of
individuals in connection with securities activities;
``(E) any natural person the Commission determines,
by regulation, to have demonstrable education or job
experience to qualify such person as having
professional knowledge of a subject related to a
particular investment, and whose education or job
experience is verified by the Financial Industry
Regulatory Authority or an equivalent self-regulatory
organization (as defined in section 3(a)(26) of the
Securities Exchange Act of 1934); or''.
TITLE VI--U.S. TERRITORIES INVESTOR PROTECTION
SEC. 601. TERMINATION OF EXEMPTION.
(a) In General.--Section 6(a) of the Investment Company Act of 1940
(15 U.S.C. 80a-6(a)) is amended by striking paragraph (1).
(b) Effective Date and Safe Harbor.--
(1) Effective date.--Except as provided in paragraph (2),
the amendment made by subsection (a) shall take effect on the
date of the enactment of this Act.
(2) Safe harbor.--With respect to a company that is exempt
under section 6(a)(1) of the Investment Company Act of 1940 (15
U.S.C. 80a-6(a)(1)) on the day before the date of the enactment
of this Act, the amendment made by subsection (a) shall take
effect on the date that is 3 years after the date of the
enactment of this Act.
(3) Extension of safe harbor.--The Securities and Exchange
Commission, by rule and regulation upon its own motion, or by
order upon application, may conditionally or unconditionally,
under section 6(c) of the Investment Company Act of 1940 (15
U.S.C. 80a-6(c)), further delay the effective date for a
company described in paragraph (2) for a maximum of 3 years
following the initial 3-year period if, before the end of the
initial 3-year period, the Commission determines that such a
rule, regulation, motion, or order is necessary or appropriate
in the public interest and for the protection of investors.
Passed the House of Representatives December 5, 2016.
Attest:
KAREN L. HAAS,
Clerk.