[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 8286 Introduced in House (IH)]
<DOC>
119th CONGRESS
2d Session
H. R. 8286
To amend the Federal securities laws with respect to the materiality of
disclosure requirements, to establish the Public Company Advisory
Committee, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
April 15, 2026
Mr. Steil (for himself and Mrs. Wagner) introduced the following bill;
which was referred to the Committee on Financial Services
_______________________________________________________________________
A BILL
To amend the Federal securities laws with respect to the materiality of
disclosure requirements, to establish the Public Company Advisory
Committee, 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; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Protecting
Americans' Retirement Savings From Politics Act''.
(b) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title; table of contents.
TITLE I--MANDATORY MATERIALITY REQUIREMENT
Sec. 101. Limitation on disclosure requirements.
TITLE II--PUBLIC COMPANY ADVISORY COMMITTEE
Sec. 201. Public Company Advisory Committee.
TITLE III--PROTECTING U.S. BUSINESS SOVEREIGNTY
Sec. 301. Study on detrimental impact of the Corporate Sustainability
Due Diligence Directive and Corporate
Sustainability Reporting Directive.
TITLE IV--CORPORATE GOVERNANCE EXAMINATION
Sec. 401. Study of certain issues with respect to proxy advisory firms
and the proxy process.
TITLE V--REGISTRATION OF PROXY ADVISORY FIRMS
Sec. 501. Registration of proxy advisory firms.
TITLE VI--LIABILITY FOR CERTAIN FAILURES TO DISCLOSE MATERIAL
INFORMATION OR MAKING OF MATERIAL MISSTATEMENTS
Sec. 601. Liability for certain failures to disclose material
information or making of material
misstatements.
TITLE VII--DUTIES OF INVESTMENT ADVISERS, ASSET MANAGERS, AND PENSION
FUNDS
Sec. 701. Duties of investment advisers, asset managers, and pension
funds.
TITLE VIII--PROTECTING AMERICANS' SAVINGS
Sec. 801. Requirements related to proxy voting.
TITLE IX--EMPOWERING SHAREHOLDERS
Sec. 901. Proxy voting of passively managed funds.
TITLE X--BEST INTEREST BASED ON PECUNIARY FACTORS
Sec. 1001. Protecting retail investors' savings.
TITLE I--MANDATORY MATERIALITY REQUIREMENT
SEC. 101. LIMITATION ON DISCLOSURE REQUIREMENTS.
(a) Securities Act of 1933.--Section 2(b) of the Securities Act of
1933 (15 U.S.C. 77b(b)) is amended--
(1) in the subsection heading, by inserting ``; Limitation
on Disclosure Requirements'' after ``Formation'';
(2) by striking ``Whenever'' and inserting the following:
``(1) In general.--Whenever''; and
(3) by adding at the end the following:
``(2) Limitation.--
``(A) In general.--Whenever pursuant to this title
the Commission is engaged in rulemaking regarding
disclosure obligations of issuers, the Commission shall
expressly provide that an issuer is only required to
disclose information in response to such disclosure
obligations to the extent the issuer has determined
that such information is material with respect to a
voting or investment decision regarding the securities
of such issuer.
``(B) Applicability.--Subparagraph (A) shall not
apply with respect to the removal of any disclosure
requirement with respect to an issuer.
``(C) Rule of construction.--For the purposes of
this paragraph, information is considered material with
respect to a voting or investment decision regarding
the securities of an issuer if there is a substantial
likelihood that a reasonable investor would view the
failure to disclose that information as having
significantly altered the total mix of information made
available to the investor.''.
(b) Securities Exchange Act of 1934.--Section 3(f) of the
Securities Exchange Act of 1934 (15 U.S.C. 78c(f)) is amended--
(1) in the subsection heading, by inserting ``; Limitation
on Disclosure Requirements'' after ``Formation'';
(2) by striking ``Whenever'' and inserting the following:
``(1) In general.--Whenever''; and
(3) by adding at the end the following:
``(2) Limitation.--
``(A) In general.--Whenever pursuant to this title
the Commission is engaged in rulemaking regarding
disclosure obligations of issuers, the Commission shall
expressly provide that an issuer is only required to
disclose information in response to such disclosure
obligations to the extent the issuer has determined
that such information is material with respect to a
voting or investment decision regarding the securities
of such issuer.
``(B) Applicability.--Subparagraph (A) shall not
apply with respect to the removal of any disclosure
requirement with respect to an issuer.
``(C) Rule of construction.--For the purposes of
this paragraph, information is considered material with
respect to a voting or investment decision regarding
the securities of an issuer if there is a substantial
likelihood that a reasonable investor would view the
failure to disclose that information as having
significantly altered the total mix of information made
available to the investor.''.
TITLE II--PUBLIC COMPANY ADVISORY COMMITTEE
SEC. 201. PUBLIC COMPANY ADVISORY COMMITTEE.
The Securities Exchange Act of 1934 is amended by inserting after
section 40 (15 U.S.C. 78qq) the following:
``SEC. 40A. PUBLIC COMPANY ADVISORY COMMITTEE.
``(a) Establishment and Purpose.--
``(1) Establishment.--There is established within the
Commission the Public Company Advisory Committee (referred to
in this section as the `Committee').
``(2) Purpose.--The Committee shall--
``(A) provide the Commission with advice on the
rules, regulations, and policies of the Commission with
regard to the Commission's mission of protecting
investors, maintaining fair, orderly, and efficient
markets, and facilitating capital formation, as they
relate to--
``(i) existing and emerging regulatory
priorities of the Commission;
``(ii) issues relating to the public
reporting and corporate governance of public
companies;
``(iii) issues relating to the proxy
process for shareholder meetings held by public
companies;
``(iv) issues relating to trading in the
securities of public companies; and
``(v) issues relating to capital formation;
``(B) not provide any advice with respect to any
policies, practices, actions, or decisions concerning
the Commission's enforcement program; and
``(C) submit to the Commission such findings and
recommendations as the Committee determines are
appropriate, including recommendations for proposed
regulatory and legislative changes.
``(b) Membership.--
``(1) In general.--The membership of the Committee shall be
not fewer than 10, and not more than 20, members appointed by
the Commission from among individuals who--
``(A) are officers, directors, or senior officials
of public companies registered with the Commission
under the Securities Act of 1933 and this Act, except
for those public companies that own asset management,
fixed income, investment advisory, broker-dealer, or
proxy services businesses;
``(B) are executives or other individuals with
senior managerial responsibility in business,
professional, trade, and industry associations that
represent the interests of such public companies; and
``(C) are professional advisers and service
providers to such public companies (including
attorneys, accountants, investment bankers, and
financial advisers).
``(2) Qualifications.--At least 50 percent of the Committee
membership shall be drawn from individuals who would qualify
for membership under paragraph (1)(A).
``(3) Term.--Each member of the Committee appointed under
paragraph (1) shall serve for a term of 4 years. Vacancies
among the members, whether caused by the resignation, death,
removal, expiration of a term, or otherwise, shall be filled
consistent with the Commission's procedures then in effect.
``(4) Staggered terms.--The members of the Committee shall
serve staggered terms, with half of the initial members of the
Committee each serving for 2 years and half serving for 4
years.
``(5) Members not on other advisory committees.--Public
companies and other organizations that are currently
represented on any other Commission Advisory Committee are not
eligible to have representatives also serve on the Public
Company Advisory Committee.
``(6) Members not commission employees.--Members appointed
under paragraph (1) shall not be considered to be employees or
agents of the Commission solely because of membership on the
Committee.
``(c) Chair; Vice Chair; Secretary; Assistant Secretary.--
``(1) In general.--The members of the Committee shall
elect, from among the members of the Committee--
``(A) a Chair;
``(B) a Vice Chair;
``(C) a Secretary; and
``(D) an Assistant Secretary.
``(2) Term.--Each member elected under paragraph (1) shall
serve for a term of 2 years in the capacity the member was
elected under paragraph (1).
``(3) Subcommittees.--The Chair may create subcommittees
that hold public or non-public meetings and provide
recommendations to the full Committee.
``(d) Meetings.--
``(1) Frequency of meetings.--The Committee shall meet--
``(A) not less frequently than twice annually, at
the call of the chair of the Committee; and
``(B) from time to time, at the call of the
Commission.
``(2) Notice.--The Chair of the Committee shall give the
members of the Committee written notice of each meeting, not
later than 2 weeks before the date of the meeting.
``(e) Staff.--The Commission shall make available to the Committee
such staff as the Chair of the Committee determines are necessary to
carry out this section.
``(f) Review by Commission.--The Commission shall--
``(1) review the findings and recommendations of the
Committee; and
``(2) each time the Committee submits a finding or
recommendation to the Commission, promptly issue a public
statement--
``(A) assessing the finding or recommendation of
the Committee; and
``(B) disclosing the action, if any, the Commission
intends to take with respect to the finding or
recommendation.
``(g) Committee Findings.--Nothing in this section shall require
the Commission to agree to or act upon any finding or recommendation of
the Committee.
``(h) Nonapplicability of the Federal Advisory Committee Act.--
Chapter 10 of part I of title 5, United States Code, shall not apply to
the Committee and the activities of the Committee.''.
TITLE III--PROTECTING U.S. BUSINESS SOVEREIGNTY
SEC. 301. STUDY ON DETRIMENTAL IMPACT OF THE CORPORATE SUSTAINABILITY
DUE DILIGENCE DIRECTIVE AND CORPORATE SUSTAINABILITY
REPORTING DIRECTIVE.
(a) Study.--The Securities and Exchange Commission shall conduct a
study to examine and evaluate--
(1) the detrimental impact and potential detrimental impact
of each of the Directives on--
(A) United States companies, consumers, and
investors; and
(B) the economy of the United States;
(2) the extent to which each of the Directives aligns with
international conventions and declarations on human rights and
environmental obligations; and
(3) the legal basis for the extraterritorial reach of each
of the Directives.
(b) Report.--Not later than 1 year after the date of the enactment
of this Act, the Securities and Exchange Commission shall submit to the
Committee on Banking, Housing, and Urban Affairs of the Senate, the
Committee on Financial Services of the House of Representatives, the
Secretary of State, the Secretary of Commerce, and the United States
Trade Representative a report that includes--
(1) the results of the study conducted under this section;
and
(2) recommendations for policymakers and relevant
stakeholders on potential mitigating measures, alternative
approaches, or modifications to each of the Directives that
would address any concerns identified in the study.
(c) Access to Information.--The Securities and Exchange Commission
may request from private entities such relevant data and information as
the Securities and Exchange Commission determines necessary to carry
out the study required under this section and such private entities
shall provide such requested data and information to the Securities and
Exchange Commission.
(d) Directives Defined.--In this section the term ``Directives''
means--
(1) Directive (EU) 2024/1760 of the European Parliament and
of the Council of 13 June 2024 on corporate sustainability due
diligence;
(2) Directive (EU) 2022/2464 of the European Parliament and
of the Council of 14 December 2022 on corporate sustainability
reporting; and
(3) any directive of the European Parliament and of the
Council that amends, supplements, replaces, or otherwise
modifies a directive described in paragraph (1) or (2),
including Directive (EU) 2026/470 of the European Parliament
and of the Council of 26 February 2026.
TITLE IV--CORPORATE GOVERNANCE EXAMINATION
SEC. 401. STUDY OF CERTAIN ISSUES WITH RESPECT TO PROXY ADVISORY FIRMS
AND THE PROXY PROCESS.
Section 4 of the Securities Exchange Act of 1934 (15 U.S.C. 78d) is
amended by adding at the end the following:
``(k) Study of Certain Issues With Respect to Proxy Advisory Firms
and the Proxy Process.--
``(1) In general.--Not later than 180 days after the date
of the enactment of this subsection, and every 5 years
thereafter, the Commission shall conduct a comprehensive study
on proxy advisory firms and the proxy process.
``(2) Scope of study.--The studies required under paragraph
(1) shall cover--
``(A) the previous 10 years, with respect to the
initial study; and
``(B) the previous 5 years, with respect to each
other study.
``(3) Contents.--Each study required under paragraph (1)
shall address the following issues:
``(A) The financial and other incentives and
obligations of all groups involved in the proxy
process.
``(B) A consideration of whether financial and
other incentives have created a process that no longer
serves the economic interests of retail investors.
``(C) An analysis of whether regulations and
financial incentives have created and protected the
outsized influence of proxy advisors or a duopoly in
proxy advice, and if so, what are the benefits and
costs of that outsized influence or duopoly.
``(D) The costs incurred by issuers in responding
to politically-, environmentally-, or socially-
motivated shareholder proposals.
``(E) An analysis of the impact that shareholder
proposals have on discouraging private companies from
going public.
``(F) A thorough assessment of the economic
analysis, if any, conducted by proxy advisory firms and
institutional shareholders when recommending or voting
in favor of shareholder proposals.
``(G) A review of the extent to which institutional
investors, who owe fiduciary duties, rely on proxy
advisory firm recommendations.
``(H) An assessment of whether, in light of their
significant influence on corporate actions and vote
outcomes, proxy advisors are subject to sufficient and
effective regulation to ensure that their policies and
recommendations are accurate, free of conflicts, and
benefit the best economic interest of shareholders at
large.
``(4) Report.--At the completion of each study required
under paragraph (1) the Commission shall issue a report to the
Committee on Banking, Housing, and Urban Affairs of the Senate
and the Committee on Financial Services of the House of
Representatives that includes the results of the study.''.
TITLE V--REGISTRATION OF PROXY ADVISORY FIRMS
SEC. 501. REGISTRATION OF PROXY ADVISORY FIRMS.
(a) Amendment.--The Securities Exchange Act of 1934 (15 U.S.C. 78a
et seq.) is amended by inserting after section 15G the following new
section:
``SEC. 15H. REGISTRATION OF PROXY ADVISORY FIRMS.
``(a) Conduct Prohibited.--It shall be unlawful for a proxy
advisory firm to make use of the mails or any means or instrumentality
of interstate commerce to provide proxy voting advice, research,
analysis, ratings or recommendations to any client, unless such proxy
advisory firm is registered under this section.
``(b) Registration Procedures.--
``(1) Application for registration.--
``(A) In general.--A proxy advisory firm shall file
with the Commission an application for registration, in
such form as the Commission shall require, by rule, and
containing the information described in subparagraph
(B).
``(B) Required information.--An application for
registration under this section shall contain--
``(i) a certification that the applicant is
able to consistently provide proxy advice based
on accurate information;
``(ii) with respect to clients of the
applicant that vote shares held on behalf of
shareholders, a certification that the
applicant--
``(I) will provide proxy voting
advice only in the best economic
interest of those shareholders;
``(II) has the requisite expertise
to ensure that voting recommendations
are in the best economic interest of
those shareholders unless otherwise
specified; and
``(III) does not violate State or
Federal law;
``(iii) information on the procedures and
methodologies that the applicant uses to ensure
that proxy voting recommendations are in the
best economic interest of the ultimate
shareholders;
``(iv) information on the organizational
structure of the applicant;
``(v) an explanation of whether or not the
applicant has in effect a code of ethics, and
if not, the reasons therefor;
``(vi) a description of any potential or
actual conflict of interest relating to the
provision of proxy advisory services, including
those arising out of or resulting from the
ownership structure of the applicant or the
provision of other services by the applicant or
any person associated with the applicant;
``(vii) the policies and procedures in
place to publicly disclose and manage conflicts
of interest under subsection (f);
``(viii) information related to the
professional and academic qualifications of
staff tasked with providing proxy advisory
services; and
``(ix) any other information and documents
concerning the applicant and any person
associated with such applicant as the
Commission, by rule, may prescribe as necessary
or appropriate in the public interest or for
the protection of investors.
``(2) Review of application.--
``(A) Initial determination.--Not later than 90
days after the date on which the application for
registration is filed with the Commission under
paragraph (1) (or within such longer period as to which
the applicant consents) the Commission shall--
``(i) by order, grant registration; or
``(ii) institute proceedings to determine
whether registration should be denied.
``(B) Conduct of proceedings.--
``(i) Content.--Proceedings referred to in
subparagraph (A)(ii) shall--
``(I) include notice of the grounds
for denial under consideration and an
opportunity for hearing; and
``(II) be concluded not later than
120 days after the date on which the
application for registration is filed
with the Commission under paragraph
(1).
``(ii) Determination.--At the conclusion of
such proceedings, the Commission, by order,
shall grant or deny such application for
registration.
``(iii) Extension authorized.--The
Commission may extend the time for conclusion
of such proceedings for not longer than 90
days, if the Commission finds good cause for
such extension and publishes its reasons for so
finding, or for such longer period as to which
the applicant consents.
``(C) Grounds for decision.--The Commission shall
grant registration under this subsection--
``(i) if the Commission finds that the
requirements of this section are satisfied; and
``(ii) unless the Commission finds (in
which case the Commission shall deny such
registration) that--
``(I) the applicant has failed to
certify to the Commission's
satisfaction that it is able to
consistently provide proxy advice based
on accurate information and to
materially comply with the procedures
and methodologies disclosed under
paragraph (1)(B) and with subsections
(f) and (g); or
``(II) if the applicant were so
registered, its registration would be
subject to suspension or revocation
under subsection (d).
``(3) Public availability of information.--Subject to
section 24, the Commission shall make the information and
documents submitted to the Commission by a proxy advisory firm
in its completed application for registration, or in any
amendment submitted under paragraph (1) or (2) of subsection
(c), publicly available on the Commission's website, or through
another comparable, readily accessible means.
``(c) Update of Registration.--
``(1) Update.--Each registered proxy advisory firm shall
promptly amend and update its application for registration
under this section if any information or document provided
therein becomes materially inaccurate, except that a registered
proxy advisory firm is not required to amend the information
required to be filed under subsection (b)(1)(B)(i) by filing
information under this paragraph, but shall amend such
information in the annual submission of the organization under
paragraph (2) of this subsection.
``(2) Certification.--Not later than 90 calendar days after
the end of each calendar year, each registered proxy advisory
firm shall file with the Commission an amendment to its
registration, in such form as the Commission, by rule, may
prescribe as necessary or appropriate in the public interest or
for the protection of investors--
``(A) certifying that the information and documents
in the application for registration of such registered
proxy advisory firm continue to be accurate in all
material respects; and
``(B) listing any material change that occurred to
such information or documents during the previous
calendar year.
``(d) Censure, Denial, or Suspension of Registration; Notice and
Hearing.--The Commission, by order, shall censure, place limitations on
the activities, functions, or operations of, suspend for a period not
exceeding 12 months, or revoke the registration of any registered proxy
advisory firm if the Commission finds, on the record after notice and
opportunity for hearing, that such censure, placing of limitations,
suspension, or revocation is necessary for the protection of investors
and in the public interest and that such registered proxy advisory
firm, or any person associated with such an organization, whether prior
to or subsequent to becoming so associated--
``(1) has committed or omitted any act, or is subject to an
order or finding, enumerated in subparagraph (A), (D), (E),
(H), or (G) of section 15(b)(4), has been convicted of any
offense specified in section 15(b)(4)(B), or is enjoined from
any action, conduct, or practice specified in subparagraph (C)
of section 15(b)(4), during the 10-year period preceding the
date of commencement of the proceedings under this subsection,
or at any time thereafter;
``(2) has been convicted during the 10-year period
preceding the date on which an application for registration is
filed with the Commission under this section, or at any time
thereafter, of--
``(A) any crime that is punishable by imprisonment
for 1 or more years, and that is not described in
section 15(b)(4)(B); or
``(B) a substantially equivalent crime by a foreign
court of competent jurisdiction;
``(3) is subject to any order of the Commission barring or
suspending the right of the person to be associated with a
registered proxy advisory firm;
``(4) fails to furnish the certifications required under
subsections (b)(2)(C)(ii)(I) and (c)(2);
``(5) has engaged in one or more prohibited acts enumerated
in paragraph (1);
``(6) fails to maintain adequate financial and managerial
resources to consistently offer advisory services to clients
that vote shares held on behalf of shareholders consistent with
the best economic interest of those shareholders, including by
failing to comply with subsections (f) or (g);
``(7) fails to maintain adequate expertise to ensure that
proxy advisory services for clients that vote shares held on
behalf of shareholders are tied to the best economic interest
of those shareholders; or
``(8) engages in a prohibited act enumerated in subsection
(j).
``(e) Termination of Registration.--
``(1) Voluntary withdrawal.--A registered proxy advisory
firm may, upon such terms and conditions as the Commission may
establish as necessary in the public interest or for the
protection of investors, which terms and conditions shall
include at a minimum that the registered proxy advisory firm
will no longer conduct such activities as to bring it within
the definition of proxy advisory firm in section 3(a)(82),
withdraw from registration by filing a written notice of
withdrawal to the Commission.
``(2) Commission authority.--In addition to any other
authority of the Commission under this title, if the Commission
finds that a registered proxy advisory firm is no longer in
existence or has ceased to do business as a proxy advisory
firm, the Commission, by order, shall cancel the registration
under this section of such registered proxy advisory firm.
``(f) Management of Conflicts of Interest.--
``(1) Organization policies and procedures.--Each
registered proxy advisory firm shall establish, maintain, and
enforce written policies and procedures reasonably designed,
taking into consideration the nature of the business of such
registered proxy advisory firm and associated persons, to
publicly disclose and manage any conflicts of interest that
arise or would reasonably be expected to arise from such
business.
``(2) Commission authority.--The Commission shall, within
one year of the date of enactment of this section, issue final
rules to prohibit, or require the management and public
disclosure of, any conflicts of interest relating to the
offering of proxy advisory services by a registered proxy
advisory firm, including, without limitation, conflicts of
interest relating to--
``(A) the manner in which a registered proxy
advisory firm is compensated by the client, any
affiliate of the client, or any other person for
providing proxy advisory services;
``(B) business relationships, ownership interests,
or any other financial or personal interests between a
registered proxy advisory firm, or any person
associated with such registered proxy advisory firm,
and any client, or any affiliate of such client;
``(C) the formulation of proxy voting policies;
``(D) the execution, or assistance with the
execution, of proxy votes if such votes are based upon
recommendations made by the proxy advisory firm in
which a person other than the issuer is a proponent;
and
``(E) any other potential conflict of interest, as
the Commission deems necessary or appropriate in the
public interest or for the protection of investors.
``(3) Disclosure on factors influencing recommendations.--
Each registered proxy advisory firm shall annually disclose to
the Commission and make publicly available the economic and
other factors that a reasonable investor would expect to
influence the recommendations of such proxy advisory firm,
including the ownership composition of such proxy advisory firm
and any meetings with, or feedback received from, outside
entities.
``(g) Reliability of Proxy Advisory Firm Services.--
``(1) In general.--Each registered proxy advisory firm
shall--
``(A) have staff and other resources sufficient to
produce proxy voting recommendations that are based on
accurate and current information and designed for
clients that vote shares held on behalf of shareholders
to advance the best economic interest of those
shareholders unless otherwise specified;
``(B) implement procedures that permit issuers that
are the subject of proxy voting recommendations--
``(i) access in a reasonable time to data
and information used to make recommendations;
and
``(ii) a reasonable opportunity to provide
meaningful comment and corrections to such data
and information, including the opportunity to
present (in person or telephonically) details
to the person responsible for developing such
data and information prior to the publication
of proxy voting recommendations to clients;
``(C) employ an ombudsman to receive complaints
about the accuracy of information used in making
recommendations from the companies that are the subject
of the proxy advisory firm's voting recommendations and
seek to resolve those complaints in a timely fashion
and prior to the publication of proxy voting
recommendations to clients; and
``(D) if the ombudsman is unable to resolve a
complaint to a company's satisfaction prior to the
publication of proxy voting recommendations to clients,
include in the final report of the firm to clients--
``(i) a statement detailing the company's
complaints, if requested in writing by the
company; and
``(ii) a statement explaining why the proxy
voting recommendation is in the best economic
interest of shareholders.
``(2) Definitions.--In this subsection:
``(A) Data and information used to make
recommendations.--The term `data and information used
to make voting recommendations'--
``(i) means the financial, operational, or
descriptive data and information on an issuer
used by proxy advisory firms and any contextual
or substantive analysis impacting the
recommendation; and
``(ii) does not include the entirety of the
proxy advisory firm's final report to its
clients.
``(B) Reasonable time.--The term `reasonable
time'--
``(i) means not less than 1 week before the
publication of proxy voting recommendations for
clients; and
``(ii) shall not otherwise interfere with a
proxy advisory firm's ability to provide its
clients with timely access to accurate proxy
voting research, analysis, or recommendations.
``(h) Private Right of Action With Respect to Illegal
Recommendations.--Any proxy advisory firm that endorses a proposal that
is not supported by the issuer but is approved and subsequently found
by a court of competent jurisdiction to violate State or Federal law
shall be liable to the applicable issuer for the costs associated with
the approval of such proposal, including implementation costs and any
penalties incurred by the issuer, and any issuer seeking to enforce
such liability may sue at law or in equity in any court of competent
jurisdiction.
``(i) Designation of Compliance Officer.--Each registered proxy
advisory firm shall designate an individual who reports directly to
senior management as responsible for administering the policies and
procedures that are required to be established pursuant to subsections
(f) and (g), and for ensuring compliance with the securities laws and
the rules and regulations thereunder, including those promulgated by
the Commission pursuant to this section.
``(j) Prohibited Conduct.--
``(1) Prohibited acts and practices.--Not later than one
year after the date of enactment of this section, the
Commission shall issue final rules to prohibit any act or
practice relating to the offering of proxy advisory services by
a registered proxy advisory firm that the Commission determines
to be unfair, coercive, or abusive, including any act or
practice relating to--
``(A) advisory or consulting services (offered
directly or indirectly, including through an affiliate)
related to corporate governance issues; or
``(B) modifying a voting recommendation or
otherwise departing from its adopted systematic
procedures and methodologies in the provision of proxy
advisory services, based on whether an issuer, or
affiliate thereof, subscribes or will subscribe to
other services or product of the registered proxy
advisory firm or any person associated with such
organization.
``(2) Rule of construction.--Nothing in paragraph (1), or
in any rules or regulations adopted thereunder, may be
construed to modify, impair, or supersede the operation of any
of the antitrust laws (as defined in the first section of the
Clayton Act, except that such term includes section 5 of the
Federal Trade Commission Act, to the extent that such section 5
applies to unfair methods of competition).
``(k) Annual Report.--
``(1) In general.--Each registered proxy advisory firm
shall, not later than 90 calendar days after the end of each
fiscal year, file with the Commission and make publicly
available an annual report in such form as the Commission, by
rule, may prescribe as necessary or appropriate in the public
interest or for the protection of investors.
``(2) Contents.--Each annual report required under
paragraph (1) shall include, at a minimum, disclosure by the
registered proxy advisory firm of the following:
``(A) A list of shareholder proposals the staff of
the registered proxy advisory firm reviewed in the
prior fiscal year.
``(B) A list of the recommendations made in the
prior fiscal year.
``(C) The economic analysis conducted to determine
that final recommendations provided in the prior fiscal
year (other than recommendations relating to an issuer-
sponsored proposal or recommendations consistent with
that of a board of directors composed of a majority of
independent directors) delivered to clients that vote
shares held on behalf of shareholders were in the best
economic interest of those shareholders.
``(D) The staff who reviewed and made
recommendations on such proposals in the prior fiscal
year.
``(E) The qualifications of such staff to ensure
that each of the recommendations for clients that vote
shares held on behalf of shareholders were tied to the
best economic interest of those shareholders.
``(F) The recommendations made in the prior fiscal
year where the proponent of such recommendation was a
client of or received services from the proxy advisory
firm.
``(G) A certification by the chief executive
officer, chief financial officer, and the primary
executive responsible for overseeing the compilation
and dissemination of proxy voting advice that the final
recommendations (other than recommendations relating to
an issuer-sponsored proposal or recommendations
consistent with that of a board of directors composed
of a majority of independent directors) delivered to
clients that vote shares held on behalf of shareholders
in the last fiscal year--
``(i) were based on internal controls and
procedures that are designed to ensure accurate
information and that such internal controls and
procedures are effective; and
``(ii) were based on the best economic
interest of those shareholders unless otherwise
specified.
``(H) The economic and other factors that a
reasonable investor would expect to influence the
recommendations of such proxy advisory firm, including
the ownership composition of such proxy advisory firm.
``(3) Report format.--Each annual report required under
paragraph (1) shall be made available in a structured, machine-
readable format, consistent with existing electronic reporting
standards.
``(l) Transparent Policies.--Each registered proxy advisory firm
shall file with the Commission and make publicly available its
methodology for the formulation of proxy voting policies and voting
recommendations to clients that vote shares held on behalf of
shareholders and how that methodology ensures that the firm's voting
recommendations are in the best economic interest of those shareholders
unless otherwise specified.
``(m) Rules of Construction.--Registration under and compliance
with this section does not constitute a waiver of, or otherwise
diminish, any right, privilege, or defense that a registered proxy
advisory firm may otherwise have under any provision of State or
Federal law, including any rule, regulation, or order thereunder.
``(n) Regulations.--
``(1) New provisions.--Such rules and regulations as are
required by this section or are otherwise necessary to carry
out this section, including the application form required under
subsection (a)--
``(A) shall be issued by the Commission, not later
than 180 days after the date of enactment of this
section; and
``(B) shall become effective not later than 1 year
after the date of enactment of this section.
``(2) Review of existing regulations.--Not later than 270
days after the date of enactment of this section, the
Commission shall--
``(A) review its existing rules and regulations
which affect the operations of proxy advisory firms;
and
``(B) amend or revise such rules and regulations in
accordance with the purposes of this section, and issue
such guidance as the Commission may prescribe as
necessary or appropriate in the public interest or for
the protection of investors.
``(o) Applicability.--This section, other than subsection (m),
which shall apply on the date of enactment of this section, shall apply
on the earlier of--
``(1) the date on which regulations are issued in final
form under subsection (n)(1); or
``(2) 270 days after the date of enactment of this section.
``(p) Best Economic Interest Defined.--In this section, the term
`best economic interest' means decisions that seek to maximize
investment returns over a time horizon consistent with the investment
objectives and risk management profile of the fund in which the
shareholders are invested.''.
(b) Conforming Amendment.--Section 17(a)(1) of the Securities
Exchange Act of 1934 (15 U.S.C. 78q(a)(1)) is amended by inserting
``proxy advisory firm,'' after ``nationally recognized statistical
rating organization,''.
(c) Proxy Advisory Firm Definitions.--Section 3(a) of the
Securities Exchange Act of 1934 (15 U.S.C. 78c(a)) is amended--
(1) by redesignating the second paragraph (80) (relating to
funding portal) as paragraph (81); and
(2) by adding at the end the following:
``(82) Proxy advisory firm.--The term `proxy advisory
firm'--
``(A) means any person that--
``(i) makes a recommendation to a security
holder as to the security holder's vote,
consent, or authorization on a specific matter
for which security holder approval is
solicited;
``(ii) markets the person's expertise as a
provider of such proxy voting advice separately
from other forms of investment advice; and
``(iii) sells such proxy voting advice for
a fee; and
``(B) does not include--
``(i) a registered investment adviser; or
``(ii) any person that is exempt under law
or regulation from the requirements otherwise
applicable to persons engaged in such a
solicitation.
``(83) Person associated with a proxy advisory firm.--With
respect to a proxy advisory firm--
``(A) a person is `associated' with the proxy
advisory firm if the person is--
``(i) a partner, officer, or director of
the proxy advisory firm (or any person
occupying a similar status or performing
similar functions);
``(ii) a person directly or indirectly
controlling, controlled by, or under common
control with the proxy advisory firm;
``(iii) an employee of the proxy advisory
firm; or
``(iv) a person the Commission determines
by rule is controlled by the proxy advisory
firm; and
``(B) a person is not `associated' with the proxy
advisory firm if the person only performs clerical or
ministerial functions with respect to a proxy advisory
firm.''.
TITLE VI--LIABILITY FOR CERTAIN FAILURES TO DISCLOSE MATERIAL
INFORMATION OR MAKING OF MATERIAL MISSTATEMENTS
SEC. 601. LIABILITY FOR CERTAIN FAILURES TO DISCLOSE MATERIAL
INFORMATION OR MAKING OF MATERIAL MISSTATEMENTS.
Section 14 of the Securities Exchange Act of 1934 (15 U.S.C. 78n)
is amended by adding at the end the following:
``(l) False or Misleading Statements.--For purposes of subsection
(a) and Rule 14a-9 (17 CFR 240.14a-9) and any successor rule, the
failure to disclose material information (such as a proxy voting advice
business's methodology, sources of information, or conflicts of
interest) or the making of a material misstatement regarding proxy
voting advice that makes a recommendation to a security holder as to
the security holder's vote, consent, or authorization on a specific
matter for which security holder approval is solicited, and that is
furnished by a person that markets the person's expertise as a provider
of such proxy voting advice separately from other forms of investment
advice, and sells such proxy voting advice for a fee, shall be
considered to be false or misleading with respect to a material
fact.''.
TITLE VII--DUTIES OF INVESTMENT ADVISERS, ASSET MANAGERS, AND PENSION
FUNDS
SEC. 701. DUTIES OF INVESTMENT ADVISERS, ASSET MANAGERS, AND PENSION
FUNDS.
Section 13(f) of the Securities Exchange Act of 1934 (15 U.S.C.
78m(f)) is amended by adding at the end the following:
``(7) Disclosures by institutional investment managers in
connection with proxy advisory firms.--
``(A) In general.--Every institutional investment
manager which uses the mails, or any means or
instrumentality of interstate commerce in the course of
its business as an institutional investment manager,
which engages a proxy advisory firm, and which
exercises voting power with respect to accounts holding
equity securities of a class described in subsection
(d)(1) or otherwise becomes or is deemed to become a
beneficial owner of any security of a class described
in subsection (d)(1) upon the purchase or sale of a
security-based swap that the Commission may define by
rule, shall file an annual report with the Commission
containing--
``(i) an explanation of how the
institutional investment manager voted with
respect to each shareholder proposal;
``(ii) the percentage of votes cast on
shareholder proposals that were consistent with
proxy advisory firm recommendations, for each
proxy advisory firm retained by the
institutional investment manager;
``(iii) an explanation of--
``(I) how the institutional
investment manager took into
consideration proxy advisory firm
recommendations in making voting
decisions, including the degree to
which the institutional investment
manager used those recommendations in
making voting decisions;
``(II) how often the institutional
investment manager voted consistent
with a recommendation made by a proxy
advisory firm, expressed as a
percentage;
``(III) how such votes are
reconciled with the fiduciary duty of
the institutional investment manager to
vote in the best economic interests of
shareholders;
``(IV) how frequently votes were
changed when an error occurred or due
to new information from issuers; and
``(V) the degree to which
investment professionals of the
institutional investment manager were
involved in proxy voting decisions; and
``(iv) a certification that the voting
decisions of the institutional investment
manager were based solely on the best economic
interest of the shareholders on behalf of whom
the institutional investment manager holds
shares.
``(B) Requirements for larger institutional
investment managers.--Every institutional investment
manager described in subparagraph (A) that has
regulatory assets under management with an aggregate
fair market value on the last trading day in any of the
preceding twelve months of at least $100,000,000,000
shall--
``(i) in any materials provided to
customers and related to customers voting their
shares, clarify that shareholders are not
required to vote on every proposal;
``(ii) with respect to each shareholder
proposal for which the institutional investment
manager votes (other than votes consistent with
the recommendation of a board of directors
composed of a majority of independent
directors) perform an economic analysis before
making such vote, to determine that the vote is
in the best economic interest of the
shareholders on behalf of whom the
institutional investment manager holds shares;
and
``(iii) include each economic analysis
required under clause (ii) in the annual report
required under subparagraph (A).
``(C) Best economic interest defined.--In this
paragraph, the term `best economic interest' means
decisions that seek to maximize investment returns over
a time horizon consistent with the investment
objectives and risk management profile of the fund in
which shareholders are invested.''.
TITLE VIII--PROTECTING AMERICANS' SAVINGS
SEC. 801. REQUIREMENTS RELATED TO PROXY VOTING.
Section 14 of the Securities Exchange Act of 1934 (15 U.S.C. 78n),
as amended by section 601, is further amended by adding at the end the
following:
``(m) Prohibition on Robovoting.--
``(1) In general.--The Commission shall issue final rules
prohibiting the use of robovoting with respect to votes related
to proxy or consent solicitation materials.
``(2) Robovoting defined.--In this subsection, the term
`robovoting' means the practice of automatically voting in a
manner consistent with the recommendations of a proxy advisory
firm or on a proxy advisory firm's electronic voting platform
with the proxy advisory firm's recommendations, in either case,
without independent review and analysis.
``(n) Prohibition on Outsourcing Voting Decisions by Institutional
Investors.--With respect to votes related to proxy or consent
solicitation materials, an institutional investor may not outsource
voting decisions to any person other than an investment adviser or a
broker or dealer that is registered with the Commission, or is exempt
from such registration, and has a fiduciary or best interest duty to
the institutional investor.
``(o) No Requirement to Vote.--No person may be required to cast
votes related to proxy or consent solicitation materials, unless
obligated by their fiduciary duty or Rule 206(4)-6 (17 CFR 275.206(4)-
6).''.
TITLE IX--EMPOWERING SHAREHOLDERS
SEC. 901. PROXY VOTING OF PASSIVELY MANAGED FUNDS.
(a) In General.--The Investment Advisers Act of 1940 (15 U.S.C.
80b-1 et seq.) is amended by inserting after section 208 (15 U.S.C.
80b-8) the following:
``SEC. 208A. PROXY VOTING OF PASSIVELY MANAGED FUNDS.
``(a) Investment Adviser Proxy Voting.--
``(1) In general.--An investment adviser that holds
authority to vote a proxy solicited by an issuer pursuant to
section 14 of the Securities Exchange Act of 1934 (15 U.S.C.
78n) in connection with any vote of covered securities held by
a passively managed fund shall--
``(A) vote in accordance with the instructions
(which may include the selection of a published voting
policy) of the beneficial owner (or fiduciary or other
designee with proxy voting authority on their behalf)
of a voting security of the passively managed fund;
``(B) vote in accordance with the voting
recommendations of the board of directors (or similar
governing body) of such issuer;
``(C) abstain from voting such securities but make
reasonable efforts to be considered present for
purposed of establishing a quorum; or
``(D) pursuant to rules issued by the Commission,
instruct vote tabulators to make a reasonable effort to
mirror vote shares to reflect the elections of the
other shareholders in the covered security.
``(2) Exception.--Paragraph (1) shall not apply with
respect to a vote on a routine matter.
``(b) Safe Harbor.--With respect to a routine or non-routine vote,
voted in the manner required by subsection (a)(1), an investment
adviser shall not be liable to any person under any law or regulation
of the United States, any constitution, law, or regulation of any State
or political subdivision thereof, or under any contract or other
legally enforceable agreement (including any arbitration agreement),
for any of the following:
``(1) Voting in accordance with the instructions of the
beneficial owner (or that beneficial owner's designee with
proxy voting authority) of a voting security of the passively
managed fund.
``(2) Not soliciting voting instructions from any person.
``(3) Voting in accordance with the voting recommendations
of an issuer under subsection (a)(1)(B) with respect to such
vote.
``(4) Abstaining from voting in accordance with subsection
(a)(1)(C) with respect to such vote.
``(5) Instructing vote tabulators to make a reasonable
effort to mirror vote shares to reflect the elections of the
other shareholders in a covered security, pursuant to rules
issued by the Commission described in subsection (a)(1)(D).
``(c) Foreign Private Issuers Exemption.--Subsection (a) shall not
apply with respect to a foreign private issuer if the published voting
policy of the investment advisor with respect to such foreign private
issuer is fully and fairly disclosed to beneficial owners, including
the extent to which such policy differs from the published voting
policy for non-exempt issuers.
``(d) Dissemination of Information.--
``(1) In general.--Any investment adviser subject to the
requirements of subsection (a)(1) shall, with respect to the
dissemination of information and other material to a voting
person, comply with the following requirements, unless the
voting person affirmatively declines to receive that
information and other material:
``(A) Provide the voting person (or the relevant
intermediary with whom the investment adviser has
access) with a form to select a published voting
policy.
``(B) Provide the voting person with not less than
5 business days after the date on which the voting
person receives the form described under subparagraph
(A) to return that form to the investment adviser.
``(2) Electronic delivery.--All, or any portion, of the
materials that an investment adviser is required to provide
under paragraph (1)(A) may be provided electronically,
including through--
``(A) an internet website;
``(B) another digital, internet, or electronic-
based information repository; or
``(C) a mobile application.
``(e) Definitions.--In this section:
``(1) Covered security.--The term `covered security'--
``(A) means a voting security, as that term is
defined in section 2(a) of the Investment Company Act
of 1940 (15 U.S.C. 80a-2(a)), in which a qualified fund
is invested; and
``(B) does not include any voting security (as
defined in subparagraph (A)) of an issuer registered
with the Commission as an investment company under
section 8 of the Investment Company Act of 1940 (15
U.S.C. 80a-8).
``(2) Passively managed fund.--The term `passively managed
fund' means a qualified fund--
``(A) that--
``(i) is designed to track, or is derived
from, an index of securities or a portion of
such an index;
``(ii) discloses that the qualified fund is
a passive index fund; or
``(iii) allocates not less than 60 percent
of the total assets of the qualified fund to an
investment strategy that is designed to track,
or is derived from, an index of securities or a
portion of such an index fund; and
``(B) that commits to refrain from exercising
control over an issuer through voting or investment
authority.
``(3) Published voting policy.--The term `published voting
policy' means--
``(A) a policy that--
``(i) articulates how proportionate shares
would be expected to be voted in anticipated
proxy voting matters; and
``(ii) is made available to investors,
including via website or other electronic
means; and
``(B) in the case of a policy of a passively
managed fund or an investment adviser, a policy that
does not--
``(i) seek to set the strategy or day-to-
day management decisions of the issuer;
``(ii) involve submitting shareholder
proposals;
``(iii) seek to nominate directors; and
``(iv) coordinate votes with other index
managers.
``(4) Qualified fund.--The term `qualified fund' means--
``(A) an investment company;
``(B) a private fund;
``(C) an eligible deferred compensation plan, as
that term is defined in section 457(b) of the Internal
Revenue Code of 1986;
``(D) a trust, plan, account, or other entity
described in section 3(c)(11) of the Investment Company
Act of 1940 (15 U.S.C. 80a-3(c)(11));
``(E) a plan maintained by an employer described in
clause (i), (ii), or (iii) of section 403(b)(1)(A) of
the Internal Revenue Code of 1986 to provide annuity
contracts described in section 403(b) of such Code;
``(F) a common trust fund, or similar fund,
maintained by a bank;
``(G) any fund established under section 8438(b)(1)
of title 5, United States Code; or
``(H) any separate managed account of a client of
an investment adviser.
``(5) Routine matter.--The term `routine matter'--
``(A) includes a proposal that relates to--
``(i) an election with respect to the board
of directors of a registrant;
``(ii) the compensation of management or
the board of directors of a registrant;
``(iii) the selection of auditors; or
``(iv) declassification; and
``(B) does not include--
``(i) a proposal that is not submitted to a
holder of covered securities by means of a
proxy statement comparable to that described in
section 240.14a-101 of title 17, Code of
Federal Regulations, or any successor
regulation; or
``(ii) a proposal that is--
``(I) the subject of a counter-
solicitation; or
``(II) part of a proposal made by a
person other than the applicable
registrant.''.
(b) Effective Date.--The amendment made by this section shall take
effect 1 year after the date of enactment of this Act.
TITLE X--BEST INTEREST BASED ON PECUNIARY FACTORS
SEC. 1001. PROTECTING RETAIL INVESTORS' SAVINGS.
(a) Best Interest Based on Pecuniary Factors.--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),
when providing personalized investment advice, the best
interest of a customer shall be determined using
pecuniary factors, which, subject to applicable law,
may not be subordinated to or limited by non-pecuniary
factors, unless--
``(i) the customer provides informed
consent, whether by e-delivery or e-sign, that
such non-pecuniary factors be considered; or
``(ii) the personalized investment advice
is consistent with the customer's written
investment profile information.
``(B) Disclosure of pecuniary effects.--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 provide
qualitative disclosure of the potential pecuniary
effects to the customer of prioritizing non-pecuniary
factors over pecuniary factors in making investment
decisions.
``(C) Pecuniary factor defined.--In 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 investment objectives, risk tolerance, and
time horizon.''.
(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 paragraph (1).
(c) Applicability.--The amendment made by paragraph (1) shall apply
to a recommendation made by a broker or dealer and investment advice
provided by an investment adviser beginning on the date that is 12
months after the date of enactment of this Act.
<all>