Fix Crowdfunding Act
Floor Speech
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Mr. GARRETT. Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 4855) to amend provisions in the securities laws relating to regulation crowdfunding to raise the dollar amount limit and to clarify certain requirements and exclusions for funding portals established by such Act, as amended.
The Clerk read the title of the bill.
The text of the bill is as follows: H.R. 4855
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 ``Fix Crowdfunding Act''. SEC. 2. CROWDFUNDING VEHICLES.
(a) Amendments to the Securities Act of 1933.--The Securities Act of 1933 (15 U.S.C. 77a et seq.) is amended--
(1) in section 4A(f)(3), by inserting ``by any of paragraphs (1) through (14) of'' before ``section 3(c)''; and
(2) in section 4(a)(6)(B), by inserting after ``any investor'' the following: ``, other than a crowdfunding vehicle (as defined in section 2(a) of the Investment Company Act of 1940),''.
(b) Amendments to the Investment Company Act of 1940.--The Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.) is amended--
(1) in section 2(a), by adding at the end the following:
``(55) The term `crowdfunding vehicle' means a company--
``(A) whose purpose (as set forth in its organizational documents) is limited to acquiring, holding, and disposing securities issued by a single company in one or more transactions and made pursuant to section 4(a)(6) of the Securities Act of 1933;
``(B) which issues only one class of securities;
``(C) which receives no compensation in connection with such acquisition, holding, or disposition of securities;
``(D) no associated person of which receives any compensation in connection with such acquisition, holding or disposition of securities unless such person is acting as or on behalf of an investment adviser registered under the Investment Advisers Act of 1940 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 C.F.R. 227.202);
``(G) the company whose securities it holds is current in its ongoing disclosure obligations under Rule 202 of Regulation Crowdfunding (17 C.F.R. 227.202); and
``(H) is advised by an investment adviser registered under the Investment Advisers Act of 1940 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. 3. CROWDFUNDING EXEMPTION FROM REGISTRATION.
Section 12(g)(6) of the Securities Exchange Act of 1934 (15 U.S.C. 78l(g)(6)) is amended--
(1) by striking ``The Commission'' and inserting the following:
``(A) In general.--The Commission'';
(2) by striking ``section 4(6)'' and inserting ``section 4(a)(6)''; and
(3) by adding at the end the following:
``(B) Treatment of securities issued by certain issuers.-- An exemption under subparagraph (A) shall be unconditional for securities offered by an issuer that had a public float of less than $75,000,000 as of the last business day of the issuer's most recently completed semiannual period, computed by multiplying the aggregate worldwide number of shares of the issuer's common equity securities held by non-affiliates by the price at which such securities were last sold (or the average bid and asked prices of such securities) in the principal market for such securities or, in the event the result of such public float calculation is zero, had annual revenues of less than $50,000,000 as of the issuer's most recently completed fiscal year.''.
Mr. Speaker, I rise in support of H.R. 4855. This is the Fix Crowdfunding Act. Once again, I thank the gentleman from North Carolina (Mr. McHenry), the sponsor of the bill, which also passed the Financial Services Committee in June with a vote of 57-2.
Let's get into it, Mr. Speaker.
Title III of the JOBS Act, known as the crowdfunding title, is one of the most promising provisions of that law, and so, by opening the door for equity crowdfunding to literally millions of Americans, people who want to invest in companies that they believe in, title III has the potential to further democratize our capital markets, and doing so will create opportunities for Main Street to generate wealth.
Unfortunately, in part due to provisions added by the Senate during conference negotiations and in part due to problems with the SEC's implementation of title III, equity crowdfunding in the United States may never reach its full potential.
As SEC Commissioner Mike Piwowar noted in his dissent to the SEC's rules that came out last year, he said: ``The rules will spin a complex web of provisions and requirements for compliance . . . Such burdens will spook many small businesses from pursuing crowdfunding as a viable path to raising capital.''
Fortunately, once again, the Financial Services Committee has stepped up to the plate to address these problems; and fortunately, we have Mr. McHenry here, who has put forward his Crowdfunding Act to fix it.
The Fix Crowdfunding Act would address some of these issues, and it does so in two important ways. First, the bill would enable special purpose vehicles, as defined by the bill, to be considered an authorized investor in crowdfunding offerings.
What does this mean?
Well, this means a group of investors can basically come together and pool the resources and then invest alongside some more sophisticated investors in these new, growing startup businesses.
As I tell you this, it is important to note that, under current regulations, unless you are, well, extremely wealthy, you are typically prohibited from investing in private businesses here in the United States.
Secondly, Mr. McHenry's Fix Crowdfunding Act increases the amount that a company can raise through this mechanism of crowdfunding before it has to go and register with the SEC.
So while these things may be just technical fixes to a complicated set of security laws, at the end of the day, what they will do is break down what we say is historical barriers that prevented startup companies and businesses from connecting with literally millions of Americans and investors across the country.
So the Fix Crowdfunding Act that we are seeing here today will address many of the problems that currently exist with the crowdfunding regulations.
Again, I want to thank the gentleman from North Carolina, and also my colleagues on the Financial Service Committee for their support.
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Mr. GARRETT. Mr. Speaker, I appreciate the fact that the gentleman from North Carolina was able to bring about that hope and change to the gentlewoman.
Mr. Speaker, before I yield to the gentleman from North Carolina, I will say that I agree with the gentlewoman that prior to 2008 and the crisis, the regulators were not doing their jobs. They were not monitoring as they were supposed to be. So true to form to the Washington way of dealing with things at that time, this administration was able to pass through a 2,000-page Democratic-inspired and -crafted piece of legislation called the Dodd-Frank legislation--2,000 pages and 400 regulations. It did as Washington normally does: give those failed regulators raises, more authority, and bigger and fancier buildings.
What was the result of that?
Well, some jobs were created since 2008. We have had one of the slowest recoveries on record. As I said before, the most recent jobs report showed that only 38,000 jobs out of 300-plus million people in this country--think about that--were created during the month of May. That was the worst jobs record since 2010. New business startups in this country are at a 20-year low. Think about that if you are waiting to get a new job from a new business--a 20-year low.
So because of that, because Dodd-Frank did not fix the problem, because those 2,000 pages and those more highly paid bureaucrats in Washington didn't solve the problem, American families and small businesses are finding it extremely difficult to find credit to expand their businesses and to hire more people.
So thank goodness we have this legislation here today and the work by the gentleman from North Carolina not only on this bill, but the previous bill that he was able to accomplish in a bipartisan manner.
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Mr. GARRETT. Mr. Speaker, I encourage my colleagues to vote ``yes'' on this very important legislation.
I yield back the balance of my time.
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Mr. GARRETT. Mr. Speaker, on that I demand the yeas and nays.
The yeas and nays were ordered.
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