[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[S. 3421 Introduced in Senate (IS)]

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115th CONGRESS
  2d Session
                                S. 3421

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


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           September 6, 2018

  Mr. Perdue introduced the following bill; which was read twice and 
               referred to the Committee on the Judiciary

_______________________________________________________________________

                                 A BILL


 
   To provide for exclusive Federal jurisdiction over certain 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 ``Blue Sky Harmonization Act''.

SEC. 2. FINDINGS.

    Congress finds the following:
            (1) Companies that are engaged in interstate commerce and 
        publicly traded on national exchanges face unique challenges, 
        often operating in every United States jurisdiction under a 
        variety of civil securities fraud statutes (commonly known as 
        ``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 those critical markets without providing 
        material investor protection benefits.
            (4) Complying with dual regulatory regimes places public 
        companies in the United States at a unique competitive 
        disadvantage in an increasingly 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 those national markets, can 
        cause immediate and irreparable financial harm to shareholders 
        and an unnecessary loss of jobs, even after those allegations 
        are later found to be baseless.
            (6) As of June 2017, there were 5,734 public companies in 
        the United States, few more than in 1982, when the economy of 
        the United States was less than \1/2\ of its size as of the 
        date of enactment of this Act. 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 
        economy of the United States and reducing investment 
        opportunities for the public in the United States.
            (7) Article I, section 8, clause 3 of the Constitution of 
        the United States (commonly known as the ``Commerce Clause'') 
        explicitly states that Congress shall have power ``To regulate 
        Commerce with foreign Nations, and among the several States, 
        and with the Indian Tribes''. The regulation of 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 uniform anti-fraud standard of the Federal Government.
            (8) In the past, Congress has exercised this authority in 
        regards to State securities preemption with both the Private 
        Securities Litigation Reform Act of 1995 (Public Law 104-67; 
        109 Stat. 737), which was designed to curb abusive Federal 
        class actions, and the National Securities Markets Improvement 
        Act of 1996 (Public Law 104-290; 110 Stat. 3416) 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.
            (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 (15 U.S.C. 78a et seq.) is amended by inserting after section 
21F (15 U.S.C. 78u-6) the following:

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

    ``(a) Definitions.--In this section:
            ``(1) Covered security.--The term `covered security' means 
        a security that 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 either 
                such entity);
                    ``(ii) listed, or authorized for listing, on a 
                national securities exchange (or a tier or segment of a 
                national securities exchange) that has listing 
                standards that the Commission determines by rule (upon 
                its own initiative or upon the basis of a petition) are 
                substantially similar to the listing standards 
                applicable to a security described in clause (i); or
                    ``(iii) a security of the same issuer that is equal 
                in seniority, or that is a senior security, to a 
                security described in clause (i) or (ii); and
                    ``(B) issued by a company that is engaged in 
                interstate commerce.
            ``(2) Securities fraud.--The term `securities fraud' means 
        any misrepresentation, omission, or manipulative or deceptive 
        conduct knowingly or unknowingly made or engaged in in 
        connection with a covered security or transaction of a covered 
        security.
    ``(b) Preemption.--No law, rule, regulation, judgment, agreement, 
order, or other action of any State, or political subdivision of a 
State, may regulate securities fraud with respect to an issuer.
    ``(c) Original Jurisdiction for Federal Courts.--The district 
courts of the United States shall have original jurisdiction over any 
civil action alleging securities fraud with respect to an issuer and 
any such action brought in any State court may be removed to the 
Federal district court for the district in which the action is pending.
    ``(d) 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 
that State to investigate and bring--
            ``(1) a civil enforcement action with respect to fraud, 
        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) a criminal enforcement action with respect to fraud, 
        deceit, or unlawful conduct in connection with a covered 
        security or transactions of a covered security if that 
        enforcement action complies in all respects with the legal 
        requirements for securities fraud under Federal law.
    ``(e) Effect.--This section shall be effective notwithstanding any 
other provision of law and shall supersede any previously enacted 
conflicting provision.''.
    (b) Securities Act of 1933.--The Securities Act of 1933 (15 U.S.C. 
77a et seq.) is amended by inserting after section 28 (15 U.S.C. 77z-3) 
the following:

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

    ``(a) Definitions.--In this section:
            ``(1) Covered security.--The term `covered security' means 
        a security that 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 either 
                such entity);
                    ``(ii) listed, or authorized for listing, on a 
                national securities exchange (or a tier or segment of a 
                national securities exchange) that has listing 
                standards that the Commission determines by rule (upon 
                its own initiative or upon the basis of a petition) are 
                substantially similar to the listing standards 
                applicable to a security described in clause (i); or
                    ``(iii) a security of the same issuer that is equal 
                in seniority, or that is a senior security, to a 
                security described in clause (i) or (ii); and
                    ``(B) issued by a company that is engaged in 
                interstate commerce.
            ``(2) Securities fraud.--The term `securities fraud' means 
        any misrepresentation, omission, or manipulative or deceptive 
        conduct knowingly or unknowingly made or engaged in in 
        connection with a covered security or transaction of a covered 
        security.
    ``(b) Preemption.--No law, rule, regulation, judgment, agreement, 
order, or other action of any State, or political subdivision of a 
State, may regulate securities fraud with respect to an issuer.
    ``(c) Original Jurisdiction for Federal Courts.--The district 
courts of the United States shall have original jurisdiction over any 
civil action alleging securities fraud with respect to an issuer and 
any such action brought in any State court may be removed to the 
Federal district court for the district in which the action is pending.
    ``(d) 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 
that State to investigate and bring--
            ``(1) a civil enforcement action with respect to fraud, 
        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) a criminal enforcement action with respect to fraud, 
        deceit, or unlawful conduct in connection with a covered 
        security or transactions of a covered security if that 
        enforcement action complies in all respects with the legal 
        requirements for securities fraud under Federal law.
    ``(e) Effect.--This section shall be effective notwithstanding any 
other provision of law and shall supersede any previously enacted 
conflicting provision.''.
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