What This Bill Does
This bill creates a new exemption (a legal permission) that allows small businesses to sell securities (ownership shares or investment products) without filing certain paperwork or providing mandatory disclosure documents with the government. The exemption still requires companies to follow federal anti-fraud laws (rules against deception and dishonest conduct). The bill is called the "Small Entrepreneurs' Empowerment and Development Act of 2023" or the "SEED Act of 2023."
Who It Affects
Small businesses and companies that want to raise money by selling securities
Investors who purchase these securities
The Securities and Exchange Commission (the federal agency that regulates securities markets)
State banking authorities and insurance commissions
Federal banking agencies
Key Provisions
A new exemption allows companies to sell up to $250,000 in securities during a 12-month period without filing required paperwork or providing mandatory disclosure documents, as long as they follow federal anti-fraud laws (Sec. 2(a)).
The Securities and Exchange Commission must create disqualification rules within 270 days that bar certain people from using this exemption, including those with final orders from regulators prohibiting securities business and those convicted of related felonies or misdemeanors (Sec. 2(b)(1) and 2(b)(2)).
Disqualification rules must ban offerings by people subject to final orders based on fraudulent or deceptive conduct violations from the previous 10 years (Sec. 2(b)(2)(B)(i)(II)).
The disqualification rules must define "covered regulator" to include state securities commissions, state banking authorities, state insurance commissions, federal banking agencies, and the National Credit Union Administration (Sec. 2(b)(3)).
What Changes
Section 4 of the Securities Act of 1933 is amended to add a new exemption for micro-offerings under a new subsection (f) (Sec. 2(a)).
Section 18(b)(4) of the Securities Act of 1933 is amended to include the new micro-offering exemption in state regulation exemptions (Sec. 2(c)).
Important Definitions
The bill defines "covered regulator" as state securities commissions, state banking authorities, state insurance commissions, federal banking agencies, and the National Credit Union Administration (Sec. 2(b)(3)).
Effective Date
Not specified in bill text
I
118TH CONGRESS
1ST SESSION H. R. 2609
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.
IN THE HOUSE OF REPRESENTATIVES
APRIL 13, 2023
Mr. MCHENRY introduced the following bill; which was referred to the
Committee on Financial Services
A BILL
To amend the Securities Act of 1933 to provide small issuers
with a micro-offering exemption free of mandated disclo-
sures or offering filings, but subject to the antifraud
provisions of the Federal securities laws, 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,
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SECTION 1. SHORT TITLE.
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This Act may be cited as the ‘‘Small Entrepreneurs’
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Empowerment and Development Act of 2023’’ or the
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‘‘SEED Act of 2023’’.
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SEC. 2. MICRO-OFFERING EXEMPTION.
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(a) IN GENERAL.—Section 4 of the Securities Act of
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1933 (15 U.S.C. 77d) is amended—
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(1) in subsection (a), by adding at the end the
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following:
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‘‘(8) transactions meeting the requirements of
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subsection (f).’’; and
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(2) by adding at the end the following:
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‘‘(f) MICRO-OFFERINGS.—The transactions referred
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to in subsection (a)(8) are transactions involving the sale
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of securities by an issuer (including all entities controlled
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by or under common control with the issuer) where the
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aggregate amount of all securities sold by the issuer, in-
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cluding any amount sold in reliance on the exemption pro-
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vided under subsection (a)(8), during the 12-month period
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preceding such transaction, does not exceed $250,000.’’.
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(b) DISQUALIFICATION.—
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(1) IN
GENERAL.—Not later than 270 days
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after the date of enactment of this Act, the Securi-
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ties and Exchange Commission shall, by rule, estab-
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lish disqualification provisions under which an issuer
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shall not be eligible to offer securities pursuant to
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section 4(a)(8) of the Securities Act of 1933, as
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added by this section.
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(2) INCLUSIONS.—Disqualification provisions
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required by this subsection shall—
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•HR 2609 IH
(A) be substantially similar to the provi-
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sions of section 230.506(d) of title 17, Code of
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Federal Regulations (or any successor thereto);
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and
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(B) disqualify any offering or sale of secu-
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rities by a person that—
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(i) is subject to a final order of a cov-
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ered regulator that—
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(I) bars the person from—
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(aa) association with an en-
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tity regulated by the covered reg-
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ulator;
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(bb) engaging in the busi-
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ness of securities, insurance, or
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banking; or
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(cc) engaging in savings as-
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sociation or credit union activi-
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ties; or
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(II) constitutes a final order
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based on a violation of any law or reg-
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ulation that prohibits fraudulent, ma-
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nipulative, or deceptive conduct, if
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such final order was issued within the
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previous 10-year period; or
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•HR 2609 IH
(ii) has been convicted of any felony
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or misdemeanor in connection with the
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purchase or sale of any security or involv-
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ing the making of any false filing with the
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Commission.
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(3) COVERED REGULATOR DEFINED.—In this
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subsection, the term ‘‘covered regulator’’ means—
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(A) a State securities commission (or an
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agency or officer of a State performing like
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functions);
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(B) a State authority that supervises or
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examines banks, savings associations, or credit
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unions;
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(C) a State insurance commission (or an
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agency or officer of a State performing like
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functions);
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(D) a Federal banking agency (as defined
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under section 3 of the Federal Deposit Insur-
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ance Act); and
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(E) the National Credit Union Administra-
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tion.
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(c) EXEMPTION UNDER STATE REGULATIONS.—Sec-
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tion 18(b)(4) of the Securities Act of 1933 (15 U.S.C.
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77r(b)(4)) is amended—
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(1) in subparagraph (F), by striking ‘‘or’’ at
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the end;
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(2) in subparagraph (G), by striking the period
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and inserting ‘‘; or’’; and
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(3) by adding at the end the following:
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‘‘(H) section 4(a)(8).’’.
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Æ
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