[House Report 118-326]
[From the U.S. Government Publishing Office]


118th Congress    }                                      {      Report
                        HOUSE OF REPRESENTATIVES
 1st Session      }                                      {     118-326

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



 
                     BUSINESSES OVER ACTIVISTS ACT

                                _______
                                

 December 19, 2023.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

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

                              R E P O R T

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 4655]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 4655) to amend the Securities Exchange Act of 
1934 to prohibit the Securities and Exchange Commission from 
compelling the inclusion or discussion of shareholder proposals 
or proxy or consent solicitation materials, and for other 
purposes, having considered the same, reports favorably thereon 
with an amendment and recommends that the bill as amended do 
pass.
    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 ``Businesses Over Activists Act''.

SEC. 2. LIMITATION WITH RESPECT TO COMPELLING THE INCLUSION OR 
                    DISCUSSION OF SHAREHOLDER PROPOSALS.

  Section 14(a) of the Securities Exchange Act of 1934 (15 U.S.C. 
78n(a)) is amended by adding at the end the following:
          ``(3) Limitation with respect to compelling inclusion or 
        discussion of shareholder proposals.--Except as provided in 
        paragraph (2), the Commission may not compel an issuer to 
        include in a proxy statement of the issuer--
                  ``(A) any shareholder proposal; or
                  ``(B) any discussion (either from the issuer or 
                otherwise) related to a shareholder proposal contained 
                in the proxy statement.
          ``(4) Rule of construction relating to state authority.--
        Nothing in this Act or any other securities law shall be 
        construed to provide the Commission the authority to preempt 
        the State regulation of shareholder proposals or proxy or 
        consent solicitation materials.''.

                          Purpose and Summary

    Introduced on July 14, 2023, by Representative Ralph 
Norman, H.R. 4655, the Businesses Over Activists Act, would 
prohibit the Securities and Exchange Commission (SEC) from 
compelling the inclusion or discussion of shareholder proposals 
and clarify that the agency does not have the authority to 
override state regulation of shareholder proposals or proxy 
materials.

                  Background and Need for Legislation

    The SEC's regulatory authority over proxy solicitations is 
limited by the Securities Exchange Act of 1934 (``Exchange 
Act''). Section 14 of the Exchange Act empowers the SEC to 
prevent deceptive or insufficient disclosures in proxy 
solicitations aimed at obtaining authorization for corporate 
actions. Therefore, it lacks the authority to mandate the 
inclusion of shareholder proposals in corporate proxy 
statements. Any expansion of the SEC's powers requires explicit 
congressional action, as exemplified by Dodd-Frank, which 
granted the SEC the authority to mandate the inclusion of 
shareholder nominees for the board in proxy statements. 
However, Congress has yet to take similar action concerning 
shareholder proposals.
    Outside the SEC's limited authority, corporate governance 
falls under state law. In states such as Delaware, shareholders 
have the right to present proposals for shareholder voting 
during annual meetings. State law does not compel companies to 
include these proposals on their ballots.
    The SEC's practice of mandating the inclusion of particular 
shareholder proposals on public company proxy ballots exceeds 
its statutory authority. The federal government cannot force 
companies into discussions regarding politically motivated 
proposals and mandate their subsidization of activist speech by 
publishing these proposals in their proxy materials. H.R. 4655 
would prevent the SEC from compelling companies to include any 
shareholder proposal on their proxy ballots, ensuring companies 
and their shareholders from being forced to deliberate 
irrelevant and politically motivated proposals.

                                Hearing

    Pursuant to clause 3(c)(6) of rule XIII, the following 
hearing was used to develop H.R. 4655: The Subcommittee on 
Capital Markets of the Committee on Financial Services held a 
hearing on July 13, 2023, titled ``Reforming the Proxy Process 
to Safeguard Investor Interests.''
    The Subcommittee on Capital Markets of the Committee on 
Financial Services held a hearing on July 18, 2023, titled 
``Oversight of the SEC's Division of Corporation Finance.''

                        Committee Consideration

    The Committee on Financial Services met in open session on 
July 27, 2023, and ordered H.R. 4655 to be reported favorably 
to the House as amended by a recorded vote of 29 ayes to 21 
nays (Record vote FC-94), a quorum being present. Before the 
question was called to order the bill favorably reported, the 
Committee adopted an amendment in the nature of a substitute 
offered by Mr. Norman by voice vote.

                            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 order to report legislation and amendments thereto. H.R. 
4655 was ordered reported favorably to the House as amended by 
a recorded vote of 29 ayes to 21 nays (Record vote no. FC-94), 
a quorum being present.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                      Committee Oversight Findings

    Pursuant to clause 3(c) 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 goal of H.R. 4655 is to prohibit 
the SEC from compelling the inclusion or discussion of 
shareholder proposals and clarifies that the agency does not 
have the authority to override state regulation of shareholder 
proposals or proxy materials.

                 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:

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    Pursuant to 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 
1973.

                       Federal Mandates Statement

    Pursuant to section 423 of the Unfunded Mandates Reform 
Act, the Committee adopts as its own the estimate of the 
Federal mandates prepared by the Director of the Congressional 
Budget Office.

                      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 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

    Pursuant to 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 a program of 
the Federal Government known to be duplicative of another 
Federal program, including any program that was included in a 
report to Congress pursuant to section 21 of the Public Law 
111-139 or the most recent Catalog of Federal Domestic 
Assistance.

             Section-by-Section Analysis of the Legislation


Section 1. Short title

    Establishes the short title of the bill as the ``Business 
Over Activists Act.''

Section 2. Limitation with respect to compelling the inclusion or 
        discussion of shareholder proposals

    Amends Section 14(a) of the Exchange Act to clarify that 
the SEC cannot compel a company to include any shareholder 
proposal or related discussion in their proxy statement, except 
as provided in paragraph (2) of the Exchange Act. Additionally, 
the bill clarifies that the SEC does not have the authority to 
preempt state regulations regarding shareholder proposals or 
proxy and consent solicitation materials under the Exchange Act 
or any other securities law.

         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

           *       *       *       *       *       *       *



                                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).
          (3) Limitation with respect to compelling inclusion 
        or discussion of shareholder proposals.--Except as 
        provided in paragraph (2), the Commission may not 
        compel an issuer to include in a proxy statement of the 
        issuer--
                  (A) any shareholder proposal; or
                  (B) any discussion (either from the issuer or 
                otherwise) related to a shareholder proposal 
                contained in the proxy statement.
          (4) Rule of construction relating to state 
        authority.--Nothing in this Act or any other securities 
        law shall be construed to provide the Commission the 
        authority to preempt the State regulation of 
        shareholder proposals or proxy or consent solicitation 
        materials.
  (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) Data Standards for Proxy and Consent Solicitation 
Materials.--
          (1) Requirement.--The Commission shall, by rule, 
        adopt data standards for all information contained in 
        any proxy or consent solicitation material prepared by 
        an issuer for an annual meeting of the shareholders of 
        the issuer, except that the Commission may exempt 
        exhibits, signatures, and certifications from those 
        data standards.
          (2) Consistency.--The data standards required under 
        paragraph (1) shall incorporate, and ensure 
        compatibility with (to the extent feasible), all 
        applicable data standards established in the rules 
        promulgated under section 124 of the Financial 
        Stability Act of 2010, including, to the extent 
        practicable, by having the characteristics described in 
        clauses (i) through (vi) of subsection (c)(1)(B) of 
        such section 124.

           *       *       *       *       *       *       *


                             MINORITY VIEWS

    This rule effectively disenfranchises shareholders, 
crippling their ability influence decision making by 
corporations that they own. Specifically, SEC Rule 14a-8 (the 
``shareholder proposal rule'') stipulates that a company must 
include a shareholder proposal in the company's proxy materials 
unless the proposal falls under any one of several bases for 
exclusion.\1\ This bill would effectively remove this rule from 
existence, preventing shareholders from being able to raise 
important issues at a company's annual meeting. Promulgated 
over 80 years ago, the shareholder proposal rule is grounded in 
the recognition that a company's annual meeting is a crucial 
forum for companies to provide transparency on certain 
important issues and for investors to raise matters, electy 
directors and advise the board and management on significant 
issues facing the company.
---------------------------------------------------------------------------
    \1\Skadden, SEC Proposes Amendments to the Shareholder Proposal 
Rules (Jul. 2022).
---------------------------------------------------------------------------
    This bill is part of the Republican war against ``woke 
capitalism.'' It is an attempt to stifle shareholder proposals 
that push companies to be more diverse, more inclusive, better 
managed, and more concerned about their impact on our climate. 
These are all issues that research has demonstrated have a 
significant impact on a company's profitability. For example, 
corporations that are actively managing and planning for 
climate change--which includes providing public climate--
related disclosures--secure an 18% higher return on investment 
than companies that aren't--and 67% higher than companies who 
refuse to disclose their emissions.\2\ Furthermore, research 
shows that diverse boards lead to improved financial results; 
indeed, companies with the highest percentages of women board 
directors outperformed those with the least by 53% when it 
comes to return on equity.\3\ Shareholders should be able to 
hold the companies they own accountable for these critical 
issues that affect the return on their investments.
---------------------------------------------------------------------------
    \2\The Guardian, ``Sustainable corporations perform better 
financially, report finds'' (accessed Sep. 25, 2023).
    \3\BoardReady, Lessons from the Pandemic: Board Diversity and 
Performance, (Jul. 13. 2021).
---------------------------------------------------------------------------
    Many groups are opposed to H.R. 4656. According to 
Americans for Financial Reform, the bill would ``insulate 'the 
management of public companies from investor input and 
accountability.''\4\ Similarly, the AFL-CIO stated that the 
bill ``if adopted . . . will disenfranchise shareholders from 
the ability to hold corporate CEOs accountable on ESG 
issues.''\5\ Other groups opposed to the bill include (but are 
not limited to): Better Markets, US SIF, the Interfaith Center 
on Corporate Responsibility, Ceres, OUT Leadership, the US 
Impact Investing Alliance, the Shareholder Rights Group, Green 
America, PRI, the Family Farm Defenders, Food and Water Watch, 
the Institute for Agriculture and Trade Policy, and the Union 
for Concerned Scientists.
---------------------------------------------------------------------------
    \4\Americans for Financial Reform, Dangerous Crypto and 
Accountability Bills Clear Congressional Committees Despite Major 
Objections from Consumer Advocacy Groups. Labor Unions and More (Jul. 
28, 2023).
    \5\AFL-CIO, Letter Opposing Legislation That Would Interfere with 
the SEC's Mandate to Protect Investors (Aug. 16, 2023).
---------------------------------------------------------------------------
    For these reasons, the minority opposes H.R. 4655.
            Sincerely,
                                   Maxine Waters,
                                           Ranking Member, Committee on 
                                               Financial Services.
                                   Nydia M. Velazquez,
                                   Gregory W. Meeks,
                                   Stephen F. Lynch,
                                   Emanuel Cleaver II,
                                   Brad Sherman,
                                   David Scott,
                                   Al Green,
                                   Jim Himes,
                                   Bill Foster,
                                   Juan Vargas,
                                   Sean Casten,
                                   Rashida Tlaib,
                                   Nikema Williams,
                                   Joyce Beatty,
                                   Vicente Gonzalez,
                                   Ayanna Pressley,
                                   Sylvia R. Garcia,
                                   Brittany Pettersen,
                                           Members of Congress.

                                  [all]