Three bills were introduced in the House on March 23 that would affect access to capital markets: The Micro Offering Safe Harbor Act (H.R. 4850), the Supporting America’s Innovators Act (H.R. 4854) and the Private Placement Improvement Act (H.R. 4852).
The Micro Offering Safe Harbor Act was introduced by Rep. Tom Emmer (R-Minn.) to exempt certain micro-offerings from the Securities Act of 1933’s registration requirements.
Specifically, the bill would amend Section 4 of the Securities Act (15 U.S.C. § 77d) to include a new exemption for “transactions involving the sale of securities by an issuer (including all entities controlled by or under common control with the issuer)” that meet one or more of the following requirements:
- Pre-existing relationship: Each purchaser has a substantive pre-existing relationship with an officer of the issuer, a director of the issuer or a shareholding of 10 percent or more of the shares of the issuer;
- 35 or fewer purchasers: The issuer reasonably believes that there are no more than 35 purchasers of securities form the issuer that are sold in reliance on the exemption during the 12-month period preceding the transaction;
- Small offering amount: The aggregate amount of all securities sold by the issuer, including any amount sold in reliance on the exemption, during the 12-month period preceding such transaction, does not exceed $500,000.
The bill has seven co-sponsors: Reps. Luke Messer (R-Ind.), Andy Barr (R-Ky.), Edward Royce (R-Calif.), Steve Chabot (R-Ohio), Scott Tipton (R-Colo.), Mo Brooks (R-Ala.) and Roger Williams (R-Texas).
The Supporting America’s Innovators Act, which was introduced by Rep. Patrick McHenry (R-N.C.), would amend the Investment Company Act of 1940 to expand the investor limitation for qualifying venture capital funds under an exemption from the definition of an investment company.
Section 3(c)(1) of the Investment Company Act concerns exemptions from the act’s definition of “investment company.” The bill would amend this section by including the following language – “(or, with respect to a qualifying venture capital fund, 500 persons)” after “one hundred persons.” Thus, “a qualifying venture capital fund” with fewer than 500 stakeholders would be exempt from being an “investment company.”
The bill would define a “qualifying venture capital fund” as being any venture capital fund (as defined under Section 203(l)(1) of the Investment Advisers Act of 1940 (15 U.S.C. § 80b–3(l)(1)) that does not purchase more than $10 million in securities of any one issuer, “as such dollar amount is annually adjusted by the Securities and Exchange Commission (SEC) 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.”
The Private Placement Improvement Act, introduced by Rep. Scott Garrett (R-N.J.), would direct the SEC to revise Regulation D’s Rule 506 exemptions from registration requirements for certain securities sales.
Specifically, the bill would eliminate the requirement to file a Form D as a prerequisite to gaining Rule 506’s safe harbor; require the SEC to notify states’ securities commissions of the information contained in the Form Ds filed on EDGAR; prohibit the SEC from requiring issuers conducting Rule 506(c) offerings to file its general solicitation materials (but not prohibiting the SEC from requesting such materials in certain situations); exempt private funds from the requirements of Rule 156; and add to the definition of “accredited investor” in Rule 501(c) to make “knowledgeable employees” of private funds accredited investors for Rule 506 purposes with respect to an offering of the private fund.