[Congressional Record (Bound Edition), Volume 163 (2017), Part 5]
[House]
[Pages 6243-6245]
[From the U.S. Government Publishing Office, www.gpo.gov]




             FAIR ACCESS TO INVESTMENT RESEARCH ACT OF 2017

  Mr. HILL. Mr. Speaker, I move to suspend the rules and pass the bill 
(H.R. 910) to direct the Securities and Exchange Commission to provide 
a safe harbor related to certain investment fund research reports, and 
for other purposes, as amended.
  The Clerk read the title of the bill.
  The text of the bill is as follows:

                                H.R. 910

       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 ``Fair Access to Investment 
     Research Act of 2017''.

     SEC. 2. SAFE HARBOR FOR INVESTMENT FUND RESEARCH.

       (a) Expansion of the Safe Harbor.--Not later than the end 
     of the 180-day period beginning on the date of enactment of 
     this Act, the Securities and Exchange Commission shall 
     propose, and not later than the end of the 270-day period 
     beginning on such date, the Commission shall adopt, upon such 
     terms, conditions, or requirements as the Commission may 
     determine necessary or appropriate in the public interest, 
     for the protection of investors, and for the promotion of 
     capital formation, revisions to section 230.139 of title 17, 
     Code of Federal Regulations, to provide that a covered 
     investment fund research report that is published or 
     distributed by a broker or dealer--
       (1) shall be deemed, for purposes of sections 2(a)(10) and 
     5(c) of the Securities Act of 1933 (15 U.S.C. 77b(a)(10), 
     77e(c)), not to constitute an offer for sale or an offer to 
     sell a security that is the subject of an offering pursuant 
     to a registration statement that is effective, even if the 
     broker or dealer is participating or will participate in the 
     registered offering of the covered investment fund's 
     securities; and
       (2) shall be deemed to satisfy the conditions of subsection 
     (a)(1) or (a)(2) of section 230.139 of title 17, Code of 
     Federal Regulations, or any successor provisions, for 
     purposes of the Commission's rules and regulations under the 
     Federal securities laws and the rules of any self-regulatory 
     organization.
       (b) Implementation of Safe Harbor.--In implementing the 
     safe harbor pursuant to subsection (a), the Commission 
     shall--
       (1) not, in the case of a covered investment fund with a 
     class of securities in substantially continuous distribution, 
     condition the safe harbor on whether the broker's or dealer's 
     publication or distribution of a covered investment fund 
     research report constitutes such broker's or dealer's 
     initiation or reinitiation of research coverage on such 
     covered investment fund or its securities;
       (2) not--
       (A) require the covered investment fund to have been 
     registered as an investment company under the Investment 
     Company Act of 1940 (15 U.S.C. 80a-1 et seq.) or subject to 
     the reporting requirements of section 13 or 15(d) of the 
     Securities Exchange Act of 1934 (15 U.S.C. 78m, 78o(d)) for 
     any period exceeding the period of time referenced under 
     paragraph (a)(1)(i)(A)(1) of section 230.139 of title 17, 
     Code of Federal Regulations; or
       (B) impose a minimum float provision exceeding that 
     referenced in paragraph (a)(1)(i)(A)(1)(i) of section 230.139 
     of title 17, Code of Federal Regulations;
       (3) provide that a self-regulatory organization may not 
     maintain or enforce any rule that would--
       (A) prohibit the ability of a member to publish or 
     distribute a covered investment fund research report solely 
     because the member is also participating in a registered 
     offering or other distribution of any securities of such 
     covered investment fund; or
       (B) prohibit the ability of a member to participate in a 
     registered offering or other distribution of securities of a 
     covered investment fund solely because the member has 
     published or distributed a covered investment fund research 
     report about such covered investment fund or its securities; 
     and
       (4) provide that a covered investment fund research report 
     shall not be subject to section 24(b) of the Investment 
     Company Act of 1940 (15 U.S.C. 80a-24(b)) or the rules and 
     regulations thereunder, except that such report may still be 
     subject to such section and the rules and regulations 
     thereunder to the extent that it is otherwise not subject to 
     the content standards in the rules of any self-regulatory 
     organization related to research reports, including those 
     contained in the rules governing communications with the 
     public regarding investment companies or substantially 
     similar standards.
       (c) Rules of Construction.--Nothing in this Act shall be 
     construed as in any way limiting--
       (1) the applicability of the antifraud or antimanipulation 
     provisions of the Federal securities laws and rules adopted 
     thereunder to a covered investment fund research report, 
     including section 17 of the Securities Act of 1933 (15 U.S.C. 
     77q), section 34(b) of the Investment Company Act of 1940 (15 
     U.S.C. 80a-33), and sections 9 and 10 of the Securities 
     Exchange Act of 1934 (15 U.S.C. 78i, 78j); or
       (2) the authority of any self-regulatory organization to 
     examine or supervise a member's practices in connection with 
     such member's publication or distribution of a covered 
     investment fund research report for compliance with 
     applicable provisions of the Federal securities laws or self-
     regulatory organization rules related to research reports, 
     including those contained in rules governing communications 
     with the public, or to require the filing of communications 
     with the public the purpose of which is not to provide 
     research and analysis of covered investment funds.
       (d) Interim Effectiveness of Safe Harbor.--
       (1) In general.--From and after the 270-day period 
     beginning on the date of enactment of this Act, if the 
     Commission has not adopted revisions to section 230.139 of 
     title 17, Code of Federal Regulations, as required by 
     subsection (a), and until such time as the Commission has 
     done so, a broker or dealer distributing or publishing a 
     covered investment fund research report after such date shall 
     be able to rely on the provisions of section 230.139 of title 
     17, Code of Federal Regulations, and the broker or dealer's 
     publication of such report shall be deemed to satisfy the 
     conditions of subsection (a)(1) or (a)(2) of section 230.139 
     of title 17, Code of Federal Regulations, if the covered 
     investment fund that is the subject of such report satisfies 
     the reporting history requirements (without regard to Form S-
     3

[[Page 6244]]

     or Form F-3 eligibility) and minimum float provisions of such 
     subsections for purposes of the Commission's rules and 
     regulations under the Federal securities laws and the rules 
     of any self-regulatory organization, as if revised and 
     implemented in accordance with subsections (a) and (b).
       (2) Status of covered investment fund.--After such period 
     and until the Commission has adopted revisions to section 
     230.139 and FINRA has revised rule 2210, for purposes of 
     subsection (c)(7)(O) of such rule, a covered investment fund 
     shall be deemed to be a security that is listed on a national 
     securities exchange and that is not subject to section 24(b) 
     of the Investment Company Act of 1940 (15 U.S.C. 80a-24(b)).
       (3) Covered investment funds communications.--
       (A) In general.--Except as provided in subparagraph (B), 
     communications that concern only covered investment funds 
     that fall within the scope of section 24(b) of the Investment 
     Company Act of 1940 (15 U.S.C. 80a-24(b)) shall not be 
     required to be filed with FINRA.
       (B) Exception.--FINRA may require the filing of 
     communications with the public if the purpose of those 
     communications is not to provide research and analysis of 
     covered investment funds.
       (e) Definitions.--For purposes of this Act:
       (1) The term ``covered investment fund research report'' 
     means a research report published or distributed by a broker 
     or dealer about a covered investment fund or any securities 
     issued by the covered investment fund, but not including a 
     research report to the extent that it is published or 
     distributed by the covered investment fund or any affiliate 
     of the covered investment fund.
       (2) The term ``covered investment fund'' means--
       (A) an investment company registered under, or that has 
     filed an election to be treated as a business development 
     company under, the Investment Company Act of 1940 and that 
     has filed a registration statement under the Securities Act 
     of 1933 for the public offering of a class of its securities, 
     which registration statement has been declared effective by 
     the Commission; and
       (B) a trust or other person--
       (i) issuing securities in an offering registered under the 
     Securities Act of 1933 and which class of securities is 
     listed for trading on a national securities exchange;
       (ii) the assets of which consist primarily of commodities, 
     currencies, or derivative instruments that reference 
     commodities or currencies, or interests in the foregoing; and
       (iii) that provides in its registration statement under the 
     Securities Act of 1933 that a class of its securities are 
     purchased or redeemed, subject to conditions or limitations, 
     for a ratable share of its assets.
       (3) The term ``FINRA'' means the Financial Industry 
     Regulatory Authority.
       (4) The term ``research report'' has the meaning given that 
     term under section 2(a)(3) of the Securities Act of 1933 (15 
     U.S.C. 77b(a)(3)), except that such term shall not include an 
     oral communication.
       (5) The term ``self-regulatory organization'' has the 
     meaning given to that term under section 3(a)(26) of the 
     Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(26)).

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Arkansas (Mr. Hill) and the gentleman from Illinois (Mr. Foster) each 
will control 20 minutes.
  The Chair recognizes the gentleman from Arkansas.


                             General Leave

  Mr. HILL. Mr. Speaker, I ask unanimous consent that all Members may 
have 5 legislative days in which to revise and extend their remarks and 
include extraneous material on this bill.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Arkansas?
  There was no objection.
  Mr. HILL. Mr. Speaker, I yield myself such time as I may consume.
  Today I rise in support of H.R. 910, the Fair Access to Investment 
Research Act, which I have had the pleasure of working on with my 
friend from Illinois (Mr. Foster) in this Congress and now-Governor 
Carney in the last Congress.
  Mr. Foster, I had the pleasure to speak with Governor Carney this 
weekend and tell him of our great collaboration in this Congress, and 
he sends his warmest regards for the process.
  This bill, Mr. Speaker, is a commonsense, bipartisan, bicameral 
effort to increase access to research and information on exchange-
traded funds, or ETFs, an important and rapidly growing investment 
vehicle in the United States and around the world.
  Before coming to Congress, I worked in the banking and investment 
industry for nearly three decades, and I have witnessed firsthand the 
explosive growth in the ETF industry. Since I started my latest firm in 
the late 1990s, I have seen the exchange-traded fund selection grow 
from about 100 funds with about $100 billion in total assets to today's 
2,000 funds with about $2.4 trillion in investment assets.
  However, despite this rapid growth in the popularity in the ETF 
market and their increasing importance to retail investors, most 
broker-dealers do not publish research on ETFs due to anomalies in our 
securities laws and regulations.
  The SEC has implemented safe harbors for research in support of 
various asset classes, including listed stocks, corporate debt, and 
closed-ended funds, and Congress has provided explicit safe harbors for 
research related to the offerings of emerging growth company 
securities. However, despite their similarities to those asset classes, 
ETFs do not benefit from similar safe harbors.
  An ETF safe harbor is also not a novel concept to the Commission, and 
there is bipartisan consensus that this is something that the SEC 
should have done years ago. In addition to providing feedback on this 
bill for the past 3 years, the SEC, itself, has looked at granting a 
safe harbor for ETF research on multiple occasions but never quite got 
around to it.
  The Fair Access to Investment Research Act simply directs the SEC to 
provide a safe harbor for research reports that cover ETFs so that 
these reports are not considered offers under the Federal securities 
laws. Because ETFs are continuously brought to the market, a safe 
harbor is necessary for broker-dealers to publish this research.
  It also holds the SEC accountable to Congress by providing an interim 
safe harbor if the SEC does not act within a 270-day period, which 
would be effective until the Commission finalizes its rules in this 
area.
  Providing this safe harbor will increase access to investment 
information for consumers and improve the efficiency of our capital 
markets. Given the importance of ETFs to the market and to the 6 
million or so U.S. households that hold ETFs, steps to facilitate 
research and allow investors access to this useful information are long 
overdue.
  Mr. Speaker, we want more information for our consumers about how 
their investments work, how an ETF fits into their investment 
portfolio, how it is consistent with their time horizon and their 
goals, and what the transaction costs are. What are the unique 
strategies around that ETF? Does it, in fact, use leverage or not? All 
these kinds of details will help our consumers know more about these 
products.
  As our Capital Markets Subcommittee ranking member, Mrs. Maloney, 
stated so eloquently at our markup earlier this year: It makes sense to 
get more research out there on ETFs. After all, if you are concerned 
with the growth of ETFs, then the last thing you want is less research.
  True it is.
  This bill in no way undermines or eliminates any investor protections 
in the Federal securities laws or the SEC's ability to oversee the 
registration and sale of ETF securities explicitly, containing a rule 
of construction that the applicability of the antifraud and 
antimanipulation provisions of the Federal securities laws are in no 
way limited by this legislation.
  This safe harbor would also only apply to bona fide research and in 
no way limits FINRA, the Federal securities regulators, and the SEC's 
ability to regulate sales and marketing literature that is used for 
ETFs.
  I would like to thank, again, my colleagues, Mr. Foster and Governor 
Carney, Senators Heller and Peters for their work in the United States 
Senate, my chairman, the ranking member, and Mrs. Maloney and the staff 
on both sides of the aisle for their hard work on this pro-consumer, 
commonsense proposal to make more information available to America's 
investing households.
  In March, H.R. 910 passed the House Financial Services Committee by 
an overwhelmingly bipartisan vote of 56-2, and a similar version of 
this legislation passed the House in the last Congress by a vote of 
411-6.
  I urge all my colleagues to support this bill today, and I reserve 
the balance of my time.
  Mr. FOSTER. Mr. Speaker, I yield myself such time as I may consume.

[[Page 6245]]

  I thank my colleague from Arkansas (Mr. Hill) for his years of hard 
bipartisan work that went into this bill.
  I am proud to support this bill today because I believe that it will 
strengthen the abilities of investors to make informed decisions. This 
legislation would add transparency in the financial markets that will 
ultimately benefit consumers.
  Exchange-traded funds are valuable and popular tools for investors to 
get exposure to diversified risk through a single security with low 
costs. My wife and I use them ourselves. They are, however, like the 
iPhone, very simple on the outside but incredibly complicated products 
on the inside. They often can be thoroughly understood only by those 
with the background and the time to analyze the way the ETF is 
constructed, as well as each of the underlying securities and the 
sectors they are targeting.
  Retail investors and retirement savers often do not have this time 
and often do not have the expertise in the markets. High-quality 
research can help them make informed decisions about which ETFs to 
invest in, equipping them to make decisions on how to diversify across 
different sectors and indices.
  ETFs are continuously issued, so they present unique potential risks 
to underwriting broker-dealers under the Federal securities laws.
  Generally, the Federal securities laws prohibit a broker-dealer from 
participating in a securities offering from publishing research 15 days 
before or 30 days after the issuance for very good reason. This is to 
prevent research that could hype the security ahead of the offering or 
try to puff its price afterwards.
  ETF pricing, however, reflects a wide variety of data across many 
issuers and classes of securities. Because they are continuously 
brought to market, it is necessary to provide a clarification in the 
law that research is permitted to be published continuously, because 
they are also continually traded on the exchanges. The antifraud 
provisions of the securities laws will still apply.
  To be clear, this bill does not vitiate any rights of investors or 
responsibilities of broker dealers with respect to the accuracy and 
truthfulness of statements. Specifically, section 2(c)(1) provides that 
the antifraud and antimanipulation provisions of the securities laws 
are not limited by anything in this bill. Moreover, this applies only 
to bona fide research, and FINRA can require sales materials to be 
posted to the public.
  Section 2(c)(2) preserves the powers of the SROs to oversee all of 
the practices of broker-dealers, including the publication of these 
reports.
  Lastly, the bill provides for a statutory safe harbor should the 
Commission not be able to promulgate a rule in the 270-day period 
established by the bill. This statutory safe harbor is only available 
to research on funds that have been reported to the SEC for the last 
year, ensuring that it is true to the purpose of the bill to provide 
research to be used by investors for existing securities.
  Statutory safe harbors exist elsewhere in the Federal securities 
laws, most notably section 4(a)(2) of the 1933 Act. A statutory private 
offering exemption can be perfected without relying on regulation D. In 
practice, though, that does not happen, and I trust that the SEC will 
prescribe an appropriate set of rules consistent with section 2(a) of 
this bill so that the regulatory safe harbor will be effective.
  I urge my colleagues to support this bill, and I reserve the balance 
of my time.
  Mr. HILL. Mr. Speaker, I thank my friend from Illinois for his 
comments and his constructive help on designing and completing the 
legislative process on this bill.
  Mr. Speaker, an integral process of getting this bill completed was 
certainly by our staff, and I want to pay particular attention to Holli 
Heiles of my personal staff, who, this day, leaves the world of the 
personal staff and moves to the Subcommittee on Capital Markets, 
Securities, and Investments of the House Financial Services Committee. 
I want to thank Holli Heiles for her outstanding work on this bill and 
for her outstanding work on behalf of the people of the Second 
Congressional District of Arkansas, as well as to congratulate her on 
her move to the committee.
  Mr. Speaker, I reserve the balance of my time.
  Mr. FOSTER. Mr. Speaker, I again thank my colleague from Arkansas 
(Mr. Hill) and now-Governor Carney, as well, for working on this bill 
over the past years. I look forward to it being signed into law.
  Mr. Speaker, I yield back the balance of my time.
  Mr. HILL. Mr. Speaker, I appreciate the work done together on this 
bill. I don't have any other speakers on this particular bill.
  I yield back the balance of my time.
  The SPEAKER pro tempore (Mr. Bacon). The question is on the motion 
offered by the gentleman from Arkansas (Mr. Hill) that the House 
suspend the rules and pass the bill, H.R. 910, as amended.
  The question was taken.
  The SPEAKER pro tempore. In the opinion of the Chair, two-thirds 
being in the affirmative, the ayes have it.
  Mr. HILL. Mr. Speaker, on that I demand the yeas and nays.
  The yeas and nays were ordered.
  The SPEAKER pro tempore. Pursuant to clause 8 of rule XX, further 
proceedings on this motion will be postponed.

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