Sec. 501. Securities offerings involving certain intangible assets
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/bill/118/s/2281/is/section-501·A research copy — for the controlling text, always check the official state or federal source. Not legal advice.
Title I of the Securities Exchange Act of 1934 ( 15 U.S.C. 78a et seq. ) is amended by adding at the end the following: In this section: The term ancillary asset means an intangible, fungible asset that is offered, sold, or otherwise provided to a person in connection with the purchase and sale of a security through an arrangement or scheme that constitutes an investment contract, as that term is used in section 2(a)(1) of the Securities Act of 1933 ( 15 U.S.C. 77b(a)(1) ). The term ancillary asset does not include an asset that provides the holder of the asset with any of the following rights in a business entity:
A debt or equity interest in that entity. Liquidation rights with respect to that entity. An entitlement to an interest or dividend payment from that entity. Any other financial interest in that entity. The term business entity means— a corporation, limited liability company, or other entity that is created by filing a document with the Secretary of State of a State (or a similar office); or a foreign entity that is eligible for registration, or that is registered to do business, under the laws of a State or Indian Tribe.
The term foreign private issuer means a foreign issuer, other than a foreign government, except that the term does not include a foreign issuer that, as of the last business day of the most recently completed fiscal quarter of the issuer, satisfies the following conditions: More than 50 percent of the outstanding voting securities of the issuer are directly or indirectly owned by residents of the United States. Any of the following: The majority of the executive officers or directors of the issuer are citizens or residents of the United States.
More than 50 percent of the assets of the issuer are located in the United States. The business of the issuer is principally administered in the United States. Subject to paragraphs
(4)and (5), an issuer engaged in business in or affecting interstate commerce, or that is organized outside of the United States and is not a foreign private issuer, that offers, sells, or otherwise provides a security through an arrangement or scheme that constitutes an investment contract, as that term is used in section 2(a)(1) of the Securities Act of 1933 ( 15 U.S.C. 77b(a)(1) ), and that provides or proposes to provide any holder of the security with an ancillary asset, shall be subject to the periodic disclosure requirements under subsection
(c)for the 1-year period beginning on the date that is 180 days after the first date on which the security is offered, sold, or otherwise provided by the issuer, if— the average daily aggregate value of all ancillary assets offered, sold, or otherwise provided by the issuer in relation to the offer, sale, or provision of the security in all spot markets open to the public in the United States (based on the knowledge of the issuer after due inquiry) is greater than $5,000,000 for the 180-day period immediately succeeding the date of that first offer, sale, or provision; and during the 180-day period described in subparagraph (A), the issuer, or any person owning not less than 10 percent of any class of equity securities of the issuer, engaged in entrepreneurial or managerial efforts that primarily determined the value of the ancillary asset. Subject to paragraphs
(4)and (5), an issuer that is engaged in business in or affecting interstate commerce, or that is organized outside of the United States and is not a foreign private issuer, that offers, sells, or otherwise provides a security through an arrangement or scheme that constitutes an investment contract, as that term is used in section 2(a)(1) of the Securities Act of 1933 ( 15 U.S.C. 77b(a)(1) ), and that provides the holder of the security with an ancillary asset in connection with the acquisition of the security, shall be subject to the periodic disclosure requirements under subsection
(c)for a given fiscal year of that issuer, if, in the immediately preceding fiscal year of the issuer (or any portion thereof)— the average daily aggregate value of all trading in the ancillary asset in all spot markets open to the public in the United States was greater than $5,000,000, based on the knowledge of the issuer after due inquiry; and the issuer, or any person owning not less than 10 percent of any class of equity securities of the issuer, engaged in entrepreneurial or managerial efforts that primarily determined the value of the ancillary asset. Subject to paragraphs
(4)and (5), an issuer that is engaged in business in or affecting interstate commerce, or that is organized outside of the United States and is not a foreign private issuer, that offers, sells, or otherwise provides a security through an arrangement or scheme that constitutes an investment contract, as that term is used in section 2(a)(1) of the Securities Act of 1933 ( 15 U.S.C. 77b(a)(1) ), and that provides the holder of the security with an ancillary asset before January 1, 2025, in connection with the acquisition of the security shall be subject to the periodic disclosure requirements under subsection
(c)beginning in the first fiscal year of the issuer that begins on or after that date, if, in the immediately preceding fiscal year of the issuer— the average daily aggregate value of trading in the ancillary asset in all spot markets open to the public for which trading volume is generally available was greater than $5,000,000, based on the knowledge of the issuer after due inquiry; and the issuer, or any person owning not less than 10 percent of any class of equity securities of the issuer, engaged in entrepreneurial or managerial efforts that primarily determined the value of the ancillary asset. Notwithstanding any other provision of law, if an issuer issues a security through an arrangement or scheme that constitutes an investment contract, as that term is used in section 2(a)(1) of the Securities Act of 1933 ( 15 U.S.C. 77b(a)(1) ), is subject to paragraph (1), (2), or (3), and has complied with the periodic disclosure requirements under subsection (c), to the extent applicable, an ancillary asset owned by the issuer, or any person affiliated with the issuer, shall be presumed— to be a commodity, consistent with section 2(c)(2)(F) of the Commodity Exchange Act ( 7 U.S.C. 2(c)(2)(F) ); and not to be a security under— section 3(a); such section 2(a)(1); section 2(a) of the Investment Company Act of 1940 ( 15 U.S.C. 80a–2(a) ); section 202(a) of the Investment Advisers Act of 1940 ( 15 U.S.C. 80b–2(a) ); or any applicable provision of State law. A person who is not an issuer, an entity controlled by an issuer (including a person that acquires an ancillary asset from such an issuer for the purpose of resale or distribution of the ancillary asset), or a person acting at the direction or on the behalf of an issuer shall be not required to treat an ancillary asset provided by, or on behalf of, an issuer as a security under this Act or any provision of law described in subparagraph (A)(ii). Subparagraph
(A)shall not apply to an ancillary asset if the United States Court of Appeals for the District of Columbia Circuit, after an appropriate proceeding, issues an order finding by clear and convincing evidence that the ancillary asset meets not less than 1 of the bases for exclusion under subsection (a)(1)(B). Nothing in this subparagraph shall be construed to preclude the Commission from entering into a settlement agreement relating to violations or alleged violations of this section. Compliance under this section shall not be used in any administrative or judicial proceeding as evidence that an ancillary asset is a security. For the purposes of paragraphs (1), (2), and (3), the calculation of daily aggregate value shall be based on data disclosed by spot markets or otherwise available to the public for inspection. If an issuer is subject to paragraph (1), (2), or
(3)of subsection (b), the issuer shall file, or cause the relevant affiliate to file, with the Commission, on a semi-annual basis, information that the Commission may, by rule, require relating to the issuer and any relevant ancillary asset, as necessary or appropriate in the public interest or for the protection of investors, which shall be exclusively comprised of the following: Basic corporate information regarding the issuer, including the following: The experience of the issuer in developing assets similar to the ancillary asset. If the issuer has previously provided ancillary assets to purchasers of securities, information on the subsequent history of those previously provided ancillary assets, including price history, if the information is publicly available. The activities that the issuer has taken in the relevant disclosure period, and is projecting to take in the 1-year period following the submission of the disclosure, with respect to promoting the use, value, or resale of the ancillary asset (including any activity to facilitate the creation or maintenance of a trading market for the ancillary asset and any network or system that utilizes the ancillary asset). The anticipated cost of the activities of the issuer in subparagraph
(C)and whether the issuer has unencumbered, liquid funds equal to that amount. To the extent the ancillary asset involves the use of a particular technology, the experience of the issuer with the use of that technology. The backgrounds of the board of directors (or equivalent body), senior management, and key employees of the issuer, the experience or functions of whom are material to the value of the ancillary asset, as well as any personnel changes relating to the issuer during the period covered by the disclosure. A description of the assets and liabilities of the issuer, to the extent material to the value of the ancillary asset. A description of any legal proceedings in which the issuer is engaged (including inquiries by governmental agencies into the activities of the issuer), to the extent material to the value of the ancillary asset. Risk factors relating to the impact of the issuer on, or unique knowledge relating to, the value of the ancillary asset. Information relating to ownership of the ancillary asset by— persons owning not less than 10 percent of any class of equity security of the issuer; and the management of the issuer. Information relating to transactions involving the ancillary asset by the issuer with related persons, promoters, and control persons. Recent sales or similar dispositions of ancillary assets by the issuer and affiliates of the issuer. Purchases or similar dispositions of ancillary assets by the issuer and affiliates of the issuer. A going concern statement from the chief financial officer of the issuer or equivalent official, signed under penalty of perjury, stating whether the issuer maintains the financial resources to continue business as a going concern for the 1-year period following the submission of the disclosure, absent a material change in circumstances. Information relating to the ancillary asset, including the following: A general description of the ancillary asset, including the standard unit of measure with respect to the ancillary asset, the intended or known functionality and uses of the ancillary asset, the market for the ancillary asset, other assets or services that may compete with the ancillary asset, and the total supply of the ancillary asset or the manner and rate of the ongoing production or creation of the ancillary asset. If ancillary assets have been offered, sold, or otherwise provided by the issuer to investors, intermediaries, or resellers, a description of the amount of assets offered, sold, or provided, the terms of each such transaction, and any contractual or other restrictions on the resale of the assets by intermediaries. If ancillary assets were distributed without charge, a description of each distribution, including the identity of any recipient that received more than 5 percent of the total amount of the ancillary assets in any such distribution. The amount of ancillary assets owned by the issuer. For the 1-year period following the submission of the disclosure, a description of the plans of the issuer to support (or to cease supporting) the use or development of the ancillary asset, including markets for the ancillary asset and each platform or system that uses the ancillary asset. Each third party not affiliated with the issuer, the activities of which may have a material impact on the value of the ancillary asset. Risk factors known to the issuer that may limit demand for, or interest in, the ancillary asset. The names and locations of the markets in which the ancillary asset is known by the issuer to be available for sale or purchase. To the extent available to the issuer, the average daily price for a constant unit of value of the ancillary asset during the relevant reporting period, as well as the 12-month high and low prices for the ancillary asset. If applicable, information relating to any external audit of the code and functionality of the ancillary asset, including the entity performing the audit and the experience of the entity in conducting similar audits. If applicable, any valuation report or economic analysis commissioned by the issuer regarding the ancillary asset or the projected market of the ancillary asset. If the ancillary asset is intangible, information relating to custody by the owner of the ancillary asset or a third party. Information on intellectual property rights claimed or disputed relating to the ancillary asset. A description of the technology underlying the issuance and trading of the ancillary asset. Any material tax considerations applicable to owning, storing, using, or trading the ancillary asset. Any material legal or regulatory considerations applicable to owning, storing, using, or trading the ancillary asset, including any legal proceeding that may impact the value of the ancillary asset. Any other material factor or information that may impact the value of the ancillary asset and about which the issuer is reasonably aware. If an issuer would otherwise be subject to specified periodic disclosure requirements under subsection
(c)and is no longer in operation, any successor entity that directly or indirectly received not less than 50 percent of the remaining proceeds raised by the sale of the related securities of that issuer shall file, or cause to be filed, with the Commission the information required under that subsection. If an entity controlled by an issuer is subject to specified periodic disclosure requirements under subsection
(c)and is engaged in entrepreneurial or managerial efforts that primarily determine the value of an ancillary asset, the entity may file with the Commission the information required under that subsection. An issuer that is not subject to the specified periodic disclosure requirements under subsection
(c)and that offers or sells a security through an arrangement or scheme that constitutes an investment contract, as that term is used in section 2(a)(1) of the Securities Act of 1933 ( 15 U.S.C. 77b(a)(1) ), and that provides the holder of that security with an ancillary asset in connection with the acquisition of the security may voluntarily file with the Commission the information required under that subsection if the issuer believes that it is reasonably likely that the issuer will become subject to those requirements in the future. The Commission may, by order, exempt an ancillary asset from the specified periodic disclosure requirements under subsection
(c)if the Commission determines that the public policy goals of disclosure and consumer protection are not satisfied by requiring disclosures relating to an ancillary asset. If an issuer fails to comply with a provision of this section, an ancillary asset provided by the issuer shall not be presumed to be a security under a provision of law described in subsection (b)(4)(A)(ii), solely because of such failure. Any statement made in a disclosure, application, or other document filed under this section shall be subject to section 18. The obligation of an issuer to file the information required under subsection
(c)shall terminate on the date that is 90 days, or such shorter period as the Commission may determine, after the date on which the issuer files a certification described in paragraph (2). A certification described in this paragraph shall be supported by reasonable evidence, based on the knowledge of the issuer filing the certification, after due inquiry, that— the average daily aggregate value of all trading in the applicable ancillary asset in all spot markets open to the public in the United States in the 12-month period preceding the date on which the certification is filed was not greater than $5,000,000; or during the 12-month period preceding the date on which the certification is filed, neither the applicable issuer, nor any entity controlled by the applicable issuer, engaged in entrepreneurial or managerial efforts that primarily determined the value of the ancillary asset. Subject to subparagraph (C)(ii), the Commission may, by majority vote and after notice and opportunity for hearing, deny a certification filed under paragraph
(1)if the Commission finds that the certification is not supported by substantial evidence. The denial, under clause (i), of a certification filed under paragraph (1)— shall terminate the certification so filed; and shall not prevent the applicable issuer from filing another certification under paragraph (1), if the re-filed certification is filed not earlier than 180 days after the date on which the original certification is denied. Termination of the disclosure requirements described in paragraph
(1)applicable to an issuer that has filed a certification under that paragraph shall be deferred pending review by the Commission of the evidence supporting the certification. If, as of the date that is 90 days after receiving a certification filed under paragraph (1), the Commission has not requested additional evidence with respect to the certification from the applicable issuer, the disclosure obligations that are the subject of the certification shall terminate. The Commission may adopt rules and guidance to implement this section, consistent with the statutory intent of this section. .
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- 15 USC 80a–2(a)
- 15 USC 80b–2(a)
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Sec. 501
Securities offerings involving certain intangible assets
Cite15 USC 80a–2(a)
Cite15 USC 80b–2(a)
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