Crowdfunding Securities Exemptions 2016 Legislation

Heather Morton 4/12/2016

Equity crowdfunding allows companies to issue securities, either debt or equity, to micro-investors, often through websites such as Kickstarter and Indiegogo. State legislators have acted on legislation to allow small businesses and other entrepreneurs to use crowdfunding to raise capital within their state's borders.

Sixteen states have 32 bills and resolutions regarding crowdfunding pending in the 2016 legislative session.

Equity Crowdfunding Laws

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Crowdfunding Securities Exemption 2016 Legislation
State: Bill Number: Bill Summary:
Alabama None  
Alaska H.B. 194 Repeals and reenacts the Alaska Securities Act, including provisions relating to exempt securities and transactions; relates to registration of securities, firms, and agents that offer or sell securities and investment advice; relates to administrative, civil, and criminal enforcement provisions, including restitution and civil penalties for violations; allows certain civil penalties to be used for an investor training fund; establishes increased civil penalties for harming older Alaskans; retains provisions concerning corporations organized under the Alaska Native Claims Settlement Act; amends Rules 4, 5, 54, 65, and 90, Alaska Rules of Civil Procedure; and provides for an effective date.
Alaska S.B. 108 Repeals and reenacts the Alaska Securities Act, including provisions relating to exempt securities and transactions; relates to registration of securities, firms, and agents that offer or sell securities and investment advice; relates to administrative, civil, and criminal enforcement provisions, including restitution and civil penalties for violations; allows certain civil penalties to be used for an investor training fund; establishes increased civil penalties for harming older Alaskans; retains provisions concerning corporations organized under the Alaska Native Claims Settlement Act; amends Rules 4, 5, 54, 65, and 90, Alaska Rules of Civil Procedure; and provides for an effective date.
Alaska

S.B. 126

Passed Senate 4/9/16

Establishes an exemption for the offering and sale of certain securities.

Arizona

H.B. 2302

Signed by governor 3/18/16, Chapter 53

Extends the securities transaction exemption relating to the offer or sale of a security to securities that are sold through an internet website that is operated by the issuer of the securities sold. Adds certain prohibitions do not apply to a website operator that is the issuer of securities offered or sold under the exemption.
Arizona

S.B. 1003

Signed by governor 3/17/16, Chapter 31

Exempts securities sold under the crowdfunding exemption from statutory registration requirements for securities sold in good faith by the bona fide owner in an isolated transaction. Stipulates the sale of securities that are sold by the bona fide owner is exempt from the restriction on repeated or successive transactions if the following apply: a. The sale is of a security that when originally issued was exempt under the crowdfunding law; and b. At least nine months have passed from the date of the last sale of such securities by the issuer to a resident of this state. Makes technical changes.
Arkansas None  
California

A.B. 722

Died pursuant to Art. IV, Sec. 10(c) of the Constitution 2/1/16

Existing law, the Corporate Securities Law of 1968, requires securities offered or sold in this state in an issuer or non-issuer transaction to be qualified through an application filed with the commissioner of Business Oversight, unless exempt from the qualification requirements. That law makes it unlawful for a person in connection with the offer, sale, or purchase of a security to engage in fraudulent or misleading acts or omissions. This bill authorizes an applicant to file an application for qualification of the offer or sale of a security by crowdfunding permit if certain conditions are met, including that the total offering of securities by the applicant to be sold in a 12-month period, within or outside this state, is limited to $1 million, less a specified amount; the aggregate amount of securities sold to any investor, including any amount sold during the 12-month period preceding the date of the transaction, does not exceed the lesser of $5,000 or 10 percent of the net worth of that natural person; and the issuer will not, directly or indirectly, conduct any unsolicited telephone solicitation of the securities offered. This bill imposes a filing fee of $200 plus 1⁄5 of two percent of the aggregate value of the securities sought to be sold in this state. Existing law provides that any person who violates a condition of qualification of the offer or sale of a security is liable to any person acquiring the security sold in violation, who may sue to recover the consideration paid for such security with interest thereon at the legal rate or for damages, as specified. This bill extends that provision to a violation of a condition of qualification by permit authorized by this bill. This bill also requires a court to award reasonable attorney’s fees and costs, and authorizes the award of treble and punitive damages, to a prevailing purchaser in an action brought against any person who violates those conditions of qualification by permit authorized by this bill. Existing law imposes liability on any person who engages in specified unlawful activity to the person who purchases a security from him or sells a security to him, and authorizes the purchaser or seller to sue either for rescission or for damages. This bill provides that the plaintiff is not required to plead or prove that the defendant acted with scienter.
California A.B. 2178 Existing law, the Corporate Securities Law of 1968, requires securities offered or sold in this state in an issuer or nonissuer transaction to be qualified through an application filed with the commissioner of Business Oversight, unless exempt from the qualification requirements. That law makes it unlawful, for a person in connection with the offer, sale, or purchase of a security, to engage in fraudulent or misleading acts or omissions. This bill authorizes an applicant to file an application for qualification of the offer or sale of a security by crowdfunding permit if certain conditions are met, including that the total offering of securities by the applicant to be sold in a 12-month period, within or outside this state, is limited to $1 million, less a specified amount; the aggregate amount of securities sold to any investor, including any amount sold during the 12-month period preceding the date of the transaction, does not exceed the lesser of $5,000 or 10 percent of the net worth of that natural person; and the issuer will not, directly or indirectly, conduct any unsolicited telephone solicitation of the securities offered. This bill imposes a filing fee of $200 plus one-fifth of two percent of the aggregate value of the securities sought to be sold in this state. Existing law provides that any person who violates a condition of qualification of the offer or sale of a security is liable to any person acquiring the security sold in violation, who may sue to recover the consideration paid for such security with interest thereon at the legal rate or for damages, as specified. This bill extends that provision to a violation of a condition of qualification by permit authorized by this bill. This bill also requires a court to award reasonable attorney’s fees and costs, and authorizes the award of treble and punitive damages, to a prevailing purchaser in an action brought against any person who violates those conditions of qualification by permit authorized by this bill. Existing law imposes liability on any person who engages in specified unlawful activity to the person who purchases a security from him or sells a security to him, and authorizes the purchaser or seller to sue either for rescission or for damages. This bill provides that the plaintiff is not required to plead or prove that the defendant acted with scienter.
Colorado

H.B. 1049

Signed by governor 3/9/16, Chapter 3

The bill amends the "Colorado Crowdfunding Act." Uses the defined term "depository institution" to describe the entity that an issuer must use to set up an escrow account to hold the proceeds of a sale of intrastate securities; and allows the issuer to terminate the escrow account once the minimum amount of proceeds from the sale of the securities have been deposited into the account.
Connecticut None  
Delaware None  
District of Columbia None  
Florida None  
Georgia None  
Guam Not available  
Hawaii

H.B. 1482

Passed House 3/10/15

Establishes a crowdfunding exemption for limited intrastate investments between Hawaii residents and Hawaii businesses, limited to no more than $1 million raised over a 12 month period, and no more than $5,000 per investor. Includes disclaimer requirements.
Hawaii

H.B. 2704

Passed House 3/3/16

Establishes exemptions from Hawaii securities law for limited intrastate investments with Hawaii businesses.

Idaho None  
Illinois None  
Indiana None  
Iowa None  
Kansas None  
Kentucky None  
Louisiana None  
Maine None  
Maryland None  
Massachusetts None  
Michigan H.B. 4126

Revises requirements on escrow of purchaser funds in intrastate offering.

Michigan

H.R. 235

Adopted 3/23/16

Supports the U.S. Securities and Exchange Commission’s recent adoption of rules pursuant to Title III of the JOBS Act which are designed to facilitate small and start-up companies’ access to capital raised through crowdfunding.

Minnesota

H.F. 328

S.F. 138

Provides an exemption from regulation for crowdfunding transactions.

Minnesota S.F. 204

Provides an exemption from regulation for crowdfunding transactions.

Minnesota

S.F. 2101

To conference committee 4/29/15

Relates to state government; appropriates money for agriculture, environment, natural resources, jobs, and economic development; provides for animal health and agricultural utilization research; makes policy and technical changes to various agricultural related provisions, including provisions related to pesticide control, plant protection, nursery law, seeds, and loans; modifies license exclusions for the direct sale of certain prepared food; specifies MNvest registration exemption.
Mississippi None  
Missouri None  
Montana No regular 2016 session  
Nebraska None  
Nevada No regular 2016 session  
New Hampshire H.B. 327

This bill allows businesses to crowdfund using equity in their businesses.

New Jersey None  
New Mexico None  
New York A.B. 7790

Relates to allowing crowdfunding with limited restrictions to assist start-ups with accessing capital.

North Carolina H.B. 14

Enacts the Jump-start Our Business Start-ups Act; enacts the New Markets Jobs Act of 2015.

North Carolina H.B. 63

Enacts the North Carolina Intrastate Private Capital Act.

North Carolina H.B. 89

Restores various tax credits and incentives for economic development; enacts the Jump-start Our Business Start-ups Act.

North Carolina H.B. 305

Enacts the New Markets Jobs Act and the Jump-Start Our Business Start-Ups Act.

North Carolina H.B. 920

Restores various tax credits and incentives for economic development; enacts the Jump-Start Our Business Start-Ups Act.

North Carolina S.B. 35

Enacts the Jump-start Our Business Start-ups Act; enacts the New Markets Jobs Act of 2015.

North Carolina S.B. 481

Enacts the North Carolina Providing Access to Capital for Entrepreneurs and Small Business Act.

North Dakota No regular 2016 session  
N. Mariana Islands Not available  
Ohio None  
Oklahoma H.B. 2778

Adds transactions governed by the regulation a+ or crowdfunding rule of the federal Securities and Exchange Commission to the list of transactions exempt from state securities laws.

Oklahoma S.B. 1389

Creates the Oklahoma Intrastate Crowdfunding Exemption; provides for definitions; provides an exemption for a certain offer or sale; provides that certain offer or sale conform to certain state and federal laws; requires certain conditions be met to become an issuer; requires that certain notice be filed; provides for a filing fee; directs deposit of certain fee into the Oklahoma Department of Securities Revolving Fund; requires certain items be included in the notice; requires the issuer provide a disclosure statement; directs what is to be included in disclosure statement; requires the issuer to provide an escrow agreement to the Oklahoma Securities Commission; directs all funds be deposited into the escrow account; limits the amount of cash and other consideration for sales of a security; provides an exception to limit; limits the amount an investor may purchase based on income; requires the issuer to provide an annual report to the Commission; provides requirements as to what is to be included in the annual report; provides penalties for failure to pay notice filing fee; provides requirements for an intermediary; directs funds received from investors to go to the escrow account; provides for registration of an intermediary; provides for a registration fee; directing deposit of registration fee into certain fund; requiring certain information to be contained in application; provides for registration upon certain findings of the Commission; authorizes certain late fees; provides for codification; and provides an effective date.

Oregon None  
Pennsylvania None  
Puerto Rico None  
Rhode Island None  
South Carolina

H.B. 3088

Passed House 5/27/15

Amends the Code of Laws of South Carolina, 1976, by adding article 10 to chapter 6, title 12 so as to enact the "South Carolina Small Business Tax Incentives Act", allowing various income tax deductions and credits for resident taxpayers for investment in qualified businesses in this state and to allow a jobs tax credit and an additional tax credit for qualified research expenses for such businesses; amends §35-1-202, relating to transactions which are exempt from the requirements of specific provisions of securities law including registration requirements, so as to exempt any offer or sale of a security by an issuer if the offer or sale is conducted in accordance with §35-1-205; and by adding §35-1-205 so as to authorize certain qualified companies in this state to solicit investments from qualified resident investors in this state in order to enable them to raise money on an intrastate basis.

South Dakota None  
Tennessee None  
Texas No regular 2016 session  
Utah None  
Vermont None  
Virginia None  
Virgin Islands Not available  
Washington H.B. 2655

Provides a business and occupation tax exemption and a sales and use tax exemption on contributions by a donor to a donee through a crowdfunding web site.

West Virginia

H.B. 2615

Signed by governor 3/24/16

Amends and reenacts §32-3-301 of the Code of West Virginia, 1931, as amended; and amends said code by adding thereto a new article, designated §32-5-501, §32-5-502, 32-2 5-503, §32-5-504, and §32-5-505, all relating to creation of a new exemption to the securities registration rule with the commissioner for intrastate securities offerings under the West Virginia Small Business Capital Act.

Wisconsin A.B. 927

This bill requires the Wisconsin Housing and Economic Development Authority (WHEDA) to contract with a business maintaining a crowdfunding Internet site that recommends funding projects of small businesses and community organizations that create jobs or promote economic growth in this state.  The bill defines “crowdfunding Internet site” as an Internet site for campaigning and collecting donations for projects. WHEDA must solicit project proposals from small businesses and community organizations for inclusion on the crowdfunding Internet site, select projects for inclusion, and provide assistance to donation campaigns for the selected projects.

Wyoming

H.B. 31

Signed by governor 3/3/16, Chapter 22

Relates to the Uniform Securities Act; adopts uniform revisions relating to general provisions, exemptions from registration of securities, registration of securities, notice filing of federal covered securities, broker-dealers, agents, investment advisers, investment adviser representatives, federal covered investment advisers, fraud, liabilities, administration, judicial review and transition to the act; conforms related provisions; provides for an appropriation; authorizes an additional position as specified; grants rulemaking authority; and provides for effective dates.

 

 

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Heather Morton is a program principal in NCSL's Fiscal Affairs Program. She covers financial services, alcohol production and sales, and medical malpractice issues for NCSL.

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