HALOS Act of 2019

II 116TH CONGRESS 1ST SESSION S. 1063 To require the Securities and Exchange Commission to revise the rules of the Commission relating to general solicitation or general advertising, and for other purposes. IN THE SENATE OF THE UNITED STATES APRIL 8, 2019 Mr. MURPHY (for himself, Mr. TOOMEY, Mr. SCHATZ, Mr. TILLIS, Ms. SINEMA, and Mr. THUNE) introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs A BILL To require the Securities and Exchange Commission to revise the rules of the Commission relating to general solicita- tion or general advertising, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Helping Angels Lead 4 Our Startups Act of 2019’’ or the ‘‘HALOS Act of 2019’’. 5 SEC. 2. HELPING ANGELS LEAD OUR STARTUPS. 6 (a) DEFINITIONS.—In this section, and for the pur- 7 poses of the revisions required under subsection (b)— 8 VerDate Sep 11 2014 01:32 Apr 12, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S1063.IS S1063 pamtmann on DSKBFK8HB2PROD with BILLS 2 •S 1063 IS (1) the term ‘‘angel investor group’’ means any 1 group that— 2 (A) is composed of accredited investors 3 who are interested in investing personal capital 4 in early-stage companies; 5 (B) holds regular meetings and has defined 6 processes and procedures for making invest- 7 ment decisions, either individually or among the 8 membership of the group as a whole; and 9 (C) is neither associated nor affiliated with 10 brokers, dealers, or investment advisers; and 11 (2) the term ‘‘issuer’’ means an issuer that— 12 (A) is a business; 13 (B) is not in bankruptcy or receivership; 14 and 15 (C) is not a blank check, blind pool, or 16 shell company. 17 (b) CLARIFICATION OF GENERAL SOLICITATION.— 18 (1) IN GENERAL.—Not later than 180 days 19 after the date of enactment of this Act, the Securi- 20 ties and Exchange Commission shall revise sections 21 230.500 through 230.508 of title 17, Code of Fed- 22 eral Regulations (referred to in this subsection as 23 ‘‘Regulation D’’), to require that, in carrying out the 24 prohibition against general solicitation or general ad- 25 VerDate Sep 11 2014 01:32 Apr 12, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S1063.IS S1063 pamtmann on DSKBFK8HB2PROD with BILLS 3 •S 1063 IS vertising under section 230.502(c) of title 17, Code 1 of Federal Regulations, the prohibition shall not 2 apply to a presentation or other communication 3 made by or on behalf of an issuer at an event— 4 (A) sponsored by— 5 (i) the United States; 6 (ii) any territory of the United States; 7 (iii) the District of Columbia; 8 (iv) any State; 9 (v) a political subdivision of any State 10 or territory; 11 (vi) an agency or public instrumen- 12 tality of any entity described in clauses (i) 13 through (v); 14 (vii) a college, university, or other in- 15 stitution of higher education; 16 (viii) a nonprofit organization; 17 (ix) an angel investor group; 18 (x) a venture forum, venture capital 19 association, or trade association; or 20 (xi) any other group, person, or entity 21 that the Securities and Exchange Commis- 22 sion may, by rule, determine to be appro- 23 priate; 24 VerDate Sep 11 2014 01:32 Apr 12, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S1063.IS S1063 pamtmann on DSKBFK8HB2PROD with BILLS 4 •S 1063 IS (B) where any advertising for the event 1 does not reference any specific offering of secu- 2 rities by the issuer; 3 (C) the sponsor of which— 4 (i) does not make investment rec- 5 ommendations or provide investment ad- 6 vice to attendees of the event; 7 (ii) does not engage in an active role 8 in any investment negotiations between the 9 issuer and investors attending the event; 10 (iii) does not charge attendees of the 11 event any fees other than reasonable ad- 12 ministrative fees; 13 (iv) does not receive any compensation 14 for— 15 (I) making introductions between 16 investors attending the event and 17 issuers; or 18 (II) investment negotiations be- 19 tween the parties described in sub- 20 clause (I); 21 (v) makes readily available to 22 attendees of the event a disclosure not 23 longer than 1 page in length, as prescribed 24 by the Securities and Exchange Commis- 25 VerDate Sep 11 2014 01:32 Apr 12, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S1063.IS S1063 pamtmann on DSKBFK8HB2PROD with BILLS 5 •S 1063 IS sion, describing the nature of the event 1 and the risks of investing in the issuers 2 presenting at the event; and 3 (vi) does not receive any compensation 4 with respect to the event that would re- 5 quire registration of the sponsor as— 6 (I) a broker or a dealer under the 7 Securities Exchange Act of 1934 (15 8 U.S.C. 78a et seq.); or 9 (II) an investment advisor under 10 the Investment Advisers Act of 1940 11 (15 U.S.C. 80b–1 et seq.); and 12 (D) where no specific information regard- 13 ing an offering of securities by the issuer is 14 communicated or distributed by or on behalf of 15 the issuer, other than— 16 (i) that the issuer is in the process of 17 offering securities or planning to offer se- 18 curities; 19 (ii) the type and amount of securities 20 being offered; 21 (iii) the amount of securities being of- 22 fered that have already been subscribed 23 for; and 24 VerDate Sep 11 2014 01:32 Apr 12, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S1063.IS S1063 pamtmann on DSKBFK8HB2PROD with BILLS 6 •S 1063 IS (iv) the intended use of proceeds of 1 the offering. 2 (2) RULE OF CONSTRUCTION.—Paragraph (1) 3 may only be construed as requiring the Securities 4 and Exchange Commission to amend Regulation D 5 with respect to presentations and communications 6 and not with respect to purchases or sales. 7 (3) NO PRE-EXISTING SUBSTANTIVE RELATION- 8 SHIP BY REASON OF EVENT.—Attendance at an 9 event described in paragraph (1) shall not qualify, 10 by itself, as establishing a pre-existing substantive 11 relationship between an issuer and a purchaser for 12 the purposes of section 230.506(b) of title 17, Code 13 of Federal Regulations. 14 Æ VerDate Sep 11 2014 01:32 Apr 12, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6301 E:\BILLS\S1063.IS S1063 pamtmann on DSKBFK8HB2PROD with BILLS