[House Report 112-265]
[From the U.S. Government Publishing Office]
112th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 112-265
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PROVIDING FOR CONSIDERATION OF THE BILL (H.R. 2930) TO AMEND THE
SECURITIES LAWS TO PROVIDE FOR REGISTRATION EXEMPTIONS FOR CERTAIN
CROWDFUNDED SECURITIES, AND FOR OTHER PURPOSES, AND PROVIDING FOR
CONSIDERATION OF THE BILL (H.R. 2940) TO DIRECT THE SECURITIES AND
EXCHANGE COMMISSION TO ELIMINATE THE PROHIBITION AGAINST GENERAL
SOLICITATION AS A REQUIREMENT FOR A CERTAIN EXEMPTION UNDER REGULATION
D
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November 2, 2011.--Referred to the House Calendar and ordered to be
printed
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Mr. Sessions, from the Committee on Rules, submitted the following
R E P O R T
[To accompany H. Res. 453]
The Committee on Rules, having had under consideration
House Resolution 453, by a nonrecord vote, report the same to
the House with the recommendation that the resolution be
adopted.
SUMMARY OF PROVISIONS OF THE RESOLUTION
The resolution provides for consideration of H.R. 2930, the
Entrepreneur Access to Capital Act, under a structured rule.
The resolution provides one hour of general debate equally
divided and controlled by the chair and ranking minority member
of the Committee on Financial Services. The resolution waives
all points of order against consideration of the bill. The
resolution provides that the amendment in the nature of a
substitute recommended by the Committee on Financial Services
now printed in the bill shall be considered as original text
for the purpose of amendment and shall be considered as read.
The resolution waives all points of order against the committee
amendment in the nature of a substitute. The resolution makes
in order only those further amendments to H.R. 2930 printed in
part A of this report. Each such amendment may be offered only
in the order printed in this report, may be offered only by a
Member designated in this report, shall be considered as read,
shall be debatable for the time specified in this report
equally divided and controlled by the proponent and an
opponent, shall not be subject to amendment, and shall not be
subject to a demand for division of the question in the House
or in the Committee of the Whole. The resolution waives all
points of order against the amendments printed in part A of
this report. The resolution provides one motion to recommit
H.R. 2930 with or without instructions.
The resolution further provides for consideration of H.R.
2940, the Access to Capital for Job Creators Act, under a
structured rule. The resolution provides one hour of debate
equally divided and controlled by the chair and ranking
minority member of the Committee on Financial Services. The
resolution waives all points of order against consideration of
the bill. The resolution provides that the amendment in the
nature of a substitute recommended by the Committee on
Financial Services now printed in the bill shall be considered
as adopted, and the bill, as amended, shall be considered as
read. The resolution waives all points of order against the
provisions in the bill, as amended. The resolution makes in
order the further amendment to H.R. 2940 printed in part B of
this report, if offered by Representative Miller of North
Carolina or his designee, which shall be considered as read and
shall be separately debatable for 10 minutes equally divided
and controlled by the proponent and an opponent. The resolution
waives all points of order against the amendment printed in
part B of this report. Finally, the resolution provides one
motion to recommit H.R. 2940 with or without instructions.
EXPLANATION OF WAIVERS
The waiver of all points of order against consideration of
H.R. 2930 includes a technical waiver of clause 2(h) of rule
XI, which prohibits a committee from improperly reporting a
measure without a quorum present. The Committee on Financial
Services did not formally order the measure reported because
the chair did not properly put the question on reporting the
measure to the committee.
Although the rule waives all points of order against the
committee amendment in the nature of a substitute, the
Committee is not aware of any points of order. The waiver is
prophylactic in nature.
Although the rule waives all points of order against the
amendments printed in part A of this report, the Committee is
not aware of any points of order. The waiver is prophylactic in
nature.
Although the rule waives all points of order against
consideration of H.R. 2940, the Committee is not aware of any
points of order. The waiver is prophylactic in nature.
Although the rule waives all points of order against
provisions in the bill, as amended, the Committee is not aware
of any points of order. The waiver is prophylactic in nature.
Although the rule waives all points of order against the
amendment printed in part B of this report, the Committee is
not aware of any points of order. The waiver is prophylactic in
nature.
COMMITTEE VOTES
The results of each record vote on an amendment or motion
to report, together with the names of those voting for and
against, are printed below:
Rules Committee record vote No. 145
Motion by Mr. McGovern to report an open rule for both H.R.
2930 and H.R. 2940. Defeated: 3-7.
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Majority Members Vote Minority Members Vote
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Mr. Sessions.................................... Nay Mr. McGovern...................... Yea
Ms. Foxx........................................ Nay Mr. Hastings of Florida........... Yea
Mr. Bishop of Utah.............................. Nay Mr. Polis......................... Yea
Mr. Nugent...................................... Nay
Mr. Scott of South Carolina..................... Nay
Mr. Webster..................................... Nay
Mr. Dreier, Chairman............................ Nay
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SUMMARY OF AMENDMENTS IN PART A MADE IN ORDER
1. McHenry (NC): Would make technical corrections. Would
also require the issuer to state a target offering amount and a
deadline to reach the target offering amount. Would require
that the Securities and Exchange Commission is provided a
notice upon completion of the offering, which shall include the
aggregate offering amount and the number of purchasers. Would
clarify the disqualification provision to ensure that both
issuers and intermediaries, as well as their predecessors,
affiliates, officers, directors, or persons fulfilling similar
roles, are disqualified from the exemption established in this
bill should they have a history of committing securities fraud.
(10 minutes)
2. Fincher (TN), Sherman (CA): Would index to inflation the
$1 million and $2 million aggregate annual amounts raised
through the issue of the securities as authorized in the bill.
The index for inflation would be measured by the annual change
in the Consumer Price Index for All Urban Consumers published
by the Bureau of Labor Statistics. (10 minutes)
3. Quayle (AZ): Would index the $10,000 individual
investment cap to inflation. (10 minutes)
4. Velazquez (NY): Would require crowdfunding
intermediaries to disclose their method of compensation to
potential investors. (10 minutes)
5. Barrow (GA): Would require the Commission to establish a
website that provides the public with crowdfunding website
safety tips for investing in securities described under section
4(6). (10 minutes)
6. Perlmutter (CO), McHenry (NC): Would preserve a state's
right to enforce securities laws with respect to fraud, deceit
or unlawful conduct. (10 minutes)
SUMMARY OF AMENDMENT IN PART B MADE IN ORDER
Miller, Brad (NC): Would require disclosure of bonus
compensation structures and ``golden parachute'' arrangements
in advertising materials associated with an exempted offering.
(10 minutes)
PART A--TEXT OF AMENDMENTS MADE IN ORDER
1. An Amendment To Be Offered by Representative McHenry of North
Carolina or His Designee, Debatable for 10 Minutes
Page 5, line 5, strike ``issuance'' and insert ``offer or
sale''.
Page 5, line 6, strike ``for which'' and insert ``by an
issuer, provided that''.
Page 5, beginning on line 7, strike ``annual amount raised
through the issue of the securities'' and insert ``amount sold
within the previous 12-month period in reliance upon this
exemption''.
Page 5, beginning on line 13, strike ``individual investments
in the securities are limited to an aggregate annual amount
equal to'' and insert ``the aggregate amount sold to any
investor in reliance on this exemption within the previous 12-
month period does not exceed''.
Page 5, line 17, strike ``the'' and insert ``such''.
Page 6, line 8, strike ``issuance'' and insert ``offer or
sale''.
Page 6, line 12, after ``website'' insert ``used for the
offer and sale of such securities''.
Page 6, line 24, strike ``person'' and insert
``intermediary''.
Page 7, line 4, strike ``competency in''.
Page 7, line 5, strike ``recognition'' and insert ``an
understanding''.
Page 7, line 8, before ``risk'' insert ``an understanding of
the''.
Page 7, line 10, before the semicolon insert ``by rule or
regulation''.
Page 7, strike lines 11 through 15 and insert the following:
``(7) requires the issuer to state a target offering
amount and a deadline to reach the target offering
amount and ensure the third party custodian described
under paragraph (10) withholds offering proceeds until
aggregate capital raised from investors other than the
issuer is no less than 60 percent of the target
offering amount;''.
Page 7, line 18, strike ``with basic'' and insert ``and
potential investors with''.
Page 7, beginning on line 19, strike ``funds are solicited
from'' and insert ``securities are offered to''.
Page 8, line 2, strike ``capital formation funds'' and insert
``proceeds of the offering''.
Page 8, line 4, before the semicolon insert ``and the
deadline to reach the target offering amount''.
Page 8, beginning on line 6, strike ``traditional broker or
dealer or'' and insert ``broker or dealer registered under
section 15(b)(1) of the Securities Exchange Act of 1934 or
an''.
Page 8, line 13, strike ``and'' and insert after such line
the following:
``(13) provides the Commission with a notice upon
completion of the offering, which shall include the
aggregate offering amount and the number of purchasers;
and''.
Page 8, line 14, strike ``(13)'' and insert ``(14)''.
Page 8, line 17, before ``securities'' insert ``or sells''.
Page 9, line 13, strike ``competency in''.
Page 9, line 14, strike ``recognition'' and insert ``an
understanding''.
Page 9, line 17, before ``risk'' insert ``an understanding of
the''.
Page 9, line 19, before the semicolon insert ``by rule or
regulation''.
Page 9, beginning on line 20, strike ``withholds capital
formation'' and insert ``ensures that the third party custodian
described under paragraph (9) withholds offering''.
Page 10, line 1, strike ``basic''.
Page 10, beginning on line 2, strike ``funds are solicited
from'' and insert ``securities are offered to''.
Page 10, line 5, strike ``capital formation funds'' and
insert ``proceeds of the offering''.
Page 10, line 7, before the semicolon insert ``and the
deadline to reach the target offering amount''.
Page 10, beginning on line 9, strike ``traditional broker or
dealer or'' and insert ``broker or dealer registered under
section 15(b)(1) of the Securities Exchange Act of 1934 or
an''.
Page 10, line 16, strike ``and'' and insert after such line
the following:
``(13) provides the Commission with a notice upon
completion of the offering, which shall include the
aggregate offering amount and the number of purchasers;
and''.
Page 10, line 17, strike ``(13)'' and insert ``(14)''.
Page 10, line 22, strike ``provided by an investor'' and
insert ``as to annual income provided by the person to whom the
securities are sold''.
Page 11, line 1, strike ``(a)(9) and (b)(8)'' and insert
``(a)(9), (a)(13), (b)(8), and (b)(13)''.
Page 11, line 5, strike ``an investor may not sell'' and
insert ``a purchaser may not transfer''.
Page 11, strike lines 11 through 15 and insert the following:
``(1) No registration as broker.--With respect to a
transaction described under section 4(6) involving an
intermediary, such intermediary shall not be required
to register as a broker under section 15(a)(1) of the
Securities Exchange Act of 1934 solely by reason of
participation in such transaction.''.
Page 11, line 21, strike ``90'' and insert ``180''.
Page 12, beginning on line 1, strike ``carry out the cost-
benefit analysis required under section 2(b) of such Act'' and
insert ``consider the costs and benefits of the action''.
Page 12, line 3, strike ``90'' and insert ``180''.
Page 12, line 6, strike ``a person'' and insert ``an
issuer''.
Page 12, beginning on line 8, strike ``or to participate in
the affairs of an intermediary facilitating the use of that
exemption.'' and insert ``based on the disciplinary history of
the issuer or its predecessors, affiliates, officers,
directors, or persons fulfilling similar roles. The Commission
shall also establish disqualification provisions under which an
intermediary shall not be eligible to act as an intermediary in
connection with an offering utilizing the exemption under
section 4(6) of the Securities Act of 1933 based on the
disciplinary history of the intermediary or its predecessors,
affiliates, officers, directors, or persons fulfilling similar
roles.''.
Page 13, beginning on line 1, strike ``the term `held of
record' shall not include holders of securities issued pursuant
to transactions described under section 4(6) of the Securities
Act of 1933.'' and insert ``securities held by persons who
purchase such securities in transactions described under
section 4(6) of the Securities Act of 1933 shall not be deemed
to be `held of record'.''.
----------
2. An Amendment To Be Offered by Representative Fincher of Tennessee or
His Designee, Debatable for 10 Minutes
Page 5, line 9, insert after ``$1,000,000'' the following:
``, as such amount is adjusted by the Commission to reflect the
annual change in the Consumer Price Index for All Urban
Consumers published by the Bureau of Labor Statistics,''.
Page 5, line 12, insert after ``$2,000,000'' the following:
``, as such amount is adjusted by the Commission to reflect the
annual change in the Consumer Price Index for All Urban
Consumers published by the Bureau of Labor Statistics,''.
----------
3. An Amendment To Be Offered by Representative Quayle of Arizona or
His Designee, Debatable for 10 Minutes
Page 5, line 16, insert before the semicolon the following:
``, as such amount is adjusted by the Commission to reflect the
annual change in the Consumer Price Index for All Urban
Consumers published by the Bureau of Labor Statistics''.
----------
4. An Amendment To Be Offered by Representative Velazquez of New York
or Her Designee, Debatable for 10 Minutes
Page 8, line 13, strike ``and''.
Page 8, line 14, strike the period and insert ``; and''.
Page 8, after line 14, insert the following:
``(14) discloses to potential investors the
intermediary's compensation structure for participation
in the security offering.''.
----------
5. An Amendment To Be Offered by Representative Barrow of Georgia or
His Designee, Debatable for 10 Minutes
Page 11, after line 9, insert the following:
``(f) Website for Crowdfunding Investment Safety Tips.--
``(1) In general.--The Commission shall establish a
website that provides the public with safety tips for
investing in securities described under section 4(6).
``(2) Links to website.--The intermediary in a
transaction involving the issuance of securities
described under section 4(6) or, in the case of such
transaction not involving an intermediary, the issuer,
shall place a link to the website described under
paragraph (1) in a prominent location on the main page
of the website of such intermediary or issuer that is
used to facilitate such transaction.''.
Page 11, line 10, strike ``(f)'' and insert ``(g)''.
----------
6. An Amendment To Be Offered by Representative Perlmutter of Colorado
or His Designee, Debatable for 10 Minutes
In section 4, strike ``Section'' and insert the following:
(a) In General.--Section
In section 4, add at the end the following:
(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, intermediary, or any other person or entity
using the exemption from registration provided by
section 4(6) of such Act.
(2) Clarification of state jurisdiction over unlawful
conduct of intermediaries, issuers, and custodians.--
Section 18(c)(1) of the Securities Act of 1933 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,
with respect to--
``(A) fraud or deceit;
``(B) unlawful conduct by a broker or dealer;
and
``(C) with respect to a transaction described
under section 4(6), unlawful conduct by an
intermediary, issuer, or custodian.''.
PART B--TEXT OF AMENDMENT MADE IN ORDER
An Amendment To Be Offered by Representative Miller of North Carolina
or His Designee, Debatable for 10 Minutes
Page 4, line 9, insert before the period the following: ``and
the person offering or selling such securities utilizing the
general advertising or general solicitation permitted by such
rules discloses in any advertising materials connected with
such offering or selling any bonus compensation structures and
`golden parachute' severance packages that the person has
provided to executive officers, directors, or other principals
of the person''.