Florida Senate - 2014                                    SB 1596
       By Senator Clemens
       27-01052B-14                                          20141596__
    1                        A bill to be entitled                      
    2         An act relating to small business investment; amending
    3         s. 517.021, F.S.; revising definitions; amending s.
    4         517.07, F.S.; conforming a provision to changes made
    5         by the act; amending s. 517.12, F.S.; conforming a
    6         cross-reference; exempting certain funding portals
    7         from registration requirements relating to the offer
    8         or sale of certain securities; creating s. 517.371,
    9         F.S.; providing a short title; exempting certain
   10         offers and sales of securities and certain individuals
   11         from specified registration requirements; prohibiting
   12         the use of specified exemptions from registration
   13         requirements in conjunction with another exemption
   14         from registration requirements; providing exceptions;
   15         limiting a funding portal’s liability for certain
   16         transactions; amending s. 626.9911, F.S.; conforming a
   17         cross-reference; providing an effective date.
   19  Be It Enacted by the Legislature of the State of Florida:
   21         Section 1. Paragraph (b) of subsection (6) and subsection
   22  (9) of section 517.021, Florida Statutes, are amended, present
   23  subsections (11) through (23) of that section are renumbered as
   24  subsections (12) through (24), respectively, and a new
   25  subsection (11) is added to that section, to read:
   26         517.021 Definitions.—When used in this chapter, unless the
   27  context otherwise indicates, the following terms have the
   28  following respective meanings:
   29         (6)
   30         (b) The term “dealer” does not include the following:
   31         1. A Any licensed practicing attorney who renders or
   32  performs any of such services in connection with the regular
   33  practice of her or his profession;
   34         2. A Any bank authorized to do business in this state,
   35  except nonbank subsidiaries of a bank;
   36         3. A Any trust company having trust powers which it is
   37  authorized to exercise in this state, which renders or performs
   38  services in a fiduciary capacity incidental to the exercise of
   39  its trust powers;
   40         4. A Any wholesaler selling exclusively to dealers;
   41         5. A Any person buying and selling for her or his own
   42  account exclusively through a registered dealer or stock
   43  exchange; or
   44         6. Pursuant to s. 517.061(11), a any person associated with
   45  an issuer of securities if such person is a bona fide employee
   46  of the issuer who has not participated in the distribution or
   47  sale of any securities within the preceding 12 months and who
   48  primarily performs, or is intended to perform at the end of the
   49  distribution, substantial duties for, or on behalf of, the
   50  issuer other than in connection with transactions in securities;
   51  or
   52         7. A funding portal exempt from registration under s.
   53  517.12(21).
   54         (9) “Federal covered adviser” means a person who is
   55  registered or required to be registered under s. 203 of the
   56  Investment Advisers Act of 1940. The term “federal covered
   57  adviser” does not include any person who is excluded from the
   58  definition of investment adviser under subparagraphs (12)(b)1.
   59  8. (13)(b)1.-8.
   60         (11) “Funding portal” means a corporation, a trust, a
   61  partnership, an association, or any other legal entity that is
   62  registered with the Secretary of State to do business in this
   63  state and acting as an intermediary in a transaction involving
   64  the offer or sale of securities for the account of others and
   65  that does not:
   66         (a) Offer investment advice or recommendations. A funding
   67  portal’s refusal to post or rejection of an offering that is
   68  deemed not credible or that may present a potential for fraud
   69  may not be construed as an offer of investment advice or
   70  recommendation;
   71         (b) Solicit purchases, sales, or offers to buy securities
   72  offered or displayed on its website or portal;
   73         (c) Compensate employees, agents, or other persons for the
   74  solicitation of purchases, sales, or offers to buy the
   75  securities offered or displayed on its website or portal; or
   76         (d) Hold, manage, possess, or otherwise handle investor
   77  funds or securities.
   78         Section 2. Subsection (1) of section 517.07, Florida
   79  Statutes, is amended to read:
   80         517.07 Registration of securities.—
   81         (1) It is unlawful and a violation of this chapter for any
   82  person to sell or offer to sell a security within this state
   83  unless the security is exempt under s. 517.051, is sold in a
   84  transaction exempt under s. 517.061 or s. 517.371, is a federal
   85  covered security, or is registered pursuant to this chapter.
   86         Section 3. Subsection (20) of section 517.12, Florida
   87  Statutes, is amended, and subsection (21) is added to that
   88  section, to read:
   89         517.12 Registration of dealers, associated persons, and
   90  investment advisers.—
   91         (20) The registration requirements of this section do not
   92  apply to a any general lines insurance agent or life insurance
   93  agent licensed under chapter 626, for the sale of a security as
   94  defined in s. 517.021(22)(g) s. 517.021(21)(g), if the
   95  individual is directly authorized by the issuer to offer or sell
   96  the security on behalf of the issuer and the issuer is a
   97  federally chartered savings bank subject to regulation by the
   98  Federal Deposit Insurance Corporation. Actions under this
   99  subsection shall constitute activity under the insurance agent’s
  100  license for purposes of ss. 626.611 and 626.621.
  101         (21) The registration requirements of this section do not
  102  apply to a funding portal that:
  103         (a) Complies with any notice or filing requirements for
  104  exemption from registration as a broker-dealer established by
  105  rule or order of the commission or office under this chapter or
  106  registration requirements for a funding portal established by
  107  the United States Securities Exchange Commission and the
  108  Financial Industry Regulatory Authority.
  109         (b) Facilitates the offer and sale of securities.
  110         (c) Provides basic information on its website regarding the
  111  high risk of investment in and limitation on the resale of
  112  exempt securities and the potential for loss of an entire
  113  investment.
  114         (d) Maintains records of the offers and sales of securities
  115  made through its website and provides access to such records
  116  upon request by the commission or office.
  117         (e) Is not subject to a disqualification established by the
  118  commission or office or a disqualification described in United
  119  States Securities and Exchange Commission Rule 262, 17 C.F.R. s.
  120  230.262, under the Securities Act of 1933.
  121         Section 4. Section 517.371, Florida Statutes, is created to
  122  read:
  123         517.371 Crowdfinance exemption.—
  124         (1) This section may be cited as the “Crowdfinance Act.”
  125         (2) As used in this section, the term “individual” means a
  126  natural person residing in this state or a corporation, trust,
  127  partnership, association, or other legal entity, including a
  128  funding portal, that is registered with the Secretary of State
  129  to do business in this state and that has its principal place of
  130  business in this state, and that does not:
  131         (a) Offer investment advice or recommendations;
  132         (b) Solicit purchases, sales, or offers to purchase
  133  securities exempted by this section;
  134         (c) Compensate employees, agents, or other persons for the
  135  solicitation of purchases, sales, or offers to purchase the
  136  securities exempted by this section; or
  137         (d) Take custody of investor funds or securities.
  138         (3) The offer or sale of a security by an issuer is exempt
  139  from the registration requirements of s. 517.07, and each
  140  individual who represents an issuer in an offer or sale is
  141  exempt from the registration requirements of s. 517.12 if the
  142  offer or sale is conducted in accordance with all of the
  143  following requirements:
  144         (a) The issuer of the security is a for-profit business
  145  entity formed under the laws of this state and registered with
  146  the Secretary of State.
  147         (b) The transaction meets the requirements of the federal
  148  exemption for intrastate offerings under s. 3(a)(11) of the
  149  Securities Act of 1933, 15 U.S.C. s. 77c(a)(11), and United
  150  States Securities and Exchange Commission Rule 147, 17 C.F.R. s.
  151  230.147, under the Securities Act of 1933.
  152         (c) The sum of all cash and other consideration received
  153  from all sales of the security in reliance upon this exemption
  154  does not exceed $1 million, less the aggregate amount received
  155  for all sales of securities by the issuer within the 12 months
  156  before the first offer or sale made in reliance upon this
  157  exemption.
  158         (d) The issuer obtains from each purchaser evidence showing
  159  that the purchaser is a resident of this state.
  160         (e) Unless the purchaser is an accredited investor as
  161  defined by Rule 501 of Regulation D of the Securities Act of
  162  1933, the aggregate amount sold by an issuer to an investor in
  163  transactions exempt from registration requirements under this
  164  subsection during a 12-month period does not exceed:
  165         1. If the investor’s annual income or net worth is less
  166  than $100,000, the greater of $2,000, 5 percent of the annual
  167  income of the investor, or 5 percent of the net worth of the
  168  investor; or
  169         2. If the investor’s annual income or net worth is $100,000
  170  or more, the greater of $100,000, 10 percent of the annual
  171  income of the investor, or 10 percent of the net worth of the
  172  investor.
  173         (f) All funds received from investors are deposited into a
  174  bank or depository institution authorized to do business in this
  175  state, and all such funds are used in accordance with
  176  representations made to investors.
  177         (g) Before the use of any general solicitation or the 25th
  178  sale of the security, whichever occurs first, the issuer files a
  179  notice with the commission in writing or in electronic form
  180  through the office’s Regulatory Enforcement and Licensing System
  181  that:
  182         1. Indicates that the issuer is conducting an offering in
  183  reliance upon this exemption.
  184         2. Contains the names and addresses of the issuer, all
  185  persons who will be involved in the offer or sale of securities
  186  on behalf of the issuer, and the bank or other depository
  187  institution in which investor funds will be deposited.
  188         3. Includes documentation verifying that the issuer is
  189  organized under the laws of this state and authorized to do
  190  business in this state.
  191         (h) The issuer is not, before or as a result of the
  192  offering, an investment company as defined in s. 3 of the
  193  Investment Company Act of 1940, 15 U.S.C. s. 80a-3, or subject
  194  to the reporting requirements of s. 13 or s. 15(d) of the
  195  Securities Exchange Act of 1934, 15 U.S.C. s. 78m or s. 78o(d).
  196         (i) Each security purchaser is notified by the issuer or
  197  the selling agent that the security is not registered under this
  198  chapter and that the securities are subject to the limitation on
  199  resales contained in subsection (e) of United States Securities
  200  and Exchange Commission Rule 147, 17 C.F.R. s. 230.147(e).
  201         (j) All offering materials prominently state in bold,
  202  conspicuous print:
  204         These securities are offered and will be sold in
  205         reliance on an exemption from the registration
  206         requirements of federal and State of Florida
  207         securities laws and are not required to comply with
  208         specific disclosure requirements that would apply to
  209         such registration. Neither the United States
  210         Securities Exchange Commission nor the Florida Office
  211         of Financial Regulation has passed upon the merits of,
  212         or given its approval to, the securities, the terms of
  213         the offering, or the accuracy or completeness of any
  214         offering materials. The securities are subject to
  215         legal restrictions on transfer and resale and
  216         investors should not assume that they will be able to
  217         resell their securities. Investing in these securities
  218         involves risk, and investors should be able to bear
  219         the loss of their entire investment. All investors
  220         should make their own determination of whether or not
  221         to make any investment based on their own independent
  222         evaluation and analysis.
  224         (4) The exemption from registration requirements provided
  225  in subsection (3) may not be used in conjunction with any other
  226  exemption from registration requirements under this chapter,
  227  except for offers and sales to a person owning 10 percent or
  228  more of the outstanding shares of any class or classes of
  229  securities or to an officer, director, partner, or trustee or a
  230  person occupying similar status or performing similar functions.
  231  Sales to such persons do not count toward the limitation
  232  provided in paragraph (3)(c).
  233         (5) Notwithstanding subsection (4), the exemption from
  234  registration requirements provided in subsection (3) may be used
  235  in conjunction with the exemption from dealer registration for a
  236  funding portal under s. 517.12(21).
  237         (6) The liability of a funding portal exempt from
  238  registration requirements under s. 517.12(21) for transactions
  239  conducted in accordance with subsection (3) through its website
  240  is limited to the aggregate sum of fees and commissions charged
  241  for such transactions.
  242         Section 5. Paragraph (b) of subsection (4) of section
  243  626.9911, Florida Statutes, is amended to read:
  244         626.9911 Definitions.—As used in this act, the term:
  245         (4) “Life expectancy provider” means a person who
  246  determines, or holds himself or herself out as determining, life
  247  expectancies or mortality ratings used to determine life
  248  expectancies:
  249         (b) In connection with a viatical settlement investment,
  250  pursuant to s. 517.021(24) s. 517.021(23); or
  251         Section 6. This act shall take effect July 1, 2014.