I
118THCONGRESS
1
STSESSION H. R. 2590
To amend the Securities Exchange Act of 1934 to create a safe harbor
for finders and private placement brokers, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
APRIL13, 2023
Mr. G
ARBARINOintroduced the following bill; which was referred to the
Committee on Financial Services
A BILL
To amend the Securities Exchange Act of 1934 to create
a safe harbor for finders and private placement brokers,
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, 2
SECTION 1. SHORT TITLE. 3
This Act may be cited as the ‘‘Unlocking Capital for 4
Small Businesses Act of 2023’’. 5
SEC. 2. SAFE HARBORS FOR PRIVATE PLACEMENT BRO-6
KERS AND FINDERS. 7
(a) I
NGENERAL.—Section 15 of the Securities Ex-8
change Act of 1934 (15 U.S.C. 78o) is amended by adding 9
at the end the following: 10
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‘‘(p) PRIVATEPLACEMENTBROKERSAFEHAR-1
BOR.— 2
‘‘(1) R
EGISTRATION REQUIREMENTS .—Not 3
later than 180 days after the date of the enactment 4
of this subsection the Commission shall promulgate 5
regulations with respect to private placement brokers 6
that are no more stringent than those imposed on 7
funding portals. 8
‘‘(2) N
ATIONAL SECURITIES ASSOCIATIONS .— 9
Not later than 180 days after the date of the enact-10
ment of this subsection the Commission shall pro-11
mulgate regulations that require the rules of any na-12
tional securities association to allow a private place-13
ment broker to become a member of such national 14
securities association subject to reduced membership 15
requirements consistent with this subsection. 16
‘‘(3) D
ISCLOSURES REQUIRED .—Before effect-17
ing a transaction, a private placement broker shall 18
disclose clearly and conspicuously, in writing, to all 19
parties to the transaction as a result of the broker’s 20
activities— 21
‘‘(A) that the broker is acting as a private 22
placement broker; 23
‘‘(B) the amount of any payment or antici-24
pated payment for services rendered as a pri-25
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vate placement broker in connection with such 1
transaction; 2
‘‘(C) the person to whom any such pay-3
ment is made; and 4
‘‘(D) any beneficial interest in the issuer, 5
direct or indirect, of the private placement 6
broker, of a member of the immediate family of 7
the private placement broker, of an associated 8
person of the private placement broker, or of a 9
member of the immediate family of such associ-10
ated person. 11
‘‘(4) P
RIVATE PLACEMENT BROKER DE -12
FINED.—In this subsection, the term ‘private place-13
ment broker’ means a person that— 14
‘‘(A) receives transaction-based compensa-15
tion— 16
‘‘(i) for effecting a transaction by— 17
‘‘(I) introducing an issuer of se-18
curities and a buyer of such securities 19
in connection with the sale of a busi-20
ness effected as the sale of securities; 21
or 22
‘‘(II) introducing an issuer of se-23
curities and a buyer of such securities 24
in connection with the placement of 25
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securities in transactions that are ex-1
empt from registration requirements 2
under the Securities Act of 1933; and 3
‘‘(ii) that is not with respect to— 4
‘‘(I) a class of publicly traded se-5
curities; 6
‘‘(II) the securities of an invest-7
ment company (as defined in section 3 8
of the Investment Company Act of 9
1940); or 10
‘‘(III) a variable or equity-in-11
dexed annuity or other variable or eq-12
uity-indexed life insurance product; 13
‘‘(B) with respect to a transaction for 14
which such transaction-based compensation is 15
received— 16
‘‘(i) does not handle or take posses-17
sion of the funds or securities; and 18
‘‘(ii) does not engage in an activity 19
that requires registration as an investment 20
adviser under State or Federal law; and 21
‘‘(C) is not a finder as defined under sub-22
section (q). 23
‘‘(q) F
INDERSAFEHARBOR.— 24
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‘‘(1) NONREGISTRATION.—A finder is exempt 1
from the registration requirements of this Act. 2
‘‘(2) N
ATIONAL SECURITIES ASSOCIATIONS .—A 3
finder shall not be required to become a member of 4
any national securities association. 5
‘‘(3) F
INDER DEFINED.—In this subsection, the 6
term ‘finder’ means a person described in para-7
graphs (A) and (B) of subsection (p)(4) that— 8
‘‘(A) receives transaction-based compensa-9
tion of equal to or less than $500,000 in any 10
calendar year; 11
‘‘(B) receives transaction-based compensa-12
tion in connection with transactions that result 13
in a single issuer selling securities valued at 14
equal to or less than $15 million in any cal-15
endar year; 16
‘‘(C) receives transaction-based compensa-17
tion in connection with transactions that result 18
in any combination of issuers selling securities 19
valued at equal to or less than $30 million in 20
any calendar year; or 21
‘‘(D) receives transaction-based compensa-22
tion in connection with fewer than 16 trans-23
actions that are not part of the same offering 24
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or are otherwise unrelated in any calendar 1
year.’’. 2
(b) V
ALIDITY OFCONTRACTSWITHREGISTERED 3
P
RIVATEPLACEMENTBROKERS ANDFINDERS.—Section 4
29 of the Securities Exchange Act (15 U.S.C. 78cc) is 5
amended by adding at the end the following: 6
‘‘(d) Subsection (b) shall not apply to a contract 7
made for a transaction if— 8
‘‘(1) the transaction is one in which the issuer 9
engaged the services of a broker or dealer that is not 10
registered under this Act with respect to such trans-11
action; 12
‘‘(2) such issuer received a self-certification 13
from such broker or dealer certifying that such 14
broker or dealer is a registered private placement 15
broker under section 15(p) or a finder under section 16
15(q); and 17
‘‘(3) the issuer either did not know that such 18
self-certification was false or did not have a reason-19
able basis to believe that such self-certification was 20
false.’’. 21
(c) R
EMOVAL OF PRIVATEPLACEMENTBROKERS 22
F
ROMDEFINITIONS OFBROKER.— 23
(1) R
ECORDS AND REPORTS ON MONETARY IN -24
STRUMENTS TRANSACTIONS .—Section 5312 of title 25
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31, United States Code, is amended in subsection 1
(a)(2)(G) by inserting ‘‘with the exception of a pri-2
vate placement broker as defined in section 15(p)(4) 3
of the Securities Exchange Act of 1934 (15 U.S.C. 4
78o(p)(4))’’ before the semicolon at the end. 5
(2) S
ECURITIES EXCHANGE ACT OF 1934 .—Sec-6
tion 3(a)(4) of the Securities Exchange Act of 1934 7
(15 U.S.C. 78c(a)(4)) is amended by adding at the 8
end the following: 9
‘‘(G) P
RIVATE PLACEMENT BROKERS .—A 10
private placement broker as defined in section 11
15(p)(4) is not a broker for the purposes of this 12
Act.’’. 13
SEC. 3. LIMITATIONS ON STATE LAW. 14
Section 15(i) of the Securities Exchange Act of 1934 15
(15 U.S.C. 78o(i)) is amended— 16
(1) by redesignating paragraphs (3) and (4) as 17
paragraphs (4) and (5), respectively; 18
(2) by inserting after paragraph (2) the fol-19
lowing: 20
‘‘(3) P
RIVATE PLACEMENT BROKERS AND FIND -21
ERS.— 22
‘‘(A) I
N GENERAL.—No State or political 23
subdivision thereof may enforce any law, rule, 24
regulation, or other administrative action that 25
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imposes greater registration, audit, financial 1
recordkeeping, or reporting requirements on a 2
private placement broker or finder than those 3
that are required under subsections (p) and (q), 4
respectively. 5
‘‘(B) D
EFINITION OF STATE .—For pur-6
poses of this paragraph, the term ‘State’ in-7
cludes the District of Columbia and each terri-8
tory of the United States.’’; and 9
(3) in paragraph (4), as so redesignated, by 10
striking ‘‘paragraph (3)’’ and inserting ‘‘paragraph 11
(5)’’. 12
Æ
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