Fix Crowdfunding Act

(Sec. 2) This bill amends the Securities Act of 1933 to allow a crowdfunding issuer to sell shares through a crowdfunding vehicle.

(Crowdfunding is a method of capital formation in which groups of people pool money, typically composed of small individual contributions, and often via Internet platforms, either to invest in a company or to support an effort by others to accomplish a specific goal.)

A "crowdfunding vehicle" is a company that:

• has purposes limited to acquiring, holding, and disposing securities issued by a single company in one or more transactions and made pursuant to crowdfunding exemption transaction requirements;
• issues only one class of securities;
• receives no compensation for such acquisition, holding, or disposition of securities;
• is a co-issuer with the company whose securities it holds; and
• meets specified requirements related to disclosure obligations and the use of investment advisers.

(Sec. 3) The bill amends the Securities Exchange Act of 1934 to revise the conditions upon which the Securities and Exchange Commission (SEC) shall exempt securities issued in crowdfunding transactions from SEC registration requirements.

Under current law, holders of crowdfunded shares do not count toward the shareholder threshold beyond which an issuer is required to register its securities with the SEC, provided that the issuer: (1) is current in its annual reporting obligations, (2) retains the services of a registered transfer agent, and (3) has less than $25 million in assets. The bill maintains this exemption but removes and replaces the conditions upon which it applies. Specifically, holders of crowdfunded shares shall not count toward the shareholder threshold if the issuer has: (1) a public float of less than $75 million, and (2) annual revenues of less than $50 million.

Fix Crowdfunding Act

This bill amends the Securities Act of 1933 (Act) to increase from $1 million to $5 million the aggregate amount of securities sold to all investors by an issuer that qualify for the crowdfunding exemption from certain prohibitions relating to interstate commerce and the mails.

(Crowdfunding is a method of capital formation where groups of people pool money, typically composed of small individual contributions, and often via Internet platforms, either to invest in a company or to support an effort by others to accomplish a specific goal.)

The bill amends the Jumpstart Our Business Startups Act (JOBS Act) to declare that a crowdfunding portal shall have a reasonable basis for disqualifying issuers from offering securities through the portal if through a background check it has found that an issuer has made an untrue statement of a material fact, omitted to state a material fact necessary to avoid making misleading statements, or engaged in fraud or deceit. No intermediary (crowdfunding portal) shall be liable for an issuer's material misstatements and omissions unless, in connection with the offer or sale of a security, it knowingly made or omitted such statements or engaged in fraud or deceit.

The bill amends the Securities Exchange Act of 1934 to exempt crowdfunding securities transactions from its registration requirements.

The Investment Company Act of 1940 is amended to exempt from the definition of investment company, and so exclude from coverage by that Act, any issuer that, for the purpose of making a crowdfunding offering, holds the securities of not more than one issuer eligible to offer securities (a single-purpose fund).

The bill allows single-purpose funds to sell and offer for sale securities according to crowdfunding requirements, and considers them venture capital funds.

The Act is further amended to permit an issuer, before commencing a crowdfunding offering, to solicit non-binding indications of interest from potential investors in the prospective offering if:

• no investor funds are accepted by the issuer, and
• any material change in the information furnished during the actual offering from the information furnished during the solicitation of interest is highlighted to potential investors in the information filed with the Securities and Exchange Commission.

No enforcement action may be brought before May 16, 2021, against crowdfunding portals established under the JOBS Act.