[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5336 Introduced in House (IH)]

<DOC>






116th CONGRESS
  1st Session
                                H. R. 5336

  To amend the Securities Exchange Act of 1934 to prohibit mandatory 
       predispute arbitration agreements, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            December 6, 2019

   Mr. Foster (for himself, Mrs. Carolyn B. Maloney of New York, Mr. 
Meeks, Mr. Casten of Illinois, Mr. Lynch, Ms. Schakowsky, Mr. McGovern, 
Mr. Clay, Ms. Dean, and Mr. Heck) introduced the following bill; which 
          was referred to the Committee on Financial Services

_______________________________________________________________________

                                 A BILL


 
  To amend the Securities Exchange Act of 1934 to prohibit mandatory 
       predispute arbitration agreements, 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 ``Investor Choice Act of 2019''.

SEC. 2. FINDINGS.

    Congress makes the following findings:
            (1) Investor confidence in fair and equitable recourse is 
        essential to the health and stability of the securities markets 
        and to the participation of retail investors in such markets.
            (2) Brokers, dealers, and investment advisers hold powerful 
        advantages over investors, and mandatory arbitration clauses, 
        including contracts that force investors to submit claims to 
        arbitration or to waive their right to participate in a class 
        action, leverage these advantages to severely restrict the 
        ability of defrauded investors to seek redress.
            (3) Investors should be free to choose arbitration to 
        resolve disputes if they judge that arbitration truly offers 
        them the best opportunity to efficiently and fairly settle 
        disputes, and investors should also be free to pursue remedies 
        in court should they view that option as superior to 
        arbitration.

SEC. 3. ARBITRATION AGREEMENTS IN THE SECURITIES EXCHANGE ACT OF 1934.

    (a) In General.--The Securities Exchange Act of 1934 is amended--
            (1) by amending section 15(o) (15 U.S.C. 78o(o)) to read as 
        follows:
    ``(o) Limitations on Pre-Dispute Agreements.--Notwithstanding any 
other provision of law, it shall be unlawful for any broker, dealer, 
funding portal, or municipal securities dealer to enter into, modify, 
or extend an agreement with customers or clients of such entity with 
respect to a future dispute between the parties that--
            ``(1) mandates arbitration for such dispute;
            ``(2) restricts, limits, or conditions the ability of a 
        customer or client of such entity to select or designate a 
        forum for resolution of such dispute; or
            ``(3) restricts, limits, or conditions the ability of a 
        customer or client to pursue a claim relating to such dispute 
        in an individual or representative capacity or on a class 
        action or consolidated basis.''; and
            (2) in section 6(b) (15 U.S.C. 78f(b)), by adding at the 
        end the following:
            ``(11) Mandatory arbitration.--The rules of the exchange 
        prohibit the listing of any security if such issuer, in its 
        bylaws, other governing documents, or any contract with a 
        shareholder related to the parties as issuer and shareholder 
        mandates arbitration for any disputes between the issuer and 
        the shareholders of the issuer.''.
    (b) Application to Existing Agreements.--
            (1) In general.--With respect to an agreement described in 
        section 15(o) of the Securities Exchange Act of 1934 that was 
        entered before the date of the enactment of this Act, any 
        provision prohibited by section 15(o) of the Securities 
        Exchange Act of 1934 is void.
            (2) Ongoing arbitration.--A provision prohibited by section 
        15(o) of the Securities Exchange Act of 1934 shall not be void 
        under paragraph (1) if arbitration required by such provision 
        was initiated by any party on or before the date of the 
        enactment of this subsection.

SEC. 4. ARBITRATION AGREEMENTS IN THE SECURITIES ACT OF 1933.

    Section 6 of the Securities Act of 1933 (15 U.S.C. 77f) is amended 
by adding at the end the following:
    ``(f) Limitation on Arbitration Requirements.--A security may not 
be registered with the Commission if the issuer of such security, in 
its bylaws, or other governing documents, or any contract with a 
shareholder related to the parties as issuer and shareholder mandates 
arbitration for any disputes between the issuer and the shareholders of 
the issuer.''.

SEC. 5. ARBITRATION AGREEMENTS IN THE INVESTMENT ADVISERS ACT OF 1940.

    (a) In General.--Section 205(f) of the Investment Advisers Act of 
1940 (15 U.S.C. 80b-5(f)) is amended to read as follows:
    ``(f) Notwithstanding any other provision of law, it shall be 
unlawful for any investment adviser to enter into, modify, or extend an 
agreement with customers or clients of such entity with respect to a 
future dispute between the parties to such agreement that--
            ``(1) mandates arbitration for such dispute;
            ``(2) restricts, limits, or conditions the ability of a 
        customer or client of such entity to select or designate a 
        forum for resolution of such dispute; or
            ``(3) restricts, limits, or conditions the ability of a 
        customer or client to pursue a claim relating to such dispute 
        in an individual or representative capacity or on a class 
        action or consolidated basis.''.
    (b) Application to Existing Agreements.--
            (1) In general.--With respect to an agreement described in 
        section 205(f) of the Investment Advisers Act of 1940 that was 
        entered before the date of the enactment of this Act, any 
        provision prohibited by section 205(f) of the Investment 
        Advisers Act of 1940 is void.
            (2) Ongoing arbitration.--A provision prohibited by section 
        205(f) of the Investment Advisers Act of 1940 shall not be void 
        under paragraph (1) if arbitration required by such provision 
        was initiated by any party on or before the date of the 
        enactment of this subsection.

SEC. 6. APPLICATION.

    Except as otherwise stated, the amendments made by this Act shall 
apply with respect to any agreement entered into, modified, or extended 
after the date of the enactment of this Act.
                                 <all>