[Congressional Record Volume 162, Number 112 (Tuesday, July 12, 2016)]
[House]
[Pages H4684-H4686]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
NATIONAL SECURITIES EXCHANGE REGULATORY PARITY ACT OF 2016
Mr. ROYCE. Mr. Speaker, I move to suspend the rules and pass the bill
(H.R. 5421) to amend the Securities Act of 1933 to apply the exemption
from State regulation of securities offerings to securities listed on a
national security exchange that has listing standards that have been
approved by the Commission, as amended.
The Clerk read the title of the bill.
The text of the bill is as follows:
H.R. 5421
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``National Securities Exchange
Regulatory Parity Act of 2016''.
[[Page H4685]]
SEC. 2. APPLICATION OF EXEMPTION.
(a) Amendments.--Section 18(b)(1) of the Securities Act of
1933 (15 U.S.C. 77r(b)(1)) is amended--
(1) by striking subparagraph (A);
(2) in subparagraph (B), by striking ``that the Commission
determines by rule (on its own initiative or on the basis of
a petition) are substantially similar to the listing
standards applicable to securities described in subparagraph
(A)'' and inserting ``that have been approved by the
Commission, consistent with section 2(c) of the National
Securities Exchange Regulatory Parity Act of 2016'';
(3) in subparagraph (C), by striking ``or (B)''; and
(4) by redesignating subparagraphs (B) and (C) as
subparagraphs (A) and (B), respectively.
(b) Effective Date.--The amendments made by subsection (a)
shall take effect--
(1) on the date of enactment of this Act, with respect to a
national securities exchange registered with, and whose
listing standards have been approved by, the Securities and
Exchange Commission on or before the date of enactment of
this Act; and
(2) on the date the Securities and Exchange Commission
issues the final rule required by subsection (c), with
respect to a national securities exchange not described under
paragraph (1).
(c) Replacement Standards.--Not later than 360 days after
the date of enactment of this Act, the Securities and
Exchange Commission shall, by rule subject to public notice
and comment, establish minimum core quantitative listing
standards pursuant to section 6 of the Securities Exchange
Act of 1934.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from
California (Mr. Royce) and the gentlewoman from California (Ms. Maxine
Waters) each will control 20 minutes.
The Chair recognizes the gentleman from California.
General Leave
Mr. ROYCE. Mr. Speaker, I ask unanimous consent that all Members may
have 5 legislative days in which to revise and extend their remarks and
to include any extraneous material on this bill.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from California?
There was no objection.
Mr. ROYCE. Mr. Speaker, I yield myself such time as I may consume.
I rise today in support of H.R. 5421. This is the National Securities
Exchange Regulatory Parity Act.
If you go back to 1996, as part of the National Securities Market
Improvement Act, Congress acted to exempt the listed securities on
three specific stock exchanges from State-by-State registration. Why
was that exemption important? You can ask anyone from Massachusetts who
tried to invest in a little company called Apple during its December
1980 IPO. State regulators banned Apple stock for sale to the public
for, in the view of State regulators, being too risky.
Congress passed a good bill in 1996, but we got one thing wrong. We
couldn't predict the future. Today, only two of the original three
exchanges exist, and many more, many more exchanges have joined the
fray. The SEC's interpretation of the law has, in fact, created a two-
tiered legal structure by giving this blue-sky exemption exclusively to
the original three named exchanges.
The bill before us today simply gives all national securities
exchanges equal treatment under the law. We give an immediate exemption
to securities listed on a national securities exchange registered with
the SEC and whose listing standards have already been approved by the
Commission, and we ask the SEC to engage in a rulemaking to establish
minimum core quantitative standards for any new exchanges that register
with the Commission after the bill's enactment.
With so many regulatory impediments to capital formation, it is
important we encourage new exchanges to become listing venues and a
source of capital for companies looking to go public, looking to
expand, and looking to hire more workers.
So I want to thank Ranking Member Maxine Waters. I also want to thank
her staff for working with us to get this bill to the floor. I also
want to thank my good friend from New York, Congresswoman Carolyn B.
Maloney, for her constructive additions to the bill since committee
markup. Finally, I would like to thank Chairman Hensarling and his able
staff, Rebekah Goshorn and Kevin Edgar, for all of their hard work.
Mr. Speaker, I urge my colleagues to join me in supporting this
commonsense legislation.
I reserve the balance of my time.
Ms. MAXINE WATERS of California. Mr. Speaker, I yield myself such
time as I may consume.
Mr. Speaker, I would like to first thank my Republican colleagues for
amending H.R. 5421 in an attempt to improve the status quo for the
benefit of securities exchanges and the investors that trade on them
and provide the Securities and Exchange Commission with additional
discretion in a currently inflexible process.
H.R. 5421 would modernize a 1996 law that governs the process used by
the SEC in determining whether an approved listing standard of a
national securities exchange should be exempt from State regulation and
oversight. That outdated process currently requires the SEC to compare
listing standards to an imperfect baseline--the standards of the New
York Stock Exchange, the American Stock Exchange, and the NASDAQ Stock
Market.
Twenty years later, that baseline does not make much sense, as the
American Stock Exchange no longer exists, and we have six other
exchanges that are approved to list securities without State oversight.
It neither seems fair to the other exchanges nor sufficiently
protective of investors to allow the three named exchanges to
effectively dictate listing standards.
However imperfect, the current standard has guided the SEC to create
an informal framework to consider certain core listing standards, such
as minimum revenue, market capitalization, number of shareholders, and
share price.
Now, the bill that we marked up in committee would have upended this
framework and preempted States for any approval listing standard. I
opposed that bill, as I believe it would have removed a valuable
analysis that protects investors and ensures appropriate State
oversight of smaller companies that may, in the future, list on a
venture exchange.
Since that time, however, my Republican colleagues have worked to
take into account these concerns and have amended the bill for the
better. I want to thank Mr. Royce for his leadership and for the work
that he has done on this issue and the time that his staff has spent
with my staff.
Under the bill before us today, the SEC would have nearly a year to
engage in a rulemaking to establish minimum core quantitative listing
standards that protect investors and the public interest. That
rulemaking would provide clarity and transparency to the preemption
process and leave the issue of State oversight over small company
trading on venture exchanges with the SEC. Most importantly, it would
provide investors and interested members of the public the opportunity
to comment on the overall process in a space where investors and the
public do not have the resources to comment on each of the 1,000 rules
proposed each year.
I do have some remaining concerns that the bill directs the SEC to
implement only core quantitative standards and does not mention
qualitative standards. However, under the bill, the quantitative
standards are to be informed by qualitative factors like investor
protection and the public interest, and the SEC retains its authority
to apply other qualitative factors, as it does now, in its initial rule
approval and the preemption process.
Moreover, I would expect the SEC, in its rulemaking, to establish
quantitative standards for some of the qualitative factors that it
currently considers, such as the number or percentage of independent
board directors and certain shareholder meeting requirements.
So I would like to thank Mr. Royce and my Republican colleagues for
amending H.R. 5421.
Mr. Speaker, I yield back the balance of my time.
Mr. ROYCE. I want to thank the gentlewoman from California for her
work to improve the bill.
Mr. Speaker, I yield such time as he may consume to the gentleman
from Illinois (Mr. Hultgren). He would like to speak on the bill.
Mr. HULTGREN. Mr. Speaker, I rise today in support of the National
Securities Exchange Regulatory Parity Act of 2016. I want to thank the
chairman of the Foreign Affairs Committee, Mr. Royce, for introducing
this legislation.
[[Page H4686]]
I am a proud cosponsor. I was also excited to see a very strong
bipartisan vote of support in the Financial Services Committee.
{time} 1445
This is a simple technical fix to a 20-year-old statute that didn't
foresee, or at least didn't contemplate, an increase in the number of
exchanges and today's competitive market structure.
In 1996, Congress enacted the National Securities Markets Improvement
Act, which codified the blue sky exemption for companies listed on the
three predominant listed venues of that time: the New York Stock
Exchange, the American Stock Exchange, and the NASDAQ. The blue sky
exemption means securities will not be subject to both State and
Federal regulation, which can be redundant and overly burdensome.
Currently, exchanges not enumerated by the Act must have
``substantially similar'' listing standards as those that are
specifically named in the Act. This puts these exchanges in an
unnecessary, government-created, competitive disadvantage. It
functionally prevents a handful of exchanges from being a first mover
in adopting innovative listing standards.
The unintended consequences of Congress' amendment to include
specific references to just a few exchanges is a two-tiered regulatory
structure and is unfair to exchanges that have since registered with
the SEC.
According to the Chicago Stock Exchange, it is not currently a
primary listing exchange for any securities, ``in part because such
securities would be subject to both Federal and State regulation, which
is prohibitively costly and overly burdensome to potential listing
companies. This change would remove this current impediment to
companies listing their securities on CHX and would help in the
exchange's efforts to develop a robust primary listing market here in
Illinois.''
Furthermore, this legislation would benefit the options industry,
which has its home in Chicago as well. The Chicago Board Options
Exchange is the largest market for stock options. Why should one of the
most innovative and respected markets have to jump through unnecessary
hurdles to update its listing standards?
We should not have artificial impediments to accessing the capital
markets.
I urge all my colleagues to oppose this commonsense legislation.
Mr. ROYCE. Mr. Speaker, I have no further requests for time, and I
urge an ``aye'' vote.
I yield back the balance of my time.
The SPEAKER pro tempore. The question is on the motion offered by the
gentleman from California (Mr. Royce) that the House suspend the rules
and pass the bill, H.R. 5421, as amended.
The question was taken; and (two-thirds being in the affirmative) the
rules were suspended and the bill, as amended, was passed.
A motion to reconsider was laid on the table.
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