[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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