[House Report 115-525]
[From the U.S. Government Publishing Office]


115th Congress    }                                          {     Report
                          HOUSE OF REPRESENTATIVES
 2d Session       }                                          {    115-525

======================================================================



 
           NATIONAL SECURITIES EXCHANGE REGULATORY PARITY ACT

                                _______
                                

January 25, 2018.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

Mr. Hensarling, from the Committee on Financial Services, submitted the 
                               following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 4546]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 4546) to amend the Securities Act of 1933 to 
specify when a nationally traded security is exempt from State 
regulation of security offerings, having considered the same, 
report favorably thereon without amendment and recommend that 
the bill do pass.

                          Purpose and Summary

    On December 5, 2017, Representative Ed Royce introduced 
H.R. 4546, the National Securities Exchange Regulatory Parity 
Act, which modernizes Section 18 of the Securities Act of 1933 
(Securities Act) and eliminates references to specific national 
securities exchanges. H.R. 4546 also clarifies that the state 
``blue sky'' exemption shall be available for all securities 
that qualify for trading in the national market system pursuant 
to section 11A(2) of the Securities Exchange Act of 1934.

                  Background and Need for Legislation

    The goal of H.R. 4546 is to better reflect today's equity 
markets, which compete aggressively to list securities and 
execute transactions. In 1996, Congress passed, and President 
Clinton signed into law, the National Securities Markets 
Improvement Act of 1996 (NSMIA). NSMIA amended Section 18 of 
the Securities Act to specifically and explicitly exempt from 
state registration the securities listed on three equity 
markets: the New York Stock Exchange (NYSE), the American Stock 
Exchange (AMEX), and the Nasdaq Stock Market (NASDAQ).
    It is Section 18(b)(1) of the Securities Act that 
specifically exempts these certain securities from individual 
state-by-state registration. This provision, commonly known as 
a ``blue sky'' exemption, applies to the exchange on which 
securities are listed for trading. In setting forth the 
standard for blue sky exemption, this 1996 addition to the 
Securities Act enumerated certain exchanges with national 
listings programs that existed when Congress added the 
provision.
    As previously mentioned, the ``blue sky'' exemption applies 
to securities listed on the NYSE, the AMEX, or the NASDAQ in 
addition to any national securities exchange the Securities and 
Exchange Commission (SEC) determines by rule has 
``substantially similar'' listing standards to those enumerated 
exchanges. Since the exemption's 1996 enactment, additional 
securities exchanges have registered with the SEC and one of 
the enumerated exchanges, AMEX, merged with the NYSE and no 
longer exists as an independently owned national securities 
exchange.
    As a result, the current framework under Section 18 has 
created a two-tiered system to list securities whereby the 
enumerated exchanges can bypass unnecessary and burdensome 
scrutiny by the SEC as compared to those exchanges that the 
Securities Act does not specifically enumerate and have since 
registered with the SEC. For example, in 2012, the SEC amended 
Rule 146 under the Securities Act to designate Bats BZX 
Exchange (Bats) as an exchange that has ``substantially 
similar'' listing standards as the NYSE and NASDAQ. 
Consequently, the SEC granted the ``blue sky'' exemption to the 
securities listed on Bats. Unlike the enumerated exchanges, 
because Bats is not specifically listed in Section 18(b)(1), 
any proposed changes that Bats or its successor owner, the 
CBOE, may make to its listing standards are subject to a formal 
finding by the SEC that the Bats standards would remain 
``substantially similar'' to those of either NYSE or Nasdaq, 
and possibly the non-existent AMEX, before Bats could implement 
the proposed changes.
    The mandate that Section 18(b)(1) of the Securities Act 
imposes on the SEC unnecessarily stifles competition and 
innovation amongst equity markets, as the law forces the SEC to 
make a finding that a proposed change to a listings standard 
must be substantially similar to the rules in effect at NYSE 
and NASDAQ. In doing so, the NYSE and NASDAQ could change a 
listing standard solely to block competition from a new equity 
market. Interestingly, Section 18(b)(1) would appear to 
conflict with Section 106 of NSMIA, which amended Section 2 of 
the Securities Act. Section 106 of NSMIA now requires the SEC 
whenever it is engaged in rulemaking to also consider whether 
the action will promote efficiency, competition, and capital 
formation. Ultimately, the Securities Act, as amended by NSMIA, 
allows the NYSE and NASDAQ to innovate its listing standards 
without going through the onerous process of first gaining SEC 
approval, but its plain language does not provide the same 
benefit to other national securities exchanges. H.R. 4546 
therefore creates parity amongst all national market system 
participants and levels the playing field to allow all national 
securities qualified for trading in the national market system 
to have the same blue sky exemptions without regard to whether 
an exchange is explicitly specified in the statute.
    The alternative is to require state registration for non-
enumerated exchanges, which is an additional burden and cost 
that is unnecessary for companies trying to access capital to 
grow. As Representative Royce said in 2016:

        The SEC's interpretation of the [current] law has 
        created a two-tiered playing field by giving this 
        ``blue sky'' exemption only to [three] exchanges which 
        existed in 1996. It was not the intention of Congress 
        to create such a carve-out. . . . Why is this exemption 
        important? You could ask anyone from Massachusetts who 
        tried to invest in a little company called Apple during 
        its IPO. State regulators banned the stock for being 
        ``too risky.''

    Opponents of this common-sense modernization of the law 
contend that the legislation somehow would increase the risks 
to investors by increasing the number of securities that do not 
need to register with the states. This concern is misguided. 
The SEC is the primary enforcement agency of securities fraud, 
and this bill in no way diminishes the SEC's oversight or 
enforcement authority. The SEC also publishes rule changes 
proposed by the national securities exchanges for public 
comment. The intent of Congress in 1996 when it amended Section 
18 of the Securities Act was not to entrench and favor the 
three referenced exchanges; rather Congress acknowledged the 
primary listing venues at the time of NSMIA's drafting and 
enactment.
    Any security listed on a registered national securities 
exchange is, and still would be, subject to SEC registration 
and required to provide periodic and annual reports to the 
shareholders. They would also still be required to comply with 
all applicable disclosure requirements that come with that 
registration. Forcing securities subject to SEC registration 
and disclosure obligations to also register with the states 
would create inefficiencies, stifle innovation, and cause 
conflicts amongst state statutory and regulatory regimes. While 
perhaps well intentioned, state securities registration and 
oversight can have negative market and economic consequences 
that include chilling public offerings of national securities 
and arbitrarily prohibiting investors in certain states from 
participating in potentially promising investment 
opportunities. What the SEC can approve by rule, the SEC can 
also reverse by rule. A future SEC could reverse these Rule 146 
approvals and alter its interpretation of ``substantially 
similar.'' Congress has the responsibility to improve the law 
and modernize the law, and provide clear directives to 
Executive and independent agencies, such as the SEC. National 
market system participants deserve the legal certainty that 
they can compete for listings. The SEC should approve listing 
standards that are consistent with the federal securities laws 
rather than have the power to compare listing standards based 
on a well-intentioned but in retrospect a clumsy statutory 
construction. A legislative solution is therefore necessary to 
resolve this outdated provision.
    In short, H.R. 4546 is a technical fix that corrects 
unintended preferential treatment that has resulted by 
specifically naming the exchanges that existed in 1996 while 
providing a statutory framework that both preserves the goal of 
the exemptive structure set forth under Section 18 and ensures 
that the statutory text can be applied as new national 
securities exchanges emerge.

                                Hearings

    The Committee on Financial Services held a hearing 
examining matters relating to H.R. 4546 on April 26, 2017 and 
April 28, 2017.

                        Committee Consideration

    The Committee on Financial Services met in open session on 
December 12, 2017 and December 13, 2017, and ordered H.R. 4546 
to be reported favorably to the House without amendment by a 
recorded vote of 46 yeas to 14 nays (Record vote no. FC-122), a 
quorum being present.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. The 
sole recorded vote was on a motion by Chairman Hensarling to 
report the bill favorably to the House without amendment. The 
motion was agreed to by a recorded vote of 46 yeas to 14 nays 
(Record vote no. FC-122), a quorum being present.


                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the findings and recommendations of 
the Committee based on oversight activities under clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
are incorporated in the descriptive portions of this report.

                    Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee states that H.R. 4546 
levels the playing field for identically regulated securities 
exchanges and eliminates additional burdens and costs for 
companies by ensuring the availability of blue sky exemptions 
for any security listed on a ``national securities exchange'' 
registered with the SEC.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee adopts as its 
own the estimate of new budget authority, entitlement 
authority, or tax expenditures or revenues contained in the 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to section 402 of the Congressional 
Budget Act of 1974.

                 Congressional Budget Office Estimates

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                  Washington, DC, January 18, 2018.
Hon. Jeb Hensarling,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 4546, the National 
Securities Exchange Regulatory Parity Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Stephen 
Rabent.
            Sincerely,
                                                Keith Hall,
                                                          Director.
    Enclosure.

H.R. 4546--National Securities Exchange Regulatory Parity Act

    Under current law, certain securities listed on national 
exchanges are exempt from state securities regulations. H.R. 
4546 would allow any security listed on a national exchange 
that is registered with the Securities and Exchange Commission 
(SEC) to be exempted from such state regulations.
    Using information from the SEC, CBO estimates that 
implementing H.R. 4546 would have an insignificant effect on 
that agency's costs. Under the bill, the SEC would have to 
review any future changes to the rules of national exchanges 
and update its own rules. CBO estimates that the cost of that 
work would be insignificant. Moreover, the SEC is authorized to 
collect fees sufficient to offset its annual appropriation; 
therefore, CBO estimates that the net effect on discretionary 
spending would be negligible, assuming appropriation actions 
consistent with that authority.
    Enacting H.R. 4546 would not affect direct spending or 
revenues; therefore, pay-as-you-go procedures do not apply.
    CBO estimates that enacting H.R. 4546 would not increase 
net direct spending or on-budget deficits in any of the four 
consecutive 10-year periods beginning in 2028.
    H.R. 4546 would preempt state laws that govern the state-
level registration of securities. Preemptions are mandates as 
defined in the Unfunded Mandates Reform Act (UMRA) because they 
limit the authority of states to apply their own laws. However, 
CBO estimates that the preemption would not affect the budgets 
of state, local, or tribal governments because it would impose 
no duty on states that would result in additional spending or 
loss of revenues.
    H.R. 4546 contains no private-sector mandates as defined in 
UMRA.
    The CBO staff contacts for this estimate are Stephen Rabent 
(for federal costs) and Rachel Austin (for mandates). The 
estimate was approved by H. Samuel Papenfuss, Deputy Assistant 
Director for Budget Analysis.

                       Federal Mandates Statement

    This information is provided in accordance with section 423 
of the Unfunded Mandates Reform Act of 1995.
    The Committee has determined that the bill does not contain 
Federal mandates on the private sector. The Committee has 
determined that the bill does not impose a Federal 
intergovernmental mandate on State, local, or tribal 
governments.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of the section 
102(b)(3) of the Congressional Accountability Act.

                         Earmark Identification

    With respect to clause 9 of rule XXI of the Rules of the 
House of Representatives, the Committee has carefully reviewed 
the provisions of the bill and states that the provisions of 
the bill do not contain any congressional earmarks, limited tax 
benefits, or limited tariff benefits within the meaning of the 
rule.

                    Duplication of Federal Programs

    In compliance with clause 3(c)(5) of rule XIII of the Rules 
of the House of Representatives, the Committee states that no 
provision of the bill establishes or reauthorizes: (1) a 
program of the Federal Government known to be duplicative of 
another Federal program; (2) a program included in any report 
from the Government Accountability Office to Congress pursuant 
to section 21 of Public Law 111-139; or (3) a program related 
to a program identified in the most recent Catalog of Federal 
Domestic Assistance, published pursuant to the Federal Program 
Information Act (Pub. L. No. 95-220, as amended by Pub. L. No. 
98-169).

                   Disclosure of Directed Rulemaking

    Pursuant to section 3(i) of H. Res. 5, (115th Congress), 
the following statement is made concerning directed rule 
makings: The Committee estimates that the bill requires no 
directed rule makings within the meaning of such section.

             Section-by-Section Analysis of the Legislation


Section 1. Short title

    This section cites H.R. 4546 as the ``National Securities 
Exchange Regulatory Parity Act''.

Section 2. Nationally traded securities exemption

    This section amends Section 18 of the Securities Act of 
1933 to extend the blue sky exemption for any security listed 
on a national securities exchange registered with the SEC and 
whose listing standards were approved by the SEC.

         Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, and existing law in which no 
change is proposed is shown in roman):

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, and existing law in which no 
change is proposed is shown in roman):

                         SECURITIES ACT OF 1933


TITLE I--

           *       *       *       *       *       *       *



SEC. 18. EXEMPTION FROM STATE REGULATION OF SECURITIES OFFERINGS.

  (a) Scope of Exemption.--Except as otherwise provided in this 
section, no law, rule, regulation, or order, or other 
administrative action of any State or any political subdivision 
thereof--
          (1) requiring, or with respect to, registration or 
        qualification of securities, or registration or 
        qualification of securities transactions, shall 
        directly or indirectly apply to a security that--
                  (A) is a covered security; or
                  (B) will be a covered security upon 
                completion of the transaction;
          (2) shall directly or indirectly prohibit, limit, or 
        impose any conditions upon the use of--
                  (A) with respect to a covered security 
                described in subsection (b), any offering 
                document that is prepared by or on behalf of 
                the issuer; or
                  (B) any proxy statement, report to 
                shareholders, or other disclosure document 
                relating to a covered security or the issuer 
                thereof that is required to be and is filed 
                with the Commission or any national securities 
                organization registered under section 15A of 
                the Securities Exchange Act of 1934, except 
                that this subparagraph does not apply to the 
                laws, rules, regulations, or orders, or other 
                administrative actions of the State of 
                incorporation of the issuer; or
          (3) shall directly or indirectly prohibit, limit, or 
        impose conditions, based on the merits of such offering 
        or issuer, upon the offer or sale of any security 
        described in paragraph (1).
  (b) Covered Securities.--For purposes of this section, the 
following are covered securities:
          (1) Exclusive federal registration of nationally 
        traded securities.--A security is a covered security if 
        such security is--
                  [(A) listed, or authorized for listing, on 
                the New York Stock Exchange or the American 
                Stock Exchange, or listed, or authorized for 
                listing, on the National Market System of the 
                Nasdaq Stock Market (or any successor to such 
                entities);]
                  [(B)] (A) a security designated as qualified 
                for trading in the national market system 
                pursuant to section 11A(a)(2) of the Securities 
                Exchange Act of 1934 that is listed, or 
                authorized for listing, on a national 
                securities exchange (or tier or segment 
                thereof) [that has listing standards 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)]; or
                  [(C)] (B) a security of the same issuer that 
                is equal in seniority or that is a senior 
                security to a security described in 
                subparagraph (A) [or (B)].
          (2) Exclusive federal registration of investment 
        companies.--A security is a covered security if such 
        security is a security issued by an investment company 
        that is registered, or that has filed a registration 
        statement, under the Investment Company Act of 1940.
          (3) Sales to qualified purchasers.--A security is a 
        covered security with respect to the offer or sale of 
        the security to qualified purchasers, as defined by the 
        Commission by rule. In prescribing such rule, the 
        Commission may define the term ``qualified purchaser'' 
        differently with respect to different categories of 
        securities, consistent with the public interest and the 
        protection of investors.
           (4) Exemption in connection with certain exempt 
        offerings.--A security is a covered security with 
        respect to a transaction that is exempt from 
        registration under this title pursuant to--
                  (A) paragraph (1) or (3) of section 4, and 
                the issuer of such security files reports with 
                the Commission pursuant to section 13 or 15(d) 
                of the Securities Exchange Act of 1934;
                  (B) section 4(4);
                  (C) section 4(6);
                  (D) a rule or regulation adopted pursuant to 
                section 3(b)(2) and such security is--
                          (i) offered or sold on a national 
                        securities exchange; or
                          (ii) offered or sold to a qualified 
                        purchaser, as defined by the Commission 
                        pursuant to paragraph (3) with respect 
                        to that purchase or sale;
                  (E) section 3(a), other than the offer or 
                sale of a security that is exempt from such 
                registration pursuant to paragraph (4), (10), 
                or (11) of such section, except that a 
                municipal security that is exempt from such 
                registration pursuant to paragraph (2) of such 
                section is not a covered security with respect 
                to the offer or sale of such security in the 
                State in which the issuer of such security is 
                located;
                  (F) Commission rules or regulations issued 
                under section 4(2), except that this 
                subparagraph does not prohibit a State from 
                imposing notice filing requirements that are 
                substantially similar to those required by rule 
                or regulation under section 4(2) that are in 
                effect on September 1, 1996; or
                  (G) section 4(a)(7).
  (c) Preservation of Authority.--
          (1) Fraud authority.--Consistent with this section, 
        the securities commission (or any agency or office 
        performing like functions) of any State shall retain 
        jurisdiction under the laws of such State to 
        investigate and bring enforcement actions, in 
        connection with securities or securities transactions
                  (A) with respect to--
                          (i) fraud or deceit; or
                          (ii) unlawful conduct by a broker or 
                        dealer; and
                  (B) in connection to a transaction described 
                under section 4(6), with respect to--
                          (i) fraud or deceit; or
                          (ii) unlawful conduct by a broker, 
                        dealer, funding portal, or issuer.
          (2) Preservation of filing requirements.--
                  (A) Notice filings permitted.--Nothing in 
                this 
                section prohibits the securities commission (or 
                any agency or office performing like functions) 
                of any State from requiring the filing of any 
                document filed with the Commission pursuant to 
                this title, together with annual or periodic 
                reports of the value of securities sold or 
                offered to be sold to persons located in the 
                State (if such sales data is not included in 
                documents filed with the Commission), solely 
                for notice purposes and the assessment of any 
                fee, together with a consent to service of 
                process and any required fee.
                  (B) Preservation of fees.--
                          (i) In general.--Until otherwise 
                        provided by law, rule, regulation, or 
                        order, or other administrative action 
                        of any State or any political 
                        subdivision thereof, adopted after the 
                        date of enactment of the National 
                        Securities Markets Improvement Act of 
                        1996, filing or registration fees with 
                        respect to securities or securities 
                        transactions shall continue to be 
                        collected in amounts determined 
                        pursuant to State law as in effect on 
                        the day before such date.
                          (ii) Schedule.--The fees required by 
                        this subparagraph shall be paid, and 
                        all necessary supporting data on sales 
                        or offers for sales required under 
                        subparagraph (A), shall be reported on 
                        the same 
                        schedule as would have been applicable 
                        had the issuer not relied on the 
                        exemption provided in subsection (a).
                  (C) Availability of preemption contingent on 
                payment of fees.--
                          (i) In general.--During the period 
                        beginning on the date of enactment of 
                        the National Securities 
                        Markets Improvement Act of 1996 and 
                        ending 3 years after that date of 
                        enactment, the securities commission 
                        (or any agency or office performing 
                        like functions) of any State may 
                        require the registration of securities 
                        issued by any issuer who refuses to pay 
                        the fees required by subparagraph (B).
                          (ii) Delays.--For purposes of this 
                        subparagraph, delays in payment of fees 
                        or underpayments of fees that are 
                        promptly remedied shall not constitute 
                        a refusal to pay fees.
                  (D) Fees not permitted on listed 
                securities.--Notwithstanding subparagraphs (A), 
                (B), and (C), no filing or fee may be required 
                with respect to any security that is a covered 
                security pursuant to subsection (b)(1), or will 
                be such a covered security upon completion of 
                the transaction, or is a security of the same 
                issuer that is equal in seniority or that is a 
                senior security to a security that is a covered 
                security pursuant to subsection (b)(1).
                  (F) Fees not permitted on crowdfunded 
                securities.--Notwithstanding subparagraphs (A), 
                (B), and (C), no filing or fee may be required 
                with respect to any security that is a covered 
                security pursuant to subsection (b)(4)(B), or 
                will be such a covered security upon completion 
                of the transaction, except for the securities 
                commission (or any agency or office performing 
                like functions) of the State of the principal 
                place of business of the issuer, or any State 
                in which purchasers of 50 percent or greater of 
                the aggregate amount of the issue are 
                residents, provided that for purposes of this 
                subparagraph, the term ``State'' includes the 
                District of Columbia and the territories of the 
                United States.
          (3) Enforcement of requirements.--Nothing in this 
        section shall prohibit the securities commission (or 
        any agency or office performing like functions) of any 
        State from suspending the offer or sale of securities 
        within such State as a result of the failure to submit 
        any filing or fee required under law and permitted 
        under this section.
  (d) Definitions.--For purposes of this section, the following 
definitions shall apply:
          (1) Offering document.--The term ``offering 
        document''--
                  (A) has the meaning given the term 
                ``prospectus'' in section 2(a)(10), but without 
                regard to the provisions of subparagraphs (a) 
                and (b) of that section; and
                  (B) includes a communication that is not 
                deemed to offer a security pursuant to a rule 
                of the Commission.
          (2) Prepared by or on behalf of the issuer.--Not 
        later than 6 months after the date of enactment of the 
        National Securities Markets Improvement Act of 1996, 
        the Commission shall, by rule, define the term 
        ``prepared by or on behalf of the issuer'' for purposes 
        of this section.
          (3) State.--The term ``State'' has the same meaning 
        as in section 3 of the Securities Exchange Act of 1934.
          (4) Senior security.--The term ``senior security'' 
        means any bond, debenture, note, or similar obligation 
        or instrument constituting a security and evidencing 
        indebtedness, and any stock of a class having priority 
        over any other class as to distribution of assets or 
        payment of dividends.

           *       *       *       *       *       *       *


                             MINORITY VIEWS

    H.R. 4546 would allow the Securities and Exchange 
Commission to preempt state oversight of securities listed on a 
national securities exchange without having to first find that 
an exchange's listing standards are ``substantially similar'' 
to the listing standards of the New York Stock Exchange (NYSE), 
the American Stock Exchange (now NYSE AMEX), or Nasdaq. This 
bill completely removes any separate analysis for state 
preemption, which, if anything, should be improved to ensure 
fair and rigorous listing standards.
    H.R. 4546 is intended to address a provision in the 
National Securities Markets Improvement Act of 1996, which 
explicitly granted state preemption to the three existing 
exchanges, NYSE, the American Stock Exchange, and Nasdaq. The 
law requires any other exchange seeking state preemption to 
prove to the SEC that its standards for listing securities are 
just as robust as the three named exchanges.
    More than twenty years later, there are now twenty-one 
securities exchanges and the American Stock Exchange has been 
acquired by NYSE. While we acknowledge that it may not make 
sense to judge exchange listing standards based on the three 
exchanges named in the 1996 law, H.R. 4546 does nothing to 
guide the SEC in how it should otherwise determine whether an 
exchange's listing standards are sufficient to warrant state 
preemption. Instead, the bill would completely remove the 
baseline analysis and with it, the quantitative thresholds the 
SEC has developed to evaluate proposed listing standards.
    However imperfect the current framework is for evaluating 
exchange listing standards for state preemption, it does not 
make sense to simply remove it and replace it with nothing. 
Doing so would, at best, create confusion and, at worst, result 
in a race-to-the-bottom as exchanges try to compete for 
business by lowering their listing standards.
    The bill also rolls back a bipartisan compromise that was 
unanimously approved on the Floor last Congress to require the 
SEC to issue rules establishing minimum core quantitative 
listing standards to determine whether an exchange's proposed 
listing standards are sufficiently robust to warrant state 
preemption.
    H.R. 4546 is opposed by consumer advocates like Americans 
for Financial Reform, Consumer Federation of America, and 
Public Citizen. Unsurprisingly, the bill is also opposed by the 
North American Securities Administrators Association (NASAA), 
who represents our state securities regulators. According to 
NASAA:

        Fair and rigorous listing standards are essential. Such 
        listing standards give investors a voice when it comes 
        to important decisions, ensure independent directors 
        are in place to watch out for investors, provide 
        oversight of conflicts of interest to ensure investors 
        have a chance at earning a return. . . . H.R. 4546 
        threatens to undercut the distinction between different 
        types of exchanges with potentially different types of 
        listing standards to the detriment of investors.

    We agree and oppose H.R. 4546.

                                   Maxine Waters.
                                   Vicente Gonzalez.
                                   Emanuel Cleaver.
                                   Al Green.
                                   Stephen F. Lynch.
                                   Keith Ellison.
                                   Joyce Beatty.
                                   Michael E. Capuano.
                                   Wm. Lacy Clay.
                                   Nydia M. Velazquez.
                                   Gwen Moore.
                                   Daniel T. Kildee.