[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4237 Introduced in House (IH)]

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118th CONGRESS
  1st Session
                                H. R. 4237

     To amend the Investment Advisers Act of 1940 and the Employee 
    Retirement Income Security Act of 1974 to specify requirements 
  concerning the consideration of pecuniary and non-pecuniary factors.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             June 21, 2023

  Mr. Barr (for himself, Mr. Allen, and Mr. Huizenga) introduced the 
   following bill; which was referred to the Committee on Financial 
    Services, and in addition to the Committee on Education and the 
 Workforce, for a period to be subsequently determined by the Speaker, 
 in each case for consideration of such provisions as fall within the 
                jurisdiction of the committee concerned

_______________________________________________________________________

                                 A BILL


 
     To amend the Investment Advisers Act of 1940 and the Employee 
    Retirement Income Security Act of 1974 to specify requirements 
  concerning the consideration of pecuniary and non-pecuniary factors.

    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 ``Ensuring Sound Guidance Act''.

SEC. 2. INVESTMENT ADVISORS ACT OF 1940 AMENDMENT.

    (a) In General.--Section 211(g) of the Investment Advisers Act of 
1940 (15 U.S.C. 80b-11(g)) is amended by adding at the end the 
following:
            ``(3) Best interest based on pecuniary factors.--
                    ``(A) In general.--For purposes of paragraph (1), 
                the best interest of a customer shall be determined 
                using pecuniary factors, which may not be subordinated 
                to or limited by non-pecuniary factors, unless the 
                customer provides informed consent, in writing, that 
                such non-pecuniary factors be so considered.
                    ``(B) Disclosure of pecuniary factors.--If a 
                customer provides a broker, dealer, or investment 
                adviser with the informed consent to consider non-
                pecuniary factors described under subparagraph (A), the 
                broker, dealer, or investment adviser shall also--
                            ``(i) disclose the expected pecuniary 
                        effects to the customer over a time period 
                        selected by the customer and not to exceed 
                        three years; and
                            ``(ii) at the end of the time period 
                        described under clause (i), disclose, by 
                        comparison to a reasonably comparable index or 
                        basket of securities selected by the customer, 
                        the actual pecuniary effects of that time 
                        period, including all fees, costs, and other 
                        expenses incurred to so consider non-pecuniary 
                        factors.
                    ``(C) Pecuniary factor defined.--The term 
                `pecuniary factor' has the meaning given such term in 
                section 404(a)(3)(D) of the Employment Retirement 
                Income Security Act of 1974 (29 U.S.C. 
                1104(a)(3)(D)).''.
    (b) Rulemaking.--Not later than the end of the 12-month period 
beginning on the date of enactment of this Act, the Securities and 
Exchange Commission shall revise or issue such rules as may be 
necessary to implement the amendment made by subsection (a).
    (c) Effective Date.--The amendment made by subsection (a) shall 
apply to actions taken by a broker, dealer, or investment adviser on or 
after the date that is 12 months after the date of enactment of this 
Act.

SEC. 3. EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974 AMENDMENT.

    (a) In General.--Section 404(a) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1104(a)) is amended by adding at the 
end the following:
            ``(3) Interest based on pecuniary factors.--
                    ``(A) In general.--For purposes of paragraph (1), a 
                fiduciary of a plan shall be considered to act solely 
                in the interest of the participants and beneficiaries 
                of the plan with respect to an investment or investment 
                course of action only if the fiduciary's action with 
                respect to such investment or investment course of 
                action is based only on pecuniary factors (except as 
                provided in subparagraph (B)). The fiduciary may not 
                subordinate the interests of the participants and 
                beneficiaries in their retirement income or financial 
                benefits under the plan to other objectives and may not 
                sacrifice investment return or take on additional 
                investment risk to promote non-pecuniary benefits or 
                goals. The weight given to any pecuniary factor by a 
                fiduciary should appropriately reflect a prudent 
                assessment of the impact of such factor on risk and 
                return.
                    ``(B) Use of non-pecuniary factors for investment 
                alternatives.--Notwithstanding paragraph (A), if a 
                fiduciary is unable to distinguish between or among 
                investment alternatives or investment courses of action 
                on the basis of pecuniary factors alone, the fiduciary 
                may use non-pecuniary factors as the deciding factor if 
                the fiduciary documents--
                            ``(i) why pecuniary factors were not 
                        sufficient to select a plan investment or 
                        investment course of action;
                            ``(ii) how the selected investment compares 
                        to the alternative investments with regard to 
                        the composition of the portfolio with regard to 
                        diversification, the liquidity and current 
                        return of the portfolio relative to the 
                        anticipated cash flow requirements of the plan, 
                        and the projected return of the portfolio 
                        relative to the funding objectives of the plan; 
                        and
                            ``(iii) how the selected non-pecuniary 
                        factor or factors are consistent with the 
                        interests of the participants and beneficiaries 
                        in their retirement income or financial 
                        benefits under the plan.
                    ``(C) Investment alternatives for participant-
                directed individual account plans.--In selecting or 
                retaining investment options for a pension plan 
                described in subsection (c)(1)(A), a fiduciary is not 
                prohibited from considering, selecting, or retaining an 
                investment option on the basis that such investment 
                option promotes, seeks, or supports one or more non-
                pecuniary benefits or goals, if--
                            ``(i) the fiduciary satisfies the 
                        requirements of paragraph (1) and subparagraphs 
                        (A) and (B) of this paragraph in selecting or 
                        retaining any such investment option; and
                            ``(ii) such investment option is not added 
                        or retained as, or included as a component of, 
                        a default investment under subsection (c)(5) 
                        (or any other default investment alternative) 
                        if its investment objectives or goals or its 
                        principal investment strategies include, 
                        consider, or indicate the use of one or more 
                        non-pecuniary factors.
                    ``(D) Pecuniary factor defined.--For the purposes 
                of this paragraph, the term `pecuniary factor' means a 
                factor that a fiduciary prudently determines is 
                expected to have a material effect on the risk or 
                return of an investment based on appropriate investment 
                horizons consistent with the plan's investment 
                objectives and the funding policy established pursuant 
                to section 402(b)(1).''.
    (b) Effective Date.--The amendments made by this section shall 
apply to actions taken by a fiduciary on or after the date that is 12 
months after the date of enactment of this Act.

SEC. 4. STUDY OF STATE AND LOCAL PENSION PLANS.

    (a) Study.--The Comptroller General of the United States shall 
conduct a study on the potential impact of underfunded State and local 
pension plans on the Federal Government, including--
            (1) the extent to which such pension plans subordinate the 
        pecuniary interests of participants and beneficiaries to 
        environmental, social, governance, or other objectives; and
            (2) legislative and administrative actions that, if 
        implemented at the Federal level, would prevent such pension 
        plans from subordinating the interests of participants and 
        beneficiaries to environmental, social, or governance 
        objectives.
    (b) Report.--Not later than 12 months after the date of enactment 
of this Act, the Comptroller General submit to Congress a report 
containing the results of the study.

SEC. 5. STUDY ON CLIMATE CHANGE AND OTHER ENVIRONMENTAL DISCLOSURES IN 
              MUNICIPAL BOND MARKET.

    (a) In General.--The Securities and Exchange Commission shall 
solicit public comment and thereafter conduct a study to determine the 
extent to which issuers of municipal securities (as such term is 
defined in section 3(a)(29) of the Securities Exchange Act of 1934 (15 
U.S.C. 78c(a)(29)) make disclosure to investors regarding climate 
change and other environmental matters.
    (b) Contents.--The study under subsection (a) shall consider and 
analyze, among other things--
            (1) the frequency of such disclosures;
            (2) whether such disclosures made by issuers of municipal 
        securities in connection with offerings of securities align 
        with such disclosures made by issuers of municipal securities 
        in other contexts or to other audiences other than investors;
            (3) any voluntary or mandatory disclosure standards 
        observed by issuers of municipal securities in the course of 
        making such disclosures; and
            (4) the degree to which investors consider such disclosures 
        in connection with making an investment decision.
    (c) Report.--The Securities and Exchange Commission shall issue a 
report on the study required under this section to the Committee on 
Banking, Housing, and Urban Affairs of the Senate and the Committee on 
Financial Services of the House of Representatives not later than 12 
months after the date of enactment of this Act. The report shall 
include a detailed discussion of the financial risks to investors from 
investments in municipal securities and whether those risks are being 
adequately disclosed as well as a discussion of regulatory or 
legislative steps that are recommended or that may be necessary to 
address any concerns identified in the study.

SEC. 6. STUDY ON SOLICITATION OF MUNICIPAL SECURITIES BUSINESS.

    (a) In General.--The Securities and Exchange Commission shall 
solicit public comment and thereafter conduct a study to determine the 
effectiveness of Rule G-38 of the Municipal Securities Rulemaking Board 
and Rule 206(4)-5 of the Securities and Exchange Commission (17 CFR 
275.206(4)-5) in preventing the payment of funds to elected officials 
or candidates for elected office in exchange for the receipt of 
government business in connection with the offer or sale of municipal 
securities (as such term is defined in section 3(a)(29) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(29)).
    (b) Contents.--The study under subsection (a) shall consider and 
analyze, among other things--
            (1) whether Rule G-38 and Rule 206(4)-5 have had their 
        intended effects and whether they have had any unintended 
        adverse effects;
            (2) the frequency and scope of enforcement actions 
        undertaken under Rule G-38 and Rule 206(4)-5;
            (3) the degree to which persons subject to Rule G-38 and 
        Rule 206(4)-5 have put in place policies and procedures 
        intended to ensure compliance with such rules;
            (4) the degree to which other State and Federal regulations 
        impact the solicitation of municipal securities business; and
            (5) the degree to which persons subject to Rule G-38 and 
        Rule 206(4)-5 are disadvantaged from participating in the 
        political process both as a general matter and relative to 
        persons who solicit or receive government business or 
        government licenses, permits, and approvals other than in 
        connection with the offer or sale of municipal securities.
    (c) Report.--The Securities and Exchange Commission shall issue a 
report on the study required under this section to the Committee on 
Banking, Housing, and Urban Affairs of the Senate and the Committee on 
Financial Services of the House of Representatives not later than 12 
months after the date of enactment of this Act. The report shall 
include a discussion of the extent to which persons affiliated with 
small businesses, as well as persons affiliated with minority and women 
opened businesses, have been affected by Rule G-38 and Rule 206(4)-5 
and a discussion of regulatory or legislative a discussion of 
regulatory or legislative steps that are recommended or that may be 
necessary to address any concerns identified in the study.
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