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[Discussion Draft]
[Discussion Draft]
September 6, 2024
118th CONGRESS
2d Session
Rules Committee Print 118–48
Text of H.R. 4790, the Prioritizing Economic Growth Over Woke Policies Act
[Showing the text of H.R. 4790, H.R. 4655, H.R. 4767, and H.R. 4823, all as reported by the Committed on Financial Services]
1.

Short title; table of contents
(a)

Short title
This Act may be cited as the “Prioritizing Economic Growth Over Woke Policies Act”.
(b)

Table of contents
The table of contents for this Act is as follows:
Sec. 1. Short title; table of contents.
Division A—GUARDRAIL Act of 2023
Sec. 1001. Short title; table of contents.
Title I—Mandatory Materiality Requirement
Sec. 1101. Limitation on disclosure requirements.
Title II—SEC justification of non-material disclosure mandates
Sec. 1201. SEC justification of non-material disclosure mandates.
Title III—Public Company Advisory Committee
Sec. 1301. Public Company Advisory Committee.
Title IV—Protecting U.S. Business Sovereignty
Sec. 1401. Study on detrimental impact of the Directive on Corporate Sustainability Due Diligence and Corporate Sustainability Reporting Directive.
Division B—Businesses Over Activists Act
Sec. 2001. Short title.
Sec. 2002. Limitation with respect to compelling the inclusion or discussion of shareholder proposals.
Division C—Protecting Americans’ Retirement Savings from Politics Act
Sec. 3001. Short title; Table of contents.
Title I—Performance over Politics
Sec. 3101. Exclusion of certain substantially similar shareholder proposals.
Title II—No Expensive, Stifling Governance
Sec. 3201. Exclusion of certain shareholder proposals.
Title III—Exclusion of certain ESG shareholder proposals
Sec. 3301. Exclusion of certain ESG shareholder proposals.
Title IV—Exclusions available regardless of significant social policy issue
Sec. 3401. Exclusions available regardless of significant social policy issue.
Title V—Corporate Governance Examination
Sec. 3501. Study of certain issues with respect to shareholder proposals, proxy advisory firms, and the proxy process.
Title VI—Registration of proxy advisory firms
Sec. 3601. Registration of proxy advisory firms.
Title VII—Liability for certain failures to disclose material information or making of material misstatements
Sec. 3701. Liability for certain failures to disclose material information or making of material misstatements.
Title VIII—Duties of investment advisors, asset managers, and pension funds
Sec. 3801. Duties of investment advisors, asset managers, and pension funds.
Title IX—Protecting Americans’ Savings
Sec. 3901. Requirements related to proxy voting.
Title X—Empowering Shareholders
Sec. 3911. Proxy voting of passively managed funds.
Title XI—Protecting Retail Investors’ Savings
Sec. 3921. Best interest based on pecuniary factors.
Sec. 3922. Study on climate change and other environmental disclosures in municipal bond market.
Sec. 3923. Study on solicitation of municipal securities business.
Division D—American FIRST Act of 2023
Sec. 4001. Short title; Table of contents.
Title I—Stop Executive Capture of Banking Regulators
Sec. 4101. Report on the implementation of recommendations from the FSOC Chairperson and Executive Orders.
Title II—Ensuring U.S. Authority over U.S. Banking Regulations
Sec. 4201. Requirements in connection with rulemakings implementing policies of non-governmental international organizations.
Sec. 4202. Report on certain climate-related interactions with covered international organizations.
Title III—Banking Regulator International Reporting
Sec. 4301. Reporting on interactions with non-governmental international organizations.
Title IV—Supervision Reform
Sec. 4401. Removal of the Vice Chairman for Supervision designation.
A

GUARDRAIL Act of 2023
1001.

Short title; table of contents
(a)

Short title
This division may be cited as the “Guiding Uniform and Responsible Disclosure Requirements and Information Limits Act of 2023” or the “GUARDRAIL Act of 2023”.
(b)

Table of contents
The table of contents for this division is as follows:
Sec. 1001. Short title; table of contents.
Title I—Mandatory Materiality Requirement
Sec. 1101. Limitation on disclosure requirements.
Title II—SEC justification of non-material disclosure mandates
Sec. 1201. SEC justification of non-material disclosure mandates.
Title III—Public Company Advisory Committee
Sec. 1301. Public Company Advisory Committee.
Title IV—Protecting U.S. Business Sovereignty
Sec. 1401. Study on detrimental impact of the Directive on Corporate Sustainability Due Diligence and Corporate Sustainability Reporting Directive.
I

Mandatory Materiality Requirement
1101.

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.”.
II

SEC justification of non-material disclosure mandates
1201.

SEC justification of non-material disclosure mandates
Section 23 of the Securities Exchange Act of 1934 (15 U.S.C. 78w) is amended by adding at the end the following:
“(e)

Non-material disclosure mandates
(1)

Disclosure
The Commission shall maintain a list on the website of the Commission that contains—
(A)
each mandate under the Federal securities laws and regulations that requires the disclosure of non-material information; and
(B)
for each such disclosure mandate, an explanation of why the mandate is required.
(2)

Study and report
The Commission shall, every 5 years, issue a report to the Congress justifying each disclosure contained on the list required under paragraph (1).
(3)

No private liability for failing to make a non-material disclosure
A person who fails to disclose non-material information required to be disclosed under the Federal securities laws or regulations shall not be liable for such failure in any private action.”.
III

Public Company Advisory Committee
1301.

Public Company Advisory Committee
The Securities Exchange Act of 1934 is amended by inserting after section 40 (15 U.S.C. 78qq) the following:
“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 its rules, regulations, and policies with regard to its 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; and
(B)
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 or 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; or
(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
(A)

In general
Each member of the Committee appointed under paragraph (1) shall serve for a term of 4 years.
(B)

Vacancies
Vacancies among the members, whether caused by the resignation, death, removal, expiration of a term, or otherwise, will be filled consistent with the Commission’s procedures then in effect.
(C)

Staggered terms
The members of the Committee shall serve staggered terms, with one-third of the initial members of the Committee each serving for 1, 2, or 3 years.
(4)

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.
(5)

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 two 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 two weeks before the date of the meeting.
(e)

Compensation and travel expenses
Each member of the Committee who is not a full-time employee of the United States shall—
(1)
be entitled to receive compensation at a rate not to exceed the daily equivalent of the annual rate of basic pay in effect for a position at level V of the Executive Schedule under section 5316 of title 5, United States Code, for each day during which the members is engaged in the actual performance of the duties of the Committee; and
(2)
while away from the home or regular place of business of the member in the performance of services for the Committee, be allowed travel expenses, including per diem in lieu of subsistence, in the same manner as persons employed intermittently in the Government service are allowed expenses under section 5703(b) of title 5, United States Code.
(f)

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.
(g)

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.
(h)

Committee findings
Nothing in this section shall require the Commission to agree to or act upon any finding or recommendation of the Committee.
(i)

Nonapplicability of FACA
Chapter 10 of part I of title 5, United States Code, shall not apply to the Committee and its activities.”.
IV

Protecting U.S. Business Sovereignty
1401.

Study on detrimental impact of the Directive on Corporate Sustainability Due Diligence 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)
the proposed directive entitled “Corporate Sustainability Due Diligence” adopted by the European Commission on February 23, 2022; and
(2)
the Corporate Sustainability Reporting Directive of the European Commission effective January 5, 2023.
B

Businesses Over Activists Act
2001.

Short title
This division may be cited as the “Businesses Over Activists Act”.
2002.

Limitation with respect to compelling the inclusion or discussion of shareholder proposals
Section 14(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78n(a)) is amended by adding at the end the following:
“(3)

Limitation with respect to compelling inclusion or discussion of shareholder proposals
Except as provided in paragraph (2), the Commission may not compel an issuer to include in a proxy statement of the issuer—
(A)
any shareholder proposal; or
(B)
any discussion (either from the issuer or otherwise) related to a shareholder proposal contained in the proxy statement.
(4)

Rule of construction relating to State authority
Nothing in this Act or any other securities law shall be construed to provide the Commission the authority to preempt the State regulation of shareholder proposals or proxy or consent solicitation materials.”.
C

Protecting Americans’ Retirement Savings from Politics Act
3001.

Short title; Table of contents
(a)

Short title
This division may be cited as the “Protecting Americans’ Retirement Savings from Politics Act”.
(b)

Table of contents
The table of contents for this division is as follows:
Sec. 3001. Short title; Table of contents.
Title I—Performance over Politics
Sec. 3101. Exclusion of certain substantially similar shareholder proposals.
Title II—No Expensive, Stifling Governance
Sec. 3201. Exclusion of certain shareholder proposals.
Title III—Exclusion of certain ESG shareholder proposals
Sec. 3301. Exclusion of certain ESG shareholder proposals.
Title IV—Exclusions available regardless of significant social policy issue
Sec. 3401. Exclusions available regardless of significant social policy issue.
Title V—Corporate Governance Examination
Sec. 3501. Study of certain issues with respect to shareholder proposals, proxy advisory firms, and the proxy process.
Title VI—Registration of proxy advisory firms
Sec. 3601. Registration of proxy advisory firms.
Title VII—Liability for certain failures to disclose material information or making of material misstatements
Sec. 3701. Liability for certain failures to disclose material information or making of material misstatements.
Title VIII—Duties of investment advisors, asset managers, and pension funds
Sec. 3801. Duties of investment advisors, asset managers, and pension funds.
Title IX—Protecting Americans’ Savings
Sec. 3901. Requirements related to proxy voting.
Title X—Empowering Shareholders
Sec. 3911. Proxy voting of passively managed funds.
Title XI—Protecting Retail Investors’ Savings
Sec. 3921. Best interest based on pecuniary factors.
Sec. 3922. Study on climate change and other environmental disclosures in municipal bond market.
Sec. 3923. Study on solicitation of municipal securities business.
I

Performance over Politics
3101.

Exclusion of certain substantially similar shareholder proposals
The Securities and Exchange Commission shall revise the resubmission requirements in section 240.14a-8(i)(12) of title 17, Code of Federal Regulations, to provide that a shareholder proposal may be excluded by an issuer from its proxy or consent solicitation material for a meeting of the shareholders of such issuer if the shareholder proposal addresses substantially the same subject matter as a proposal, or proposals, previously included in the proxy or consent solicitation material for a meeting of the shareholders of such issuer—
(1)
for a meeting of the shareholders conducted in the preceding 5 calendar years; and
(2)
if the most recent vote—
(A)
occurred in the preceding 3 calendar years; and
(B)
(i)
if voted on once during such 5-year period, received less than 10 percent of the votes cast;
(ii)
if voted on twice during such 5-year period, received less than 20 percent of the votes cast; or
(iii)
if voted on three or more times during such 5-year period, received less than 40 percent of the votes cast.
II

No Expensive, Stifling Governance
3201.

Exclusion of certain shareholder proposals
(a)

Exclusion of certain shareholder proposals
A shareholder proposal submitted to an issuer pursuant to section 240.14a-8 of title 17, Code of Federal Regulations, may be excluded by an issuer from its proxy or consent solicitation material for a meeting of the shareholders of such issuer if the shareholder proposal—
(1)
has been substantially implemented by the issuer by implementing policies, practices, or procedures that compare favorably with the guidelines of the proposal and address the proposal’s underlying concerns; or
(2)
substantially duplicates by having the same principal thrust or principal focus as another proposal previously submitted to the issuer by another proponent that will be included in such material.
(b)

Nullification of proposed rule
The Securities and Exchange Commission may not finalize or apply the positions contained in the proposed rule entitled “Substantial Implementation, Duplication, and Resubmission of Shareholder Proposals under Exchange Act Rule 14a-8” (87 Fed. Reg. 45052), issue any substantially similar rule, or apply any substantially similar rule, including with respect to a no-action or other interpretive request.
III

Exclusion of certain ESG shareholder proposals
3301.

Exclusion of certain ESG shareholder proposals
A shareholder proposal submitted to an issuer pursuant to section 240.14a-8 of title 17, Code of Federal Regulations, may be excluded by an issuer from its proxy or consent solicitation material for a meeting of the shareholders of such issuer if the subject matter of the shareholder proposal is environmental, social, or political (or a similar subject matter).
IV

Exclusions available regardless of significant social policy issue
3401.

Exclusions available regardless of significant social policy issue
An issuer may exclude a shareholder proposal pursuant to section 240.14a-8(i) of title 17, Code of Federal Regulations, without regard to whether such shareholder proposal relates to a significant social policy issue.
V

Corporate Governance Examination
3501.

Study of certain issues with respect to shareholder proposals, proxy advisory firms, and the proxy process
Section 4(j) of the Securities Exchange Act of 1934 (15 U.S.C. 78d(j)) is amended by adding at the end the following:
“(10)

Study of certain issues with respect to shareholder proposals, proxy advisory firms, and the proxy process
(A)

In general
Not later than 180 days after the date of the enactment of this paragraph, and every 5 years thereafter, the Commission shall conduct a comprehensive study on shareholder proposals, proxy advisory firms, and the proxy process.
(B)

Scope of study
The studies required under subparagraph (A) shall cover—
(i)
the previous 10 years, with respect to the initial study; and
(ii)
the previous 5 years, with respect to each other study.
(C)

Contents
Each study required under subparagraph (A) shall address the following issues:
(i)
The financial and other incentives and obligations of all groups involved in the proxy process.
(ii)
A consideration of whether financial and other incentives have created a process that no longer serves the economic interests of long-term retail investors.
(iii)
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.
(iv)
The costs incurred by issuers in responding to politically-, environmentally-, or socially-motivated shareholder proposals.
(v)
An assessment, including a cost-benefit analysis, of the adequacy of the current submission thresholds in Rule 14a-8 (17 CFR 240.14a-8) to ensure that shareholder proponents have demonstrated a meaningful economic stake in a company, which is appropriate to effectively serve markets and shareholders at large.
(vi)
An examination of the extent to which the politicization of the shareholder proposal process is increasing the operating costs of public companies.
(vii)
An analysis of the impact that shareholder proposals have on discouraging private companies from going public.
(viii)
An evaluation of the risk that shareholder proposals may contribute to the balkanization of the U.S. economy over time.
(ix)
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.
(x)
A review of the extent to which institutional investors, who owe fiduciary duties, rely on proxy advisory firm recommendations.
(xi)
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 economic best interest of shareholders at large.
(D)

Report
At the completion of each study required under subparagraph (A) 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.”.
VI

Registration of proxy advisory firms
3601.

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:
“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; and
(II)
has the requisite expertise to ensure that voting recommendations are in the best economic interest of those shareholders;
(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;
(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.
(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)

Statements of financial condition
Each registered proxy advisory firm shall, on a confidential basis, file with the Commission, at intervals determined by the Commission, such financial statements, certified (if required by the rules or regulations of the Commission) by an independent public auditor, and information concerning its financial condition, as the Commission, by rule, may prescribe as necessary or appropriate in the public interest or for the protection of investors.
(l)

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;
(ii)
do not violate applicable State or Federal law; and
(iii)
were based on the best economic interest of those shareholders.
(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.
(m)

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.
(n)

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.
(o)

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.
(p)

Applicability
This section, other than subsection (n), 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 (o)(1); or
(2)
270 days after the date of enactment of this section.
(q)

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 who is primarily engaged in the business of providing proxy voting advice, research, analysis, ratings, or recommendations to clients, which conduct constitutes a solicitation within the meaning of section 14; and
(B)
does not include 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.” .
VII

Liability for certain failures to disclose material information or making of material misstatements
3701.

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 section 18, 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.”.
VIII

Duties of investment advisors, asset managers, and pension funds
3801.

Duties of investment advisors, 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 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.” .
IX

Protecting Americans’ Savings
3901.

Requirements related to proxy voting
Section 14 of the Securities Exchange Act of 1934 (15 U.S.C. 78n), as amended by section 3701, 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 pre-populating votes 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 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.
(p)

Proxy advisory firm calculation of votes
With respect to votes related to proxy or consent solicitation materials with respect to an issuer, a proxy advisor firm shall calculate the vote result consistent with the law of the State in which the issuer is incorporated.”.
X

Empowering Shareholders
3911.

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:
“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 of the beneficial owner of a voting security of the passively managed fund;
(B)
vote in accordance with the voting recommendations of such issuer; or
(C)
abstain from voting but make reasonable efforts to be considered present for purposes of establishing a quorum.
(2)

Exception
Paragraph (1) shall not apply with respect to a vote on a routine matter.
(b)

Safe harbor
With respect to a matter that is not a routine matter, in the case of a vote described in 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 of a voting security of the passively managed fund.
(2)
Not soliciting voting instructing from any person under subsection (a)(1) with respect to such vote.
(3)
Voting in accordance with the voting recommendations of an issuer pursuant to subparagraph (B) of such subsection.
(4)
Abstaining from voting in accordance with subparagraph (C) of such subsection.
(c)

Foreign private issuers exemption
Subsection (a) shall not apply with respect to a foreign private issuer if the voting policy of the investment advisor with respect to such foreign private issuers is fully and fairly disclosed to beneficial owners, including the extent to which such policy differs from the voting policy for non-exempt issuers.
(d)

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 that—
(A)
is designed to track, or is derived from, an index of securities or a portion of such an index;
(B)
discloses that the qualified fund is a passive index fund; or
(C)
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.
(3)

Qualified fund
The term qualified fund means—
(A)
an investment company, as that term is defined in section 3 of the Investment Company Act of 1940 (15 U.S.C. 80a–3);
(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.
(4)

Registrant
The term registrant means an issuer of covered securities.
(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 the registrant;
(ii)
the compensation of management or the board of directors of the registrant;
(iii)
the selection of auditors;
(iv)
a matter where there is a material conflict of interest between or among the issuer, members of management, members of the board of directors, or an affiliate of the issuer;
(v)
declassification; or
(vi)
transactions that would transform the structure of the registrant, including—
(I)
a merger or consolidation; and
(II)
the sale, lease, or exchange of all, or substantially all, of the property and assets of a registrant; 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 on the first August 1 that occurs after the date that is 2 years after the date of enactment of this Act.
XI

Protecting Retail Investors’ Savings
3921.

Best interest based on pecuniary factors
(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 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—
(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 in 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 consider non-pecuniary factors.
(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 appropriate investment horizons.”.
(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)

Applicability
The amendment made by subsection (a) shall apply to actions taken by a broker, dealer, or investment adviser beginning on the date that is 12 months after the date of enactment of this Act.
3922.

Study on climate change and other environmental disclosures in municipal bond market
(a)

In general
The Securities and Exchange Commission shall—
(1)
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 disclosures to investors regarding climate change and other environmental matters; and
(2)
solicit public comment with respect to such study.
(b)

Contents
The study required under subsection (a) shall consider and analyze—
(1)
the frequency with which disclosures described in subsection (a)(1) are made;
(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 audiences other than investors;
(3)
any voluntary or mandatory disclosure standards observed by issuers of municipal securities in the course of making such disclosures;
(4)
the degree to which investors consider such disclosures in connection with making an investment decision; and
(5)
such other information as the Securities and Exchange Commission determines appropriate.
(c)

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 and the Committee on Financial Services of the House of Representatives a report that includes—
(1)
the results of the study required under this section;
(2)
a detailed discussion of the financial risks to investors from investments in municipal securities;
(3)
whether such risks are adequately disclosed to investors; and
(4)
recommended regulatory or legislative steps to address any concerns identified in the study.
3923.

Study on solicitation of municipal securities business
(a)

In general
The Securities and Exchange Commission shall—
(1)
conduct a study on the effectiveness of each covered rule 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; and
(2)
solicit public comment with respect to such study.
(b)

Contents
The study required under subsection (a) shall consider and analyze—
(1)
the effectiveness of each covered rule, including whether each covered rule accomplishes the intended effect of such covered rule and has any unintended adverse effects;
(2)
the frequency and scope of enforcement actions undertaken pursuant to each covered rule;
(3)
the degree to which—
(A)
persons subject to each covered rule—
(i)
have in effect policies and procedures intended to ensure compliance with each such covered rule; and
(ii)
are disadvantaged from participating in the political process generally and in relation 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; and
(B)
other State and Federal laws and regulations impact the solicitation of municipal securities business; and
(4)
such other information as the Securities and Exchange Commission determines appropriate.
(c)

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 and the Committee on Financial Services of the House of Representatives a report that includes—
(1)
the results of the study required under this section;
(2)
an analysis 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 the covered rules; and
(3)
recommended regulatory or legislative steps to address any concerns identified in the study.
(d)

Definitions
In this section:
(1)

Covered rule
The term “covered rule” means—
(A)
Rule G–38 of the Municipal Securities Rulemaking Board; and
(B)
Rule 206(4)–5 (17 CFR 275.206(4)–5).
(2)

Municipal securities
The term “municipal securities” has the meaning given the term in section 3(a)(29) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(29)).
D

American FIRST Act of 2023
4001.

Short title; Table of contents
(a)

Short title
This division may be cited as the “American Financial Institution Regulatory Sovereignty and Transparency Act of 2023” or the “American FIRST Act of 2023”.
(b)

Table of contents
The table of contents for this division is as follows:
Sec. 4001. Short title; Table of contents.
Title I—Stop Executive Capture of Banking Regulators
Sec. 4101. Report on the implementation of recommendations from the FSOC Chairperson and Executive Orders.
Title II—Ensuring U.S. Authority over U.S. Banking Regulations
Sec. 4201. Requirements in connection with rulemakings implementing policies of non-governmental international organizations.
Sec. 4202. Report on certain climate-related interactions with covered international organizations.
Title III—Banking Regulator International Reporting
Sec. 4301. Reporting on interactions with non-governmental international organizations.
Title IV—Supervision Reform
Sec. 4401. Removal of the Vice Chairman for Supervision designation.
I

Stop Executive Capture of Banking Regulators
4101.

Report on the implementation of recommendations from the FSOC Chairperson and Executive Orders
(a)

Board of Governors of the Federal Reserve System
Section 10 of the Federal Reserve Act (12 U.S.C. 247b), as amended by section 4401(b), is further amended by adding at the end the following:
“(11)

Report on the implementation of recommendations from the FSOC Chairperson and Executive Orders
The Board of Governors of the Federal Reserve System may not implement a non-binding recommendation made by the Chairperson of the Financial Stability Oversight Council or contained in an Executive Order unless the Board of Governors first provides the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate with—
(A)
notice that the Board of Governors intends to implement such recommendation;
(B)
a report containing the proposed implementation by the Board of Governors and a justification for such implementation; and
(C)
upon request, not later than the end of the 120-day period beginning on the date of the notice under subparagraph (A), testimony on such proposed implementation.”.
(b)

Office of the Comptroller of the Currency
Section 324 of the Revised Statutes of the United States (12 U.S.C. 1) is amended by adding at the end the following:
“(c)

Report on the implementation of recommendations from the FSOC Chairperson and Executive Orders
The Comptroller of the Currency may not implement a non-binding recommendation made by the Chairperson of the Financial Stability Oversight Council or contained in an Executive Order unless the Comptroller of the Currency first provides the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate with—
(1)
notice that the Comptroller of the Currency intends to implement such recommendation;
(2)
a report containing the proposed implementation by the Comptroller of the Currency and a justification for such implementation; and
(3)
upon request, not later than the end of the 120-day period beginning on the date of the notice under paragraph (1), testimony on such proposed implementation.”.
(c)

Federal Deposit Insurance Corporation
Section 2 of the Federal Deposit Insurance Act (12 U.S.C. 1812) is amended by inserting after subsection (f) the following:
“(g)

Report on the implementation of recommendations from the FSOC Chairperson and Executive Orders
The Board of Directors of the Corporation may not implement a non-binding recommendation made by the Chairperson of the Financial Stability Oversight Council or contained in an Executive Order unless the Board of Directors first provides the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate with—
(1)
notice that the Board of Directors intends to implement such recommendation;
(2)
a report containing the proposed implementation by the Board of Directors and a justification for such implementation; and
(3)
upon request, not later than the end of the 120-day period beginning on the date of the notice under paragraph (1), testimony on such proposed implementation.”.
(d)

National Credit Union Administration
Section 102 of the Federal Credit Union Act (12 U.S.C. 1752a) is amended by adding at the end the following:
“(g)

Report on the implementation of recommendations from the FSOC Chairperson and Executive Orders
The Board may not implement a non-binding recommendation made by the Chairperson of the Financial Stability Oversight Council or contained in an Executive Order unless the Board first provides the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate with—
(1)
notice that the Board intends to implement such recommendation;
(2)
a report containing the proposed implementation by the Board and a justification for such implementation; and
(3)
upon request, not later than the end of the 120-day period beginning on the date of the notice under paragraph (1), testimony on such proposed implementation.”.
(e)

Federal Housing Finance Agency
Section 1311 of the Housing and Community Development Act of 1992 (12 U.S.C. 4511) is amended by adding at the end the following:
“(d)

Report on the implementation of recommendations from the FSOC Chairperson and Executive Orders
The Director may not implement a non-binding recommendation made by the Chairperson of the Financial Stability Oversight Council or contained in an Executive Order unless the Director first provides the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate with—
(1)
notice that the Director intends to implement such recommendation;
(2)
a report containing the proposed implementation by the Director and a justification for such implementation; and
(3)
upon request, not later than the end of the 120-day period beginning on the date of the notice under paragraph (1), testimony on such proposed implementation.”.
II

Ensuring U.S. Authority over U.S. Banking Regulations
4201.

Requirements in connection with rulemakings implementing policies of non-governmental international organizations
(a)

Board of Governors of the Federal Reserve System
Section 10 of the Federal Reserve Act (12 U.S.C. 247b), as amended by section 4101(a), is further amended by inserting after paragraph (11) the following:
“(12)

Requirements in connection with rulemakings implementing policies of non-governmental international organizations
(A)

In general
The Board of Governors of the Federal Reserve System may not propose or finalize a major covered rule unless, not later than 120 days before issuing such a proposed or final rule, the Board of Governors provides the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate with notice, testimony, and a detailed economic analysis with respect to the proposed or final rule, including projections of economic costs, sectoral effects, and effects on the availability of credit, the gross domestic product, and employment.
(B)

Major covered rule defined
In this paragraph, the term “major covered rule” means a rule—
(i)
that the Board of Governors determines would have an effect, in the aggregate, on the economy of the United States of $10,000,000,000 or more during the 10-year period beginning on the date the rule takes effect; and
(ii)
that is intended to align or conform with a recommendation from a non-governmental international organization (including the Financial Stability Board, the Bank for International Settlements, the Network of Central Banks and Supervisors for Greening the Financial System, and the Basel Committee on Banking Supervision).”.
(b)

Office of the Comptroller of the Currency
Section 324 of the Revised Statutes of the United States (12 U.S.C. 1), as amended by section 4101(b), is further amended by adding at the end the following:
“(d)

Requirements in connection with rulemakings implementing policies of non-governmental international organizations
(1)

In general
The Comptroller of the Currency may not propose or finalize a major covered rule unless, not later than 120 days before issuing such a proposed or final rule, the Comptroller of the Currency provides the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate with notice, testimony, and a detailed economic analysis with respect to the proposed or final rule, including projections of economic costs, sectoral effects, and effects on the availability of credit, the gross domestic product, and employment.
(2)

Major covered rule defined
In this subsection, the term “major covered rule” means a rule—
(A)
that the Comptroller of the Currency determines would have an effect, in the aggregate, on the economy of the United States of $10,000,000,000 or more during the 10-year period beginning on the date the rule takes effect; and
(B)
that is intended to align or conform with a recommendation from a non-governmental international organization (including the Financial Stability Board, the Bank for International Settlements, the Network of Central Banks and Supervisors for Greening the Financial System, and the Basel Committee on Banking Supervision).”.
(c)

Federal Deposit Insurance Corporation
Section 2 of the Federal Deposit Insurance Act (12 U.S.C. 1812), as amended by section 4101(c), is further amended by inserting after subsection (g) the following:
“(h)

Requirements in connection with rulemakings implementing policies of non-governmental international organizations
(1)

In general
The Board of Directors of the Corporation may not propose or finalize a major covered rule unless, not later than 120 days before issuing such a proposed or final rule, the Board of Directors provides the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate with notice, testimony, and a detailed economic analysis with respect to the proposed or final rule, including projections of economic costs, sectoral effects, and effects on the availability of credit, the gross domestic product, and employment.
(2)

Major covered rule defined
In this subsection, the term “major covered rule” means a rule—
(A)
that the Board of Directors determines would have an effect, in the aggregate, on the economy of the United States of $10,000,000,000 or more during the 10-year period beginning on the date the rule takes effect; and
(B)
that is intended to align or conform with a recommendation from a non-governmental international organization (including the Financial Stability Board, the Bank for International Settlements, the Network of Central Banks and Supervisors for Greening the Financial System, and the Basel Committee on Banking Supervision).”.
(d)

National Credit Union Administration
Section 102 of the Federal Credit Union Act (12 U.S.C. 1752a), as amended by section 4101(d), is further amended by adding at the end the following:
“(h)

Requirements in connection with rulemakings implementing policies of non-governmental international organizations
(1)

In general
The Board may not propose or finalize a major covered rule unless, not later than 120 days before issuing such a proposed or final rule, the Board provides the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate with notice, testimony, and a detailed economic analysis with respect to the proposed or final rule, including projections of economic costs, sectoral effects, and effects on the availability of credit, the gross domestic product, and employment.
(2)

Major covered rule defined
In this subsection, the term “major covered rule” means a rule—
(A)
that the Board determines would have an effect, in the aggregate, on the economy of the United States of $10,000,000,000 or more during the 10-year period beginning on the date the rule takes effect; and
(B)
that is intended to align or conform with a recommendation from a non-governmental international organization (including the Financial Stability Board, the Bank for International Settlements, the Network of Central Banks and Supervisors for Greening the Financial System, and the Basel Committee on Banking Supervision).”.
(e)

Federal Housing Finance Agency
Section 1311 of the Housing and Community Development Act of 1992 (12 U.S.C. 4511), as amended by section 4101(e), is further amended by adding at the end the following:
“(e)

Requirements in connection with rulemakings implementing policies of non-governmental international organizations
(1)

In general
The Director may not propose or finalize a major covered rule unless, not later than 120 days before issuing such a proposed or final rule, the Director provides the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate with notice, testimony, and a detailed economic analysis with respect to the proposed or final rule, including projections of economic costs, sectoral effects, and effects on the availability of credit, the gross domestic product, and employment.
(2)

Major covered rule defined
In this subsection, the term “major covered rule” means a rule—
(A)
that the Director determines would have an effect, in the aggregate, on the economy of the United States of $10,000,000,000 or more during the 10-year period beginning on the date the rule takes effect; and
(B)
that is intended to align or conform with a recommendation from a non-governmental international organization (including the Financial Stability Board, the Bank for International Settlements, the Network of Central Banks and Supervisors for Greening the Financial System, and the Basel Committee on Banking Supervision).”.
4202.

Report on certain climate-related interactions with covered international organizations
(a)

In general
A Federal banking regulator may not meet with or otherwise engage with a covered international organization on the topic of climate-related financial risk during a calendar year unless the Federal banking regulator has issued a report to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate containing, for the previous calendar year—
(1)
a complete description of the activities of the covered international organization in which the Federal banking regulator participates (including any task force, committee, or other organizational unit thereof); and
(2)
a detailed accounting of the governmental and non-governmental funding sources of the covered international organization (including any task force, committee, or other organizational unit thereof).
(b)

Definitions
In this section:
(1)

Covered international organization
The term “covered international organization” means the Financial Stability Board, the Bank for International Settlements, the Network of Central Banks and Supervisors for Greening the Financial System, and the Basel Committee on Banking Supervision.
(2)

Federal banking regulator
The term “Federal banking regulator” means the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Federal Housing Finance Agency, the National Credit Union Administration, and the Office of the Comptroller of the Currency.
III

Banking Regulator International Reporting
4301.

Reporting on interactions with non-governmental international organizations
(a)

Board of Governors of the Federal Reserve System
Section 10 of the Federal Reserve Act (12 U.S.C. 247b), as amended by section 4201(a), is further amended by inserting after paragraph (12) the following:
“(13)

Reporting on interactions with non-governmental international organizations
With respect to interactions between the Board of Governors of the Federal Reserve System and a non-governmental international organization (including the Financial Stability Board, the Bank for International Settlements, the Network of Central Banks and Supervisors for Greening the Financial System, and the Basel Committee on Banking Supervision), the Board of Governors shall—
(A)
keep a complete record of all such interactions, including minutes of all meetings and any recommendations made during such interaction for international standardization with respect to open-market policies and operations, discount lending and operations (including collateral policies), or supervisory policies and operations; and
(B)
issue an annual report to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate containing—
(i)
all of the information recorded pursuant to subparagraph (A) with respect to the previous year; and
(ii)
with respect to each non-governmental international organization with which the Board of Governors had an interaction in the previous year, a description of the funding sources of the non-governmental international organization.”.
(b)

Office of the Comptroller of the Currency
Section 324 of the Revised Statutes of the United States (12 U.S.C. 1), as amended by section 4201(b), is further amended by adding at the end the following:
“(e)

Reporting on interactions with non-governmental international organizations
With respect to interactions between the Office of the Comptroller of the Currency and a non-governmental international organization (including the Financial Stability Board, the Bank for International Settlements, the Network of Central Banks and Supervisors for Greening the Financial System, and the Basel Committee on Banking Supervision), the Comptroller of the Currency shall—
(1)
keep a complete record of all such interactions, including minutes of all meetings and any recommendations made during such interaction for international standardization with respect to discount lending and operations (including collateral policies) or supervisory policies and operations; and
(2)
issue an annual report to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate containing—
(A)
all of the information recorded pursuant to paragraph (1) with respect to the previous year; and
(B)
with respect to each non-governmental international organization with which the Office of the Comptroller of the Currency had an interaction in the previous year, a description of the funding sources of the non-governmental international organization.”.
(c)

Federal Deposit Insurance Corporation
Section 2 of the Federal Deposit Insurance Act (12 U.S.C. 1812), as amended by section 4201(c), is further amended is amended by inserting after subsection (h) the following:
“(i)

Reporting on interactions with non-governmental international organizations
With respect to interactions between the Federal Deposit Insurance Corporation and a non-governmental international organization (including the Financial Stability Board, the Bank for International Settlements, the Network of Central Banks and Supervisors for Greening the Financial System, and the Basel Committee on Banking Supervision), the Board of Directors of the Corporation shall—
(1)
keep a complete record of all such interactions, including minutes of all meetings and any recommendations made during such interaction for international standardization with respect to discount lending and operations (including collateral policies) or supervisory policies and operations; and
(2)
issue an annual report to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate containing—
(A)
all of the information recorded pursuant to paragraph (1) with respect to the previous year; and
(B)
with respect to each non-governmental international organization with which the Corporation had an interaction in the previous year, a description of the funding sources of the non-governmental international organization.”.
(d)

National Credit Union Administration
Section 102 of the Federal Credit Union Act (12 U.S.C. 1752a), as amended by section 4201(d), is further amended by adding at the end the following:
“(i)

Reporting on interactions with non-governmental international organizations
With respect to interactions between the Administration and a non-governmental international organization (including the Financial Stability Board, the Bank for International Settlements, the Network of Central Banks and Supervisors for Greening the Financial System, and the Basel Committee on Banking Supervision), the Board shall—
(1)
keep a complete record of all such interactions, including minutes of all meetings and any recommendations made during such interaction for international standardization with respect to discount lending and operations (including collateral policies) or supervisory policies and operations; and
(2)
issue an annual report to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate containing—
(A)
all of the information recorded pursuant to paragraph (1) with respect to the previous year; and
(B)
with respect to each non-governmental international organization with which the Administration had an interaction in the previous year, a description of the funding sources of the non-governmental international organization.”.
(e)

Federal Housing Finance Agency
Section 1311 of the Housing and Community Development Act of 1992 (12 U.S.C. 4511), as amended by section 4201(e), is further amended by adding at the end the following:
“(f)

Reporting on interactions with non-governmental international organizations
With respect to interactions between the Federal Housing Finance Agency and a non-governmental international organization (including the Financial Stability Board, the Bank for International Settlements, the Network of Central Banks and Supervisors for Greening the Financial System, and the Basel Committee on Banking Supervision), the Director shall—
(1)
keep a complete record of all such interactions, including minutes of all meetings and any recommendations made during such interaction for international standardization with respect to discount lending and operations (including collateral policies) or supervisory policies and operations; and
(2)
issue an annual report to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate containing—
(A)
all of the information recorded pursuant to paragraph (1) with respect to the previous year; and
(B)
with respect to each non-governmental international organization with which the Federal Housing Finance Agency had an interaction in the previous year, a description of the funding sources of the non-governmental international organization.”.
IV

Supervision Reform
4401.

Removal of the Vice Chairman for Supervision designation
(a)

In general
The second undesignated paragraph of section 10 of the Federal Reserve Act (12 U.S.C. 242) (relating to the Chairman and Vice Chairman of the Board) is amended by striking “and 2 shall be designated by the President, by and with the advice and consent of the Senate, to serve as Vice Chairmen of the Board, each for a term of 4 years, 1 of whom shall serve in the absence of the Chairman, as provided in the fourth undesignated paragraph of this section, and 1 of whom shall be designated Vice Chairman for Supervision. The Vice Chairman for Supervision shall develop policy recommendations for the Board regarding supervision and regulation of depository institution holding companies and other financial firms supervised by the Board, and shall oversee the supervision and regulation of such firms.” and inserting “and 1 shall be designated by the President, by and with the consent of the Senate, to serve as Vice Chairman of the Board for a term of 4 years.”.
(b)

Conforming amendment
Section 10 of the Federal Reserve Act (12 U.S.C. 241 et seq.) is amended by striking paragraph (12).