[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[S. 1171 Introduced in Senate (IS)]

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117th CONGRESS
  1st Session
                                S. 1171

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


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             April 15, 2021

 Mr. Merkley (for himself, Mr. Durbin, Ms. Warren, Mr. Whitehouse, Mr. 
Menendez, and Mr. Blumenthal) introduced the following bill; which was 
read twice and referred to the Committee on Banking, Housing, and Urban 
                                Affairs

_______________________________________________________________________

                                 A BILL


 
To amend the Securities Exchange Act of 1934 to prohibit mandatory pre-
        dispute 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 2021''.

SEC. 2. FINDINGS.

    Congress finds the following:
            (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 those markets.
            (2) Issuers, 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 the right of investors to 
        participate in a class action lawsuit, leverage those 
        advantages to severely restrict the ability of defrauded 
        investors to seek redress.
            (3) Investors should be free to--
                    (A) choose arbitration to resolve disputes if they 
                judge that arbitration truly offers them the best 
                opportunity to efficiently and fairly settle disputes; 
                and
                    (B) 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 (15 U.S.C. 78a 
et seq.) is amended--
            (1) in section 6(b) (15 U.S.C. 78f(b)), by adding at the 
        end the following:
            ``(11) The rules of the exchange prohibit the listing of 
        any security if the issuer of the security, in the bylaws of 
        the issuer, other governing documents, or any contract with a 
        shareholder relating to the parties as issuer and shareholder, 
        mandates arbitration for any dispute between the issuer and the 
        shareholders of the issuer, without regard to whether such a 
        provision in the bylaws, documents, or contract is otherwise 
        permissible under title 9, United States Code.''; and
            (2) in section 15 (15 U.S.C. 78o), by amending subsection 
        (o) to read as follows:
    ``(o) Limitations on Pre-Dispute Agreements.--Notwithstanding any 
other provision of law, including any provision of title 9, United 
States Code, 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 that entity with respect to a 
future dispute between the parties that--
            ``(1) mandates arbitration for that dispute;
            ``(2) restricts, limits, or conditions the ability of a 
        customer or client of that entity to select or designate a 
        forum for resolution of that dispute; or
            ``(3) restricts, limits, or conditions the ability of a 
        customer or client of that entity to pursue a claim relating to 
        that 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 15(o) of the Securities Exchange Act of 1934 (15 U.S.C. 
        78o(o)), as amended by subsection (a) of this section, that was 
        entered into before the date of enactment of this Act, any 
        provision of that agreement that is prohibited by such section 
        15(o), as amended by subsection (a) of this section, is void.
            (2) Ongoing arbitration.--A provision of an agreement 
        prohibited by section 15(o) of the Securities Exchange Act of 
        1934 (15 U.S.C. 78o(o)), as amended by subsection (a) of this 
        section, shall not be void under paragraph (1) if arbitration 
        required by that provision was initiated by any party on or 
        before the date of enactment of this Act.

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 the security, in the 
bylaws of the issuer, other governing documents, or any contract with a 
shareholder relating to the parties as issuer and shareholder, mandates 
arbitration for any dispute between the issuer and the shareholders of 
the issuer, without regard to whether such a provision in the bylaws, 
documents, or contract is otherwise permissible under title 9, United 
States Code.''.

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, including any 
provision of title 9, United States Code, it shall be unlawful for any 
investment adviser to enter into, modify, or extend an agreement with 
customers or clients of the investment adviser with respect to a future 
dispute between the parties to that agreement that--
            ``(1) mandates arbitration for that dispute;
            ``(2) restricts, limits, or conditions the ability of a 
        customer or client of the investment adviser to select or 
        designate a forum for resolution of that dispute; or
            ``(3) restricts, limits, or conditions the ability of a 
        customer or client of the investment adviser to pursue a claim 
        relating to that 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 (15 
        U.S.C. 80b-5(f)), as amended by subsection (a) of this section, 
        that was entered into before the date of enactment of this Act, 
        any provision prohibited by such section 205(f), as amended by 
        subsection (a) of this section, is void.
            (2) Ongoing arbitration.--A provision of an agreement 
        prohibited by section 205(f) of the Investment Advisers Act of 
        1940 (15 U.S.C. 80b-5(f)), as amended by subsection (a) of this 
        section, shall not be void under paragraph (1) if arbitration 
        required by that provision was initiated by any party on or 
        before the date of enactment of this Act.

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 enactment of this Act.
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