August 23, 2019

HB 16-1049: Amending Crowdfunding Act to Describe Entity Holding Escrow Account

On January 13, 2016, Rep. Pete Lee and Sens. Mark Scheffel and Owen Hill introduced HB 16-1049Concerning an Escrow Account Held by a Depository Institution on Behalf of an Issuer of an Intrastate Offering of Securities. The bill was assigned to the House Finance Committee.

This bill amends the “Colorado Crowdfunding Act,” enacted in 2015, by using the term “depository institution” to describe the entity that an issuer must use to set up an escrow account to hold proceeds from the intrastate sale of securities. Additionally, if enacted, the proposed bill would allow the issuer to terminate the escrow account once the minimum amount of proceeds from a sale of securities is deposited into the account.

The bill proposes to amend three sections of C.R.S. § 11-51-308.5: Section (3)(a)(IV)(D), Section (3)(a)(IV)(F), and Section (3)(a)(IX). First, under Section (3)(a)(IV)(D), it is proposed that the term “Depository Institution” be inserted in place of “bank, regulated trust company or corporate fiduciary, savings bank, savings and loan association, or credit union.”

Second, under subsection (F), it has been proposed that an exception be added, providing that “once the minimum offering amount has been raised and deposited in the escrow account, the issuer may terminate the escrow arrangement.”

Lastly, under subsection (IV), the term “depository institution” has been proposed to be inserted in place of the term “financial institution.”

Since its introduction, the bill passed out of the Finance Committee unamended and was referred to the House Committee of the Whole for Second Reading. It passed Second and Third Reading in the House, unamended, and was introduced in the Senate on February 1. On February 18, it passed out of the Senate Finance Committee, unamended, and was scheduled on the consent calendar of the Senate Committee of the Whole.

Mark Proust is a 2016 J.D. candidate at the University of Denver Sturm College of Law.