H. Rpt. 119-572 accompanies the "Small Entrepreneurs' Empowerment and Development Act of 2025" — legislation that falls within the Financial Services Committee's jurisdiction. Committee reports serve as the official legislative history of a bill, documenting what the legislation would do and why the committee recommends passage. Reports of this kind include the committee's section-by-section analysis, any amendments adopted during markup, the Congressional Budget Office cost estimate, dissenting views from minority members, and the legal basis for the legislation. Courts and agencies consult committee reports when interpreting enacted laws, making these documents important beyond the immediate legislative moment.
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House Report 119-572 - SMALL ENTREPRENEURS' EMPOWERMENT AND DEVELOPMENT ACT OF 2025
[House Report 119-572]
[From the U.S. Government Publishing Office]
119th Congress } { Report
HOUSE OF REPRESENTATIVES
2d Session } { 119-572
=======================================================================
SMALL ENTREPRENEURS' EMPOWERMENT AND DEVELOPMENT ACT OF 2025
----------------
March 25, 2026.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
----------------
Mr. Hill of Arkansas, from the Committee on Financial Services,
submitted the following
R E P O R T
together with
MINORITY VIEWS
[To accompany H.R. 4171]
The Committee on Financial Services, to whom was referred
the bill (H.R. 4171) to amend the Securities Act of 1933 to
provide small issuers with a micro-offering exemption free of
mandated disclosures or offering filings, but subject to the
antifraud provisions of the Federal securities laws, and for
other purposes, having considered the same, reports favorably
thereon with an amendment and recommends that the bill as
amended do pass.
CONTENTS
Page
Purpose and Summary.............................................. 2
Background and Need for Legislation.............................. 2
Committee Consideration.......................................... 3
Related Hearings................................................. 4
Committee Votes.................................................. 4
Committee Oversight Findings..................................... 7
Performance Goals and Objectives................................. 7
Committee Cost Estimate.......................................... 7
New Budget Authority and CBO Cost Estimate....................... 7
Unfunded Mandates Statement...................................... 7
Earmark Statement................................................ 7
Federal Advisory Committee Act Statement......................... 8
Applicability to the Legislative Branch.......................... 8
Duplication of Federal Programs.................................. 8
Section-by-Section Analysis of the Legislation................... 8
Changes in Existing Law Made by the Bill, as Reported............ 8
Minority Views................................................... 18
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Small Entrepreneurs' Empowerment and
Development Act of 2025'' or the ``SEED Act of 2025''.
SEC. 2. MICRO-OFFERING EXEMPTION.
(a) In General.--Section 4 of the Securities Act of 1933 (15 U.S.C.
77d) is amended--
(1) in subsection (a), by adding at the end the following:
``(8) transactions meeting the requirements of subsection
(f).''; and
(2) by adding at the end the following:
``(f) Micro-Offerings.--
``(1) In general.--The transactions referred to in subsection
(a)(8) are transactions involving the offer or sale of
securities by an issuer (including all entities controlled by
or under common control with the issuer) where the aggregate
amount of all securities offered or sold by the issuer,
including any amount sold in reliance on the exemption provided
under subsection (a)(8), during the 12-month period preceding
the date of such transaction, does not exceed $500,000.
``(2) Adjustment.--The dollar amount in paragraph (1) shall
be adjusted by the Commission not less frequently than once
every 5 years and at the same time as the adjustments made
under section 4A(h), 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, setting the threshold to the nearest $10,000.
``(3) Bad actor prohibition.--The exemption under this
subsection shall not apply to any person subject to--
``(A) an event that would disqualify an issuer or
other covered person under section 230.506(d) of title
17, Code of Federal Regulations, or any successor
regulation; or
``(B) a statutory disqualification, as defined in
section 3(a) of the Securities Exchange Act of 1934 (15
U.S.C. 78c(a)).''.
(b) Exemption Under State Regulations.--Section 18(b)(4) of the
Securities Act of 1933 (15 U.S.C. 77r(b)(4)) is amended--
(1) in subparagraph (F), by striking ``or'' at the end;
(2) in subparagraph (G), by striking the period and inserting
``; or''; and
(3) by adding at the end the following:
``(H) section 4(a)(8).''.
Purpose and Summary
H.R. 4171, the Small Entrepreneurs' Empowerment and
Development (SEED) Act of 2025, was introduced on June 26,
2025, by Republican Representative Andrew Garbarino (NY-02).
H.R. 4171 amends the Securities Act of 1933 to provide small
issuers with a micro-offering exemption free of mandated
disclosures or offering filings, but subject to the anti-fraud
provisions of the federal securities laws.
Background and Need for Legislation
Across the world, micro-lending has successfully bridged
the gap for entrepreneurs in underserved financial markets,
enabling them to launch and scale their ventures.\1\ H.R. 4171
exempts small-scale offerings from complex filing requirements,
making it easier for emerging businesses to raise up to
$500,000 annually. To protect investors, issuers remain subject
to federal anti-fraud laws and ``bad actor'' disqualification
rules.
---------------------------------------------------------------------------
\1\Stephen T. Day, Microfinance Disrupts Bias Against the Unbanked,
GEORGETOWN JOURNAL ON POVERTY LAW & POLICY (Feb. 8, 2023), https://
www.law.georgetown.edu/poverty-journal/blog/microfinance-disrupts-bias-
against-the-unbanked/#::text=Founded%20in%20the%
201970s%2C%20microfinance,improves%20resilience%20during%20economic%20do
wnturns.
---------------------------------------------------------------------------
This exemption would particularly help small businesses
facing difficulties in accessing bank loans because micro-
lending fills the gap. According to the Federal Reserve's 2024
Small Business Credit Survey, 60 percent of small employer
firms received just some or none of the financing they
sought.\2\ A streamlined micro-offering exemption will reduce
barriers to capital formation for small businesses and
entrepreneurs seeking to raise relatively small amounts of
capital and cannot afford costly legal and registration
requirements.
---------------------------------------------------------------------------
\2\Fed. Reserve Banks, 2025 Report on Employer Firms: Findings from
the 2024 Small Business Credit Survey (Mar. 2025), https://
www.fedsmallbusiness.org/survey/2025/report-on-employer-firms.
---------------------------------------------------------------------------
Committee Consideration
119TH CONGRESS
On June 26, 2025, Representative Garbarino introduced H.R.
4171, the Small Entrepreneurs' Empowerment and Development
(SEED) Act of 2025.
The bill was referred solely to the Committee on Financial
Services. The bill was attached to the February 26, 2025,
hearing titled ``The Future of American Capital: Strengthening
Public and Private Markets by Increasing Investor Access and
Facilitating Capital Formation'' and the March 25, 2025,
hearing titled, ``Beyond Silicon Valley: Expanding Access to
Capital Across America.''
On March 4, 2026, the Committee on Financial Services met
in open session to consider, among others, H.R. 4171. The
Committee ordered H.R. 4171, as amended, to be reported with a
favorable recommendation to the House of Representatives.
118TH CONGRESS
On April 13, 2023, Representative Patrick McHenry (NC-10)
introduced H.R. 2609, the SEED Act of 2023, a prior iteration
of H.R. 4171. Representative Tom Emmer (MN-06) was added as an
additional cosponsor. The bill was referred solely to the
Committee on Financial Services.
On April 24, 2023, Representative Patrick McHenry (R-NC)
introduced H.R. 2799, the Expanding Access to Capital Act of
2023. This package included the previously introduced H.R.
2609. On April 26, 2023, the Committee on Financial Services
ordered H.R. 2799, as amended, to be favorably reported to the
House of Representatives by a vote of 28 to 21. On March 8,
2024, H.R. 2799 was passed by the House by a vote of 212 to
205. The bill was received in the Senate and referred to the
Committee on Banking, Housing, and Urban Affairs. There was no
further legislative action on H.R. 2609 or H.R. 2799 in the
118th Congress.
117TH CONGRESS
On September 30, 2021, Representative McHenry introduced
H.R. 5458, the SEED Act of 2021, a prior iteration of H.R.
4171, with Representative Emmer as an original cosponsor.
Representatives Richard Hudson (NC-08), Mike Flood (NE-01), and
Stephanie Bice (OK-05) were subsequently added as additional
cosponsors. The bill was referred solely to the Committee on
Financial Services. There was no further legislative action on
H.R. 5458 in the 117th Congress.
Related Hearings
Pursuant to clause 3(c)(6) of rule XIII of the Rules of the
House of Representatives, the following hearings were used to
develop H.R. 4171:
On February 26, 2025, the Subcommittee on Capital Markets
held a hearing titled, ``The Future of American Capital:
Strengthening Public and Private Markets by Increasing Investor
Access and Facilitating Capital Formation.'' A discussion draft
of H.R. 4171 was attached the hearing. The Subcommittee heard
testimony from: Mr. Andrew Barnell, CEO and Co-Founder,
Geneoscopy; Mr. McKeever ``Mac'' Conwell, Founder and Managing
Partner, RareBreed Ventures; Ms. Rebecca Kacaba, CEO and Co-
Founder, DealMaker; Ms. Anna Pinedo, Partner, Mayer Brown; and
Ms. Alexandra Thornton, Senior Director, Financial Regulation,
Center for American Progress.
On March 25, 2025, the Committee on Financial Services held
a hearing titled ``Beyond Silicon Valley: Expanding Access to
Capital Across America.'' A discussion draft of H.R. 4171 was
attached the hearing. The Committee heard testimony from: Mr.
Steve Case, Chairman and CEO, Revolution LLC; Mr. Bill Newell,
Senior Business Advisor & Former CEO, Sutro Biopharma; Ms.
Candice Matthews Brackeen, General Partner, Lightship Capital;
Mr. Joel Trotter, Partner, Latham & Watkins LLP; and Ms. Amanda
Senn, Director of the Alabama Securities Commission.
Committee Votes
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee Report to include record
votes on the motion to report legislation and amendments
thereto.
On March 4, 2026, the Committee ordered H.R. 4171, as
amended, to be reported favorably to the House by a recorded
vote of 26 yeas and 17 nays, a quorum being present. (Record
Vote No. FC-252).
The Committee considered the following amendments to H.R.
4171:
Representative Andy Barr (KY-06) offered an
amendment in the nature of a substitute, which
increased the micro-offering exemption threshold to
$500,000 and required this exemption to be indexed to
inflation every five years. This amendment was adopted
by a voice vote.
Ranking Member Maxine Waters (D-CA) offered
an amendment (No. 9), designated Amd1_H4171. This
amendment requires the SEC to issue a report
summarizing complaints related to covered micro-
offerings. This amendment failed by a recorded vote of
17 yeas and 26 nays, a quorum being present. (Record
Vote No. FC-251).
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Committee Oversight Findings
Pursuant to clause 3(c) of rule XIII of the Rules of the
House of Representatives, the findings and recommendations of
the Committee, based on oversight activities under clause
2(b)(1) of rule X of the Rules of the House of Representatives
are incorporated in the descriptive portions of this report.
Performance Goals and Objectives
Pursuant to clause 3(c)(4) of rule XIII of the Rules of the
House of Representatives, the goal of H.R. 4171 is to create a
streamlined micro-offering exemption that will reduce barriers
to capital formation for small businesses and entrepreneurs
seeking to raise relatively small amounts of capital and cannot
afford costly legal and registration requirements.
Committee Cost Estimate
Clause 3(d)(1) of rule XIII of the Rules of the House of
Representatives requires an estimate and a comparison of the
costs that would be incurred in carrying out H.R. 4171. The
Committee has requested but not received a cost estimate from
the Director of the Congressional Budget Office. However,
pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee will adopt as its own
the cost estimate by the Director of the Congressional Budget
Office once it has been prepared.
New Budget Authority and CBO Cost Estimate
With respect to the requirements of clause 3(c)(2) of rule
XIII of the Rules of the House of Representatives and section
308(a) of the Congressional Budget Act of 1974 and with respect
to requirements of clause 3(c)(3) of rule XIII of the Rules of
the House of Representatives and section 402 of the
Congressional Budget Act of 1974, the Committee will adopt as
its own the cost estimate for the bill prepared by the Director
of the Congressional Budget Office. However, a cost estimate
was not made available to the Committee in time for the filing
of this report. The Chairman of the Committee shall cause such
estimate to be printed in the Congressional Record upon its
receipt by the Committee.
Unfunded Mandates Statement
The Committee has requested but not received from the
Director of the Congressional Budget Office an estimate of the
Federal mandates pursuant to section 423 of the Unfunded
Mandates Reform Act. The Chairman of the Committee shall cause
such estimate to be printed in the Congressional Record upon
its receipt by the Committee.
Earmark Statement
In compliance with clause 9 of rule XXI of the Rules of the
House of Representatives, this bill, as reported, contains no
congressional earmarks, limited tax benefits, or limited tariff
benefits as defined in clause 9(e), 9(f), or 9(g) of rule XXI.
Federal Advisory Committee Act Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Applicability to the Legislative Branch
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of section
102(b)(3) of the Congressional Accountability Act.
Duplication of Federal Programs
Pursuant to clause 3(c)(5) of rule XIII of the Rules of the
House of Representatives, the Committee states that no
provision of the bill establishes or reauthorizes a program of
the Federal Government known to be duplicative of another
Federal program, including any program that was included in a
report to Congress pursuant to section 21 of the Public Law
111-139 or the most recent Catalog of Federal Domestic
Assistance.
Section-by-Section Analysis of the Legislation
Section 1. Short title
Section 1 provides the short title is the ```Small
Entrepreneurs' Empowerment and Development Act of 2025'' or the
``SEED Act of 2025''.
Section 2. Micro-offering exemption
Section 2 amends Section 4 of the Securities Act of 1933 by
including a micro-offering exemption for transactions under
$500,000. The dollar amount shall be adjusted for inflation to
the nearest $10,000 every five years. The exemption shall not
apply to any issuers or persons disqualified as ``Bad Actors''
or those subject to statutory disqualifications from
association with FINRA member firms or SEC-registered entities.
Issuers qualifying for the exemption are also exempt from state
regulations.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italics, and existing law in which no
change is proposed is shown in roman):
SECURITIES ACT OF 1933
TITLE I--
* * * * * * *
exempted transactions
Sec. 4. (a) The provisions of section 5 shall not apply to--
(1) transactions by any person other than an issuer,
underwriter, or dealer.
(2) transactions by an issuer not involving any
public offering.
(3) transactions by a dealer (including an
underwriter no longer acting as an underwriter in
respect of the security involved in such transaction),
except--
(A) transactions taking place prior to the
expiration of forty days after the first date
upon which the security was bona fide offered
to the public by the issuer or by or through an
underwriter,
(B) transactions in a security as to which a
registration statement has been filed taking
place prior to the expiration of forty days
after the effective date of such registration
statement or prior to the expiration of forty
days after the first date upon which the
security was bona fide offered to the public by
the issuer or by or through an underwriter
after such effective date, whichever is later
(excluding in the computation of such forty
days any time during which a stop order issued
under section 8 is in effect as to the
security), or such shorter period as the
Commission may specify by rules and regulations
or order, and
(C) transactions as to securities
constituting the whole or a part of an unsold
allotment to or subscription by such dealer as
a participant in the distribution of such
securities by the issuer or by or through an
underwriter.
With respect to transactions referred to in clause (B),
if securities of the issuer have not previously been
sold pursuant to an earlier effective registration
statement the applicable period, instead of forty days,
shall be ninety days, or such shorter period as the
Commission may specify by rules and regulations or
order.
(4) brokers' transactions executed upon customers'
orders on any exchange or in the over-the-counter
market but not the solicitation of such orders.
(5) transactions involving offers or sales by an
issuer solely to one or more accredited investors, if
the aggregate offering price of an issue of securities
offered in reliance on this paragraph does not exceed
the amount allowed under section 3(b)(1) of this title,
if there is no advertising or public solicitation in
connection with the transaction by the issuer or anyone
acting on the issuer's behalf, and if the issuer files
such notice with the Commission as the Commission shall
prescribe.
(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 maximum
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 section 4A(b).
(7) transactions meeting the requirements of
subsection (d).
(8) transactions meeting the requirements of
subsection (f).
(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.
(c)(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 solicitations,
general advertisements, or similar or related
activities 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 securities.
(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
purchase 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
disqualification as defined in section 3(a)(39) of this
title and does not 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 compensation, investment
advice or recommendations to issuers or investors; and
(B) the provision of standardized documents to the
issuers and investors, so long as such person or entity
does not negotiate 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.
(d) Certain Accredited Investor Transactions.--The
transactions referred to in subsection (a)(7) are transactions
meeting the following requirements:
(1) Accredited investor requirement.--Each purchaser
is an accredited investor, as that term is defined in
section 230.501(a) of title 17, Code of Federal
Regulations (or any successor regulation).
(2) Prohibition on general solicitation or
advertising.--Neither the seller, nor any person acting
on the seller's behalf, offers or sells securities by
any form of general solicitation or general
advertising.
(3) Information requirement.--In the case of a
transaction involving the securities of an issuer that
is neither subject to section 13 or 15(d) of the
Securities Exchange Act of 1934 (15 U.S.C. 78m;
78o(d)), nor exempt from reporting pursuant to section
240.12g3-2(b) of title 17, Code of Federal Regulations,
nor a foreign government (as defined in section 230.405
of title 17, Code of Federal Regulations) eligible to
register securities under Schedule B, the seller and a
prospective purchaser designated by the seller obtain
from the issuer, upon request of the seller, and the
seller in all cases makes available to a prospective
purchaser, the following information (which shall be
reasonably current in relation to the date of resale
under this section):
(A) The exact name of the issuer and the
issuer's predecessor (if any).
(B) The address of the issuer's principal
executive offices.
(C) The exact title and class of the
security.
(D) The par or stated value of the security.
(E) The number of shares or total amount of
the securities outstanding as of the end of the
issuer's most recent fiscal year.
(F) The name and address of the transfer
agent, corporate secretary, or other person
responsible for transferring shares and stock
certificates.
(G) A statement of the nature of the business
of the issuer and the products and services it
offers, which shall be presumed reasonably
current if the statement is as of 12 months
before the transaction date.
(H) The names of the officers and directors
of the issuer.
(I) The names of any persons registered as a
broker, dealer, or agent that shall be paid or
given, directly or indirectly, any commission
or remuneration for such person's participation
in the offer or sale of the securities.
(J) The issuer's most recent balance sheet
and profit and loss statement and similar
financial statements, which shall--
(i) be for such part of the 2
preceding fiscal years as the issuer
has been in operation;
(ii) be prepared in accordance with
generally accepted accounting
principles or, in the case of a foreign
private issuer, be prepared in
accordance with generally accepted
accounting principles or the
International Financial Reporting
Standards issued by the International
Accounting Standards Board;
(iii) be presumed reasonably current
if--
(I) with respect to the
balance sheet, the balance
sheet is as of a date less than
16 months before the
transaction date; and
(II) with respect to the
profit and loss statement, such
statement is for the 12 months
preceding the date of the
issuer's balance sheet; and
(iv) if the balance sheet is not as
of a date less than 6 months before the
transaction date, be accompanied by
additional statements of profit and
loss for the period from the date of
such balance sheet to a date less than
6 months before the transaction date.
(K) To the extent that the seller is a
control person with respect to the issuer, a
brief statement regarding the nature of the
affiliation, and a statement certified by such
seller that they have no reasonable grounds to
believe that the issuer is in violation of the
securities laws or regulations.
(4) Issuers disqualified.--The transaction is not for
the sale of a security where the seller is an issuer or
a subsidiary, either directly or indirectly, of the
issuer.
(5) Bad actor prohibition.--Neither the seller, nor
any person that has been or will be paid (directly or
indirectly) remuneration or a commission for their
participation in the offer or sale of the securities,
including solicitation of purchasers for the seller is
subject to an event that would disqualify an issuer or
other covered person under Rule 506(d)(1) of Regulation
D (17 CFR 230.506(d)(1)) or is subject to a statutory
disqualification described under section 3(a)(39) of
the Securities Exchange Act of 1934.
(6) Business requirement.--The issuer is engaged in
business, is not in the organizational stage or in
bankruptcy or receivership, and is not a blank check,
blind pool, or shell company that has no specific
business plan or purpose or has indicated that the
issuer's primary business plan is to engage in a merger
or combination of the business with, or an acquisition
of, an unidentified person.
(7) Underwriter prohibition.--The transaction is not
with respect to a security that constitutes the whole
or part of an unsold allotment to, or a subscription or
participation by, a broker or dealer as an underwriter
of the security or a redistribution.
(8) Outstanding class requirement.--The transaction
is with respect to a security of a class that has been
authorized and outstanding for at least 90 days prior
to the date of the transaction.
(e) Additional Requirements.--
(1) In general.--With respect to an exempted
transaction described under subsection (a)(7):
(A) Securities acquired in such transaction
shall be deemed to have been acquired in a
transaction not involving any public offering.
(B) Such transaction shall be deemed not to
be a distribution for purposes of section
2(a)(11).
(C) Securities involved in such transaction
shall be deemed to be restricted securities
within the meaning of Rule 144 (17 CFR
230.144).
(2) Rule of construction.--The exemption provided by
subsection (a)(7) shall not be the exclusive means for
establishing an exemption from the registration
requirements of section 5.
(f) Micro-Offerings.--
(1) In general.--The transactions referred to in
subsection (a)(8) are transactions involving the offer
or sale of securities by an issuer (including all
entities controlled by or under common control with the
issuer) where the aggregate amount of all securities
offered or sold by the issuer, including any amount
sold in reliance on the exemption provided under
subsection (a)(8), during the 12-month period preceding
the date of such transaction, does not exceed $500,000.
(2) Adjustment.--The dollar amount in paragraph (1)
shall be adjusted by the Commission not less frequently
than once every 5 years and at the same time as the
adjustments made under section 4A(h), 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, setting
the threshold to the nearest $10,000.
(3) Bad actor prohibition.--The exemption under this
subsection shall not apply to any person subject to--
(A) an event that would disqualify an issuer
or other covered person under section
230.506(d) of title 17, Code of Federal
Regulations, or any successor regulation; or
(B) a statutory disqualification, as defined
in section 3(a) of the Securities Exchange Act
of 1934 (15 U.S.C. 78c(a)).
* * * * * * *
SEC. 18. EXEMPTION FROM STATE REGULATION OF SECURITIES OFFERINGS.
(a) Scope of Exemption.--Except as otherwise provided in this
section, no law, rule, regulation, or order, or other
administrative action of any State or any political subdivision
thereof--
(1) requiring, or with respect to, registration or
qualification of securities, or registration or
qualification of securities transactions, shall
directly or indirectly apply to a security that--
(A) is a covered security; or
(B) will be a covered security upon
completion of the transaction;
(2) shall directly or indirectly prohibit, limit, or
impose any conditions upon the use of--
(A) with respect to a covered security
described in subsection (b), any offering
document that is prepared by or on behalf of
the issuer; or
(B) any proxy statement, report to
shareholders, or other disclosure document
relating to a covered security or the issuer
thereof that is required to be and is filed
with the Commission or any national securities
organization registered under section 15A of
the Securities Exchange Act of 1934, except
that this subparagraph does not apply to the
laws, rules, regulations, or orders, or other
administrative actions of the State of
incorporation of the issuer; or
(3) shall directly or indirectly prohibit, limit, or
impose conditions, based on the merits of such offering
or issuer, upon the offer or sale of any security
described in paragraph (1).
(b) Covered Securities.--For purposes of this section, the
following are covered securities:
(1) Exclusive federal registration of nationally
traded securities.--A security is a covered security if
such security is--
(A) a security designated as qualified for
trading in the national market system pursuant
to section 11A(a)(2) of the Securities Exchange
Act of 1934 (15 U.S.C. 78k-1(a)(2)) that is
listed, or authorized for listing, on a
national securities exchange (or tier or
segment thereof); or
(B) a security of the same issuer that is
equal in seniority or that is a senior security
to a security described in subparagraph (A).
(2) Exclusive federal registration of investment
companies.--A security is a covered security if such
security is a security issued by an investment company
that is registered, or that has filed a registration
statement, under the Investment Company Act of 1940.
(3) Sales to qualified purchasers.--A security is a
covered security with respect to the offer or sale of
the security to qualified purchasers, as defined by the
Commission by rule. In prescribing such rule, the
Commission may define the term ``qualified purchaser''
differently with respect to different categories of
securities, consistent with the public interest and the
protection of investors.
(4) Exemption in connection with certain exempt
offerings.--A security is a covered security with
respect to a transaction that is exempt from
registration under this title pursuant to--
(A) paragraph (1) or (3) of section 4, and
the issuer of such security files reports with
the Commission pursuant to section 13 or 15(d)
of the Securities Exchange Act of 1934;
(B) section 4(4);
(C) section 4(6);
(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;
(E) section 3(a), other than the offer or
sale of a security that is exempt from such
registration pursuant to paragraph (4), (10),
or (11) of such section, except that a
municipal security that is exempt from such
registration pursuant to paragraph (2) of such
section is not a covered security with respect
to the offer or sale of such security in the
State in which the issuer of such security is
located;
(F) Commission rules or regulations issued
under section 4(2), except that this
subparagraph does not prohibit a State from
imposing notice filing requirements that are
substantially similar to those required by rule
or regulation under section 4(2) that are in
effect on September 1, 1996; [or]
(G) section 4(a)(7)[.]; or
(H) section 4(a)(8).
(c) Preservation of Authority.--
(1) Fraud authority.--Consistent with this section,
the securities commission (or any agency or office
performing like functions) of any State shall retain
jurisdiction under the laws of such State to
investigate and bring enforcement actions, 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
(ii) unlawful conduct by a broker,
dealer, funding portal, or issuer.
(2) Preservation of filing requirements.--
(A) Notice filings permitted.--Nothing in
this
section prohibits the securities commission (or
any agency or office performing like functions)
of any State from requiring the filing of any
document filed with the Commission pursuant to
this title, together with annual or periodic
reports of the value of securities sold or
offered to be sold to persons located in the
State (if such sales data is not included in
documents filed with the Commission), solely
for notice purposes and the assessment of any
fee, together with a consent to service of
process and any required fee.
(B) Preservation of fees.--
(i) In general.--Until otherwise
provided by law, rule, regulation, or
order, or other administrative action
of any State or any political
subdivision thereof, adopted after the
date of enactment of the National
Securities Markets Improvement Act of
1996, filing or registration fees with
respect to securities or securities
transactions shall continue to be
collected in amounts determined
pursuant to State law as in effect on
the day before such date.
(ii) Schedule.--The fees required by
this subparagraph shall be paid, and
all necessary supporting data on sales
or offers for sales required under
subparagraph (A), shall be reported on
the same
schedule as would have been applicable
had the issuer not relied on the
exemption provided in subsection (a).
(C) Availability of preemption contingent on
payment of fees.--
(i) In general.--During the period
beginning on the date of enactment of
the National Securities
Markets Improvement Act of 1996 and
ending 3 years after that date of
enactment, the securities commission
(or any agency or office performing
like functions) of any State may
require the registration of securities
issued by any issuer who refuses to pay
the fees required by subparagraph (B).
(ii) Delays.--For purposes of this
subparagraph, delays in payment of fees
or underpayments of fees that are
promptly remedied shall not constitute
a refusal to pay fees.
(D) Fees not permitted on listed
securities.--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)(1), or will
be such a covered security upon completion of
the transaction, or is a security of the same
issuer that is equal in seniority or that is a
senior security to a security that is a covered
security pursuant to subsection (b)(1).
(F) Fees not permitted on crowdfunded
securities.--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.
(3) Enforcement of requirements.--Nothing in this
section shall prohibit the securities commission (or
any agency or office performing like functions) of any
State from suspending the offer or sale of securities
within such State as a result of the failure to submit
any filing or fee required under law and permitted
under this section.
(d) Definitions.--For purposes of this section, the following
definitions shall apply:
(1) Offering document.--The term ``offering
document''--
(A) has the meaning given the term
``prospectus'' in section 2(a)(10), but without
regard to the provisions of subparagraphs (a)
and (b) of that section; and
(B) includes a communication that is not
deemed to offer a security pursuant to a rule
of the Commission.
(2) Prepared by or on behalf of the issuer.--Not
later than 6 months after the date of enactment of the
National Securities Markets Improvement Act of 1996,
the Commission shall, by rule, define the term
``prepared by or on behalf of the issuer'' for purposes
of this section.
(3) State.--The term ``State'' has the same meaning
as in section 3 of the Securities Exchange Act of 1934.
(4) Senior security.--The term ``senior security''
means any bond, debenture, note, or similar obligation
or instrument constituting a security and evidencing
indebtedness, and any stock of a class having priority
over any other class as to distribution of assets or
payment of dividends.
* * * * * * *
MINORITY VIEWS
This bill would provide small issuers with a micro-offering
exemption to raise up to $250,000 without needing to provide
any disclosures whatsoever, including, for example, basic
financial information like revenues and expenses. Securities
laws are built on the premise of transparency through
disclosure in order to allow investors to make the most
informed decision as possible with their hard-earned savings.
Without disclosures, investors--particularly retail investors
without the resources to do their own due diligence--will be in
the dark about the exact nature of the enterprise they are
investing in as well as any risks inherent in that offering.
Smaller offerings generally are exempt from the full panoply of
disclosures required of public companies, but they generally
must still provide limited information as opposed to nothing at
all. While this bill retains some anti-fraud protections, it
does not require disclosure of financial statements, use of
proceeds, risk factors, management and ownership structure, and
offering terms, nor ongoing reporting obligations, which are
all required of other exempt federal securities offerings such
as Reg A and Reg D. And, while antifraud protections allow
investors a legal recourse to sue issuers for fraud, not every
investor has the means to afford legal counsel to represent
them in such a suit--which makes this option ill-suited for
most Americans.
This bill was previously included as a provision in the
large Republican-led capital formation package in the 118th
Congress (H.R. 2799), which received near unanimous Democratic
opposition on the House Floor. It also received unanimous
Democratic opposition (and had a Republican vote against it
too, Walter Jones) in the 115th Congress when a substantially
similar bill, H.R. 2201, was considered by the House. H.R. 4171
is currently opposed by the North American Securities
Administrators Association (NASAA) opposes this bill, and
notably, was opposed in the 118th Congress by NASAA, along with
the Consumer Federation of America (CFA), Americans for
Financial Reform (AFR), Public Citizen, the Council of
Institution Investors (CII), and the Center for American
Progress.
For these reasons, we oppose H.R. 4171.
Sincerely,
Maxine Waters,
Ranking Member.
Nydia M. Velazquez,
Brad Sherman,
Al Green,
Bill Foster,
Joyce Beatty,
Juan Vargas,
Sylvia R. Garcia,
Members of Congress.
[all]