Bill Text: TX HB2580 | 2015-2016 | 84th Legislature | Introduced
Bill Title: Relating to crowdfunding portal regulations.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2015-03-16 - Referred to Investments & Financial Services [HB2580 Detail]
Download: Texas-2015-HB2580-Introduced.html
By: Johnson | H.B. No. 2580 |
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relating to crowdfunding portal regulations. | ||
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: | ||
SECTION 1. The Securities Act (Article 581-1 et seq., | ||
Vernon's Texas Civil Statutes) is amended by adding Section 44 to | ||
read as follows: | ||
Sec. 44. CROWDFUNDING. (a) The Board shall adopt rules to | ||
regulate and facilitate online intrastate crowdfunding. | ||
(b) The rules adopted by the Board under Subsection (a) of | ||
this section must: | ||
(1) prohibit offerings made by businesses whose | ||
organization substantially limits the owner's liability; | ||
(2) require each offering to disclose the minimum | ||
amount to be raised that will be sufficient to execute a business | ||
plan and dedicate a certain amount of funds to a specific business | ||
plan; | ||
(3) require each offering to set a date by which all | ||
funds be raised; | ||
(4) require the portal to refund all funds to | ||
investors if the minimum investment amount is not raised by the date | ||
set by the issuer; | ||
(5) define "control person" to include any person who | ||
has de facto control or has equivalent powers; | ||
(6) authorize crowdfunding portals to: | ||
(A) be founded and administered by entities | ||
outside of this state; | ||
(B) use an account in any Texas bank for any | ||
required escrow account; and | ||
(C) engage in general solicitation or | ||
advertising of the offering if: | ||
(i) the solicitation and advertising are | ||
directed only to residents of this state; | ||
(ii) securities are purchased only through | ||
the Texas crowdfunding website; and | ||
(iii) all solicitation and advertising is | ||
accompanied by a notice stating that the offering is limited to | ||
Texas residents; | ||
(7) prohibit crowdfunding portals from: | ||
(A) compensating employees, agents, or other | ||
persons in a manner that takes into account the volume of | ||
securities sold through its Texas crowdfunding website, unless the | ||
persons are registered with the Commissioner and are permitted to | ||
receive such compensation; or | ||
(B) offering investment advice or | ||
recommendations, unless the portal is a registered investment | ||
adviser; | ||
(8) prohibit issuers from: | ||
(A) accepting more than the greater of $5,000 or | ||
five percent of a person's annual income from any single purchaser | ||
unless the issuer has a reasonable basis for believing that the | ||
purchaser of a security under this section is a resident of this | ||
state and: | ||
(i) is an accredited investor described by | ||
Section 1152.110, Insurance Code; or | ||
(ii) is an individual who: | ||
(a) had an income of at least $75,000 | ||
for each of the two most recent years and expects to have an income | ||
of at least $75,000 during the current year; and | ||
(b) is a licensed attorney or a | ||
licensed certified public accountant or is registered with the | ||
Financial Industry Regulatory Authority or a successor | ||
association; or | ||
(B) raising more than $2 million in an offering | ||
as determined under 17 C.F.R. Section 230.502(a); and | ||
(9) prohibit issuers from accepting funds from a | ||
purchaser who is not a resident of this state. | ||
(c) The Board by rule must require crowdfunding portal | ||
websites to disclose to prospective investors, for each Texas | ||
crowdfunding offering, not later than the 21st day before an | ||
investor may purchase the securities offered: | ||
(1) the name of the issuer; | ||
(2) the name and age of each individual who: | ||
(A) is a director, general partner, manager, | ||
managing member, or executive officer of the issuer; | ||
(B) owns at least five percent of any class of | ||
securities of the issuer, other than pure debt securities; | ||
(C) has the power to execute non-ministerial | ||
contracts on behalf of the issuer; or | ||
(D) has the right, in any capacity, to exercise | ||
significant management control over the issuer; | ||
(3) the business experience and current occupation of | ||
each control person; | ||
(4) a statement of whether any control person or any | ||
entity in which a control person acted as a control person has been | ||
a debtor in bankruptcy or similar proceedings within the last seven | ||
years; | ||
(5) the amount being raised in the offering, and the | ||
minimum offering amount; | ||
(6) the manner in which the proceeds of the offering | ||
will be spent; | ||
(7) the business purpose of the offering, including a | ||
description of the projects for which the proceeds of the offering | ||
will be used; | ||
(8) a description of the securities being offered, | ||
including voting rights and rights to distributions, and whether | ||
those rights are superior or subordinate to the rights of other | ||
securities of the issuer; | ||
(9) a statement of whether the interests of investors | ||
may be diluted; | ||
(10) a statement showing the total capital to be | ||
invested in the projects for which the proceeds of the offering will | ||
be used, and the sources of the capital; | ||
(11) a description of any other securities of the | ||
issuer currently outstanding, or into which outstanding securities | ||
may be converted; | ||
(12) a table showing the ownership of the issuer | ||
immediately following the offering, if all of the securities | ||
offered in the offering are sold; | ||
(13) a description of any litigation pending or | ||
threatened against the issuer; | ||
(14) any significant conflicts of interest associated | ||
with the offering; | ||
(15) all compensation to be paid in connection with | ||
the offering; | ||
(16) the business performance record, during the | ||
preceding five years, of the issuer and each control person; | ||
(17) financial statements of the issuer, including: | ||
(A) a profit and loss statement for the most | ||
recent fiscal year; and | ||
(B) a balance sheet dated not earlier than the | ||
91st day before the date of the offering that is: | ||
(i) audited or prepared in accordance with | ||
generally accepted accounting principles; or | ||
(ii) certified by the chief executive | ||
officer of the issuer as reflecting all material transactions of | ||
the issuer, if any audited or reviewed financial statements of the | ||
issuer prepared within the last three years are provided; | ||
(18) a statement of the relationship between the | ||
issuer and the issuer's Texas crowdfunding portal, including any | ||
compensation paid to the portal; | ||
(19) a statement of the material risks associated with | ||
investing in the offering; | ||
(20) a statement determined by the commission, that | ||
these investments are not guaranteed and that the entire investment | ||
may be lost, and the statement shall require the affirmative | ||
agreement of the purchaser before funds are transferred; and | ||
(21) other information as the Commissioner may require | ||
by rule. | ||
(e) The portal is not considered to be offering investment | ||
advice or recommendations as restricted under a rule adopted under | ||
Subsection (b)(5)(B) of this section solely because the portal: | ||
(1) selects or performs due diligence with respect to | ||
an issuer or offering to be listed; or | ||
(2) provides generally applicable educational | ||
materials. | ||
(f) A portal may not be: | ||
(1) an entity precluded from engaging as an issuer in | ||
an offering described by 17 C.F.R. Section 230.506(d)(1) by reason | ||
of a conviction, order, judgment, decree, suspension, expulsion, | ||
or bar that was issued after September 1, 2015; or | ||
(2) an individual who, for an entity described by | ||
Subdivision (1) of this subsection: | ||
(A) is a director, general partner, manager, | ||
managing member, or executive officer of the issuer; | ||
(B) owns at least five percent of any class of | ||
securities of the issuer, other than pure debt securities; | ||
(C) has the power to execute non-ministerial | ||
contracts on behalf of such entity; or | ||
(D) has the right, in any capacity, to exercise | ||
significant management control over the issuer. | ||
(g) The Board shall adopt rules and procedures necessary for | ||
the administration of this Act. | ||
SECTION 2. This Act takes effect September 1, 2015. |