[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5037 Introduced in House (IH)]

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115th CONGRESS
  2d Session
                                H. R. 5037

  To provide for exclusive Federal jurisdiction over civil securities 
                 fraud actions, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           February 15, 2018

Mr. MacArthur (for himself, Mr. Davidson, Ms. Tenney, and Mr. McHenry) 
 introduced the following bill; which was referred to the Committee on 
                           Financial Services

_______________________________________________________________________

                                 A BILL


 
  To provide for exclusive Federal jurisdiction over civil securities 
                 fraud actions, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Securities Fraud Act of 2018''.

SEC. 2. FINDINGS.

    Congress finds the following:
            (1) Companies engaged in interstate commerce and publicly 
        traded on national exchanges face unique challenges, operating 
        often in every United States jurisdiction, under a variety of 
        civil securities fraud statutes (``blue sky laws'') that can 
        overlap or contradict each other and Federal law.
            (2) Civil and criminal fraud have inherent differences in 
        affect and burden of proof. States have a unique interest in 
        prosecuting criminal fraud that should be maintained.
            (3) Imposing differing State regulatory requirements for 
        civil securities fraud on national markets increases risk, 
        creates inefficiencies, raises costs, and can harm the 
        efficient operation of these critical markets, without 
        providing material investor protection benefits.
            (4) Complying with dual regulatory regimes places America's 
        public companies at a unique competitive disadvantage in an 
        increasing global marketplace.
            (5) Reputational risk for United States publicly traded 
        companies accused of ``civil fraud'' in State civil enforcement 
        actions, often based on State law standards that differ from 
        Federal law that otherwise governs these national markets, can 
        cause immediate and irreparable financial harm to shareholders 
        and unnecessary loss of jobs, even after such allegations are 
        later found to be baseless.
            (6) As of June 2017, there were 5,734 public companies, 
        little more than in 1982, when the economy was less than half 
        its current size. The lack of a uniform standard for public 
        companies is a contributing factor to the declining interest in 
        the United States public market, harming the United States 
        economy and reducing investment opportunities for the United 
        States public.
            (7) The Commerce Clause, found in article I, section 8, 
        clause 3 of the Constitution, explicitly states that the United 
        States Congress shall have power ``To regulate Commerce with 
        foreign Nations, and among the several States, and with the 
        Indian Tribes''. Interstate Commerce is an explicitly Federal 
        responsibility, and companies actively engaging in commerce 
        across State lines and raising capital on national markets 
        should be primarily regulated by the Federal Government's 
        uniform anti-fraud standard.
            (8) In the past, Congress has exercised this authority in 
        regards to State securities preemption with both the Private 
        Securities Litigation Reform Act (``PSLRA''), which was 
        designed to curb abusive Federal class actions (Public Law 104-
        67), and the National Securities Markets Improvements Act 
        (``NSMIA'') to ensure that States could not impose their own 
        views of what should or should not be included in registration 
        statements filed in connection with nationally traded 
        securities (Public Law 104-290).
            (9) It is in the public interest to establish preemption of 
        Federal regulators and courts over civil securities fraud, 
        eliminating concurrent Federal and State jurisdiction over the 
        specific companies covered by this Act.

SEC. 3. FEDERAL JURISDICTION OVER SECURITIES FRAUD.

    (a) Securities Exchange Act of 1934.--The Securities Exchange Act 
of 1934 is amended by inserting after section 21F (15 U.S.C. 78u-6) the 
following:

``SEC. 21G. FEDERAL JURISDICTION OVER SECURITIES FRAUD.

    ``(a) In General.--No law, rule, regulation, judgment, agreement, 
order, or other action of any State or political subdivision thereof, 
shall regulate securities fraud with respect to an issuer.
    ``(b) Actions Brought Exclusively in Federal Court.--The district 
courts of the United States shall have original and exclusive 
jurisdiction over any civil action alleging securities fraud with 
respect to an issuer, and any such action brought in any State court 
shall be removable to the Federal district court for the district in 
which the action is pending.
    ``(c) Preservation of State Authority.--Consistent with this 
section, the securities commission (or agency or office performing like 
functions) of any State shall retain jurisdiction under the laws of 
such State to investigate and bring--
            ``(1) civil enforcement actions with respect to fraud or 
        deceit, or unlawful conduct in connection with securities or 
        securities transactions other than in connection with a covered 
        security or transactions of a covered security; and
            ``(2) criminal enforcement actions with respect to fraud or 
        deceit, or unlawful conduct in connection with a covered 
        security or transactions of a covered security provided such 
        State criminal enforcement actions shall comply in all respects 
        with the legal requirements for securities fraud under Federal 
        law.
    ``(d) Effect.--These provisions shall be effective notwithstanding 
any other provision of law and shall supersede any previously enacted 
conflicting provisions.
    ``(e) Definitions.--In this section--
            ``(1) Securities fraud.--The term `securities fraud' means 
        any misrepresentation, omission, or manipulative or deceptive 
        conduct knowingly or unknowingly made or engaged in connection 
        with a covered security or transaction of a covered security.
            ``(2) Covered security.--A security is a `covered security' 
        if such security is--
                    ``(A)(i) listed, or authorized for listing, on the 
                New York Stock Exchange or the National Market System 
                of the Nasdaq Stock Market (or any successor to such 
                entities);
                    ``(ii) listed, or authorized for listing, on a 
                national securities exchange (or tier or segment 
                thereof) that has listing standards that the Commission 
                determines by rule (on its own initiative or on the 
                basis of a petition) are substantially similar to the 
                listing standards applicable to securities described in 
                subparagraph (A); or
                    ``(iii) a security of the same issuer that is equal 
                in seniority or that is a senior security to a security 
                described in subparagraph (A) or (B); and
                    ``(B) issued by a company engaged in interstate 
                commerce.''.
    (b) Securities Act of 1933.--The Securities Act of 1933 is amended 
by inserting after section 28 (15 U.S.C. 77z-3) the following new 
section:

``SEC. 29. FEDERAL JURISDICTION OVER SECURITIES FRAUD.

    ``(a) In General.--No law, rule, regulation, judgment, agreement, 
order, or other action of any State or political subdivision thereof, 
shall regulate securities fraud with respect to an issuer.
    ``(b) Actions Brought Exclusively in Federal Court.--The district 
courts of the United States shall have original and exclusive 
jurisdiction over any civil action alleging securities fraud with 
respect to an issuer, and any such action brought in any State court 
shall be removable to the Federal district court for the district in 
which the action is pending.
    ``(c) Preservation of State Authority.--Consistent with this 
section, the securities commission (or agency or office performing like 
functions) of any State shall retain jurisdiction under the laws of 
such State to investigate and bring--
            ``(1) civil enforcement actions with respect to fraud or 
        deceit, or unlawful conduct in connection with securities or 
        securities transactions other than in connection with a covered 
        security or transactions of a covered security; and
            ``(2) criminal enforcement actions with respect to fraud or 
        deceit, or unlawful conduct in connection with a covered 
        security or transactions of a covered security provided such 
        State criminal enforcement actions shall comply in all respects 
        with the legal requirements for securities fraud under Federal 
        law.
    ``(d) Effect.--These provisions shall be effective notwithstanding 
any other provision of law and shall supersede any previously enacted 
conflicting provisions.
    ``(e) Definitions.--In this section--
            ``(1) Securities fraud.--The term `securities fraud' means 
        any misrepresentation, omission, or manipulative or deceptive 
        conduct knowingly or unknowingly made or engaged in connection 
        with a covered security or transaction of a covered security.
            ``(2) Covered security.--A security is a `covered security' 
        if such security is--
                    ``(A)(i) listed, or authorized for listing, on the 
                New York Stock Exchange or the National Market System 
                of the Nasdaq Stock Market (or any successor to such 
                entities);
                    ``(ii) listed, or authorized for listing, on a 
                national securities exchange (or tier or segment 
                thereof) that has listing standards that the Commission 
                determines by rule (on its own initiative or on the 
                basis of a petition) are substantially similar to the 
                listing standards applicable to securities described in 
                subparagraph (A); or
                    ``(iii) a security of the same issuer that is equal 
                in seniority or that is a senior security to a security 
                described in subparagraph (A) or (B); and
                    ``(B) issued by a company engaged in interstate 
                commerce.''.
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