,i  #aacth ,,congress  #b;d ,session    
,h4 ,r4 #defe  ,,in ,,the ,,house ,,of  
,,representatives  ,may #f1 #bjad ,mr4  
,mc,henry 7for himself and ,mr4         
,garrett7 introduced the following bill2
 which was referred to the ,committee on
 ,financial ,services  ,a ,,bill  ,to   
amend the securities laws to improve the
 small company capital formation        
provisions1 and for other purposes4  #a4
 ,short title ,this ,act may be cited as
 the ,startup ,capital ,modernization   
,act of #bjad4  #b4 ,increase in small  
issues exemptive authority ,section     
#c7;b77#a7 of the ,securities ,act of   
#aicc 7#ae ,u4,s4,c4 #gg;c7b77#a77 is   
amended by striking #e1jjj1jjj and      
inserting #aj1jjj1jjj4  #c4 ,preemption 
of ,state laws  7a7 ,in general ,the    
first subparagraph 7,d7 of section      
#ah7;b77#d7 of the ,securities ,act of  
#aicc 7#ae ,u4,s4,c4 #ggr7b77#d77       
7relating to a rule or regulation       
adopted pursuant to section #c7;b77#b77 
is amended by inserting section         

#c7;b77#a7 or before section #c7;b77#b74
  7b7 ,clarification of the preservation
 of ,state enforcement authority  7#a7  
,in general ,the amendment made by      
subsection 7a7 relates solely to ,state 
registration1 documentation1 and        
offering requirements1 as described     
under section #ah7;a7 of the ,securities
 ,act of #aicc 7#ae ,u4,s4,c4 #ggr7a771 
and shall have no impact or limitation  
on other ,state authority to take       
enforcement action with regard to an    
issuer1 intermediary1 or any other      
person or entity using the exemption    
from registration provided by section   
#c7;b77#a7 of such ,act4  7#b7          
,clarification of ,state jurisdiction   
over unlawful conduct of intermediaries1
 issuers1 and custodians ,section       
#ah7;c77#a7 of the ,securities ,act of  
#aicc is amended--  7,a7 in subparagraph
 7,a71 by striking and at the end2  7,b7
 in subparagraph 7,b71 by striking the  
period at the end and inserting 2 and2  
and  7,c7 by adding at the end the      

following3  7,c7 with respect to a      
transaction described under section     
#c7;b71 unlawful conduct by an issuer or
 custodian4  4  #d4 ,exclusion from     
shareholder cap  7a7 ,in general        
,section #ab7;g7 of the ,securities     
,exchange ,act of #aicd 7#ae ,u4,s4,c4  
#ghl7g77 is amended by adding at the end
 the following3  7#g7 ,exclusion for    
securities issued under ,regulation ,a  
pursuant to section #c7;b7 of the       
,securities ,act of #aicc ,all          
securities issued under ,regulation ,a  
7#ag ,c4,f4,r4 #bcj4bea et seq47        
pursuant to section #c7;b7 of the       
,securities ,act of #aicc shall be      
exempt from the provisions of this      
subsection if the issuer has filed      
audited financial statements with the   
,commission and the issuer is in        
compliance with all periodic disclosures
 required by the ,commission pursuant to
 section #c7;b77#d7 of the ,securities  
,act of #aicc4  4  7b7 ,rulemaking ,the 
,securities and ,exchange ,commission   

shall issue a rule to carry out section 
#ab7;g77#g7 of the ,securities ,exchange
 ,act of #aicd 7#ae ,u4,s4,c4 #gh;c71 as
 added by this section1 not later than  
#ahj days after the date of enactment of
 this section4  7c7 ,rule of            
applicability ,the exclusion provided   
under section #ab7;g77#g7 of the        
,securities ,exchange ,act of #aicd 7#ae
 ,u4,s4,c4 #gh;c71 as added by this     
section1 shall apply to securities      
issued before1 on1 or after the date of 
the enactment of this ,act4  #e4        
,exempted transactions  7a7 ,exempted   
transactions ,section #d of the         
,securities ,act of #aicc 7#ae ,u4,s4,c4
 #gg;d7 is amended--  7#a7 in subsection
 7a71 by adding at the end the following
 new paragraph3  7#g7 transactions      
meeting the requirements of subsection  
7d74  2  7#b7 by redesignating the      
second subsection 7b7 7relating to      
securities offered and sold in          
compliance with ,rule #ejf of           
,regulation ,d7 as subsection 7c72 and  

7#c7 by adding at the end the following3
  7d7  7#a7 ,the transactions referred  
to in subsection 7a77#g7 are            
transactions where--  7,a7 each         
purchaser is an accredited investor1 as 
that term is defined in section         
#bcj4eja7;a7 of title #ag1 ,code of     
,federal ,regulations 7or any successor 
thereto72 and  7,b7 if any securities   
sold in reliance on subsection 7a77#g7  
are offered by means of any general     
solicitation or general advertising1 the
 seller takes reasonable steps to       
verify1 in the manner set forth in      
section #bcj4ejf7;c77ii7 of title #ag1  
,code of ,federal ,regulations 7or any  
successor regulation71 that each        
purchaser is an accredited investor4    
7#b7 ,securities sold in reliance on    
subsection 7a77#g7 shall be deemed to   
have been acquired in a transaction not 
involving any public offering4  7#c7    
,the exemption provided by this         
subsection shall not be available for a 
transaction where the seller is--  7,a7 

an issuer1 its subsidiaries or parent2  
7,b7 an underwriter acting on behalf of 
the issuer1 its subsidiaries or parent1 
which receives compensation from the    
issuer with respect to such sale2 or    
7,c7 a dealer4  7#d7 ,a transaction     
meeting the requirements of this        
subsection shall be deemed not to be a  
distribution for purposes of section    
#b7;a77#aa74  4  7b7 ,exemption in      
connection with certain exempt offerings
 ,section #ah7;b77#d7 of the ,securities
 ,act of #aicc 7#ae ,u4,s4,c4           
#ggr7b77#d77 is amended--  7#a7 by      
redesignating the second subparagraph   
7,d7 and subparagraph 7,e7 as           
subparagraphs 7,e7 and 7,f71            
respectively2  7#b7 in subparagraph     
7,e71 as so redesignated1 by striking 2 
or and inserting a semicolon2  7#c7 in  
subparagraph 7,f71 as so redesignated1  
by striking the period and inserting 2  
or2 and  7#d7 by adding at the end the  
following new subparagraph3  7,g7       
section #d7;a77#g74  4