---
kind: "section"
citation: "15 U.S.C. § 77d–1"
title: "15"
title_heading: "Commerce and Trade"
number: "77d–1"
heading: "Requirements with respect to certain small transactions"
release: "119-102"
url: "https://uscodex.org/usc/15/77d-1"
units:
  - "Chapter 2A — Securities and Trust Indentures"
  - "Subchapter I — Domestic Securities"
---

# §77d–1. Requirements with respect to certain small transactions

- (a) **Requirements on intermediaries—** A [person](/usc/15/78m.md?p=h-8-E) acting as an [intermediary](/usc/15/6901.md?p=7) in a transaction involving the offer or sale of [securities](/usc/15/77b.md?p=a-1) for the [account](/usc/15/1681a.md?p=r-4) of others pursuant to [section 77d(6)](/usc/15/77d.md)[^1] of this title shall—
  - (1) register with the [Commission](/usc/15/77b.md?p=a-5) as—
    - (A) a [broker](/usc/15/6102.md?p=d-2-B-i); or
    - (B) a funding portal (as defined in [section 78c(a)(80)](/usc/15/78c.md?p=a-80)[^2] of this title);
  - (2) register with any applicable [self-regulatory organization](/usc/15/78c.md?p=a-26) (as defined in [section 78c(a)(26) of this title](/usc/15/78c.md?p=a-26));
  - (3) provide such disclosures, including disclosures related to risks and other investor education materials, as the [Commission](/usc/15/77b.md?p=a-5) shall, by rule, determine appropriate;
  - (4) ensure that each investor—
    - (A) reviews investor-education information, in accordance with standards established by the [Commission](/usc/15/77b.md?p=a-5), by rule;
    - (B) positively affirms that the investor understands that the investor is risking the loss of the entire investment, and that the investor could bear such a loss; and
    - (C) answers questions demonstrating—
      - (i) an understanding of the level of risk generally applicable to investments in startups, emerging businesses, and small [issuers](/usc/15/77b.md?p=a-4);
      - (ii) an understanding of the risk of illiquidity; and
      - (iii) an understanding of such other matters as the [Commission](/usc/15/77b.md?p=a-5) determines appropriate, by rule;
  - (5) take such measures to reduce the risk of fraud with respect to such transactions, as established by the [Commission](/usc/15/77b.md?p=a-5), by rule, including obtaining a background and [securities](/usc/15/77b.md?p=a-1) enforcement regulatory history check on each officer, director, and [person](/usc/15/78m.md?p=h-8-E) holding more than 20 percent of the outstanding equity of every [issuer](/usc/15/77b.md?p=a-4) whose [securities](/usc/15/77b.md?p=a-1) are offered by such [person](/usc/15/78m.md?p=h-8-E);
  - (6) not later than 21 days prior to the first day on which [securities](/usc/15/77b.md?p=a-1) are sold to any investor (or such other period as the [Commission](/usc/15/77b.md?p=a-5) may establish), make available to the [Commission](/usc/15/77b.md?p=a-5) and to potential investors any information provided by the [issuer](/usc/15/77b.md?p=a-4) pursuant to [subsection (b)](#b);
  - (7) ensure that all offering proceeds are only provided to the [issuer](/usc/15/77b.md?p=a-4) when the aggregate capital raised from all investors is equal to or greater than a target offering amount, and allow all investors to cancel their commitments to invest, as the [Commission](/usc/15/77b.md?p=a-5) shall, by rule, determine appropriate;
  - (8) make such efforts as the [Commission](/usc/15/77b.md?p=a-5) determines appropriate, by rule, to ensure that no investor in a 12-month period has purchased [securities](/usc/15/77b.md?p=a-1) offered pursuant to [section 77d(6)](/usc/15/77d.md)[^1] of this title that, in the aggregate, from all [issuers](/usc/15/77b.md?p=a-4), exceed the investment limits set forth in [section 77d(6)(B)](/usc/15/77d.md)[^1] of this title;
  - (9) take such steps to protect the privacy of information collected from investors as the [Commission](/usc/15/77b.md?p=a-5) shall, by rule, determine appropriate;
  - (10) not compensate promoters, finders, or lead generators for providing the [broker](/usc/15/6102.md?p=d-2-B-i) or funding portal with the personal identifying information of any potential investor;
  - (11) prohibit its directors, officers, or partners (or any [person](/usc/15/78m.md?p=h-8-E) occupying a similar status or performing a similar function) from having any financial interest in an [issuer](/usc/15/77b.md?p=a-4) using its services; and
  - (12) meet such other requirements as the [Commission](/usc/15/77b.md?p=a-5) may, by rule, prescribe, for the protection of investors and in the public interest.
- (b) **Requirements for issuers—** For purposes of [section 77d(6)](/usc/15/77d.md)[^1] of this title, an [issuer](/usc/15/77b.md?p=a-4) who offers or sells [securities](/usc/15/77b.md?p=a-1) shall—
  - (1) file with the [Commission](/usc/15/77b.md?p=a-5) and provide to investors and the relevant [broker](/usc/15/6102.md?p=d-2-B-i) or funding portal, and make available to potential investors—
    - (A) the name, legal status, physical address, and website address of the [issuer](/usc/15/77b.md?p=a-4);
    - (B) the names of the directors and officers (and any [persons](/usc/15/78m.md?p=h-8-E) occupying a similar status or performing a similar function), and each [person](/usc/15/78m.md?p=h-8-E) holding more than 20 percent of the shares of the [issuer](/usc/15/77b.md?p=a-4);
    - (C) a description of the business of the [issuer](/usc/15/77b.md?p=a-4) and the anticipated business plan of the [issuer](/usc/15/77b.md?p=a-4);
    - (D) a description of the financial condition of the [issuer](/usc/15/77b.md?p=a-4), including, for offerings that, together with all other offerings of the [issuer](/usc/15/77b.md?p=a-4) under [section 77d(6)](/usc/15/77d.md)[^1] of this title within the preceding 12-month period, have, in the aggregate, target offering amounts of—
      - (i) $100,000 or less—
        - (I) the income tax returns filed by the [issuer](/usc/15/77b.md?p=a-4) for the most recently completed year (if any); and
        - (II) financial statements of the [issuer](/usc/15/77b.md?p=a-4), which shall be certified by the principal executive officer of the [issuer](/usc/15/77b.md?p=a-4) to be true and complete in all material respects;
      - (ii) more than $100,000, but not more than $500,000, financial statements reviewed by a public accountant who is independent of the [issuer](/usc/15/77b.md?p=a-4), using professional standards and procedures for such review or standards and procedures established by the [Commission](/usc/15/77b.md?p=a-5), by rule, for such purpose; and
      - (iii) more than $500,000 (or such other amount as the [Commission](/usc/15/77b.md?p=a-5) may establish, by rule), audited financial statements;
    - (E) a description of the stated purpose and intended use of the proceeds of the offering sought by the [issuer](/usc/15/77b.md?p=a-4) with respect to the target offering amount;
    - (F) the target offering amount, the deadline to reach the target offering amount, and regular updates regarding the progress of the [issuer](/usc/15/77b.md?p=a-4) in meeting the target offering amount;
    - (G) the price to the public of the [securities](/usc/15/77b.md?p=a-1) or the method for determining the price, provided that, prior to sale, each investor shall be provided in writing the final price and all required disclosures, with a reasonable opportunity to rescind the commitment to [purchase](/usc/15/77b.md?p=a-18) the [securities](/usc/15/77b.md?p=a-1);
    - (H) a description of the ownership and capital structure of the [issuer](/usc/15/77b.md?p=a-4), including—
      - (i) terms of the [securities](/usc/15/77b.md?p=a-1) of the [issuer](/usc/15/77b.md?p=a-4) being offered and each other class of [security](/usc/15/77b.md?p=a-1) of the [issuer](/usc/15/77b.md?p=a-4), including how such terms may be modified, and a summary of the differences between such [securities](/usc/15/77b.md?p=a-1), including how the rights of the [securities](/usc/15/77b.md?p=a-1) being offered may be materially limited, diluted, or qualified by the rights of any other class of [security](/usc/15/77b.md?p=a-1) of the [issuer](/usc/15/77b.md?p=a-4);
      - (ii) a description of how the exercise of the rights held by the principal shareholders of the [issuer](/usc/15/77b.md?p=a-4) could negatively impact the purchasers of the [securities](/usc/15/77b.md?p=a-1) being offered;
      - (iii) the name and ownership level of each existing shareholder who owns more than 20 percent of any class of the [securities](/usc/15/77b.md?p=a-1) of the [issuer](/usc/15/77b.md?p=a-4);
      - (iv) how the [securities](/usc/15/77b.md?p=a-1) being offered are being valued, and examples of methods for how such [securities](/usc/15/77b.md?p=a-1) may be valued by the [issuer](/usc/15/77b.md?p=a-4) in the future, including during subsequent corporate actions; and
      - (v) the risks to purchasers of the [securities](/usc/15/77b.md?p=a-1) relating to minority ownership in the [issuer](/usc/15/77b.md?p=a-4), the risks associated with corporate actions, including additional issuances of shares, a sale of the [issuer](/usc/15/77b.md?p=a-4) or of assets of the [issuer](/usc/15/77b.md?p=a-4), or transactions with related parties; and
    - (I) such other information as the [Commission](/usc/15/77b.md?p=a-5) may, by rule, prescribe, for the protection of investors and in the public interest;
  - (2) not advertise the terms of the offering, except for notices which direct investors to the funding portal or [broker](/usc/15/6102.md?p=d-2-B-i);
  - (3) not compensate or commit to compensate, directly or indirectly, any [person](/usc/15/78m.md?p=h-8-E) to promote its offerings through communication channels provided by a [broker](/usc/15/6102.md?p=d-2-B-i) or funding portal, without taking such steps as the [Commission](/usc/15/77b.md?p=a-5) shall, by rule, require to ensure that such [person](/usc/15/78m.md?p=h-8-E) clearly discloses the receipt, past or prospective, of such compensation, upon each instance of such promotional communication;
  - (4) not less than annually, file with the [Commission](/usc/15/77b.md?p=a-5) and provide to investors reports of the results of operations and financial statements of the [issuer](/usc/15/77b.md?p=a-4), as the [Commission](/usc/15/77b.md?p=a-5) shall, by rule, determine appropriate, subject to such exceptions and termination dates as the [Commission](/usc/15/77b.md?p=a-5) may establish, by rule; and
  - (5) comply with such other requirements as the [Commission](/usc/15/77b.md?p=a-5) may, by rule, prescribe, for the protection of investors and in the public interest.
- (c) **Liability for material misstatements and omissions—**
  - (1) **Actions authorized—**
    - (A) **In general—** Subject to [paragraph (2)](#c-2), a [person](/usc/15/78m.md?p=h-8-E) who [purchases](/usc/15/77b.md?p=a-18) a [security](/usc/15/77b.md?p=a-1) in a transaction exempted by the provisions of [section 77d(6)](/usc/15/77d.md)[^1] of this title may bring an action against an [issuer](#c-3) described in [paragraph (2)](#c-2), either at law or in equity in any court of competent jurisdiction, to recover the consideration paid for such [security](/usc/15/77b.md?p=a-1) with interest thereon, less the amount of any income received thereon, upon the tender of such [security](/usc/15/77b.md?p=a-1), or for damages if such [person](/usc/15/78m.md?p=h-8-E) no longer owns the [security](/usc/15/77b.md?p=a-1).
    - (B) **Liability—** An action brought under this paragraph shall be subject to the provisions of [section 77l(b)](/usc/15/77l.md?p=b) of this title and [section 77m of this title](/usc/15/77m.md), as if the liability were created under [section 77l(a)(2)](/usc/15/77l.md?p=a-2) of this title.
  - (2) **Applicability—** An [issuer](#c-3) shall be liable in an action under [paragraph (1)](#c-1), if the [issuer](#c-3)—
    - (A) by the use of any means or instruments of transportation or communication in [interstate commerce](/usc/15/77b.md?p=a-7) or of the mails, by any means of any [written](/usc/15/77b.md?p=a-9) or oral communication, in the offering or sale of a [security](/usc/15/77b.md?p=a-1) in a transaction exempted by the provisions of [section 77d(6)](/usc/15/77d.md)[^1] of this title, makes an untrue statement of a material fact or omits to [state](/usc/15/15g.md?p=2) a material fact required to be stated or necessary in [order](/usc/15/8702.md?p=14) to make the statements, in the light of the circumstances under which they were made, not misleading, provided that the purchaser did not know of such untruth or omission; and
    - (B) does not sustain the burden of proof that such [issuer](#c-3) did not know, and in the exercise of reasonable care could not have known, of such untruth or omission.
  - (3) **Definition—** As used in this subsection, the term “issuer” includes any [person](/usc/15/78m.md?p=h-8-E) who is a director or partner of the issuer, and the principal executive officer or officers, principal financial officer, and controller or principal accounting officer of the issuer (and any [person](/usc/15/78m.md?p=h-8-E) occupying a similar status or performing a similar function) that offers or sells a [security](/usc/15/77b.md?p=a-1) in a transaction exempted by the provisions of [section 77d(6)](/usc/15/77d.md)[^1] of this title, and any [person](/usc/15/78m.md?p=h-8-E) who offers or sells the [security](/usc/15/77b.md?p=a-1) in such offering.
- (d) **Information available to States—** The [Commission](/usc/15/77b.md?p=a-5) shall make, or shall cause to be made by the relevant [broker](/usc/15/6102.md?p=d-2-B-i) or funding portal, the information described in [subsection (b)](#b) and such other information as the [Commission](/usc/15/77b.md?p=a-5), by rule, determines appropriate, available to the [securities](/usc/15/77b.md?p=a-1) [commission](/usc/15/77b.md?p=a-5) (or any agency or office performing like functions) of each [State](/usc/15/15g.md?p=2) and [territory](/usc/15/77b.md?p=a-6) of the United States and the District of Columbia.
- (e) **Restrictions on sales—** [Securities](/usc/15/77b.md?p=a-1) issued pursuant to a transaction described in [section 77d(6)](/usc/15/77d.md)[^1] of this title—
  - (1) may not be transferred by the purchaser of such [securities](/usc/15/77b.md?p=a-1) during the 1-year period beginning on the date of [purchase](/usc/15/77b.md?p=a-18), unless such [securities](/usc/15/77b.md?p=a-1) are transferred—
    - (A) to the [issuer](/usc/15/77b.md?p=a-4) of the [securities](/usc/15/77b.md?p=a-1);
    - (B) to an [accredited investor](/usc/15/77b.md?p=a-15);
    - (C) as part of an offering registered with the [Commission](/usc/15/77b.md?p=a-5); or
    - (D) to a member of the family of the purchaser or the equivalent, or in connection with the death or divorce of the purchaser or other similar circumstance, in the discretion of the [Commission](/usc/15/77b.md?p=a-5); and
  - (2) shall be subject to such other limitations as the [Commission](/usc/15/77b.md?p=a-5) shall, by rule, establish.
- (f) **Applicability—** [Section 77d(6)](/usc/15/77d.md)[^1] of this title shall not apply to transactions involving the offer or sale of [securities](/usc/15/77b.md?p=a-1) by any [issuer](/usc/15/77b.md?p=a-4) that—
  - (1) is not organized under and subject to the laws of a [State](/usc/15/15g.md?p=2) or [territory](/usc/15/77b.md?p=a-6) of the United States or the District of Columbia;
  - (2) is subject to the requirement to file reports pursuant to [section 78m of this title](/usc/15/78m.md) or [section 78o(d)](/usc/15/78o.md?p=d) of this title;
  - (3) is an [investment company](/usc/15/77z–2.md?p=i-2), as defined in [section 80a–3 of this title](/usc/15/80a–3.md), or is excluded from the definition of [investment company](/usc/15/77z–2.md?p=i-2) by [section 80a–3(b) of this title](/usc/15/80a–3.md?p=b) or [section 80a–3(c) of this title](/usc/15/80a–3.md?p=c); or
  - (4) the [Commission](/usc/15/77b.md?p=a-5), by rule or regulation, determines appropriate.
- (g) **Rule of construction—** Nothing in this section or [section 77d(6)](/usc/15/77d.md)[^1] of this title shall be construed as preventing an [issuer](/usc/15/77b.md?p=a-4) from raising capital through methods not described under [section 77d(6)](/usc/15/77d.md)[^1] of this title.
- (h) **Certain calculations—**
  - (1) **Dollar amounts—** Dollar amounts in [section 77d(6)](/usc/15/77d.md)[^1] of this title and [subsection (b)](#b) of this section shall be adjusted by the [Commission](/usc/15/77b.md?p=a-5) not less frequently than once every 5 years, by notice published in the Federal Register to reflect any change in the [Consumer](/usc/15/1615.md?p=d-2) Price Index for All Urban [Consumers](/usc/15/1615.md?p=d-2) published by the Bureau of Labor Statistics.
  - (2) **Income and net worth—** The income and net worth of a natural [person](/usc/15/78m.md?p=h-8-E) under [section 77d(6)(B)](/usc/15/77d.md)[^1] of this title shall be calculated in accordance with any rules of the [Commission](/usc/15/77b.md?p=a-5) under this subchapter regarding the calculation of the income and net worth, respectively, of an [accredited investor](/usc/15/77b.md?p=a-15).

## Footnotes

[^1]: See References in Text note below.
[^2]: So in original. Two pars. (a)(80) of section 78c have been enacted.

## Source credit

(May 27, 1933, ch. 38, title I, § 4A, as added Pub. L. 112–106, title III, § 302(b), Apr. 5, 2012, 126 Stat. 315.)

## Notes

### Editorial Notes

### References in Text

Section 77d(6) of this title, referred to in text, was redesignated section 77d(a)(6) of this title by Pub. L. 112–106, title II, § 201(b)(1), (c)(1), Apr. 5, 2012, 126 Stat. 314.