H.R. 2201 amends the Securities Act of 1933 to exempt certain micro-offering from the Act’s registration requirements. This will allow small businesses to operate with confidence that they are not in violation of the law when making a non-public securities offering, so long as:
- Each purchaser has a substantive pre-existing relationship with an officer, director, or shareholder with 10% or more of the shares of the issuer;
- The issuer reasonably believes that there are no more than 35 purchasers of securities from the issuer that are sold in reliance on the exemption during the 12-month period preceding the transaction; and
- The aggregate amount of all securities sold by the issuer does not exceed $500,000 over a 12-month period.
The bill also exempts these transaction from state regulation of securities offerings.
The summary below was written by the Congressional Research Service, which is a nonpartisan division of the Library of Congress, and was published on Nov 9, 2017.
Micro Offering Safe Harbor Act
(Sec. 2) This bill amends the Securities Act of 1933 to exempt certain micro-offerings from: (1) state regulation of securities offerings, and (2) federal prohibitions related to interstate solicitation.
The exempted micro-offerings must meet all of the following requirements:
the purchaser has a substantive pre-existing relationship with the issuer, during the 12-month period preceding the transaction there are no more than 35 purchasers relying on the exemption, and the amount of all securities sold by the issuer (including any amount sold in reliance upon the exemption) during the 12-month period preceding the transaction does not exceed $500,000. A transaction shall not qualify for the exemption if the issuer or one of certain related persons triggers a "bad actor" disqualification under specified regulations due to a relevant criminal conviction, court or regulatory order, or other disciplinary event.