[House Report 117-54]
[From the U.S. Government Publishing Office]
117th Congress } { Report
HOUSE OF REPRESENTATIVES
1st Session } { 117-54
======================================================================
ESG DISCLOSURE SIMPLIFICATION ACT OF 2021
_______
June 8, 2021.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Ms. Waters, from the Committee on Financial Services, submitted the
following
R E P O R T
together with
MINORITY VIEWS
[To accompany H.R. 1187]
[Including cost estimate of the Congressional Budget Office]
The Committee on Financial Services, to whom was referred
the bill (H.R. 1187) to provide for disclosure of additional
material information about public companies and establish a
Sustainable Finance Advisory Committee, and for other purposes,
having considered the same, reports favorably thereon with an
amendment and recommends that the bill as amended do pass.
CONTENTS
Page
Purpose and Summary.............................................. 3
Background and Need for Legislation.............................. 4
Section-by-Section Analysis of the Legislation................... 5
Hearings......................................................... 7
Committee Consideration.......................................... 7
Committee Votes.................................................. 7
Committee Oversight Findings..................................... 12
Statement of Performance Goals and Objectives.................... 12
New Budget Authority and C.B.O. Cost Estimate.................... 12
Committee Cost Estimate.......................................... 12
Federal Mandates Statement....................................... 12
Advisory Committee Statement..................................... 12
Applicability to Legislative Branch.............................. 12
Congressional Earmarks, Limited Tax Benefits, and Limited Tariff
Benefits....................................................... 12
Duplicative Federal Programs..................................... 13
Changes in Existing Law.......................................... 13
Minority Views................................................... 33
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``ESG Disclosure Simplification Act of
2021''.
SEC. 2. FINDINGS.
Congress finds the following:
(1) The Securities and Exchange Commission has broad
authority to require the disclosure of information if such
information is in the interest of, or is material to investors.
(2) The Commission does not require companies to disclose
information related to environmental, social, and governance
(``ESG'') matters, and does not require companies to adhere to
standards for disclosing such information.
(3) Investors have reported that voluntary disclosures of ESG
metrics are inadequate.
(4) A rule requiring reporting and standardization of ESG
disclosures is in the interest of investors.
(5) ESG matters are material to investors, and the Commission
must establish standards for disclosure of such matters.
SEC. 3. ESG DISCLOSURES.
(a) In General.--Section 14 of the Securities Exchange Act of 1934
(15 U.S.C. 78n) is amended by adding at the end the following:
``(k) ESG Disclosures.--
``(1) In general.--Each issuer the securities of which are
registered under section 12 or that is required to file annual
reports under section 15(d) shall disclose in any proxy or
consent solicitation material for an annual meeting of the
shareholders--
``(A) a clear description of the views of the issuer
about the link between ESG metrics and the long-term
business strategy of the issuer; and
``(B) a description of any process the issuer uses to
determine the impact of ESG metrics on the long-term
business strategy of the issuer.
``(2) ESG metrics defined.--In this subsection, the term `ESG
metrics' has the meaning given the term in part 210 of title
17, Code of Federal Regulations as amended pursuant to section
3(b) of the ESG Disclosure Simplification Act of 2021.''.
(b) Rulemaking.--
(1) In general.--The Securities and Exchange Commission (in
this Act referred to as the ``Commission'') shall amend part
210 of title 17, Code of Federal Regulations (or any successor
thereto) to--
(A) require each issuer, in any filing of the issuer
described in such part that requires audited financial
statements, to disclose environmental, social, and
governance metrics (in this Act referred to as ESG
metrics); and
(B) define ESG metrics.
(2) Sustainable finance advisory committee.--The Sustainable
Finance Advisory Committee established pursuant to section 4(k)
of the Securities and Exchange Act of 1934 shall, not later
than 180 days after the date of the first meeting of such
Committee, submit to the Commission recommendations about what
ESG metrics the Commission should require issuers to disclose.
(3) Materiality.--It is the sense of Congress that ESG
metrics, as such term is defined by the Commission pursuant to
paragraph (1), are de facto material for the purposes of
disclosures under the Securities Exchange Act of 1934 and the
Securities Act of 1933.
(4) Incorporation of international standards.--When amending
part 210 of title 17, Code of Federal Regulations (or any
successor thereto) pursuant to paragraph (1), the Commission
may, as the Commission determines appropriate, incorporate any
internationally recognized, independent, multi-stakeholder
environmental, social, and governance disclosure standards.
(5) Location of disclosure.--Any disclosure required by
paragraph (1) may be included in a notes section of the filing.
(6) Delay for small issuers.--The Commission may use a phased
approach when applying any amendments made pursuant to
paragraph (1) to small issuers and may determine the criteria
by which an issuer qualifies as a small issuer for purposes of
such phased approach.
SEC. 4. SUSTAINABLE FINANCE ADVISORY COMMITTEE.
Section 4 of the Securities Exchange Act of 1934 (15 U.S.C. 78d) is
amended by adding at the end the following:
``(k) Sustainable Finance Advisory Committee.--
``(1) Establishment.--The Commission shall establish a
permanent advisory committee to be called the `Sustainable
Finance Advisory Committee' (in this subsection referred to as
the `Committee').
``(2) Duties of committee.--The Committee shall--
``(A) submit a report to the Commission not later
than 18 months after the date of the first meeting of
the Committee that--
``(i) identifies the challenges and
opportunities for investors associated with
sustainable finance; and
``(ii) recommends policy changes to
facilitate the flow of capital towards
sustainable investments, in particular
environmentally sustainable investments;
``(B) when solicited, advise the Commission on
sustainable finance; and
``(C) communicate with individuals and entities with
an interest in sustainable finance.
``(3) Membership.--
``(A) Members.--
``(i) In general.--The Committee shall
consist of no more than 20 members who shall
each serve for one four-year term.
``(ii) Representation.--Each member shall
represent individuals and entities with an
interest in sustainable finance, such as--
``(I) experts on sustainable finance;
``(II) operators of financial
infrastructure;
``(III) entities that provide
analysis, data, or methodologies that
facilitate sustainable finance;
``(IV) insurance companies, pension
funds, asset managers, depository
institutions, or credit unions; or
``(V) other financial institutions
that intermediate investments in
sustainable finance or manage risks
related to sustainable development.
``(iii) Representation of interests.--A
member may not represent a single individual or
entity and shall represent types of individuals
and entities with similar interests in
sustainable finance.
``(B) Selection.--
``(i) In general.--The Commission shall--
``(I) publish criteria for selection
of members on the website of the
Commission and in the Federal Register;
and
``(II) solicit applications for
membership on the website of the
Commission and in the Federal Register.
``(ii) Equal share.--From the individuals who
submit applications for membership, each
Commissioner of the Commission shall select an
equal number of the members of the Committee.
``(C) Pay.--Members may not receive pay by reason of
their service on the Committee but may receive travel
or transportation expenses in accordance with
applicable provisions under subchapter I of chapter 57
of title 5, United States Code.
``(D) Member transparency.--The name of each member
and the types of individuals and entities that such
member represents shall be published on the website of
the Commission.
``(E) Staff.--The Committee shall be supported by
staff from the Office of the Investor Advocate of the
Commission that are dedicated to environmental, social
and governance (in this subsection referred to as
`ESG') issues.
``(F) Authorization of appropriation.--There are
authorized to be appropriated such sums as are
necessary to finance costs associated with staff
dedicated to ESG issues in the Office of the Investor
Advocate of the Commission.
``(4) Sustainable finance.--For the purposes of this
subsection, the term `sustainable finance' means the provision
of finance with respect to investments taking into account
environmental, social, and governance considerations.
``(5) SEC response.--The Commission shall, not later than 6
months after the date on which the Committee submits a report
to the Commission pursuant to paragraph (2)(A), publish a
response to such report.''.
Purpose and Summary
On February 18, 2021, Representative Juan Vargas introduced
H.R. 1187, the ESG Disclosure Simplification Act of 2021, which
would require issuers to disclose to shareholders certain
environmental, social, and governance (ESG) metrics, the
connection between those metrics and the issuer's long term
business strategy, and the method by which the issuer
determines how ESG metrics affect its long term strategy. The
bill would also require the U.S. Securities and Exchange
Commission (SEC) to adopt rules requiring issuers to disclose
ESG metrics in filings that require audited financial
statements. Additionally, the bill would establish a
Sustainable Financial Advisory Committee (SFAC) to provide the
SEC with a report identifying policy changes that could
facilitate sustainable investments.
Background and Need for Legislation
Investors have been demanding more--and better--disclosure
of ESG information from public companies.\1\ Many investors
view ESG information as important, not just for evaluating
reputational risks, but for evaluating companies' financial
performance as well as long-term viability.\2\ In a 2015
report, Blackrock Investment Institute explained that
``[c]ompanies that score high on ESG measures tend to quickly
adapt to changing environmental and social trends, use
resources efficiently, have engaged (and, therefore,
productive) employees, and face lower risks of regulatory fines
or reputational damage.''\3\ The credit rating agencies also
now incorporate ESG factors into their ratings methodologies.
For instance, Standard & Poors has taken over 100 rating
actions based on environmental and climate concerns.\4\ In
February 2021, the Subcommittee on Investor Protection,
Entrepreneurship and Capital Markets convened a virtual
hearing, entitled Climate Change and Social Responsibility:
Helping Corporate Boards and Investors Make Decisions for a
Sustainable World,\5\ in which expert witnesses highlighted the
importance of ESG metrics and the critical role these metrics
play in the investment decision process. For example, with
respect to climate change, Veena Ramani, Senior Program
Director of Capital Markets Systems at Ceres, testified that:
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\1\See e.g., Donnelly Financial, The Future of ESG and
Sustainability Reporting: What Issuers Need to Know Right Now, at 3
(Nov. 14, 2018) (finding that 65% of institutional investors ``often or
always consider environmental and social issues in their investment
decisions,'' and 95% ``often or always consider governance issues--for
all investments.'').
\2\See e.g., Bank of America, ESG: Good Companies Can Make Good
Stocks, at 1 (December 18, 2016) (finding that ``[ESG] metrics have
been strong indicators of future volatility, earnings risk, price
declines and bankruptcies.''); Nordea, Cracking the ESG Code, at 1
(September 5, 2017) (``Companies that score higher on ESG demonstrate
better operational performance, with regards to both the level and the
stability of returns.'').
\3\Blackrock Investment Institute, The Price of Climate Change:
Global Warming's Impact on Portfolios (Oct. 31, 2015).
\4\Standard & Poor's, How Does S&P Global Ratings Incorporate
Environmental, Social, and Governance Risks Into Its Ratings Analysis
(Nov. 21, 2017).
\5\House Committee on Financial Services, Climate Change and Social
Responsibility: Helping Corporate Boards and Investors Make Decisions
for a Sustainable World, 117th Cong. (Feb. 25, 2021).
Some 9,526 companies disclosed information on climate
issues in response to the CDP questionnaire in 2020,
compared to over 200 respondents in 2003. Yet,
important stakeholders are still not getting the
quality information that they need to effectively
integrate climate change risks into their investment
process. A 2020 survey of nearly 3,000 investment
professionals found that 40% of investment
professionals factor climate risks into decision-
making, but about half said that they currently lack
climate-related disclosures that they need.\6\
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\6\Id; see, also Harvard Law School Forum on Corporate Governance,
House of Representatives Testimony on Climate Change and Social
Responsibility (Mar. 9, 2021).
In October 2018, a coalition of large public pension funds,
asset managers, law professors, and non-profit organizations
filed a petition with the SEC for a rulemaking on ESG
disclosures.\7\ The petition called on the SEC to develop a
comprehensive ESG disclosure framework, and identified seven
specific issues that the SEC could act on immediately: (1)
climate risk; (2) annual ESG disclosures based on the Global
Reporting Initiative (GRI) framework; (3) gender pay ratios;
(4) human capital management; (5) human rights; (6) political
spending; and, (7) tax disclosure.\8\
---------------------------------------------------------------------------
\7\Letter from Cynthia A. Williams, Jill E. Fisch, et al. to
Secretary Fields, Request for Rulemaking on Environmental, Social, and
Governance (ESG) Disclosure, File No. 4 730 (Oct. 1, 2018).
\8\See id. at 13--16.
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In addition, over 2,300 investment managers, asset
managers, and service providers, representing over $80 trillion
in assets under management (AUM) are signatories to the UN-
sponsored Principles for Responsible Investment (PRI), which
commit these institutions to incorporating ESG factors into
their investment decisions.\9\ Of these signatories, 458 are
U.S. institutions, which collectively represent over $40
trillion AUM.
---------------------------------------------------------------------------
\9\PRI is a non-profit organization, originally formed by the
United Nations in 2006, that brings together the world's investment
community in order to promote responsible investment and encourages
investors to use responsible investment. See About the PRI (last
visited on June 7, 2021).
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Section-by-Section Analysis
Section 1. Short title
This section states that the title of the bill is the ``ESG
Disclosure Simplification Act of 2021.''
Section 2. ESG disclosures
Subsection 2(a) of this bill amends section 14 of the
Securities Exchange Act of 1934 (15 U.S.C. 78n) by adding a new
subsection (k). The new subsection (k) would require issuers
that have registered securities, or that file annual reports,
to disclose in any proxy or consent solicitation material for
an annual shareholder meeting: a clear description of the link
between environmental, social, and governance (ESG) metrics and
the issuer's long-term business strategy; and any process the
issuer uses to determine the impact of these ESG metrics on its
long-term business strategy.
Subsection 2(b)(1) of this bill would require the
Securities and Exchange Commission to promulgate rules to
define and require the disclosure of ESG metrics.
Subsection 2(b)(2) of this bill would require that the
Sustainable Finance Advisory Committee created by the
amendments contained in Section 3 of this bill to submit to the
SEC recommendations regarding what ESG metrics the SEC should
require issuers to disclose within 180 days of its first
meeting.
Subsection 2(b)(3) of this bill would establish that ESG
metrics defined by the SEC are de facto material for disclosure
purposes.
Subsection 2(b)(4) of this bill would allow the SEC to
incorporate any internationally recognized, independent, multi-
stakeholder environmental, social, and governance disclosure
standards.
Subsection 2(b)(5) of this bill would allow the SEC to
incorporate any internationally recognized, independent, multi-
stakeholder environmental, social, and governance disclosure
standards to be included in a notes section of the filing.
Subsection 2(b)(6) of this bill would allow the SEC to use
a phased approach for small issuers and to determine the
criteria used to determine when an issuer qualifies as a small
issuer.
Section 3. Sustainable Finance Advisory Commission
This section would amend section 4 of the Securities
Exchange Act of 1934 (15 U.S.C. 78d) by adding a new subsection
(k), which would establish a permanent advisory committee to be
called the Sustainable Finance Advisory Committee (SFAC), and
would set forth the duties and membership of the Committee.
Within 18 months after SFAC's first meeting, the it would
be required to issue a report that identifies challenges and
opportunities for investors associated with sustainable finance
and recommend policy changes that facilitate the flow of
capital towards sustainable investments, particularly
environmentally sustainable investments. SFAC would also be
required to advise the SEC on sustainable finance and
communicate with interested individuals and entities.
SFAC would consist of no more than 20 members, who would
each serve for a single four-year term. Without representing
single individuals or entities, each member will represent
types of individuals and entities with similar interests in
sustainable finance, such as: experts on sustainable finance;
operators of financial infrastructure; entities that provide
analysis, data, or methodologies that facilitate sustainable
finance; insurance companies, pension funds, asset managers,
depository institutions, credit unions, or other financial
institutions.
The SEC would be required to publish the criteria utilized
for selection of members and to solicit applications on the
SEC's website and in the Federal Register. Each SEC
Commissioner would select an equal number of members of the
Committee.
Members of the Committee would not be permitted receive pay
for their position on the Committee, but may receive travel or
transportation expenses.
The name of each member and the types of individuals and
entities the Member represents would be required to be
published on the SEC's website.
The SEC's Office of the Investor Advocate staff would
support SFAC. Funds necessary to finance costs associated with
these staff are authorized to be appropriated.
The term `sustainable finance' is defined under the bill as
the provision of finance with respect to investments taking
into account environmental, social, and governance
considerations.
The SEC would be required to publish a response to the
Committee report within 6 months of the report's submission to
the Commission.
Hearings
For the purposes of section 3(c)(6) of House rule XIII, the
Committee on Financial Services' Subcommittee on Investor
Protection, Entrepreneurship, and Capital Markets on February
25, 2021 held a hearing to consider H.R. 1187 entitled,
``Climate Change and Social Responsibility: Helping Corporate
Boards and Investors Make Decisions for a Sustainable World.''
Testifying before the Committee were: Andy Green, Senior
Fellow, Center for American Progress; Heather McTeer Toney,
Environmental Justice Liaison, Environmental Defense Fund and
Senior Advisor, Mom's Clean Air Force; Veena Ramani, Senior
Program Director, Capital Market Systems, Ceres; James Andrus,
Investment Manager, California Public Employees' Retirement
System; and Vivek Ramaswamy, Biotech Entrepreneur and Author.
Committee Consideration
The Committee on Financial Services met in open session on
April 21, 2021, and ordered H.R. 1187 to be reported favorably
to the House with an amendment in the nature of a substitute by
a vote of 28 yeas and 22 nays, a quorum being present.
Committee Votes and Roll Call Votes
In compliance with clause 3(b) of rule XIII of the Rules of
the House of Representatives, the Committee advises that the
following roll call votes occurred during the Committee's
consideration of H.R. 1187:
Statement of Oversight Findings and Recommendations of the Committee
In compliance with clause 3(c)(1) of rule XIII and clause
2(b)(1) of rule X of the Rules of the House of Representatives,
the Committee's oversight findings and recommendations are
reflected in the descriptive portions of this report.
Statement of Performance Goals and Objectives
Pursuant to clause (3)(c) of rule XIII of the Rules of the
House of Representatives, the goals of H.R. 1187 are to ensure
that the Securities Exchange Act requires ESG disclosures.
New Budget Authority and CBO Cost Estimate
Pursuant to clause 3(c)(2) of rule XIII of the Rules of the
House of Representatives and section 308(a) of the
Congressional Budget Act of 1974, and pursuant to clause
3(c)(3) of rule XIII of the Rules of the House of
Representatives and section 402 of the Congressional Budget Act
of 1974, the Committee has requested an estimate from the
Director of the Congressional Budget Office. CBO was unable to
provide an estimate in a timely manner.
Committee Cost Estimate
Clause 3(d)(1) of rule XIII of the Rules of the House of
Representatives requires an estimate and a comparison of the
costs that would be incurred in carrying out H.R. 1187. After
careful review, including discussions with the Congressional
Budget Office, the Committee estimates that H.R. 1187 would
have an insignificant impact on spending.
Unfunded Mandate Statement
Pursuant to Section 423 of the Congressional Budget and
Impoundment Control Act (as amended by Section 101(a)(2) of the
Unfunded Mandates Reform Act, Pub. L. 104-4), the Committee
does not believe H.R. 1187, as amended, contains any unfunded
mandates and adopts as its own any future estimate in that
regard as prepared by the Director of the Congressional Budget
Office.
Advisory Committee
H.R. 1187 establishes a sustainable finance advisory
committee, which operates consistent with section 5(b) of the
Federal Advisory Committee Act.
Application of Law to the Legislative Branch
Pursuant to section 102(b)(3) of the Congressional
Accountability Act, Pub. L. No. 104-1, H.R. 1187, as amended,
does not apply to terms and conditions of employment or to
access to public services or accommodations within the
legislative branch.
Earmark Statement
In accordance with clause 9 of rule XXI of the Rules of the
House of Representatives, H.R. 1187 does not contain any
congressional earmarks, limited tax benefits, or limited tariff
benefits as described in clauses 9(e), 9(f), and 9(g) of rule
XXI.
Duplication of Federal Programs
Pursuant to clause 3(c)(5) of rule XIII of the Rules of the
House of Representatives, the Committee states that no
provision of H.R. 1187 establishes or reauthorizes a program of
the Federal Government known to be duplicative of another
federal program, a program that was included in any report from
the Government Accountability Office to Congress pursuant to
section 21 of Public Law 111-139, or a program related to a
program identified in the most recent Catalog of Federal
Domestic Assistance.
Changes to Existing Law
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, H.R. 1187 as reported, are shown as follows:
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 (new matter is
printed in italics and existing law in which no change is
proposed is shown in roman):
SECURITIES EXCHANGE ACT OF 1934
TITLE I--REGULATION OF SECURITIES EXCHANGES
* * * * * * *
securities and exchange commission
Sec. 4. (a) There is hereby established a Securities and
Exchange Commission (hereinafter referred to as the
``Commission'') to be composed of five commissioners to be
appointed by the President by and with the advice and consent
of the Senate. Not more than three of such commissioners shall
be members of the same political party, and in making
appointments members of different political parties shall be
appointed alternately as nearly as may be practicable. No
commissioner shall engage in any other business, vocation, or
employment than that of serving as commissioner, nor shall any
commissioner participate, directly or indirectly, in any stock-
market operations or transactions of a character subject to
regulation by the Commission pursuant to this title. Each
commissioner shall hold office for a term of five years and
until his successor is appointed and has qualified, except that
he shall not so continue to serve beyond the expiration of the
next session of Congress subsequent to the expiration of said
fixed term of office, and except (1) any commissioner appointed
to fill a vacancy occurring prior to the expiration of the term
for which his predecessor was appointed shall be appointed for
the remainder of such term, and (2) the terms of office of the
commissioners first taking office after the enactment of this
title shall expire as designated by the President at the time
of nomination, one at the end of one year, one at the end of
two years, one at the end of three years, one at the end of
four years, and one at the end of five years, after the date of
the enactment of this title.
(b) Appointment and Compensation of Staff and Leasing
Authority.--
(1) Appointment and compensation.--The Commission
shall appoint and compensate officers, attorneys,
economists, examiners, and other employees in
accordance with section 4802 of title 5, United States
Code.
(2) Reporting of information.--In establishing and
adjusting schedules of compensation and benefits for
officers, attorneys, economists, examiners, and other
employees of the Commission under applicable provisions
of law, the Commission shall inform the heads of the
agencies referred to under section 1206 of the
Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 (12 U.S.C. 1833b) and Congress
of such compensation and benefits and shall seek to
maintain comparability with such agencies regarding
compensation and benefits.
(3) Leasing authority.--Nothwithstanding any other
provision of law, the Commission is authorized to enter
directly into leases for real property for office,
meeting, storage, and such other space as is necessary
to carry out its functions, and shall be exempt from
any General Services Administration space management
regulations or directives.
(c) Notwithstanding any other provision of law, in accordance
with regulations which the Commission shall prescribe to
prevent conflicts of interest, the Commission may accept
payment and reimbursement, in cash or in kind, from non-Federal
agencies, organizations, and individuals for travel,
subsistence, and other necessary expenses incurred by
Commission members and employees in attending meetings and
conferences concerning the functions or activities of the
Commission. Any payment or reimbursement accepted shall be
credited to the appropriated funds of the Commission. The
amount of travel, subsistence, and other necessary expenses for
members and employees paid or reimbursed under this subsection
may exceed per diem amounts established in official travel
regulations, but the Commission may include in its regulations
under this subsection a limitation on such amounts.
(d) Notwithstanding any other provision of law, former
employers of participants in the Commission's professional
fellows programs may pay such participants their actual
expenses for relocation to Washington, District of Columbia, to
facilitate their participation in such programs, and program
participants may accept such payments.
(e) Notwithstanding any other provision of law, whenever any
fee is required to be paid to the Commission pursuant to any
provision of the securities laws or any other law, the
Commission may provide by rule that such fee shall be paid in a
manner other than in cash and the Commission may also specify
the time that such fee shall be determined and paid relative to
the filing of any statement or document with the Commission.
(f) Reimbursement of Expenses for Assisting Foreign
Securities Authorities.--Notwithstanding any other provision of
law, the Commission may accept payment and reimbursement, in
cash or in kind, from a foreign securities authority, or made
on behalf of such authority, for necessary expenses incurred by
the Commission, its members, and employees in carrying out any
investigation pursuant to section 21(a)(2) of this title or in
providing any other assistance to a foreign securities
authority. Any payment or reimbursement accepted shall be
considered a reimbursement to the appropriated funds of the
Commission.
(g) Office of the Investor Advocate.--
(1) Office established.--There is established within
the Commission the Office of the Investor Advocate (in
this subsection referred to as the ``Office'').
(2) Investor advocate.--
(A) In general.--The head of the Office shall
be the Investor Advocate, who shall--
(i) report directly to the Chairman;
and
(ii) be appointed by the Chairman, in
consultation with the Commission, from
among individuals having experience in
advocating for the interests of
investors in securities and investor
protection issues, from the perspective
of investors.
(B) Compensation.--The annual rate of pay for
the Investor Advocate shall be equal to the
highest rate of annual pay for other senior
executives who report to the Chairman of the
Commission.
(C) Limitation on service.--An individual who
serves as the Investor Advocate may not be
employed by the Commission--
(i) during the 2-year period ending
on the date of appointment as Investor
Advocate; or
(ii) during the 5-year period
beginning on the date on which the
person ceases to serve as the Investor
Advocate.
(3) Staff of office.--The Investor Advocate, after
consultation with the Chairman of the Commission, may
retain or employ independent counsel, research staff,
and service staff, as the Investor Advocate deems
necessary to carry out the functions, powers, and
duties of the Office.
(4) Functions of the investor advocate.--The Investor
Advocate shall--
(A) assist retail investors in resolving
significant problems such investors may have
with the Commission or with self-regulatory
organizations;
(B) identify areas in which investors would
benefit from changes in the regulations of the
Commission or the rules of self-regulatory
organizations;
(C) identify problems that investors have
with financial service providers and investment
products;
(D) analyze the potential impact on investors
of--
(i) proposed regulations of the
Commission; and
(ii) proposed rules of self-
regulatory organizations registered
under this title; and
(E) to the extent practicable, propose to the
Commission changes in the regulations or orders
of the Commission and to Congress any
legislative, administrative, or personnel
changes that may be appropriate to mitigate
problems identified under this paragraph and to
promote the interests of investors.
(5) Access to documents.--The Commission shall ensure
that the Investor Advocate has full access to the
documents of the Commission and any self-regulatory
organization, as necessary to carry out the functions
of the Office.
(6) Annual reports.--
(A) Report on objectives.--
(i) In general.--Not later than June
30 of each year after 2010, the
Investor Advocate 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 on
the objectives of the Investor Advocate
for the following fiscal year.
(ii) Contents.--Each report required
under clause (i) shall contain full and
substantive analysis and explanation.
(B) Report on activities.--
(i) In general.--Not later than
December 31 of each year after 2010,
the Investor Advocate 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 on
the activities of the Investor Advocate
during the immediately preceding fiscal
year.
(ii) Contents.--Each report required
under clause (i) shall include--
(I) appropriate statistical
information and full and
substantive analysis;
(II) information on steps
that the Investor Advocate has
taken during the reporting
period to improve investor
services and the responsiveness
of the Commission and self-
regulatory organizations to
investor concerns;
(III) a summary of the most
serious problems encountered by
investors during the reporting
period;
(IV) an inventory of the
items described in subclause
(III) that includes--
(aa) identification
of any action taken by
the Commission or the
self-regulatory
organization and the
result of such action;
(bb) the length of
time that each item has
remained on such
inventory; and
(cc) for items on
which no action has
been taken, the reasons
for inaction, and an
identification of any
official who is
responsible for such
action;
(V) recommendations for such
administrative and legislative
actions as may be appropriate
to resolve problems encountered
by investors; and
(VI) any other information,
as determined appropriate by
the Investor Advocate.
(iii) Independence.--Each report
required under this paragraph shall be
provided directly to the Committees
listed in clause (i) without any prior
review or comment from the Commission,
any commissioner, any other officer or
employee of the Commission, or the
Office of Management and Budget.
(iv) Confidentiality.--No report
required under clause (i) may contain
confidential information.
(7) Regulations.--The Commission shall, by
regulation, establish procedures requiring a formal
response to all recommendations submitted to the
Commission by the Investor Advocate, not later than 3
months after the date of such submission.
(8) Ombudsman.--
(A) Appointment.--Not later than 180 days
after the date on which the first Investor
Advocate is appointed under paragraph
(2)(A)(i), the Investor Advocate shall appoint
an Ombudsman, who shall report directly to the
Investor Advocate.
(B) Duties.--The Ombudsman appointed under
subparagraph (A) shall--
(i) act as a liaison between the
Commission and any retail investor in
resolving problems that retail
investors may have with the Commission
or with self-regulatory organizations;
(ii) review and make recommendations
regarding policies and procedures to
encourage persons to present questions
to the Investor Advocate regarding
compliance with the securities laws;
and
(iii) establish safeguards to
maintain the confidentiality of
communications between the persons
described in clause (ii) and the
Ombudsman.
(C) Limitation.--In carrying out the duties
of the Ombudsman under subparagraph (B), the
Ombudsman shall utilize personnel of the
Commission to the extent practicable. Nothing
in this paragraph shall be construed as
replacing, altering, or diminishing the
activities of any ombudsman or similar office
of any other agency.
(D) Report.--The Ombudsman shall submit a
semiannual report to the Investor Advocate that
describes the activities and evaluates the
effectiveness of the Ombudsman during the
preceding year. The Investor Advocate shall
include the reports required under this section
in the reports required to be submitted by the
Inspector Advocate under paragraph (6).
(h) Examiners.--
(1) Division of trading and markets.--The Division of
Trading and Markets of the Commission, or any successor
organizational unit, shall have a staff of examiners
who shall--
(A) perform compliance inspections and
examinations of entities under the jurisdiction
of that Division; and
(B) report to the Director of that Division.
(2) Division of investment management.--The Division
of Investment Management of the Commission, or any
successor organizational unit, shall have a staff of
examiners who shall--
(A) perform compliance inspections and
examinations of entities under the jurisdiction
of that Division; and
(B) report to the Director of that Division.
(i) Securities and Exchange Commission Reserve Fund.--
(1) Reserve fund established.--There is established
in the Treasury of the United States a separate fund,
to be known as the ``Securities and Exchange Commission
Reserve Fund'' (referred to in this subsection as the
``Reserve Fund'').
(2) Reserve fund amounts.--
(A) In general.--Except as provided in
subparagraph (B), any registration fees
collected by the Commission under section 6(b)
of the Securities Act of 1933 (15 U.S.C.
77f(b)) or section 24(f) of the Investment
Company Act of 1940 (15 U.S.C. 80a-24(f)) shall
be deposited into the Reserve Fund.
(B) Limitations.--For any 1 fiscal year--
(i) the amount deposited in the Fund
may not exceed $50,000,000; and
(ii) the balance in the Fund may not
exceed $100,000,000.
(C) Excess fees.--Any amounts in excess of
the limitations described in subparagraph (B)
that the Commission collects from registration
fees under section 6(b) of the Securities Act
of 1933 (15 U.S.C. 77f(b)) or section 24(f) of
the Investment Company Act of 1940 (15 U.S.C.
80a-24(f)) shall be deposited in the General
Fund of the Treasury of the United States and
shall not be available for obligation by the
Commission.
(3) Use of amounts in reserve fund.--The Commission
may obligate amounts in the Reserve Fund, not to exceed
a total of $100,000,000 in any 1 fiscal year, as the
Commission determines is necessary to carry out the
functions of the Commission. Any amounts in the reserve
fund shall remain available until expended. Not later
than 10 days after the date on which the Commission
obligates amounts under this paragraph, the Commission
shall notify Congress of the date, amount, and purpose
of the obligation.
(4) Rule of construction.--Amounts collected and
deposited in the Reserve Fund shall not be construed to
be Government funds or appropriated monies and shall
not be subject to apportionment for the purpose of
chapter 15 of title 31, United States Code, or under
any other authority.
(j) Office of the Advocate for Small Business Capital
Formation.--
(1) Office established.--There is established within
the Commission the Office of the Advocate for Small
Business Capital Formation (hereafter in this
subsection referred to as the ``Office'').
(2) Advocate for small business capital formation.--
(A) In general.--The head of the Office shall
be the Advocate for Small Business Capital
Formation, who shall--
(i) report directly to the
Commission; and
(ii) be appointed by the Commission,
from among individuals having
experience in advocating for the
interests of small businesses and
encouraging small business capital
formation.
(B) Compensation.--The annual rate of pay for
the Advocate for Small Business Capital
Formation shall be equal to the highest rate of
annual pay for other senior executives who
report directly to the Commission.
(C) No current employee of the commission.--
An individual may not be appointed as the
Advocate for Small Business Capital Formation
if the individual is currently employed by the
Commission.
(3) Staff of office.--The Advocate for Small Business
Capital Formation, after consultation with the
Commission, may retain or employ independent counsel,
research staff, and service staff, as the Advocate for
Small Business Capital Formation determines to be
necessary to carry out the functions of the Office.
(4) Functions of the advocate for small business
capital formation.--The Advocate for Small Business
Capital Formation shall--
(A) assist small businesses and small
business investors in resolving significant
problems such businesses and investors may have
with the Commission or with self-regulatory
organizations;
(B) identify areas in which small businesses
and small business investors would benefit from
changes in the regulations of the Commission or
the rules of self-regulatory organizations;
(C) identify problems that small businesses
have with securing access to capital, including
any unique challenges to minority-owned small
businesses, women-owned small businesses, and
small businesses affected by hurricanes or
other natural disasters;
(D) analyze the potential impact on small
businesses and small business investors of--
(i) proposed regulations of the
Commission that are likely to have a
significant economic impact on small
businesses and small business capital
formation; and
(ii) proposed rules that are likely
to have a significant economic impact
on small businesses and small business
capital formation of self-regulatory
organizations registered under this
title;
(E) conduct outreach to small businesses and
small business investors, including through
regional roundtables, in order to solicit views
on relevant capital formation issues;
(F) to the extent practicable, propose to the
Commission changes in the regulations or orders
of the Commission and to Congress any
legislative, administrative, or personnel
changes that may be appropriate to mitigate
problems identified under this paragraph and to
promote the interests of small businesses and
small business investors;
(G) consult with the Investor Advocate on
proposed recommendations made under
subparagraph (F); and
(H) advise the Investor Advocate on issues
related to small businesses and small business
investors.
(5) Access to documents.--The Commission shall ensure
that the Advocate for Small Business Capital Formation
has full access to the documents and information of the
Commission and any self-regulatory organization, as
necessary to carry out the functions of the Office.
(6) Annual report on activities.--
(A) In general.--Not later than December 31
of each year after 2015, the Advocate for Small
Business Capital Formation 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 on the activities of
the Advocate for Small Business Capital
Formation during the immediately preceding
fiscal year.
(B) Contents.--Each report required under
subparagraph (A) shall include--
(i) appropriate statistical
information and full and substantive
analysis;
(ii) information on steps that the
Advocate for Small Business Capital
Formation has taken during the
reporting period to improve small
business services and the
responsiveness of the Commission and
self-regulatory organizations to small
business and small business investor
concerns;
(iii) a summary of the most serious
issues encountered by small businesses
and small business investors, including
any unique issues encountered by
minority-owned small businesses, women-
owned small businesses, and small
businesses affected by hurricanes or
other natural disasters and their
investors, during the reporting period;
(iv) an inventory of the items
summarized under clause (iii)
(including items summarized under such
clause for any prior reporting period
on which no action has been taken or
that have not been resolved to the
satisfaction of the Advocate for Small
Business Capital Formation as of the
beginning of the reporting period
covered by the report) that includes--
(I) identification of any
action taken by the Commission
or the self-regulatory
organization and the result of
such action;
(II) the length of time that
each item has remained on such
inventory; and
(III) for items on which no
action has been taken, the
reasons for inaction, and an
identification of any official
who is responsible for such
action;
(v) recommendations for such changes
to the regulations, guidance and orders
of the Commission and such legislative
actions as may be appropriate to
resolve problems with the Commission
and self-regulatory organizations
encountered by small businesses and
small business investors and to
encourage small business capital
formation; and
(vi) any other information, as
determined appropriate by the Advocate
for Small Business Capital Formation.
(C) Confidentiality.--No report required by
subparagraph (A) may contain confidential
information.
(D) Independence.--Each report required under
subparagraph (A) shall be provided directly to
the committees of Congress listed in such
subparagraph without any prior review or
comment from the Commission, any commissioner,
any other officer or employee of the
Commission, or the Office of Management and
Budget.
(7) Regulations.--The Commission shall establish
procedures requiring a formal response to all
recommendations submitted to the Commission by the
Advocate for Small Business Capital Formation, not
later than 3 months after the date of such submission.
(8) Government-business forum on small business
capital formation.--The Advocate for Small Business
Capital Formation shall be responsible for planning,
organizing, and executing the annual Government-
Business Forum on Small Business Capital Formation
described in section 503 of the Small Business
Investment Incentive Act of 1980 (15 U.S.C. 80c-1).
(9) Rule of construction.--Nothing in this subsection
may be construed as replacing or reducing the
responsibilities of the Investor Advocate with respect
to small business investors.
(k) Sustainable Finance Advisory Committee.--
(1) Establishment.--The Commission shall establish a
permanent advisory committee to be called the
``Sustainable Finance Advisory Committee'' (in this
subsection referred to as the ``Committee'').
(2) Duties of committee.--The Committee shall--
(A) submit a report to the Commission not
later than 18 months after the date of the
first meeting of the Committee that--
(i) identifies the challenges and
opportunities for investors associated
with sustainable finance; and
(ii) recommends policy changes to
facilitate the flow of capital towards
sustainable investments, in particular
environmentally sustainable
investments;
(B) when solicited, advise the Commission on
sustainable finance; and
(C) communicate with individuals and entities
with an interest in sustainable finance.
(3) Membership.--
(A) Members.--
(i) In general.--The Committee shall
consist of no more than 20 members who
shall each serve for one four-year
term.
(ii) Representation.--Each member
shall represent individuals and
entities with an interest in
sustainable finance, such as--
(I) experts on sustainable
finance;
(II) operators of financial
infrastructure;
(III) entities that provide
analysis, data, or
methodologies that facilitate
sustainable finance;
(IV) insurance companies,
pension funds, asset managers,
depository institutions, or
credit unions; or
(V) other financial
institutions that intermediate
investments in sustainable
finance or manage risks related
to sustainable development.
(iii) Representation of interests.--A
member may not represent a single
individual or entity and shall
represent types of individuals and
entities with similar interests in
sustainable finance.
(B) Selection.--
(i) In general.--The Commission
shall--
(I) publish criteria for
selection of members on the
website of the Commission and
in the Federal Register; and
(II) solicit applications for
membership on the website of
the Commission and in the
Federal Register.
(ii) Equal share.--From the
individuals who submit applications for
membership, each Commissioner of the
Commission shall select an equal number
of the members of the Committee.
(C) Pay.--Members may not receive pay by
reason of their service on the Committee but
may receive travel or transportation expenses
in accordance with applicable provisions under
subchapter I of chapter 57 of title 5, United
States Code.
(D) Member transparency.--The name of each
member and the types of individuals and
entities that such member represents shall be
published on the website of the Commission.
(E) Staff.--The Committee shall be supported
by staff from the Office of the Investor
Advocate of the Commission that are dedicated
to environmental, social and governance (in
this subsection referred to as ``ESG'') issues.
(F) Authorization of appropriation.--There
are authorized to be appropriated such sums as
are necessary to finance costs associated with
staff dedicated to ESG issues in the Office of
the Investor Advocate of the Commission.
(4) Sustainable finance.--For the purposes of this
subsection, the term ``sustainable finance'' means the
provision of finance with respect to investments taking
into account environmental, social, and governance
considerations.
(5) SEC response.--The Commission shall, not later
than 6 months after the date on which the Committee
submits a report to the Commission pursuant to
paragraph (2)(A), publish a response to such report.
* * * * * * *
proxies
Sec. 14. (a)(1) It shall be unlawful for any person, by the
use of the mails or by any means or instrumentality of
interstate commerce or of any facility of a national securities
exchange or otherwise, in contravention of such rules and
regulations as the Commission may prescribe as necessary or
appropriate in the public interest or for the protection of
investors, to solicit or to permit the use of his name to
solicit any proxy or consent or authorization in respect of any
security (other than an exempted security) registered pursuant
to section 12 of this title.
(2) The rules and regulations prescribed by the Commission
under paragraph (1) may include--
(A) a requirement that a solicitation of proxy,
consent, or authorization by (or on behalf of) an
issuer include a nominee submitted by a shareholder to
serve on the board of directors of the issuer; and
(B) a requirement that an issuer follow a certain
procedure in relation to a solicitation described in
subparagraph (A).
(b)(1) It shall be unlawful for any member of a national
securities exchange, or any broker or dealer registered under
this title, or any bank, association, or other entity that
exercises fiduciary powers, in contravention of such rules and
regulations as the Commission may prescribe as necessary or
appropriate in the public interest or for the protection of
investors, to give, or to refrain from giving a proxy, consent,
authorization, or information statement in respect of any
security registered pursuant to section 12 of this title, or
any security issued by an investment company registered under
the Investment Company Act of 1940, and carried for the account
of a customer.
(2) With respect to banks, the rules and regulations
prescribed by the Commission under paragraph (1) shall not
require the disclosure of the names of beneficial owners of
securities in an account held by the bank on the date of
enactment of this paragraph unless the beneficial owner
consents to the disclosure. The provisions of this paragraph
shall not apply in the case of a bank which the Commission
finds has not made a good faith effort to obtain such consent
from such beneficial owners.
(c) Unless proxies, consents, or authorizations in respect of
a security registered pursuant to section 12 of this title, or
a security issued by an investment company registered under the
Investment Company Act of 1940, are solicited by or on behalf
of the management of the issuer from the holders of record of
such security in accordance with the rules and regulations
prescribed under subsection (a) of this section, prior to any
annual or other meeting of the holders of such security, such
issuer shall, in accordance with rules and regulations
prescribed by the Commission, file with the Commission and
transmit to all holders of record of such security information
substantially equivalent to the information which would be
required to be transmitted if a solicitation were made, but no
information shall be required to be filed or transmitted
pursuant to this subsection before July 1, 1964.
(d)(1) It shall be unlawful for any person, directly or
indirectly, by use of the mails or by any means or
instrumentality of interstate commerce or of any facility of a
national securities exchange or otherwise, to make a tender
offer for, or a request or invitation for tenders of, any class
of any equity security which is registered pursuant to section
12 of this title, or any equity security of an insurance
company which would have been required to be so registered
except for the exemption contained in section 12(g)(2)(G) of
this title, or any equity security issued by a closed-end
investment company registered under the Investment Company Act
of 1940, if, after consummation thereof, such person would,
directly or indirectly, be the beneficial owner of more than 5
per centum of such class, unless at the time copies of the
offer or request or invitation are first published or sent or
given to security holders such person has filed with the
Commission a statement containing such of the information
specified in section 13(d) of this title, and such additional
information as the Commission may by rules and regulations
prescribe as necessary or appropriate in the public interest or
for the protection of investors. All requests or invitations
for tenders or advertisements making a tender offer or
requesting or inviting tenders, of such a security shall be
filed as a part of such statement and shall contain such of the
information contained in such statement as the Commission may
by rules and regulations prescribe. Copies of any additional
material soliciting or requesting such tender offers subsequent
to the initial solicitation or request shall contain such
information as the Commission may by rules and regulations
prescribe as necessary or appropriate in the public interest or
for the protection of investors, and shall be filed with the
Commission not later than the time copies of such material are
first published or sent or given to security holders. Copies of
all statements, in the form in which such material is furnished
to security holders and the Commission, shall be sent to the
issuer not later than the date such material is first published
or sent or given to any security holders.
(2) When two or more persons act as a partnership, limited
partnership, syndicate, or other group for the purpose of
acquiring, holding, or disposing of securities of an issuer,
such syndicate or group shall be deemed a ``person'' for
purposes of this subsection.
(3) In determining, for purposes of this subsection, any
percentage of a class of any security, such class shall be
deemed to consist of the amount of the outstanding securities
of such class, exclusive of any securities of such class held
by or for the account of the issuer or a subsidiary of the
issuer.
(4) Any solicitation or recommendation to the holders of such
a security to accept or reject a tender offer or request or
invitation for tenders shall be made in accordance with such
rules and regulations as the Commission may prescribe as
necessary or appropriate in the public interest or for the
protection of investors.
(5) Securities deposited pursuant to a tender offer or
request or invitation for tenders may be withdrawn by or on
behalf of the depositor at any time until the expiration of
seven days after the time definitive copies of the offer or
request or invitation are first published or sent or given to
security holders, and at any time after sixty days from the
date of the original tender offer or request or invitation,
except as the Commission may otherwise prescribe by rules,
regulations, or order as necessary or appropriate in the public
interest or for the protection of investors.
(6) Where any person makes a tender offer, or request or
invitation for tenders, for less than all the outstanding
equity securities of a class, and where a greater number of
securities is deposited pursuant thereto within ten days after
copies of the offer or request or invitation are first
published or sent or given to security holders than such person
is bound or willing to take up and pay for, the securities
taken up shall be taken up as nearly as may be pro rata,
disregarding fractions, according to the number of securities
deposited by each depositor. The provisions of this subsection
shall also apply to securities deposited within ten days after
notice of an increase in the consideration offered to security
holders, as described in paragraph (7), is first published or
sent or given to security holders.
(7) Where any person varies the terms of a tender offer or
request or invitation for tenders before the expiration thereof
by increasing the consideration offered to holders of such
securities, such person shall pay the increased consideration
to each security holder whose securities are taken up and paid
for pursuant to the tender offer or request or invitation for
tenders whether or not such securities have been taken up by
such person before the variation of the tender offer or request
or invitation.
(8) The provisions of this subsection shall not apply to any
offer for, or request or invitation for tenders of, any
security--
(A) if the acquisition of such security, together
with all other acquisitions by the same person of
securities of the same class during the preceding
twelve months, would not exceed 2 per centum of that
class;
(B) by the issuer of such security; or
(C) which the Commission, by rules or regulations or
by order, shall exempt from the provisions of this
subsection as not entered into for the purpose of, and
not having the effect of, changing or influencing the
control of the issuer or otherwise as not comprehended
within the purposes of this subsection.
(e) It shall be unlawful for any person to make any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements made, in the light of
the circumstances under which they are made, not misleading, or
to engage in any fraudulent, deceptive, or manipulative acts or
practices, in connection with any tender offer or request or
invitation for tenders, or any solicitation of security holders
in opposition to or in favor of any such offer, request, or
invitation. The Commission shall, for the purposes of this
subsection, by rules and regulations define, and prescribe
means reasonably designed to prevent, such acts and practices
as are fraudulent, deceptive, or manipulative.
(f) If, pursuant to any arrangement or understanding with the
person or persons acquiring securities in a transaction subject
to subsection (d) of this section or subsection (d) of section
13 of this title, any persons are to be elected or designated
as directors of the issuer, otherwise than at a meeting of
security holders, and the persons so elected or designated will
constitute a majority of the directors of the issuer, then,
prior to the time any such person takes office as a director,
and in accordance with rules and regulations prescribed by the
Commission, the issuer shall file with the Commission, and
transmit to all holders of record of securities of the issuer
who would be entitled to vote at a meeting for election of
directors, information substantially equivalent to the
information which would be required by subsection (a) or (c) of
this section to be transmitted if such person or persons were
nominees for election as directors at a meeting of such
security holders.
(g)(1)(A) At the time of filing such preliminary proxy
solicitation material as the Commission may require by rule
pursuant to subsection (a) of this section that concerns an
acquisition, merger, consolidation, or proposed sale or other
disposition of substantially all the assets of a company, the
person making such filing, other than a company registered
under the Investment Company Act of 1940, shall pay to the
Commission the following fees:
(i) for preliminary proxy solicitation material
involving an acquisition, merger, or consolidation, if
there is a proposed payment of cash or transfer of
securities or property to shareholders, a fee at a rate
that, subject to paragraph (4), is equal to $92 per
$1,000,000 of such proposed payment, or of the value of
such securities or other property proposed to be
transferred; and
(ii) for preliminary proxy solicitation material
involving a proposed sale or other disposition of
substantially all of the assets of a company, a fee at
a rate that, subject to paragraph (4), is equal to $92
per $1,000,000 of the cash or of the value of any
securities or other property proposed to be received
upon such sale or disposition.
(B) The fee imposed under subparagraph (A) shall be reduced
with respect to securities in an amount equal to any fee paid
to the Commission with respect to such securities in connection
with the proposed transaction under section 6(b) of the
Securities Act of 1933 (15 U.S.C. 77f(b)), or the fee paid
under that section shall be reduced in an amount equal to the
fee paid to the Commission in connection with such transaction
under this subsection. Where two or more companies involved in
an acquisition, merger, consolidation, sale, or other
disposition of substantially all the assets of a company must
file such proxy material with the Commission, each shall pay a
proportionate share of such fee.
(2) At the time of filing such preliminary information
statement as the Commission may require by rule pursuant to
subsection (c) of this section, the issuer shall pay to the
Commission the same fee as required for preliminary proxy
solicitation material under paragraph (1) of this subsection.
(3) At the time of filing such statement as the Commission
may require by rule pursuant to subsection (d)(1) of this
section, the person making the filing shall pay to the
Commission a fee at a rate that, subject to paragraph (4), is
equal to $92 per $1,000,000 of the aggregate amount of cash or
of the value of securities or other property proposed to be
offered. The fee shall be reduced with respect to securities in
an amount equal to any fee paid with respect to such securities
in connection with the proposed transaction under section 6(b)
of the Securities Act of 1933 (15 U.S.C. 77f(b)), or the fee
paid under that section shall be reduced in an amount equal to
the fee paid to the Commission in connection with such
transaction under this subsection.
(4) Annual adjustment.--For each fiscal year, the
Commission shall by order adjust the rate required by
paragraphs (1) and (3) for such fiscal year to a rate
that is equal to the rate (expressed in dollars per
million) that is applicable under section 6(b) of the
Securities Act of 1933 (15 U.S.C. 77f(b)) for such
fiscal year.
(5) Fee collection.--Fees collected pursuant to this
subsection for fiscal year 2012 and each fiscal year
thereafter shall be deposited and credited as general
revenue of the Treasury and shall not be available for
obligation.
(6) Review; effective date; publication.--In
exercising its authority under this subsection, the
Commission shall not be required to comply with the
provisions of section 553 of title 5, United States
Code. An adjusted rate prescribed under paragraph (4)
shall be published and take effect in accordance with
section 6(b) of the Securities Act of 1933 (15 U.S.C.
77f(b)).
(7) Pro rata application.--The rates per $1,000,000
required by this subsection shall be applied pro rata
to amounts and balances of less than $1,000,000.
(8) Notwithstanding any other provision of law, the
Commission may impose fees, charges, or prices for matters not
involving any acquisition, merger, consolidation, sale, or
other disposition of assets described in this subsection, as
authorized by section 9701 of title 31, United States Code, or
otherwise.
(h) Proxy Solicitations and Tender Offers in Connection With
Limited Partnership Rollup Transactions.--
(1) Proxy rules to contain special provisions.--It
shall be unlawful for any person to solicit any proxy,
consent, or authorization concerning a limited
partnership rollup transaction, or to make any tender
offer in furtherance of a limited partnership rollup
transaction, unless such transaction is conducted in
accordance with rules prescribed by the Commission
under subsections (a) and (d) as required by this
subsection. Such rules shall--
(A) permit any holder of a security that is
the subject of the proposed limited partnership
rollup transaction to engage in preliminary
communications for the purpose of determining
whether to solicit proxies, consents, or
authorizations in opposition to the proposed
limited partnership rollup transaction, without
regard to whether any such communication would
otherwise be considered a solicitation of
proxies, and without being required to file
soliciting material with the Commission prior
to making that determination, except that--
(i) nothing in this subparagraph
shall be construed to limit the
application of any provision of this
title prohibiting, or reasonably
designed to prevent, fraudulent,
deceptive, or manipulative acts or
practices under this title; and
(ii) any holder of not less than 5
percent of the outstanding securities
that are the subject of the proposed
limited partnership rollup transaction
who engages in the business of buying
and selling limited partnership
interests in the secondary market shall
be required to disclose such ownership
interests and any potential conflicts
of interests in such preliminary
communications;
(B) require the issuer to provide to holders
of the securities that are the subject of the
limited partnership rollup transaction such
list of the holders of the issuer's securities
as the Commission may determine in such form
and subject to such terms and conditions as the
Commission may specify;
(C) prohibit compensating any person
soliciting proxies, consents, or authorizations
directly from security holders concerning such
a limited partnership rollup transaction--
(i) on the basis of whether the
solicited proxy, consent, or
authorization either approves or
disapproves the proposed limited
partnership rollup transaction; or
(ii) contingent on the approval,
disapproval, or completion of the
limited partnership rollup transaction;
(D) set forth disclosure requirements for
soliciting material distributed in connection
with a limited partnership rollup transaction,
including requirements for clear, concise, and
comprehensible disclosure with respect to--
(i) any changes in the business plan,
voting rights, form of ownership
interest, or the compensation of the
general partner in the proposed limited
partnership rollup transaction from
each of the original limited
partnerships;
(ii) the conflicts of interest, if
any, of the general partner;
(iii) whether it is expected that
there will be a significant difference
between the exchange values of the
limited partnerships and the trading
price of the securities to be issued in
the limited partnership rollup
transaction;
(iv) the valuation of the limited
partnerships and the method used to
determine the value of the interests of
the limited partners to be exchanged
for the securities in the limited
partnership rollup transaction;
(v) the differing risks and effects
of the limited partnership rollup
transaction for investors in different
limited partnerships proposed to be
included, and the risks and effects of
completing the limited partnership
rollup transaction with less than all
limited partnerships;
(vi) the statement by the general
partner required under subparagraph
(E);
(vii) such other matters deemed
necessary or appropriate by the
Commission;
(E) require a statement by the general
partner as to whether the proposed limited
partnership rollup transaction is fair or
unfair to investors in each limited
partnership, a discussion of the basis for that
conclusion, and an evaluation and a description
by the general partner of alternatives to the
limited partnership rollup transaction, such as
liquidation;
(F) provide that, if the general partner or
sponsor has obtained any opinion (other than an
opinion of counsel), appraisal, or report that
is prepared by an outside party and that is
materially related to the limited partnership
rollup transaction, such soliciting materials
shall contain or be accompanied by clear,
concise, and comprehensible disclosure with
respect to--
(i) the analysis of the transaction,
scope of review, preparation of the
opinion, and basis for and methods of
arriving at conclusions, and any
representations and undertakings with
respect thereto;
(ii) the identity and qualifications
of the person who prepared the opinion,
the method of selection of such person,
and any material past, existing, or
contemplated relationships between the
person or any of its affiliates and the
general partner, sponsor, successor, or
any other affiliate;
(iii) any compensation of the
preparer of such opinion, appraisal, or
report that is contingent on the
transaction's approval or completion;
and
(iv) any limitations imposed by the
issuer on the access afforded to such
preparer to the issuer's personnel,
premises, and relevant books and
records;
(G) provide that, if the general partner or
sponsor has obtained any opinion, appraisal, or
report as described in subparagraph (F) from
any person whose compensation is contingent on
the transaction's approval or completion or who
has not been given access by the issuer to its
personnel and premises and relevant books and
records, the general partner or sponsor shall
state the reasons therefor;
(H) provide that, if the general partner or
sponsor has not obtained any opinion on the
fairness of the proposed limited partnership
rollup transaction to investors in each of the
affected partnerships, such soliciting
materials shall contain or be accompanied by a
statement of such partner's or sponsor's
reasons for concluding that such an opinion is
not necessary in order to permit the limited
partners to make an informed decision on the
proposed transaction;
(I) require that the soliciting material
include a clear, concise, and comprehensible
summary of the limited partnership rollup
transaction (including a summary of the matters
referred to in clauses (i) through (vii) of
subparagraph (D) and a summary of the matter
referred to in subparagraphs (F), (G), and
(H)), with the risks of the limited partnership
rollup transaction set forth prominently in the
fore part thereof;
(J) provide that any solicitation or offering
period with respect to any proxy solicitation,
tender offer, or information statement in a
limited partnership rollup transaction shall be
for not less than the lesser of 60 calendar
days or the maximum number of days permitted
under applicable State law; and
(K) contain such other provisions as the
Commission determines to be necessary or
appropriate for the protection of investors in
limited partnership rollup transactions.
(2) Exemptions.--The Commission may, consistent with
the public interest, the protection of investors, and
the purposes of this title, exempt by rule or order any
security or class of securities, any transaction or
class of transactions, or any person or class of
persons, in whole or in part, conditionally or
unconditionally, from the requirements imposed pursuant
to paragraph (1) or from the definition contained in
paragraph (4).
(3) Effect on commission authority.--Nothing in this
subsection limits the authority of the Commission under
subsection (a) or (d) or any other provision of this
title or precludes the Commission from imposing, under
subsection (a) or (d) or any other provision of this
title, a remedy or procedure required to be imposed
under this subsection.
(4) Definition of limited partnership rollup
transaction.--Except as provided in paragraph (5), as
used in this subsection, the term ``limited partnership
rollup transaction'' means a transaction involving the
combination or reorganization of one or more limited
partnerships, directly or indirectly, in which--
(A) some or all of the investors in any of
such limited partnerships will receive new
securities, or securities in another entity,
that will be reported under a transaction
reporting plan declared effective before the
date of enactment of this subsection by the
Commission under section 11A;
(B) any of the investors' limited partnership
securities are not, as of the date of filing,
reported under a transaction reporting plan
declared effective before the date of enactment
of this subsection by the Commission under
section 11A;
(C) investors in any of the limited
partnerships involved in the transaction are
subject to a significant adverse change with
respect to voting rights, the term of existence
of the entity, management compensation, or
investment objectives; and
(D) any of such investors are not provided an
option to receive or retain a security under
substantially the same terms and conditions as
the original issue.
(5) Exclusions from definition.--Notwithstanding
paragraph (4), the term ``limited partnership rollup
transaction'' does not include--
(A) a transaction that involves only a
limited partnership or partnerships having an
operating policy or practice of retaining cash
available for distribution and reinvesting
proceeds from the sale, financing, or
refinancing of assets in accordance with such
criteria as the Commission determines
appropriate;
(B) a transaction involving only limited
partnerships wherein the interests of the
limited partners are repurchased, recalled, or
exchanged in accordance with the terms of the
preexisting limited partnership agreements for
securities in an operating company specifically
identified at the time of the formation of the
original limited partnership;
(C) a transaction in which the securities to
be issued or exchanged are not required to be
and are not registered under the Securities Act
of 1933;
(D) a transaction that involves only issuers
that are not required to register or report
under section 12, both before and after the
transaction;
(E) a transaction, except as the Commission
may otherwise provide by rule for the
protection of investors, involving the
combination or reorganization of one or more
limited partnerships in which a non-affiliated
party succeeds to the interests of a general
partner or sponsor, if--
(i) such action is approved by not
less than 66\2/3\ percent of the
outstanding units of each of the
participating limited partnerships; and
(ii) as a result of the transaction,
the existing general partners will
receive only compensation to which they
are entitled as expressly provided for
in the preexisting limited partnership
agreements; or
(F) a transaction, except as the Commission
may otherwise provide by rule for the
protection of investors, in which the
securities offered to investors are securities
of another entity that are reported under a
transaction reporting plan declared effective
before the date of enactment of this subsection
by the Commission under section 11A, if--
(i) such other entity was formed, and
such class of securities was reported
and regularly traded, not less than 12
months before the date on which
soliciting material is mailed to
investors; and
(ii) the securities of that entity
issued to investors in the transaction
do not exceed 20 percent of the total
outstanding securities of the entity,
exclusive of any securities of such
class held by or for the account of the
entity or a subsidiary of the entity.
(i) Disclosure of Pay Versus Performance.--The Commission
shall, by rule, require each issuer to disclose in any proxy or
consent solicitation material for an annual meeting of the
shareholders of the issuer a clear description of any
compensation required to be disclosed by the issuer under
section 229.402 of title 17, Code of Federal Regulations (or
any successor thereto), including, for any issuer other than an
emerging growth company, information that shows the
relationship between executive compensation actually paid and
the financial performance of the issuer, taking into account
any change in the value of the shares of stock and dividends of
the issuer and any distributions. The disclosure under this
subsection may include a graphic representation of the
information required to be disclosed.
(j) Disclosure of Hedging by Employees and Directors.--The
Commission shall, by rule, require each issuer to disclose in
any proxy or consent solicitation material for an annual
meeting of the shareholders of the issuer whether any employee
or member of the board of directors of the issuer, or any
designee of such employee or member, is permitted to purchase
financial instruments (including prepaid variable forward
contracts, equity swaps, collars, and exchange funds) that are
designed to hedge or offset any decrease in the market value of
equity securities--
(1) granted to the employee or member of the board of
directors by the issuer as part of the compensation of
the employee or member of the board of directors; or
(2) held, directly or indirectly, by the employee or
member of the board of directors.
(k) ESG Disclosures.--
(1) In general.--Each issuer the securities of which
are registered under section 12 or that is required to
file annual reports under section 15(d) shall disclose
in any proxy or consent solicitation material for an
annual meeting of the shareholders--
(A) a clear description of the views of the
issuer about the link between ESG metrics and
the long-term business strategy of the issuer;
and
(B) a description of any process the issuer
uses to determine the impact of ESG metrics on
the long-term business strategy of the issuer.
(2) ESG metrics defined.--In this subsection, the
term ``ESG metrics'' has the meaning given the term in
part 210 of title 17, Code of Federal Regulations as
amended pursuant to section 3(b) of the ESG Disclosure
Simplification Act of 2021.
* * * * * * *
MINORITY VIEWS
Committee Republicans believe information that is useful to
investment decisions should be disclosed to the public.
Unfortunately, H.R. 1187, the ESG Disclosure Simplification Act
of 2021 is yet another Democrat mandatory disclosure bill that
will not provide useful information to investors, but will
instead be costly for many public companies.
This bill is an attempt by the Democrats to expand the
jurisdiction of the U.S. Securities and Exchange Commission
(SEC) over social policy and use our securities laws to push a
left-wing partisan agenda. Committee Democrats have long called
for a one-size-fits-all set of disclosure requirements for
public companies on environmental, social, and governance
issues. Like so many of the Democrat-sponsored mandatory
disclosure bills, the bill has a greater appeal to social
activists and ``woke'' corporations than Main Street investors.
The Securities Exchange Act of 1934 currently requires
public companies to file annual reports with the SEC to
publicly disclose information that investors would find
important to making investment decisions. If ESG-related
information is material to the investors of a public company,
those companies are already required to make those disclosures
under current law. Under H.R. 1187, the SEC would be forced to
create ``ESG metrics'' that will be ``de facto material'' for
the purposes of disclosures under the Securities Exchange Act
of 1934 and the Securities Act of 1933.
H.R. 1187's approach is problematic because:
The materiality standard has served as the basis
for America's public company disclosure regime for
approximately eight decades. This standard has helped the U.S.
public markets become the best in the world.
Congressional meddling in what constitutes
``material'' information expands the concept of materiality
beyond its historical scope, which will bury investors in
unnecessary or unhelpful disclosures and lead to poor investing
outcomes.
H.R. 1187 fails to define ``ESG metrics'' and
authorizes the Democrat-led SEC to determine the metrics.
Congress' inability to develop metrics is indicative of the
difficulties--and, in many cases, the inappropriateness--of
choosing which environmental, social, and/or governance issues
are appropriate for a company to disclose. SEC Commissioner
Hester Peirce highlighted this difficulty stating: ``[t]he
collection of issues that gets dropped into the ESG bucket is
diverse, but many of them simply cannot be reduced to a single,
standardizable score.''
To the extent that a public company is otherwise
engaging in lawful activity, but not in ways that comport well
with the ``ESG metrics''' developed by the SEC, activists could
use the disclosures to name and shame those companies. This
approach makes the public markets less attractive to all
companies.
Moreover, H.R. 1187, as amended from the 116th Congress,
includes inaccurate findings that state, the ``Commission does
not require companies to disclose information related to ESG
matters [or] adhere to standards for disclosing such
information.'' This is factually incorrect.
Regulation S-K governs non-financial statement disclosure
requirements and includes a number of requirements that can
implicate climate risk if such risks are deemed material to
investors as well as many line-item corporate governance
disclosure requirements, including board composition, executive
compensation, and audit committee structure.
In sum, H.R. 1187 simply adds unnecessary, costly, and
potentially confusing disclosures for companies that do not
need to make them. This will only discourage companies from
going or staying public, which ultimately means fewer
investment options for Main Street Americans saving for their
children's education or retirement. Instead of attacking
American companies and reducing investment options for
Americans, Committee Republicans want to support American
businesses and everyday Americans trying to save their hard-
earned money.
For these reasons, Committee Republicans are opposed to the
bill.
Patrick T. McHenry.
Bill Posey.
Bill Huizenga.
Andy Barr.
J. French Hill.
Lee M. Zeldin.
Alexander X. Mooney.
Ted Budd.
Trey Hollingsworth.
John W. Rose (TN).
Lance Gooden.
Van Taylor.
Frank D. Lucas.
Blaine Luetkemeyer.
Ann Wagner.
Roger Williams (TX).
Tom Emmer.
Barry Loudermilk.
Warren Davidson.
David Kustoff.
Anthony Gonzalez (OH).
Bryan Steil.
William R. Timmons IV.
[all]