By: Johnson	H.B. No. 2580

	A BILL TO BE ENTITLED
	AN ACT
	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.