[House Report 119-712]
[From the U.S. Government Publishing Office]
119th Congress] [Report
HOUSE OF REPRESENTATIVES
2d Session] [119-712
======================================================================
PROTECTING AMERICANS' RETIREMENT SAVINGS FROM
POLITICS ACT
_______
June 24, 2026.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Hill of Arkansas, from the Committee on Financial Services,
submitted the following
R E P O R T
together with
MINORITY VIEWS
[To accompany H.R. 8286]
The Committee on Financial Services, to whom was referred
the bill (H.R. 8286) to amend the Federal securities laws with
respect to the materiality of disclosure requirements, to
establish the Public Company 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.............................................. 15
Background and Need for Legislation.............................. 16
Committee Consideration.......................................... 21
Related Hearings................................................. 22
Committee Votes.................................................. 23
Committee Oversight Findings..................................... 30
Performance Goals and Objectives................................. 30
Committee Cost Estimate.......................................... 30
New Budget Authority and CBO Cost Estimate....................... 30
Unfunded Mandates Statement...................................... 30
Earmark Statement................................................ 30
Federal Advisory Committee Act Statement......................... 30
Applicability to the Legislative Branch.......................... 31
Duplication of Federal Programs.................................. 31
Section-by-Section Analysis of the Legislation................... 31
Changes in Existing Law Made by the Bill, as Reported............ 32
Documents included by Unanimous Consent.......................... 142
Minority Views................................................... 154
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Protecting
Americans' Retirement Savings From Politics Act''.
(b) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title; table of contents.
TITLE I--MANDATORY MATERIALITY REQUIREMENT
Sec. 101. Limitation on disclosure requirements.
TITLE II--PUBLIC COMPANY ADVISORY COMMITTEE
Sec. 201. Public Company Advisory Committee.
TITLE III--PROTECTING U.S. BUSINESS SOVEREIGNTY
Sec. 301. Study on detrimental impact of the Corporate Sustainability
Due Diligence Directive and Corporate Sustainability Reporting
Directive.
TITLE IV--CORPORATE GOVERNANCE EXAMINATION
Sec. 401. Study of certain issues with respect to proxy advisory firms
and the proxy process.
TITLE V--REGISTRATION OF PROXY ADVISORY FIRMS
Sec. 501. Registration of proxy advisory firms.
TITLE VI--LIABILITY FOR CERTAIN FAILURES TO DISCLOSE MATERIAL
INFORMATION OR MAKING OF MATERIAL MISSTATEMENTS
Sec. 601. Liability for certain failures to disclose material
information or making of material misstatements.
TITLE VII--DUTIES OF INVESTMENT ADVISERS, ASSET MANAGERS, AND PENSION
FUNDS
Sec. 701. Duties of investment advisers, asset managers, and pension
funds.
TITLE VIII--PROTECTING AMERICANS' SAVINGS
Sec. 801. Requirements related to proxy voting.
TITLE IX--EMPOWERING SHAREHOLDERS
Sec. 901. Proxy voting of passively managed funds.
TITLE X--BEST INTEREST BASED ON PECUNIARY FACTORS
Sec. 1001. Protecting retail investors' savings.
TITLE I--MANDATORY MATERIALITY REQUIREMENT
SEC. 101. LIMITATION ON DISCLOSURE REQUIREMENTS.
(a) Securities Act of 1933.--Section 2(b) of the Securities Act of
1933 (15 U.S.C. 77b(b)) is amended--
(1) in the subsection heading, by inserting ``; Limitation on
Disclosure Requirements'' after ``Formation'';
(2) by striking ``Whenever'' and inserting the following:
``(1) In general.--Whenever''; and
(3) by adding at the end the following:
``(2) Limitation.--
``(A) In general.--Whenever pursuant to this title
the Commission is engaged in rulemaking regarding
disclosure obligations of issuers, the Commission shall
expressly provide that an issuer is only required to
disclose information in response to such disclosure
obligations to the extent the issuer has determined
that such information is material with respect to a
voting or investment decision regarding the securities
of such issuer.
``(B) Applicability.--Subparagraph (A) shall not
apply with respect to the removal of any disclosure
requirement with respect to an issuer.
``(C) Rule of construction.--For the purposes of this
paragraph, information is considered material with
respect to a voting or investment decision regarding
the securities of an issuer if there is a substantial
likelihood that a reasonable investor would view the
failure to disclose that information as having
significantly altered the total mix of information made
available to the investor.''.
(b) Securities Exchange Act of 1934.--Section 3(f) of the Securities
Exchange Act of 1934 (15 U.S.C. 78c(f)) is amended--
(1) in the subsection heading, by inserting ``; Limitation on
Disclosure Requirements'' after ``Formation'';
(2) by striking ``Whenever'' and inserting the following:
``(1) In general.--Whenever''; and
(3) by adding at the end the following:
``(2) Limitation.--
``(A) In general.--Whenever pursuant to this title
the Commission is engaged in rulemaking regarding
disclosure obligations of issuers, the Commission shall
expressly provide that an issuer is only required to
disclose information in response to such disclosure
obligations to the extent the issuer has determined
that such information is material with respect to a
voting or investment decision regarding the securities
of such issuer.
``(B) Applicability.--Subparagraph (A) shall not
apply with respect to the removal of any disclosure
requirement with respect to an issuer.
``(C) Rule of construction.--For the purposes of this
paragraph, information is considered material with
respect to a voting or investment decision regarding
the securities of an issuer if there is a substantial
likelihood that a reasonable investor would view the
failure to disclose that information as having
significantly altered the total mix of information made
available to the investor.''.
TITLE II--PUBLIC COMPANY ADVISORY COMMITTEE
SEC. 201. PUBLIC COMPANY ADVISORY COMMITTEE.
The Securities Exchange Act of 1934 is amended by inserting after
section 40 (15 U.S.C. 78qq) the following:
``SEC. 40A. PUBLIC COMPANY ADVISORY COMMITTEE.
``(a) Establishment and Purpose.--
``(1) Establishment.--There is established within the
Commission the Public Company Advisory Committee (referred to
in this section as the `Committee').
``(2) Purpose.--The Committee shall--
``(A) provide the Commission with advice on the
rules, regulations, and policies of the Commission with
regard to the Commission's mission of protecting
investors, maintaining fair, orderly, and efficient
markets, and facilitating capital formation, as they
relate to--
``(i) existing and emerging regulatory
priorities of the Commission;
``(ii) issues relating to the public
reporting and corporate governance of public
companies;
``(iii) issues relating to the proxy process
for shareholder meetings held by public
companies;
``(iv) issues relating to trading in the
securities of public companies; and
``(v) issues relating to capital formation;
``(B) not provide any advice with respect to any
policies, practices, actions, or decisions concerning
the Commission's enforcement program; and
``(C) submit to the Commission such findings and
recommendations as the Committee determines are
appropriate, including recommendations for proposed
regulatory and legislative changes.
``(b) Membership.--
``(1) In general.--The membership of the Committee shall be
not fewer than 10, and not more than 20, members appointed by
the Commission from among individuals who--
``(A) are officers, directors, or senior officials of
public companies registered with the Commission under
the Securities Act of 1933 and this Act, except for
those public companies that own asset management, fixed
income, investment advisory, broker-dealer, or proxy
services businesses;
``(B) are executives or other individuals with senior
managerial responsibility in business, professional,
trade, and industry associations that represent the
interests of such public companies; and
``(C) are professional advisers and service providers
to such public companies (including attorneys,
accountants, investment bankers, and financial
advisers).
``(2) Qualifications.--At least 50 percent of the Committee
membership shall be drawn from individuals who would qualify
for membership under paragraph (1)(A).
``(3) Term.--Each member of the Committee appointed under
paragraph (1) shall serve for a term of 4 years. Vacancies
among the members, whether caused by the resignation, death,
removal, expiration of a term, or otherwise, shall be filled
consistent with the Commission's procedures then in effect.
``(4) Staggered terms.--The members of the Committee shall
serve staggered terms, with half of the initial members of the
Committee each serving for 2 years and half serving for 4
years.
``(5) Members not on other advisory committees.--Public
companies and other organizations that are currently
represented on any other Commission Advisory Committee are not
eligible to have representatives also serve on the Public
Company Advisory Committee.
``(6) Members not commission employees.--Members appointed
under paragraph (1) shall not be considered to be employees or
agents of the Commission solely because of membership on the
Committee.
``(c) Chair; Vice Chair; Secretary; Assistant Secretary.--
``(1) In general.--The members of the Committee shall elect,
from among the members of the Committee--
``(A) a Chair;
``(B) a Vice Chair;
``(C) a Secretary; and
``(D) an Assistant Secretary.
``(2) Term.--Each member elected under paragraph (1) shall
serve for a term of 2 years in the capacity the member was
elected under paragraph (1).
``(3) Subcommittees.--The Chair may create subcommittees that
hold public or non-public meetings and provide recommendations
to the full Committee.
``(d) Meetings.--
``(1) Frequency of meetings.--The Committee shall meet--
``(A) not less frequently than twice annually, at the
call of the chair of the Committee; and
``(B) from time to time, at the call of the
Commission.
``(2) Notice.--The Chair of the Committee shall give the
members of the Committee written notice of each meeting, not
later than 2 weeks before the date of the meeting.
``(e) Staff.--The Commission shall make available to the Committee
such staff as the Chair of the Committee determines are necessary to
carry out this section.
``(f) Review by Commission.--The Commission shall--
``(1) review the findings and recommendations of the
Committee; and
``(2) each time the Committee submits a finding or
recommendation to the Commission, promptly issue a public
statement--
``(A) assessing the finding or recommendation of the
Committee; and
``(B) disclosing the action, if any, the Commission
intends to take with respect to the finding or
recommendation.
``(g) Committee Findings.--Nothing in this section shall require the
Commission to agree to or act upon any finding or recommendation of the
Committee.
``(h) Nonapplicability of the Federal Advisory Committee Act.--
Chapter 10 of part I of title 5, United States Code, shall not apply to
the Committee and the activities of the Committee.''.
TITLE III--PROTECTING U.S. BUSINESS SOVEREIGNTY
SEC. 301. STUDY ON DETRIMENTAL IMPACT OF THE CORPORATE SUSTAINABILITY
DUE DILIGENCE DIRECTIVE AND CORPORATE
SUSTAINABILITY REPORTING DIRECTIVE.
(a) Study.--The Securities and Exchange Commission shall conduct a
study to examine and evaluate--
(1) the detrimental impact and potential detrimental impact
of each of the Directives on--
(A) United States companies, consumers, and
investors; and
(B) the economy of the United States;
(2) the extent to which each of the Directives aligns with
international conventions and declarations on human rights and
environmental obligations; and
(3) the legal basis for the extraterritorial reach of each of
the Directives.
(b) Report.--Not later than 1 year after the date of the enactment of
this Act, the Securities and Exchange Commission shall submit to the
Committee on Banking, Housing, and Urban Affairs of the Senate, the
Committee on Financial Services of the House of Representatives, the
Secretary of State, the Secretary of Commerce, and the United States
Trade Representative a report that includes--
(1) the results of the study conducted under this section;
and
(2) recommendations for policymakers and relevant
stakeholders on potential mitigating measures, alternative
approaches, or modifications to each of the Directives that
would address any concerns identified in the study.
(c) Access to Information.--The Securities and Exchange Commission
may request from private entities such relevant data and information as
the Securities and Exchange Commission determines necessary to carry
out the study required under this section and such private entities
shall provide such requested data and information to the Securities and
Exchange Commission.
(d) Directives Defined.--In this section, the term ``Directives''
means--
(1) Directive (EU) 2024/1760 of the European Parliament and
of the Council of 13 June 2024 on corporate sustainability due
diligence;
(2) Directive (EU) 2022/2464 of the European Parliament and
of the Council of 14 December 2022 on corporate sustainability
reporting; and
(3) any directive of the European Parliament and of the
Council that amends, supplements, replaces, or otherwise
modifies a directive described in paragraph (1) or (2),
including Directive (EU) 2026/470 of the European Parliament
and of the Council of 26 February 2026.
TITLE IV--CORPORATE GOVERNANCE EXAMINATION
SEC. 401. STUDY OF CERTAIN ISSUES WITH RESPECT TO PROXY ADVISORY FIRMS
AND THE PROXY PROCESS.
Section 4 of the Securities Exchange Act of 1934 (15 U.S.C. 78d) is
amended by adding at the end the following:
``(k) Study of Certain Issues With Respect to Proxy Advisory Firms
and the Proxy Process.--
``(1) In general.--Not later than 180 days after the date of
the enactment of this subsection, and every 5 years thereafter,
the Commission shall conduct a comprehensive study on proxy
advisory firms and the proxy process.
``(2) Scope of study.--The studies required under paragraph
(1) shall cover--
``(A) the previous 10 years, with respect to the
initial study; and
``(B) the previous 5 years, with respect to each
other study.
``(3) Contents.--Each study required under paragraph (1)
shall address the following issues:
``(A) The financial and other incentives and
obligations of all groups involved in the proxy
process.
``(B) A consideration of whether financial and other
incentives have created a process that no longer serves
the economic interests of retail investors.
``(C) An analysis of whether regulations and
financial incentives have created and protected the
outsized influence of proxy advisors or a duopoly in
proxy advice, and if so, what are the benefits and
costs of that outsized influence or duopoly.
``(D) The costs incurred by issuers in responding to
politically-, environmentally-, or socially-motivated
shareholder proposals.
``(E) An analysis of the impact that shareholder
proposals have on discouraging private companies from
going public.
``(F) A thorough assessment of the economic analysis,
if any, conducted by proxy advisory firms and
institutional shareholders when recommending or voting
in favor of shareholder proposals.
``(G) A review of the extent to which institutional
investors, who owe fiduciary duties, rely on proxy
advisory firm recommendations.
``(H) An assessment of whether, in light of their
significant influence on corporate actions and vote
outcomes, proxy advisors are subject to sufficient and
effective regulation to ensure that their policies and
recommendations are accurate, free of conflicts, and
benefit the best economic interest of shareholders at
large.
``(4) Report.--At the completion of each study required under
paragraph (1), the Commission shall issue a report to the
Committee on Banking, Housing, and Urban Affairs of the Senate
and the Committee on Financial Services of the House of
Representatives that includes the results of the study.''.
TITLE V--REGISTRATION OF PROXY ADVISORY FIRMS
SEC. 501. REGISTRATION OF PROXY ADVISORY FIRMS.
(a) Amendment.--The Securities Exchange Act of 1934 (15 U.S.C. 78a et
seq.) is amended by inserting after section 15G the following new
section:
``SEC. 15H. REGISTRATION OF PROXY ADVISORY FIRMS.
``(a) Conduct Prohibited.--It shall be unlawful for a proxy advisory
firm to make use of the mails or any means or instrumentality of
interstate commerce to provide proxy voting advice, research, analysis,
ratings or recommendations to any client, unless such proxy advisory
firm is registered under this section.
``(b) Registration Procedures.--
``(1) Application for registration.--
``(A) In general.--A proxy advisory firm shall file
with the Commission an application for registration, in
such form as the Commission shall require, by rule, and
containing the information described in subparagraph
(B).
``(B) Required information.--An application for
registration under this section shall contain--
``(i) a certification that the applicant is
able to consistently provide proxy advice based
on accurate information;
``(ii) with respect to clients of the
applicant that vote shares held on behalf of
shareholders, a certification that the
applicant--
``(I) will provide proxy voting
advice only in the best economic
interest of those shareholders;
``(II) has the requisite expertise to
ensure that voting recommendations are
in the best economic interest of those
shareholders unless otherwise
specified; and
``(III) does not violate State or
Federal law;
``(iii) information on the procedures and
methodologies that the applicant uses to ensure
that proxy voting recommendations are in the
best economic interest of the ultimate
shareholders;
``(iv) information on the organizational
structure of the applicant;
``(v) an explanation of whether or not the
applicant has in effect a code of ethics, and
if not, the reasons therefor;
``(vi) a description of any potential or
actual conflict of interest relating to the
provision of proxy advisory services, including
those arising out of or resulting from the
ownership structure of the applicant or the
provision of other services by the applicant or
any person associated with the applicant;
``(vii) the policies and procedures in place
to publicly disclose and manage conflicts of
interest under subsection (f);
``(viii) information related to the
professional and academic qualifications of
staff tasked with providing proxy advisory
services; and
``(ix) any other information and documents
concerning the applicant and any person
associated with such applicant as the
Commission, by rule, may prescribe as necessary
or appropriate in the public interest or for
the protection of investors.
``(2) Review of application.--
``(A) Initial determination.--Not later than 90 days
after the date on which the application for
registration is filed with the Commission under
paragraph (1) (or within such longer period as to which
the applicant consents) the Commission shall--
``(i) by order, grant registration; or
``(ii) institute proceedings to determine
whether registration should be denied.
``(B) Conduct of proceedings.--
``(i) Content.--Proceedings referred to in
subparagraph (A)(ii) shall--
``(I) include notice of the grounds
for denial under consideration and an
opportunity for hearing; and
``(II) be concluded not later than
120 days after the date on which the
application for registration is filed
with the Commission under paragraph
(1).
``(ii) Determination.--At the conclusion of
such proceedings, the Commission, by order,
shall grant or deny such application for
registration.
``(iii) Extension authorized.--The Commission
may extend the time for conclusion of such
proceedings for not longer than 90 days, if the
Commission finds good cause for such extension
and publishes its reasons for so finding, or
for such longer period as to which the
applicant consents.
``(C) Grounds for decision.--The Commission shall
grant registration under this subsection--
``(i) if the Commission finds that the
requirements of this section are satisfied; and
``(ii) unless the Commission finds (in which
case the Commission shall deny such
registration) that--
``(I) the applicant has failed to
certify to the Commission's
satisfaction that it is able to
consistently provide proxy advice based
on accurate information and to
materially comply with the procedures
and methodologies disclosed under
paragraph (1)(B) and with subsections
(f) and (g); or
``(II) if the applicant were so
registered, its registration would be
subject to suspension or revocation
under subsection (d).
``(3) Public availability of information.--Subject to section
24, the Commission shall make the information and documents
submitted to the Commission by a proxy advisory firm in its
completed application for registration, or in any amendment
submitted under paragraph (1) or (2) of subsection (c),
publicly available on the Commission's website, or through
another comparable, readily accessible means.
``(c) Update of Registration.--
``(1) Update.--Each registered proxy advisory firm shall
promptly amend and update its application for registration
under this section if any information or document provided
therein becomes materially inaccurate, except that a registered
proxy advisory firm is not required to amend the information
required to be filed under subsection (b)(1)(B)(i) by filing
information under this paragraph, but shall amend such
information in the annual submission of the organization under
paragraph (2) of this subsection.
``(2) Certification.--Not later than 90 calendar days after
the end of each calendar year, each registered proxy advisory
firm shall file with the Commission an amendment to its
registration, in such form as the Commission, by rule, may
prescribe as necessary or appropriate in the public interest or
for the protection of investors--
``(A) certifying that the information and documents
in the application for registration of such registered
proxy advisory firm continue to be accurate in all
material respects; and
``(B) listing any material change that occurred to
such information or documents during the previous
calendar year.
``(d) Censure, Denial, or Suspension of Registration; Notice and
Hearing.--The Commission, by order, shall censure, place limitations on
the activities, functions, or operations of, suspend for a period not
exceeding 12 months, or revoke the registration of any registered proxy
advisory firm if the Commission finds, on the record after notice and
opportunity for hearing, that such censure, placing of limitations,
suspension, or revocation is necessary for the protection of investors
and in the public interest and that such registered proxy advisory
firm, or any person associated with such firm, whether prior to or
subsequent to becoming so associated--
``(1) has committed or omitted any act, or is subject to an
order or finding, enumerated in subparagraph (A), (D), (E),
(H), or (G) of section 15(b)(4), has been convicted of any
offense specified in section 15(b)(4)(B), or is enjoined from
any action, conduct, or practice specified in subparagraph (C)
of section 15(b)(4), during the 10-year period preceding the
date of commencement of the proceedings under this subsection,
or at any time thereafter;
``(2) has been convicted during the 10-year period preceding
the date on which an application for registration is filed with
the Commission under this section, or at any time thereafter,
of--
``(A) any crime that is punishable by imprisonment
for 1 or more years, and that is not described in
section 15(b)(4)(B); or
``(B) a substantially equivalent crime by a foreign
court of competent jurisdiction;
``(3) is subject to any order of the Commission barring or
suspending the right of the person to be associated with a
registered proxy advisory firm;
``(4) fails to furnish the certifications required under
subsections (b)(2)(C)(ii)(I) and (c)(2);
``(5) has engaged in one or more prohibited acts enumerated
in paragraph (1);
``(6) fails to maintain adequate financial and managerial
resources to consistently offer advisory services to clients
that vote shares held on behalf of shareholders consistent with
the best economic interest of those shareholders, including by
failing to comply with subsections (f) or (g);
``(7) fails to maintain adequate expertise to ensure that
proxy advisory services for clients that vote shares held on
behalf of shareholders are tied to the best economic interest
of those shareholders; or
``(8) engages in a prohibited act enumerated in subsection
(j).
``(e) Termination of Registration.--
``(1) Voluntary withdrawal.--A registered proxy advisory firm
may, upon such terms and conditions as the Commission may
establish as necessary in the public interest or for the
protection of investors, which terms and conditions shall
include at a minimum that the registered proxy advisory firm
will no longer conduct such activities as to bring it within
the definition of proxy advisory firm in section 3(a)(82),
withdraw from registration by filing a written notice of
withdrawal to the Commission.
``(2) Commission authority.--In addition to any other
authority of the Commission under this title, if the Commission
finds that a registered proxy advisory firm is no longer in
existence or has ceased to do business as a proxy advisory
firm, the Commission, by order, shall cancel the registration
under this section of such registered proxy advisory firm.
``(f) Management of Conflicts of Interest.--
``(1) Organization policies and procedures.--Each registered
proxy advisory firm shall establish, maintain, and enforce
written policies and procedures reasonably designed, taking
into consideration the nature of the business of such
registered proxy advisory firm and associated persons, to
publicly disclose and manage any conflicts of interest that
arise or would reasonably be expected to arise from such
business.
``(2) Commission authority.--The Commission shall, within one
year of the date of enactment of this section, issue final
rules to prohibit, or require the management and public
disclosure of, any conflicts of interest relating to the
offering of proxy advisory services by a registered proxy
advisory firm, including, without limitation, conflicts of
interest relating to--
``(A) the manner in which a registered proxy advisory
firm is compensated by the client, any affiliate of the
client, or any other person for providing proxy
advisory services;
``(B) business relationships, ownership interests, or
any other financial or personal interests between a
registered proxy advisory firm, or any person
associated with such registered proxy advisory firm,
and any client, or any affiliate of such client;
``(C) the formulation of proxy voting policies;
``(D) the execution, or assistance with the
execution, of proxy votes if such votes are based upon
recommendations made by the proxy advisory firm in
which a person other than the issuer is a proponent;
and
``(E) any other potential conflict of interest, as
the Commission deems necessary or appropriate in the
public interest or for the protection of investors.
``(3) Disclosure on factors influencing recommendations.--
Each registered proxy advisory firm shall annually disclose to
the Commission and make publicly available the economic and
other factors that a reasonable investor would expect to
influence the recommendations of such proxy advisory firm,
including the ownership composition of such proxy advisory firm
and any meetings with, or feedback received from, outside
entities.
``(g) Reliability of Proxy Advisory Firm Services.--
``(1) In general.--Each registered proxy advisory firm
shall--
``(A) have staff and other resources sufficient to
produce proxy voting recommendations that are based on
accurate and current information and designed for
clients that vote shares held on behalf of shareholders
to advance the best economic interest of those
shareholders unless otherwise specified;
``(B) implement procedures that permit issuers that
are the subject of proxy voting recommendations--
``(i) access in a reasonable time to data and
information used to make recommendations; and
``(ii) a reasonable opportunity to provide
meaningful comment and corrections to such data
and information, including the opportunity to
present (in person or telephonically) details
to the person responsible for developing such
data and information prior to the publication
of proxy voting recommendations to clients;
``(C) employ an ombudsman to receive complaints about
the accuracy of information used in making
recommendations from the companies that are the subject
of the proxy advisory firm's voting recommendations and
seek to resolve those complaints in a timely fashion
and prior to the publication of proxy voting
recommendations to clients; and
``(D) if the ombudsman is unable to resolve a
complaint to a company's satisfaction prior to the
publication of proxy voting recommendations to clients,
include in the final report of the firm to clients--
``(i) a statement detailing the company's
complaints, if requested in writing by the
company; and
``(ii) a statement explaining why the proxy
voting recommendation is in the best economic
interest of shareholders.
``(2) Definitions.--In this subsection:
``(A) Data and information used to make
recommendations.--The term `data and information used
to make voting recommendations'--
``(i) means the financial, operational, or
descriptive data and information on an issuer
used by proxy advisory firms and any contextual
or substantive analysis impacting the
recommendation; and
``(ii) does not include the entirety of the
proxy advisory firm's final report to its
clients.
``(B) Reasonable time.--The term `reasonable time'--
``(i) means not less than 1 week before the
publication of proxy voting recommendations for
clients; and
``(ii) shall not otherwise interfere with a
proxy advisory firm's ability to provide its
clients with timely access to accurate proxy
voting research, analysis, or recommendations.
``(h) Private Right of Action With Respect to Illegal
Recommendations.--Any proxy advisory firm that endorses a proposal that
is not supported by the issuer but is approved and subsequently found
by a court of competent jurisdiction to violate State or Federal law
shall be liable to the applicable issuer for the costs associated with
the approval of such proposal, including implementation costs and any
penalties incurred by the issuer, and any issuer seeking to enforce
such liability may sue at law or in equity in any court of competent
jurisdiction.
``(i) Designation of Compliance Officer.--Each registered proxy
advisory firm shall designate an individual who reports directly to
senior management as responsible for administering the policies and
procedures that are required to be established pursuant to subsections
(f) and (g), and for ensuring compliance with the securities laws and
the rules and regulations thereunder, including those promulgated by
the Commission pursuant to this section.
``(j) Prohibited Conduct.--
``(1) Prohibited acts and practices.--Not later than one year
after the date of enactment of this section, the Commission
shall issue final rules to prohibit any act or practice
relating to the offering of proxy advisory services by a
registered proxy advisory firm that the Commission determines
to be unfair, coercive, or abusive, including any act or
practice relating to--
``(A) advisory or consulting services (offered
directly or indirectly, including through an affiliate)
related to corporate governance issues; or
``(B) modifying a voting recommendation or otherwise
departing from its adopted systematic procedures and
methodologies in the provision of proxy advisory
services, based on whether an issuer, or affiliate
thereof, subscribes or will subscribe to other services
or product of the registered proxy advisory firm or any
person associated with such organization.
``(2) Rule of construction.--Nothing in paragraph (1), or in
any rules or regulations adopted thereunder, may be construed
to modify, impair, or supersede the operation of any of the
antitrust laws (as defined in the first section of the Clayton
Act, except that such term includes section 5 of the Federal
Trade Commission Act, to the extent that such section 5 applies
to unfair methods of competition).
``(k) Annual Report.--
``(1) In general.--Each registered proxy advisory firm shall,
not later than 90 calendar days after the end of each fiscal
year, file with the Commission and make publicly available an
annual report in such form as the Commission, by rule, may
prescribe as necessary or appropriate in the public interest or
for the protection of investors.
``(2) Contents.--Each annual report required under paragraph
(1) shall include, at a minimum, disclosure by the registered
proxy advisory firm of the following:
``(A) A list of shareholder proposals the staff of
the registered proxy advisory firm reviewed in the
prior fiscal year.
``(B) A list of the recommendations made in the prior
fiscal year.
``(C) The economic analysis conducted to determine
that final recommendations provided in the prior fiscal
year (other than recommendations relating to an issuer-
sponsored proposal or recommendations consistent with
that of a board of directors composed of a majority of
independent directors) delivered to clients that vote
shares held on behalf of shareholders were in the best
economic interest of those shareholders.
``(D) The staff who reviewed and made recommendations
on such proposals in the prior fiscal year.
``(E) The qualifications of such staff to ensure that
each of the recommendations for clients that vote
shares held on behalf of shareholders were tied to the
best economic interest of those shareholders.
``(F) The recommendations made in the prior fiscal
year where the proponent of such recommendation was a
client of or received services from the proxy advisory
firm.
``(G) A certification by the chief executive officer,
chief financial officer, and the primary executive
responsible for overseeing the compilation and
dissemination of proxy voting advice that the final
recommendations (other than recommendations relating to
an issuer-sponsored proposal or recommendations
consistent with that of a board of directors composed
of a majority of independent directors) delivered to
clients that vote shares held on behalf of shareholders
in the last fiscal year--
``(i) were based on internal controls and
procedures that are designed to ensure accurate
information and that such internal controls and
procedures are effective; and
``(ii) were based on the best economic
interest of those shareholders unless otherwise
specified.
``(H) The economic and other factors that a
reasonable investor would expect to influence the
recommendations of such proxy advisory firm, including
the ownership composition of such proxy advisory firm.
``(3) Report format.--Each annual report required under
paragraph (1) shall be made available in a structured, machine-
readable format, consistent with existing electronic reporting
standards.
``(l) Transparent Policies.--Each registered proxy advisory firm
shall file with the Commission and make publicly available its
methodology for the formulation of proxy voting policies and voting
recommendations to clients that vote shares held on behalf of
shareholders and how that methodology ensures that the firm's voting
recommendations are in the best economic interest of those shareholders
unless otherwise specified.
``(m) Rules of Construction.--Registration under and compliance with
this section does not constitute a waiver of, or otherwise diminish,
any right, privilege, or defense that a registered proxy advisory firm
may otherwise have under any provision of State or Federal law,
including any rule, regulation, or order thereunder.
``(n) Regulations.--
``(1) New provisions.--Such rules and regulations as are
required by this section or are otherwise necessary to carry
out this section, including the application form required under
subsection (a)--
``(A) shall be issued by the Commission, not later
than 180 days after the date of enactment of this
section; and
``(B) shall become effective not later than 1 year
after the date of enactment of this section.
``(2) Review of existing regulations.--Not later than 270
days after the date of enactment of this section, the
Commission shall--
``(A) review its existing rules and regulations which
affect the operations of proxy advisory firms; and
``(B) amend or revise such rules and regulations in
accordance with the purposes of this section, and issue
such guidance as the Commission may prescribe as
necessary or appropriate in the public interest or for
the protection of investors.
``(o) Applicability.--This section, other than subsection (m), which
shall apply on the date of enactment of this section, shall apply on
the earlier of--
``(1) the date on which regulations are issued in final form
under subsection (n)(1); or
``(2) 270 days after the date of enactment of this section.
``(p) Best Economic Interest Defined.--In this section, the term
`best economic interest' means decisions that seek to maximize
investment returns over a time horizon consistent with the investment
objectives and risk management profile of the fund in which the
shareholders are invested.''.
(b) Conforming Amendment.--Section 17(a)(1) of the Securities
Exchange Act of 1934 (15 U.S.C. 78q(a)(1)) is amended by inserting
``proxy advisory firm,'' after ``nationally recognized statistical
rating organization,''.
(c) Proxy Advisory Firm Definitions.--Section 3(a) of the Securities
Exchange Act of 1934 (15 U.S.C. 78c(a)) is amended--
(1) by redesignating the second paragraph (80) (relating to
funding portal) as paragraph (81); and
(2) by adding at the end the following:
``(82) Proxy advisory firm.--The term `proxy advisory firm'--
``(A) means any person that--
``(i) makes a recommendation to a security
holder as to the security holder's vote,
consent, or authorization on a specific matter
for which security holder approval is
solicited;
``(ii) markets the person's expertise as a
provider of such proxy voting advice separately
from other forms of investment advice; and
``(iii) sells such proxy voting advice for a
fee; and
``(B) does not include--
``(i) a registered investment adviser; or
``(ii) any person that is exempt under law or
regulation from the requirements otherwise
applicable to persons engaged in such a
solicitation.
``(83) Person associated with a proxy advisory firm.--With
respect to a proxy advisory firm--
``(A) a person is `associated' with the proxy
advisory firm if the person is--
``(i) a partner, officer, or director of the
proxy advisory firm (or any person occupying a
similar status or performing similar
functions);
``(ii) a person directly or indirectly
controlling, controlled by, or under common
control with the proxy advisory firm;
``(iii) an employee of the proxy advisory
firm; or
``(iv) a person the Commission determines by
rule is controlled by the proxy advisory firm;
and
``(B) a person is not `associated' with the proxy
advisory firm if the person only performs clerical or
ministerial functions with respect to a proxy advisory
firm.''.
TITLE VI--LIABILITY FOR CERTAIN FAILURES TO DISCLOSE MATERIAL
INFORMATION OR MAKING OF MATERIAL MISSTATEMENTS
SEC. 601. LIABILITY FOR CERTAIN FAILURES TO DISCLOSE MATERIAL
INFORMATION OR MAKING OF MATERIAL MISSTATEMENTS.
Section 14 of the Securities Exchange Act of 1934 (15 U.S.C. 78n) is
amended by adding at the end the following:
``(l) False or Misleading Statements.--For purposes of subsection (a)
and Rule 14a-9 (17 CFR 240.14a-9) and any successor rule, the failure
to disclose material information (such as a proxy voting advice
business's methodology, sources of information, or conflicts of
interest) or the making of a material misstatement regarding proxy
voting advice that makes a recommendation to a security holder as to
the security holder's vote, consent, or authorization on a specific
matter for which security holder approval is solicited, and that is
furnished by a person that markets the person's expertise as a provider
of such proxy voting advice separately from other forms of investment
advice, and sells such proxy voting advice for a fee, shall be
considered to be false or misleading with respect to a material
fact.''.
TITLE VII--DUTIES OF INVESTMENT ADVISERS, ASSET MANAGERS, AND PENSION
FUNDS
SEC. 701. DUTIES OF INVESTMENT ADVISERS, ASSET MANAGERS, AND PENSION
FUNDS.
Section 13(f) of the Securities Exchange Act of 1934 (15 U.S.C.
78m(f)) is amended by adding at the end the following:
``(7) Disclosures by institutional investment managers in
connection with proxy advisory firms.--
``(A) In general.--Every institutional investment
manager which uses the mails, or any means or
instrumentality of interstate commerce in the course of
its business as an institutional investment manager,
which engages a proxy advisory firm, and which
exercises voting power with respect to accounts holding
equity securities of a class described in subsection
(d)(1) or otherwise becomes or is deemed to become a
beneficial owner of any security of a class described
in subsection (d)(1) upon the purchase or sale of a
security-based swap that the Commission may define by
rule, shall file an annual report with the Commission
containing--
``(i) an explanation of how the institutional
investment manager voted with respect to each
shareholder proposal;
``(ii) the percentage of votes cast on
shareholder proposals that were consistent with
proxy advisory firm recommendations, for each
proxy advisory firm retained by the
institutional investment manager;
``(iii) an explanation of--
``(I) how the institutional
investment manager took into
consideration proxy advisory firm
recommendations in making voting
decisions, including the degree to
which the institutional investment
manager used those recommendations in
making voting decisions;
``(II) how often the institutional
investment manager voted consistent
with a recommendation made by a proxy
advisory firm, expressed as a
percentage;
``(III) how such votes are reconciled
with the fiduciary duty of the
institutional investment manager to
vote in the best economic interests of
shareholders;
``(IV) how frequently votes were
changed when an error occurred or due
to new information from issuers; and
``(V) the degree to which investment
professionals of the institutional
investment manager were involved in
proxy voting decisions; and
``(iv) a certification that the voting
decisions of the institutional investment
manager were based solely on the best economic
interest of the shareholders on behalf of whom
the institutional investment manager holds
shares.
``(B) Requirements for larger institutional
investment managers.--Every institutional investment
manager described in subparagraph (A) that has
regulatory assets under management with an aggregate
fair market value on the last trading day in any of the
preceding twelve months of at least $100,000,000,000
shall--
``(i) in any materials provided to customers
and related to customers voting their shares,
clarify that shareholders are not required to
vote on every proposal;
``(ii) with respect to each shareholder
proposal for which the institutional investment
manager votes (other than votes consistent with
the recommendation of a board of directors
composed of a majority of independent
directors) perform an economic analysis before
making such vote, to determine that the vote is
in the best economic interest of the
shareholders on behalf of whom the
institutional investment manager holds shares;
and
``(iii) include each economic analysis
required under clause (ii) in the annual report
required under subparagraph (A).
``(C) Best economic interest defined.--In this
paragraph, the term `best economic interest' means
decisions that seek to maximize investment returns over
a time horizon consistent with the investment
objectives and risk management profile of the fund in
which shareholders are invested.''.
TITLE VIII--PROTECTING AMERICANS' SAVINGS
SEC. 801. REQUIREMENTS RELATED TO PROXY VOTING.
Section 14 of the Securities Exchange Act of 1934 (15 U.S.C. 78n), as
amended by section 601, is further amended by adding at the end the
following:
``(m) Prohibition on Robovoting.--
``(1) In general.--The Commission shall issue final rules
prohibiting the use of robovoting with respect to votes related
to proxy or consent solicitation materials.
``(2) Robovoting defined.--In this subsection, the term
`robovoting' means the practice of automatically voting in a
manner consistent with the recommendations of a proxy advisory
firm or on a proxy advisory firm's electronic voting platform
with the proxy advisory firm's recommendations, in either case,
without independent review and analysis.
``(n) Prohibition on Outsourcing Voting Decisions by Institutional
Investors.--With respect to votes related to proxy or consent
solicitation materials, an institutional investor may not outsource
voting decisions to any person other than an investment adviser or a
broker or dealer that is registered with the Commission, or is exempt
from such registration, and has a fiduciary or best interest duty to
the institutional investor.
``(o) No Requirement to Vote.--No person may be required to cast
votes related to proxy or consent solicitation materials, unless
obligated by their fiduciary duty or Rule 206(4)-6 (17 CFR 275.206(4)-
6).''.
TITLE IX--EMPOWERING SHAREHOLDERS
SEC. 901. PROXY VOTING OF PASSIVELY MANAGED FUNDS.
(a) In General.--The Investment Advisers Act of 1940 (15 U.S.C. 80b-1
et seq.) is amended by inserting after section 208 (15 U.S.C. 80b-8)
the following:
``SEC. 208A. PROXY VOTING OF PASSIVELY MANAGED FUNDS.
``(a) Investment Adviser Proxy Voting.--
``(1) In general.--An investment adviser that holds authority
to vote a proxy solicited by an issuer pursuant to section 14
of the Securities Exchange Act of 1934 (15 U.S.C. 78n) in
connection with any vote of covered securities held by a
passively managed fund shall--
``(A) vote in accordance with the instructions (which
may include the selection or default choice of a
published voting policy) of the beneficial owner (or
fiduciary or other designee with investment and proxy
voting authority on their behalf) of a voting security
of the passively managed fund;
``(B) vote in accordance with the voting
recommendations of the board of directors (or similar
governing body) of such issuer;
``(C) abstain from voting such securities but make
reasonable efforts to be considered present for
purposes of establishing a quorum; or
``(D) pursuant to rules issued by the Commission,
instruct vote tabulators to make a reasonable effort to
mirror vote shares to reflect the elections of the
other shareholders in the covered security.
``(2) Exception.--Paragraph (1) shall not apply with respect
to a vote on a routine matter.
``(b) Safe Harbor.--With respect to a routine or non-routine vote,
voted in the manner required by subsection (a)(1), an investment
adviser shall not be liable to any person under any law or regulation
of the United States, any constitution, law, or regulation of any State
or political subdivision thereof, or under any contract or other
legally enforceable agreement (including any arbitration agreement),
for any of the following:
``(1) Voting in accordance with the instructions of the
beneficial owner (or that beneficial owner's designee with
investment and proxy voting authority) of a voting security of
the passively managed fund.
``(2) Not soliciting voting instructions from any person.
``(3) Voting in accordance with the voting recommendations of
an issuer under subsection (a)(1)(B) with respect to such vote.
``(4) Abstaining from voting in accordance with subsection
(a)(1)(C) with respect to such vote.
``(5) Instructing vote tabulators to make a reasonable effort
to mirror vote shares to reflect the elections of the other
shareholders in a covered security, pursuant to rules issued by
the Commission described in subsection (a)(1)(D).
``(c) Foreign Private Issuers Exemption.--Subsection (a) shall not
apply with respect to a foreign private issuer if the published voting
policy of the investment advisor with respect to such foreign private
issuer is fully and fairly disclosed to beneficial owners, including
the extent to which such policy differs from the published voting
policy for non-exempt issuers.
``(d) Dissemination of Information.--
``(1) In general.--Any investment adviser subject to the
requirements of subsection (a)(1) shall, with respect to the
dissemination of information and other material to a voting
person, comply with the following requirements, unless the
voting person affirmatively declines to receive that
information and other material:
``(A) Provide the voting person (or the relevant
intermediary with whom the investment adviser has
access) with a form to select a published voting
policy.
``(B) Provide the voting person with not less than 5
business days after the date on which the voting person
receives the form described under subparagraph (A) to
return that form to the investment adviser.
``(2) Electronic delivery.--All, or any portion, of the
materials that an investment adviser is required to provide
under paragraph (1)(A) may be provided electronically,
including through--
``(A) an internet website;
``(B) another digital, internet, or electronic-based
information repository; or
``(C) a mobile application.
``(e) Definitions.--In this section:
``(1) Covered security.--The term `covered security'--
``(A) means a voting security, as that term is
defined in section 2(a) of the Investment Company Act
of 1940 (15 U.S.C. 80a-2(a)), in which a qualified fund
is invested; and
``(B) does not include any voting security (as
defined in subparagraph (A)) of an issuer registered
with the Commission as an investment company under
section 8 of the Investment Company Act of 1940 (15
U.S.C. 80a-8).
``(2) Passively managed fund.--The term `passively managed
fund' means a qualified fund--
``(A) that--
``(i) is designed to track, or is derived
from, an index of securities or a portion of
such an index;
``(ii) discloses that the qualified fund is a
passive index fund; or
``(iii) allocates not less than 60 percent of
the total assets of the qualified fund to an
investment strategy that is designed to track,
or is derived from, an index of securities or a
portion of such an index fund; and
``(B) that commits to refrain from exercising control
over an issuer through voting or investment authority.
``(3) Published voting policy.--The term `published voting
policy' means--
``(A) a policy that--
``(i) articulates how proportionate shares
would be expected to be voted in anticipated
proxy voting matters; and
``(ii) is made available to investors,
including via website or other electronic
means; and
``(B) in the case of a policy of a passively managed
fund or an investment adviser, a policy that does not--
``(i) seek to set the strategy or day-to-day
management decisions of the issuer;
``(ii) involve submitting shareholder
proposals;
``(iii) seek to nominate directors; and
``(iv) coordinate votes with other index
managers.
``(4) Qualified fund.--The term `qualified fund' means--
``(A) an investment company;
``(B) a private fund;
``(C) an eligible deferred compensation plan, as that
term is defined in section 457(b) of the Internal
Revenue Code of 1986;
``(D) a trust, plan, account, or other entity
described in section 3(c)(11) of the Investment Company
Act of 1940 (15 U.S.C. 80a-3(c)(11));
``(E) a plan maintained by an employer described in
clause (i), (ii), or (iii) of section 403(b)(1)(A) of
the Internal Revenue Code of 1986 to provide annuity
contracts described in section 403(b) of such Code;
``(F) a common trust fund, or similar fund,
maintained by a bank;
``(G) any fund established under section 8438(b)(1)
of title 5, United States Code; or
``(H) any separate managed account of a client of an
investment adviser.
``(5) Routine matter.--The term `routine matter'--
``(A) includes a proposal that relates to--
``(i) an election with respect to the board
of directors of a registrant;
``(ii) the compensation of management or the
board of directors of a registrant;
``(iii) the selection of auditors; or
``(iv) declassification; and
``(B) does not include--
``(i) a proposal that is not submitted to a
holder of covered securities by means of a
proxy statement comparable to that described in
section 240.14a-101 of title 17, Code of
Federal Regulations, or any successor
regulation; or
``(ii) a proposal that is--
``(I) the subject of a counter-
solicitation; or
``(II) part of a proposal made by a
person other than the applicable
registrant.''.
(b) Effective Date.--The amendment made by this section shall take
effect 1 year after the date of enactment of this Act.
TITLE X--BEST INTEREST BASED ON PECUNIARY FACTORS
SEC. 1001. PROTECTING RETAIL INVESTORS' SAVINGS.
(a) Best Interest Based on Pecuniary Factors.--Section 211(g) of the
Investment Advisers Act of 1940 (15 U.S.C. 80b-11(g)) is amended by
adding at the end the following:
``(3) Best interest based on pecuniary factors.--
``(A) In general.--For purposes of paragraph (1),
when providing personalized investment advice, the best
interest of a customer shall be determined using
pecuniary factors, which, subject to applicable law,
may not be subordinated to or limited by non-pecuniary
factors, unless--
``(i) the customer provides informed consent,
whether by e-delivery or e-sign, that such non-
pecuniary factors be considered; or
``(ii) the personalized investment advice is
consistent with the customer's written
investment profile information.
``(B) Disclosure of pecuniary effects.--If a customer
provides a broker, dealer, or investment adviser with
the informed consent to consider non-pecuniary factors
described under subparagraph (A), the broker, dealer,
or investment adviser shall provide qualitative
disclosure of the potential pecuniary effects to the
customer of prioritizing non-pecuniary factors over
pecuniary factors in making investment decisions.
``(C) Pecuniary factor defined.--In this paragraph,
the term `pecuniary factor' means a factor that a
fiduciary prudently determines is expected to have a
material effect on the risk or return of an investment
based on investment objectives, risk tolerance, and
time horizon.''.
(b) Rulemaking.--Not later than the end of the 12-month period
beginning on the date of enactment of this Act, the Securities and
Exchange Commission shall revise or issue such rules as may be
necessary to implement the amendment made by paragraph (1).
(c) Applicability.--The amendment made by paragraph (1) shall apply
to a recommendation made by a broker or dealer and investment advice
provided by an investment adviser beginning on the date that is 12
months after the date of enactment of this Act.
Purpose and Summary
H.R. 8286, the Protecting Americans' Retirement Savings
from Politics Act, was introduced on April 15, 2026, by
Republican Representative Bryan Steil (WI-01). H.R. 8286
reinforces the materiality standard in financial disclosures
and increases the accountability of proxy advisory firms by
mandating that the Securities and Exchange Commission (SEC)
disclosures focus strictly on information relevant to
investment or voting decisions, requiring proxy advisors to
register and face liability for misstatements, and prohibiting
automated robo-voting to ensure institutional investors fulfill
their fiduciary duties.
Background and Need for Legislation
TITLE I: MANDATORY MATERIALITY REQUIREMENT
Section 101 amends the Securities Act of 1933 (Securities
Act) and the Securities Exchange Act of 1934 (Exchange Act) to
mandate that information required to be disclosed to the SEC by
issuers be material to voting or investment decisions regarding
those issuers, and for other purposes.
The SEC's pursuit of environmental, social and governance
(ESG) disclosure initiatives under its prior Chair, Gary
Gensler, threatened the Commission's longstanding materiality
standard. This standard has been the touchstone of our public
company disclosure regime since the concept was first included
in the Securities Act and the Exchange Act. Under the
principles-based materiality standard, a company must disclose
information to prospective investors and shareholders so that
they can make informed investment and proxy voting
decisions.\1\ With respect to ESG information, public companies
are already required to make disclosures under current law when
such information is material. Furthermore, the SEC has
previously stated that mandatory disclosures regarding
environmental and social issues should only be imposed if
required by law or if such information is material to
investors.\2\ This title will ensure that when the SEC is
engaged in rulemaking regarding issuers' disclosure
obligations, the SEC will expressly provide that an issuer is
only required to disclose information in response to such
disclosure obligations to the extent the issuer has determined
that such information is material to a voting or investment
decision.
---------------------------------------------------------------------------
\1\17 CFR Sec. 230.405.
\2\See SEC, Concept Release, Business and Financial Disclosure
Required by Regulation S-K, available at https://www.sec.gov/rules/
concept/2016/33 10064.pdf?n=27847.
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A standalone discussion draft of the language of this title
was noticed for consideration as H.R.___, the Mandatory
Materiality Requirement Act of 2025, by Representative
Huizenga, in the September 10, 2025, Committee hearing titled,
``Proxy Power and Proposal Abuse: Reforming Rule 14a-8 to
Protect Shareholder Value.''
TITLE II: PUBLIC COMPANY ADVISORY COMMITTEE
Section 201 amends the Exchange Act to establish within the
SEC the Public Company Advisory Committee (PCAC). The SEC has
four advisory committees, including the SEC Small Business
Advisory Committee, which was established by the SEC Small
Business Advocate Act of 2016. The committee is designed to
provide a formal mechanism for the SEC to receive advice and
recommendations on SEC rules, regulations, and policy matters
relating to small businesses. While this committee's
recommendations relating to small businesses include smaller
public companies, the SEC does not currently have an advisory
committee that provides recommendations related to all public
companies. This title will establish the PCAC to provide advice
and recommendations on SEC rules, regulations, and policies
regarding its mission. The committee will consist of appointed
members from public companies, business associations, and
professional advisors.
A standalone discussion draft of the language of this title
was noticed for consideration in the September 10, 2025,
Committee hearing titled, ``Proxy Power and Proposal Abuse:
Reforming Rule 14a-8 to Protect Shareholder Value'' and was
subsequently introduced by Representative Lucas as H.R. 6967,
the Public Company Advisory Committee Act of 2026.
TITLE III: PROTECTING U.S. BUSINESS SOVEREIGNTY
Section 301 requires the SEC to conduct a study on the
detrimental impact of the Corporate Sustainability Due
Diligence Directive (CSDDD) and Corporate Sustainability
Reporting Directive (CSRD) on United States companies. The CSDD
is a European Union directive that requires certain EU and non-
EU companies to identify and prevent, stop, or mitigate the
actual and potential impacts of their activities on the
environment and human rights. The CSDD would require companies
to conduct due diligence not just on their own operations, but
also on the activities of their subsidiaries and other entities
in their value chains with which they have direct and indirect
established business relationships. They would need to develop
and implement ``prevention action plans,'' obtain contractual
assurances from their direct business partners that they will
comply with the plans, and subsequently verify compliance.
Similarly, the EU's CSRD requires U.S. companies with EU
subsidiaries to provide comprehensive and granular disclosures
covering a spectrum of ESG topics. The information reported may
not be limited to a company's own operations but would extend
to direct and indirect business relationships across the value
chain. These disclosures are expected to be some of the most
challenging areas of reporting, given the scope and the
reliance on information from parties not controlled by the
company. This title mandates a study of the potential harmful
effects and implications of the CSDD and CSRD on U.S.
companies, consumers, investors, and the economy.
TITLE IV: CORPORATE GOVERNANCE EXAMINATION
Section 401 requires the SEC to conduct comprehensive
studies on proxy advisory firms and the proxy process. The
study will be done within 180 days of the bill's enactment and
repeated every five years, covering the previous 10 years
initially and the previous 5 years subsequently.
The studies will address key issues, such as financial
incentives and obligations of parties involved, the impact on
long-term retail investors and the influence of proxy advisory
firms. The studies will provide data-driven insights to enhance
shareholder value and promote transparent corporate governance
practices. Results will be reported to relevant congressional
committees.
A standalone discussion draft of the language of this title
was noticed for consideration as H.R.___, the Corporate
Governance Examination Act, by Representative Wagner, in the
April 29, 2025, Subcommittee hearing titled, ``Exposing the
Proxy Advisory Cartel: How ISS & Glass Lewis Influence
Markets'', and the September 10, 2025 Committee hearing titled,
``Proxy Power and Proposal Abuse: Reforming Rule 14a-8 to
Protect Shareholder Value.''
TITLE V: REGISTRATION OF PROXY ADVISORY FIRMS
Section 501 requires proxy advisory firms to register with
the SEC, establish requirements for managing conflicts of
interest, and mandate disclosure of certain information.
The outsized influence of proxy advisory firms, such as
Institutional Shareholder Services (ISS) and Glass Lewis, on
the proxy voting system has raised concerns about bias and
accountability. These firms command over 90% of the market and
hold significant sway over institutional investors' voting
decisions, impacting corporate governance's fairness and
transparency. Factors contributing to their increasing
influence include their role in providing voting
recommendations to busy institutional investors and the rise of
passive investing, which magnifies their impact on voting
decisions. Investment advisors should not wholly delegate their
fiduciary responsibilities to proxy advisors, and the SEC
should actively monitor investment advisors to ensure they
fulfill their duties. This title would require proxy advisors
to provide economic analysis when considering social and
political issues, ensuring their recommendations align with
investment advisors' fiduciary duties. In addition, the title
enhances transparency and accountability by requiring proxy
advisors to share draft reports with issuers, disclose
methodologies and sources of information, and publish annual
reports summarizing their activities.
A standalone discussion draft of the language of this title
was noticed for consideration as H.R.___, To amend the
Securities Exchange Act of 1934 to provide for the registration
of proxy advisory firms, by Representative Steil, in the April
29, 2025 Subcommittee hearing titled, ``Exposing the Proxy
Advisory Cartel: How ISS & Glass Lewis Influence Markets,'' and
the September 10, 2025 Committee hearing titled, ``Proxy Power
and Proposal Abuse: Reforming Rule 14a-8 to Protect Shareholder
Value.''
TITLE VI: LIABILITY FOR CERTAIN FAILURES TO DISCLOSE MATERIAL
INFORMATION OR MAKING OF MATERIAL MISSTATEMENTS
Section 601 amends Section 14 of the Exchange Act to state
that failure to disclose material information or making
material misstatements regarding proxy voting advice will be
considered false or misleading with respect to a material fact.
Proxy advisors play a significant role in influencing
voting decisions of institutional investors, who rely on their
recommendations. If these firms provide inaccurate or
incomplete information, investors may make uninformed decisions
that can have detrimental effects on their investments.
Liability for proxy advisor firms is essential to protect
investors, maintain market integrity, promote transparency,
ensure fairness, and provide legal recourse in cases of
inaccurate or misleading proxy voting advice. Holding these
firms accountable for material misstatements or non-disclosures
encourages accuracy, objectivity, and independence in their
recommendations, safeguarding shareholder interests and
enhancing trust in the corporate governance process.
A standalone discussion draft of the language of this title
was noticed for consideration as H.R.___, To amend the
Securities Exchange Act of 1934 to provide for liability for
certain failures to disclose material information or making of
material misstatements, by Representative Steil, in the April
29, 2025, Subcommittee hearing titled, ``Exposing the Proxy
Advisory Cartel: How ISS & Glass Lewis Influence Markets.''
TITLE VII: DUTIES OF INVESTMENT ADVISERS, ASSET MANAGERS, AND PENSION
FUNDS
Section 701 requires proxy advisor clients to provide
annual reports to beneficiaries and customers, revealing how
they voted on shareholder proposals and whether the votes
aligned with proxy advisory recommendations. Larger entities
must also conduct economic analyses for votes against board
recommendations, which will be made public.
To enhance transparency and accountability, it is
imperative that proxy advisory firm clients are required to
publish detailed annual reports. These reports should encompass
essential information, such as the percentage of votes cast in
accordance with proxy advisory recommendations, the percentage
of votes in favor of ESG-related shareholder proposals, and an
explanation of how firms reconcile their votes with their
fiduciary duty to act in the best economic interest of
shareholders. By providing such comprehensive reporting,
investors gain valuable insights into the decision-making
processes of proxy advisory firm clients, enabling them to
evaluate whether the firm is meeting its fiduciary obligations.
Similarly, large asset managers must demonstrate their
commitment to accountability and transparency by publicly
disclosing the economic analysis behind their shareholder
voting decisions. By sharing the rationale behind their voting
decisions, including the financial factors considered when
opposing boards of independent directors, asset managers should
justify these inconsistencies and empower shareholders to
comprehend how economic interests are prioritized. This level
of transparency fosters trust and enables investors to evaluate
whether voting decisions align with their own financial
objectives effectively.
A standalone discussion draft of the language of this title
was noticed for consideration as H.R.___, To amend the
Securities Exchange Act of 1934 to require certain disclosures
by institutional investment managers in connection with proxy
advisory firms, by Representative Loudermilk, in the April 29,
2025, Subcommittee hearing titled, ``Exposing the Proxy
Advisory Cartel: How ISS & Glass Lewis Influence Markets'', and
was subsequently introduced as H.R. 3402, which was noticed at
the September 10, 2025 Committee hearing titled, ``Proxy Power
and Proposal Abuse: Reforming Rule 14a-8 to Protect Shareholder
Value.''
TITLE VIII: PROTECTING AMERICANS' SAVINGS
Section 801 prohibits robo-voting, the practice of
automated proxy voting based on proxy advisory firm
recommendations. It also clarifies that individuals are not
obligated to vote on proxy materials.
Investment advisers bear the ultimate responsibility for
overseeing the proxy advisory firms they retain. While SEC
Staff Legal Bulletin 20 provides a starting point for this
oversight, it is necessary to examine whether institutional
investors are genuinely fulfilling their fiduciary duties when
relying on these firms' recommendations.\3\ The concern arises
when institutional investors blindly follow proxy advisory
recommendations without conducting thorough evaluations. This
hasty approach not only undermines the quality of decision-
making but also compromises companies' ability to present their
case effectively. While proxy advisory firms play a role in the
proxy voting analysis, they should not have undue influence
over voting decisions. Institutional investors must exercise
their fiduciary duties by critically evaluating recommendations
and ensuring they align with the best interests of their
clients. The prohibition of robo-voting will prevent hasty and
uninformed decisions, encouraging investors to engage in
thorough analysis before casting their votes. Moreover, by
removing the robo-voting mechanism, institutional investors
will be compelled to critically evaluate proxy advisory firm
recommendations before casting their votes. This shift will
allow for greater due diligence, thereby protecting the
economic interests of retail investors.
---------------------------------------------------------------------------
\3\See Proxy Voting: Proxy Voting Responsibilities of Investment
Advisers and Availability of Exemptions from the Proxy Rules for Proxy
Advisory Firms; Staff Legal Bulletin No. 20 (IM/CF) (Jun. 30, 2014).
---------------------------------------------------------------------------
A standalone discussion draft of the language of this title
was noticed for consideration in the April 29, 2025,
Subcommittee hearing titled, ``Exposing the Proxy Advisory
Cartel: How ISS & Glass Lewis Influence Markets'', and the
September 10, 2025 Committee hearing titled, ``Proxy Power and
Proposal Abuse: Reforming Rule 14a-8 to Protect Shareholder
Value.'' The bill was subsequently introduced by Representative
Nunn as H.R. 8383, the Protecting Americans' Savings Act.
TITLE IX: EMPOWERING SHAREHOLDERS
Section 901 requires managers of passive funds to either
follow the specific instructions of individual investors, vote
in alignment with the company's board, mirror vote, or abstain
from the vote entirely.
The dominant position of the three largest index fund
providers grants them unparalleled influence, with a combined
voting share of approximately one-quarter at shareholder
meetings of most S&P 500 companies. However, it's crucial to
emphasize that passive index funds are designed to be exactly
that--passive. Their primary goal is not to pick winners and
losers but rather to replicate the performance of the
underlying index more broadly. Consequently, using these funds
as a platform to advance specific social and political
ideologies, such as ESG and DEI, may not align with the true
essence of passive investing and can potentially divert focus
from maximizing investor returns. This divergence in the
intended nature of passive index funds raises legitimate
concerns about the prioritization of political ideologies over
the financial interests of retail investors. As such, it is
essential to take measures to safeguard the integrity of these
funds and ensure that they remain true to their passive nature.
For instance, when an investment adviser has the authority to
vote on a proxy in connection with a passively managed fund,
they should give deference to the recommendations of those
boards on shareholder proposals related to social or political
policy issues.
A standalone discussion draft of the language of this title
was noticed for consideration in the September 10, 2025,
Committee hearing titled, ``Proxy Power and Proposal Abuse:
Reforming Rule 14a-8 to Protect Shareholder Value'' and was
subsequently introduced by Representative Huizenga as H.R.
8265, the Empowering Shareholders Act of 2026.
TITLE X: BEST INTEREST BASED ON PECUNIARY FACTORS
Section 1001 amends the Investment Advisers Act of 1940 to
specify requirements concerning the consideration of pecuniary
and non-pecuniary factors, with the option for investors to
consent to the use of non-pecuniary factors in decision-making.
Investment advisers have a fiduciary duty to act in the
best financial interest of their clients. Title X aims to
ensure that investment advisers are not prioritizing non-
financial goals over financial returns without the explicit
consent of their clients. Moreover, this title ensures such
clients are provided with information regarding the expected
pecuniary effects and all fees, costs, and other expenses
incurred to consider non-pecuniary factors. The goal is to
safeguard investors from potentially harmful consequences and
to guarantee that ESG investing does not compromise the
fiduciary duty of investment advisers.
Committee Consideration
119TH CONGRESS
On April 15, 2026, Representative Steil introduced the
Protecting Americans' Retirement Savings from Politics Act,
with Representative Ann Wagner (R-MO) as original cosponsor.
Representative Dan Meuser (R-PA) was added subsequently as a
cosponsor. The bill was referred solely to the Committee on
Financial Services.
On April 21, 2026, the Committee on Financial Services met
in open session to consider, among others, H.R. 8286. The
Committee ordered H.R. 8286, as amended, to be reported with a
favorable recommendation to the House of Representatives.
118TH CONGRESS
On July 20, 2023, Representative Steil introduced H.R.
4767, the Protecting Americans' Retirement Savings from
Politics Act. This bill is an earlier iteration of H.R. 8286.
The bill was referred solely to the Committee on Financial
Services. On July 27, 2023, the Committee ordered H.R. 4767 to
be reported by a vote of 29 to 21 and filed H. Rept. 118-324 to
accompany the bill. H.R. 4767 was subsequently included in H.R.
4790, the Prioritizing Economic Growth Over Woke Policies Act,
introduced by Representative Huizenga. The Committee ordered
H.R. 4790 to be reported by a vote of 29 to 21 and filed H.
Rept. 118-336. On September 19, 2024, H.R. 4790 passed the
House by a vote of 215 to 203. On September 23, 2024, the bill
was received by the Senate and referred to the Committee on
Banking, Housing, and Urban Affairs. There was no further
action on either H.R. 4767 or H.R. 4790 in the 118th Congress.
Related Hearings
Pursuant to clause 3(c)(6) of rule XIII of the Rules of the
House of Representatives, the following hearings were used to
develop H.R. 8286:
On April 29, 2025, the Subcommittee on Capital Markets held
a hearing titled, ``Exposing the Proxy Advisory Cartel: How ISS
& Glass Lewis Influence Markets.'' The Subcommittee heard
testimony from: Mr. Charles Crain, Managing Vice President,
Policy, National Association of Manufacturers; Ms. Elizabeth
Ising, Partner, Gibson Dunn; Mr. Paul Rose, Dean, School of
Law, Case Western Reserve; Mr. Paul Washington, President and
CEO, Society for Corporate Governance; and Ms. Nell Minow, Vice
Chair, ValueEdge Advisors.
On September 10, 2025, the Committee on Financial Services
held a hearing titled, ``Proxy Power and Proposal Abuse:
Reforming Rule 14a-8 to Protect Shareholder Value.'' The
Committee heard testimony from: Mr. James Copland, Senior
Fellow & Director of Legal Policy, Manhattan Institute; Mrs.
Ferrell Keel, Partner, Jones Day; Mr. Ron Mueller, Partner,
Gibson Dunn & Crutcher LLP; and Mr. Brad Lander, Comptroller,
City of New York.
H.R. 8286 is composed of provisions from ten bills. These
bills are:
A discussion draft, H.R.___, the Mandatory
Materiality Requirement Act of 2025, by Representative
Huizenga.
H.R. 6967, the Public Company Advisory
Committee Act of 2026, introduced by Representative
Lucas. On January 22, 2026, H.R. 6967, as amended, was
ordered to be reported by the Committee by a vote of 39
to 15. On March 19, 2026, the Committee filed H. Rept.
119-557 to accompany the bill.
A discussion draft, H.R.___, To require the
SEC to conduct a study on the detrimental impact of the
Corporate Sustainability Due Diligence Directive and
Corporate Sustainability Reporting Directive on United
States companies, by Representative Meuser.
A discussion draft, H.R.___, the Corporate
Governance Examination Act, by Representative Wagner.
A discussion draft, H.R.___, To amend the
Securities Exchange Act of 1934 to provide for the
registration of proxy advisory firms, by Representative
Steil.
A discussion draft, H.R.___, To amend the
Securities Exchange Act of 1934 to provide for
liability for certain failures to disclose material
information or making of material misstatements, by
Representative Steil.
H.R. 3402, To amend the Securities Exchange
Act of 1934 to require certain disclosures by
institutional investment managers in connection with
proxy advisory firms, and for other purposes,
introduced by Representative Loudermilk.
H.R. 8383, the Protecting Americans' Savings
Act, by Representative Nunn.
H.R. 8265, the Empowering Shareholders Act
of 2026, introduced by Representative Huizenga
H.R. 2358, the Ensuring Sound Guidance Act
of 2025, introduced by Representative Barr.
Committee Votes
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee Report to include record
votes on the motion to report legislation and amendments
thereto.
On April 21, 2026, the Committee ordered H.R. 8286, as
amended, to be reported favorably to the House by a recorded
vote of 27 yeas and 24 nays, a quorum being present. (Record
Vote No. FC-262).
The Committee considered the following amendments to H.R.
8286:
Representative Steil offered an amendment in
the nature of a substitute, which made minor edits and
technical changes. This amendment was adopted by a
voice vote.
Representative Gregory Meeks (D-NY) offered
an amendment (No. 2), designated Meeks 125. This
amendment includes a Sense of Congress stating that the
principles of diversity, equity, and inclusion have a
real and material impact on a business' overall
performance and financial outlook. This amendment
failed by a recorded vote of 22 yeas and 26 nays, a
quorum being present. (Record Vote No. FC-257).
Representative Juan Vargas (D-CA) offered an
amendment (No. 3), designated Vargas 032. This
amendment ensures that the Securities and Exchange
Commission (SEC) has the authority to issue disclosure-
based rulemakings pertaining to climate, corporate
diversity, or human capital management. This amendment
failed by a recorded vote of 24 yeas and 26 nays, a
quorum being present. (Record Vote No. FC-258).
Ranking Member Maxine Waters (D-CA) offered
an amendment (No. 4), designated Waters 165. This
amendment terminates the SEC's Staff Legal Bulletin
(SLB) 14M, which replaced the ``significant social
policy'' test under SLB 14L. This amendment failed by a
recorded vote of 24 yeas and 27 nays, a quorum being
present. (Record Vote No. FC-259).
Representative Sean Casten (D-IL) offered an
amendment (No. 5), designated Casten 105. This
amendment mandates the SEC conduct an economic impact
study on the consequences of the United States failing
to adopt comprehensive climate change disclosure
requirements for publicly traded companies. This
amendment failed by a recorded vote of 24 yeas and 27
nays, a quorum being present. (Record Vote No. FC 260).
Representative Rashida Tlaib (D-MI) offered
an amendment (No. 6), designated Tlaib 127. This
amendment creates a safe harbor for proxy votes on
issues of executive compensation from the entirety of
the underlying bill's provisions. This amendment failed
by a recorded vote of 23 yeas and 27 nays, a quorum
being present. (Record Vote No. FC-261).
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. 8286 is to modernize
corporate governance by refocusing federal oversight on
financial materiality and fiduciary integrity.
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. 8286. The
Committee has requested but not received a cost estimate from
the Director of the Congressional Budget Office (CBO). However,
pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee will adopt as its own
the cost estimate by the Director of the CBO once it has been
prepared.
New Budget Authority and CBO Cost Estimate
With respect to the requirements of 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 with respect
to requirements of 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 will adopt as
its own the cost estimate for the bill prepared by the Director
of the CBO. However, a cost estimate was not made available to
the Committee in time for the filing of this report. The
Chairman of the Committee shall cause such estimate to be
printed in the Congressional Record upon its receipt by the
Committee.
Unfunded Mandates Statement
The Committee has requested but not received from the
Director of the CBO an estimate of the Federal mandates
pursuant to section 423 of the Unfunded Mandates Reform Act.
The Chairman of the Committee shall cause such estimate to be
printed in the Congressional Record upon its receipt by the
Committee.
Earmark Statement
In compliance with clause 9 of rule XXI of the Rules of the
House of Representatives, this bill, as reported, contains no
congressional earmarks, limited tax benefits, or limited tariff
benefits as defined in clause 9(e), 9(f), or 9(g) of rule XXI.
Federal Advisory Committee Act Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Applicability to the 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.
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
Section 1 provides the short title is the ```Protecting
Americans'' Retirement Savings From Politics Act.''
Section 101. Limitation on disclosure requirements
Section 101 ensures that when the SEC is engaged in
rulemaking regarding issuers' disclosure obligations, the SEC
will expressly provide that an issuer is only required to
disclose information in response to such disclosure obligations
to the extent the issuer has determined that such information
is material to a voting or investment decision.
Section 201. Public Company Advisory Committee
Section 201 establishes the Public Company Advisory
Committee to provide advice and recommendations on SEC rules,
regulations, and policies regarding its mission. The committee
will consist of appointed members from public companies,
business associations, and professional advisors.
Section 301. Study on detrimental impact of the Corporate
Sustainability Due Diligence Directive and Corporate
Sustainability Reporting Directive
Section 301 mandates a study of the potential harmful
effects and implications of the Corporate Sustainability Due
Diligence Directive and Corporate Sustainability Reporting
Directive on U.S. companies, consumers, investors, and the
economy.
Section 401. Study of certain issues with respect to proxy advisory
firms and the proxy process
Section 401 requires the SEC to conduct comprehensive
studies on proxy advisory firms and the proxy process,
addressing key issues such as financial incentives and
obligations of parties involved, the impact on long-term retail
investors and the influence of proxy advisory firms.
Section 501. Registration of proxy advisory firms
Section 501 requires proxy advisors to provide economic
analysis when considering social and political issues, ensuring
their recommendations align with investment advisors' fiduciary
duties.
Section 601. Liability for certain failures to disclose material
information or making of material misstatements
Section 601 amends Section 14 of the Securities Exchange
Act to state that failure to disclose material information or
making material misstatements regarding proxy voting advice
will be considered false or misleading with respect to a
material fact.
Section 701. Duties of investment advisers, asset managers, and pension
funds
Section 701 requires proxy advisor clients to provide
annual reports to beneficiaries and customers, revealing how
they voted on shareholder proposals and whether the votes
aligned with proxy advisory recommendations. Larger entities
must also conduct economic analyses for votes against board
recommendations, which will be made public.
Section 801. Requirements related to proxy voting
Section 801 prohibits robo-voting, the practice of
automated proxy voting based on proxy advisory firm
recommendations. It also clarifies that individuals are not
obligated to vote on proxy materials.
Section 901. Proxy voting of passively managed funds
Section 901 requires managers of passive funds to either
follow the specific instructions of individual investors, vote
in alignment with the company's board, mirror vote, or abstain
from the vote entirely.
Section 1001. Protecting retail investors' savings
Section 1001 amends the Investment Advisers Act of 1940 to
specify requirements concerning the consideration of pecuniary
and non-pecuniary factors, with the option for investors to
consent to the use of non-pecuniary factors in decision-making.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italics, and existing law in which no
change is proposed is shown in roman):
SECURITIES ACT OF 1933
TITLE I--
* * * * * * *
definitions
Sec. 2. (a) Definitions.--When used in this title, unless the
context otherwise requires--
(1) The term ``security'' means any note, stock,
treasury stock, security future, security-based swap,
bond, debenture, evidence of indebtedness, certificate
of interest or participation in any profit-sharing
agreement, collateral-trust certificate,
preorganization certificate or subscription,
transferable share, investment contract, voting-trust
certificate, certificate of deposit for a security,
fractional undivided interest in oil, gas, or other
mineral rights, any put, call, straddle, option, or
privilege on any security, certificate of deposit, or
group or index of securities (including any interest
therein or based on the value thereof), or any put,
call, straddle, option, or privilege entered into on a
national securities exchange relating to foreign
currency, or, in general, any interest or instrument
commonly known as a ``security'', or any certificate of
interest or participation in, temporary or interim
certificate for, receipt for, guarantee of, or warrant
or right to subscribe to or purchase, any of the
foregoing.
(2) The term ``person'' means an individual, a
corporation, a partnership, an association, a joint-
stock company, a trust, any unincorporated
organization, or a government or political subdivision
thereof. As used in this paragraph the term ``trust''
shall include only a trust where the interest or
interests of the beneficiary or beneficiaries are
evidenced by a security.
(3) The term ``sale'' or ``sell'' shall include every
contract of sale or disposition of a security or
interest in a security, for value. The term ``offer to
sell'', ``offer for sale'', or ``offer'' shall include
every attempt or offer to dispose of, or solicitation
of an offer to buy, a security or interest in a
security, for value. The terms defined in this
paragraph and the term ``offer to buy'' as used in
subsection (c) of section 5 shall not include
preliminary negotiations or agreements between an
issuer (or any person directly or indirectly
controlling or controlled by an issuer, or under direct
or indirect common control with an issuer) and any
underwriter or among underwriters who are or are to be
in privity of contract with an issuer (or any person
directly or indirectly controlling or controlled by an
issuer, or under direct or indirect common control with
an issuer). Any security given or delivered with, or as
a bonus on account of, any purchase of securities or
any other thing, shall be conclusively presumed to
constitute a part of the subject of such purchase and
to have been offered and sold for value. The issue or
transfer of a right or privilege, when originally
issued or transferred with a security, giving the
holder of such security the right to convert such
security into another security of the same issuer or of
another person, or giving a right to subscribe to
another security of the same issuer or of another
person, which right cannot be exercised until some
future date, shall not be deemed to be an offer or sale
of such other security; but the issue or transfer of
such other security upon the exercise of such right of
conversion or subscription shall be deemed a sale of
such other security. Any offer or sale of a security
futures product by or on behalf of the issuer of the
securities underlying the security futures product, an
affiliate of the issuer, or an underwriter, shall
constitute a contract for sale of, sale of, offer for
sale, or offer to sell the underlying securities. Any
offer or sale of a security-based swap by or on behalf
of the issuer of the securities upon which such
security-based swap is based or is referenced, an
affiliate of the issuer, or an underwriter, shall
constitute a contract for sale of, sale of, offer for
sale, or offer to sell such securities. The publication
or distribution by a broker or dealer of a research
report about an emerging growth company that is the
subject of a proposed public offering of the common
equity securities of such emerging growth company
pursuant to a registration statement that the issuer
proposes to file, or has filed, or that is effective
shall be deemed for purposes of paragraph (10) of this
subsection and section 5(c) not to constitute an offer
for sale or offer to sell a security, even if the
broker or dealer is participating or will participate
in the registered offering of the securities of the
issuer. As used in this paragraph, the term ``research
report'' means a written, electronic, or oral
communication that includes information, opinions, or
recommendations with respect to securities of an issuer
or an analysis of a security or an issuer, whether or
not it provides information reasonably sufficient upon
which to base an investment decision.
(4) The term ``issuer'' means every person who issues
or proposes to issue any security; except that with
respect to certificates of deposit, voting-trust
certificates, or collateral-trust certificates, or with
respect to certificates of interest or shares in an
unincorporated investment trust not having a board of
directors (or persons performing similar functions) or
of the fixed, restricted management, or unit type, the
term ``issuer'' means the person or persons performing
the acts and assuming the duties of depositor or
manager pursuant to the provisions of the trust or
other agreement or instrument under which such
securities are issued; except that in the case of an
unincorporated association which provides by its
articles for limited liability of any or all of its
members, or in the case of a trust, committee, or other
legal entity, the trustees or members thereof shall not
be individually liable as issuers of any security
issued by the association, trust, committee, or other
legal entity; except that with respect to equipment-
trust certificates or like securities, the term
``issuer'' means the person by whom the equipment or
property is or is to be used; and except that with
respect to fractional undivided interests in oil, gas,
or other mineral rights, the term ``issuer'' means the
owner of any such right or of any interest in such
right (whether whole or fractional) who creates
fractional interests therein for the purpose of public
offering.
(5) The term ``Commission'' means the Securities and
Exchange Commission.
(6) The term ``Territory'' means Puerto Rico, the
Virgin Islands, and the insular possessions of the
United States.
(7) The term ``interstate commerce'' means trade or
commerce in securities or any transportation or
communication relating thereto among the several States
or between the District of Columbia or any Territory of
the United States and any State or other Territory, or
between any foreign country and any State, Territory,
or the District of Columbia, or within the District of
Columbia.
(8) The term ``registration statement'' means the
statement provided for in section 6, and includes any
amendment thereto and any report, document, or
memorandum filed as part of such statement or
incorporated therein by reference.
(9) The term ``write'' or ``written'' shall include
printed, lithographed, or any means of graphic
communication.
(10) The term ``prospectus'' means any prospectus,
notice, circular, advertisement, letter, or
communication, written or by radio or television, which
offers any security for sale or confirms the sale of
any security; except that (a) a communication sent or
given after the effective date of the registration
statement (other than a prospectus permitted under
subsection (b) of section 10) shall not be deemed a
prospectus if it is proved that prior to or at the same
time with such communication a written prospectus
meeting the requirements of subsection (a) of section
10 at the time of such communication was sent or given
to the person to whom the communication was made, and
(b) a notice, circular, advertisement, letter, or
communication in respect of a security shall not be
deemed to be a prospectus if it states from whom a
written prospectus meeting the requirements of section
10 may be obtained and, in addition, does no more than
identify the security, state the price thereof, state
by whom orders will be executed, and contain such other
information as the Commission, by rules or regulations
deemed necessary or appropriate in the public interest
and for the protection of investors, and subject to
such terms and conditions as may be prescribed therein,
may permit.
(11) The term ``underwriter'' means any person who
has purchased from an issuer with a view to, or offers
or sells for an issuer in connection with, the
distribution of any security, or participates or has a
direct or indirect participation in any such
undertaking, or participates or has a participation in
the direct or indirect underwriting of any such
undertaking; but such term shall not include a person
whose interest is limited to a commission from an
underwriter or dealer not in excess of the usual and
customary distributors' or sellers' commission. As used
in this paragraph the term ``issuer'' shall include, in
addition to an issuer, any person directly or
indirectly controlling or controlled by the issuer, or
any person under direct or indirect common control with
the issuer.
(12) The term ``dealer'' means any person who engages
either for all or part of his time, directly or
indirectly, as agent, broker, or principal, in the
business of offering, buying, selling, or otherwise
dealing or trading in securities issued by another
person.
(13) The term ``insurance company'' means a company
which is organized as an insurance company, whose
primary and predominant business activity is the
writing of insurance or the reinsuring of risks
underwritten by insurance companies, and which is
subject to supervision by the insurance commissioner,
or a similar official or agency, of a State or
territory or the District of Columbia; or any receiver
or similar official or any liquidating agent for such
company, in his capacity as such.
(14) The term ``separate account'' means an account
established and maintained by an insurance company
pursuant to the laws of any State or territory of the
United States, the District of Columbia, or of Canada
or any province thereof, under which income, gains and
losses, whether or not realized, from assets allocated
to such account, are, in accordance with the applicable
contract, credited to or charged against such account
without regard to other income, gains, or losses of the
insurance company.
(15) The term ``accredited investor'' shall mean--
(i) a bank as defined in section 3(a)(2)
whether acting in its individual or fiduciary
capacity; an insurance company as defined in
paragraph (13) of this subsection; an
investment company registered under the
Investment Company Act of 1940 or a business
development company as defined in section
2(a)(48) of that Act; a Small Business
Investment Company licensed by the Small
Business Administration; or an employee benefit
plan, including an individual retirement
account, which is subject to the provisions of
the Employee Retirement Income Security Act of
1974, if the investment decision is made by a
plan fiduciary, as defined in section 3(21) of
such Act, which is either a bank, insurance
company, or registered investment adviser; or
(ii) any person who, on the basis of such
factors as financial sophistication, net worth,
knowledge, and experience in financial matters,
or amount of assets under management qualifies
as an accredited investor under rules and
regulations which the Commission shall
prescribe.
(16) The terms ``security future'', ``narrow-based
security index'', and ``security futures product'' have
the same meanings as provided in section 3(a)(55) of
the Securities Exchange Act of 1934.
(17) The terms ``swap'' and ``security-based swap''
have the same meanings as in section 1a of the
Commodity Exchange Act (7 U.S.C. 1a).
(18) The terms ``purchase'' or ``sale'' of a
security-based swap shall be deemed to mean the
execution, termination (prior to its scheduled maturity
date), assignment, exchange, or similar transfer or
conveyance of, or extinguishing of rights or
obligations under, a security-based swap, as the
context may require.
(19) The term ``emerging growth company'' means an
issuer that had total annual gross revenues of less
than $1,000,000,000 (as such amount is indexed for
inflation every 5 years by the Commission to reflect
the change in the Consumer Price Index for All Urban
Consumers published by the Bureau of Labor Statistics,
setting the threshold to the nearest 1,000,000) during
its most recently completed fiscal year. An issuer that
is an emerging growth company as of the first day of
that fiscal year shall continue to be deemed an
emerging growth company until the earliest of--
(A) the last day of the fiscal year of the
issuer during which it had total annual gross
revenues of $1,000,000,000 (as such amount is
indexed for inflation every 5 years by the
Commission to reflect the change in the
Consumer Price Index for All Urban Consumers
published by the Bureau of Labor Statistics,
setting the threshold to the nearest 1,000,000)
or more;
(B) the last day of the fiscal year of the
issuer following the fifth anniversary of the
date of the first sale of common equity
securities of the issuer pursuant to an
effective registration statement under this
title;
(C) the date on which such issuer has, during
the previous 3-year period, issued more than
$1,000,000,000 in non-convertible debt; or
(D) the date on which such issuer is deemed
to be a ``large accelerated filer'', as defined
in section 240.12b-2 of title 17, Code of
Federal Regulations, or any successor thereto.
(b) Consideration of Promotion of Efficiency, Competition,
and Capital Formation; Limitation on Disclosure Requirements.--
[Whenever]
(1) In general._Whenever pursuant to this title the
Commission is engaged in rulemaking and is required to
consider or determine whether an action is necessary or
appropriate in the public interest, the Commission
shall also consider, in addition to the protection of
investors, whether the action will promote efficiency,
competition, and capital formation.
(2) Limitation.--
(A) In general.--Whenever pursuant to this
title the Commission is engaged in rulemaking
regarding disclosure obligations of issuers,
the Commission shall expressly provide that an
issuer is only required to disclose information
in response to such disclosure obligations to
the extent the issuer has determined that such
information is material with respect to a
voting or investment decision regarding the
securities of such issuer.
(B) Applicability.--Subparagraph (A) shall
not apply with respect to the removal of any
disclosure requirement with respect to an
issuer.
(C) Rule of construction.--For the purposes
of this paragraph, information is considered
material with respect to a voting or investment
decision regarding the securities of an issuer
if there is a substantial likelihood that a
reasonable investor would view the failure to
disclose that information as having
significantly altered the total mix of
information made available to the investor.
* * * * * * *
----------
SECURITIES EXCHANGE ACT OF 1934
TITLE I--REGULATION OF SECURITIES EXCHANGES
* * * * * * *
definitions and application of title
Sec. 3. (a) When used in this title, unless the context
otherwise requires--
(1) The term ``exchange'' means any organization,
association, or group of persons, whether incorporated
or unincorporated, which constitutes, maintains, or
provides a market place or facilities for bringing
together purchasers and sellers of securities or for
otherwise performing with respect to securities the
functions commonly performed by a stock exchange as
that term is generally understood, and includes the
market place and the market facilities maintained by
such exchange.
(2) The term ``facility'' when used with respect to
an exchange includes its premises, tangible or
intangible property whether on the premises or not, any
right to the use of such premises or property or any
service thereof for the purpose of effecting or
reporting a transaction on an exchange (including,
among other things, any system of communication to or
from the exchange, by ticker or otherwise, maintained
by or with the consent of the exchange), and any right
of the exchange to the use of any property or service.
(3)(A) The term ``member'' when used with respect to
a national securities exchange means (i) any natural
person permitted to effect transactions on the floor of
the exchange without the services of another person
acting as broker, (ii) any registered broker or dealer
with which such a natural person is associated, (iii)
any registered broker or dealer permitted to designate
as a representative such a natural person, and (iv) any
other registered broker or dealer which agrees to be
regulated by such exchange and with respect to which
the exchange undertakes to enforce compliance with the
provisions of this title, the rules and regulations
thereunder, and its own rules. For purposes of sections
6(b)(1), 6(b)(4), 6(b)(6), 6(b)(7), 6(d), 17(d), 19(d),
19(e), 19(g), 19(h), and 21 of this title, the term
``member'' when used with respect to a national
securities exchange also means, to the extent of the
rules of the exchange specified by the Commission, any
person required by the Commission to comply with such
rules pursuant to section 6(f) of this title.
(B) The term ``member'' when used with respect to a
registered securities association means any broker or
dealer who agrees to be regulated by such association
and with respect to whom the association undertakes to
enforce compliance with the provisions of this title,
the rules and regulations thereunder, and its own
rules.
(4) Broker.--
(A) In general.--The term ``broker'' means
any person engaged in the business of effecting
transactions in securities for the account of
others.
(B) Exception for certain bank activities.--A
bank shall not be considered to be a broker
because the bank engages in any one or more of
the following activities under the conditions
described:
(i) Third party brokerage
arrangements.--The bank enters into a
contractual or other written
arrangement with a broker or dealer
registered under this title under which
the broker or dealer offers brokerage
services on or off the premises of the
bank if--
(I) such broker or dealer is
clearly identified as the
person performing the brokerage
services;
(II) the broker or dealer
performs brokerage services in
an area that is clearly marked
and, to the extent practicable,
physically separate from the
routine deposit-taking
activities of the bank;
(III) any materials used by
the bank to advertise or
promote generally the
availability of brokerage
services under the arrangement
clearly indicate that the
brokerage services are being
provided by the broker or
dealer and not by the bank;
(IV) any materials used by
the bank to advertise or
promote generally the
availability of brokerage
services under the arrangement
are in compliance with the
Federal securities laws before
distribution;
(V) bank employees (other
than associated persons of a
broker or dealer who are
qualified pursuant to the rules
of a self-regulatory
organization) perform only
clerical or ministerial
functions in connection with
brokerage transactions
including scheduling
appointments with the
associated persons of a broker
or dealer, except that bank
employees may forward customer
funds or securities and may
describe in general terms the
types of investment vehicles
available from the bank and the
broker or dealer under the
arrangement;
(VI) bank employees do not
receive incentive compensation
for any brokerage transaction
unless such employees are
associated persons of a broker
or dealer and are qualified
pursuant to the rules of a
self-regulatory organization,
except that the bank employees
may receive compensation for
the referral of any customer if
the compensation is a nominal
one-time cash fee of a fixed
dollar amount and the payment
of the fee is not contingent on
whether the referral results in
a transaction;
(VII) such services are
provided by the broker or
dealer on a basis in which all
customers that receive any
services are fully disclosed to
the broker or dealer;
(VIII) the bank does not
carry a securities account of
the customer except as
permitted under clause (ii) or
(viii) of this subparagraph;
and
(IX) the bank, broker, or
dealer informs each customer
that the brokerage services are
provided by the broker or
dealer and not by the bank and
that the securities are not
deposits or other obligations
of the bank, are not guaranteed
by the bank, and are not
insured by the Federal Deposit
Insurance Corporation.
(ii) Trust activities.--The bank
effects transactions in a trustee
capacity, or effects transactions in a
fiduciary capacity in its trust
department or other department that is
regularly examined by bank examiners
for compliance with fiduciary
principles and standards, and--
(I) is chiefly compensated
for such transactions,
consistent with fiduciary
principles and standards, on
the basis of an administration
or annual fee (payable on a
monthly, quarterly, or other
basis), a percentage of assets
under management, or a flat or
capped per order processing fee
equal to not more than the cost
incurred by the bank in
connection with executing
securities transactions for
trustee and fiduciary
customers, or any combination
of such fees; and
(II) does not publicly
solicit brokerage business,
other than by advertising that
it effects transactions in
securities in conjunction with
advertising its other trust
activities.
(iii) Permissible securities
transactions.--The bank effects
transactions in--
(I) commercial paper, bankers
acceptances, or commercial
bills;
(II) exempted securities;
(III) qualified Canadian
government obligations as
defined in section 5136 of the
Revised Statutes, in conformity
with section 15C of this title
and the rules and regulations
thereunder, or obligations of
the North American Development
Bank; or
(IV) any standardized, credit
enhanced debt security issued
by a foreign government
pursuant to the March 1989 plan
of then Secretary of the
Treasury Brady, used by such
foreign government to retire
outstanding commercial bank
loans.
(iv) Certain stock purchase plans.--
(I) Employee benefit plans.--
The bank effects transactions,
as part of its transfer agency
activities, in the securities
of an issuer as part of any
pension, retirement, profit-
sharing, bonus, thrift,
savings, incentive, or other
similar benefit plan for the
employees of that issuer or its
affiliates (as defined in
section 2 of the Bank Holding
Company Act of 1956), if the
bank does not solicit
transactions or provide
investment advice with respect
to the purchase or sale of
securities in connection with
the plan.
(II) Dividend reinvestment
plans.--The bank effects
transactions, as part of its
transfer agency activities, in
the securities of an issuer as
part of that issuer's dividend
reinvestment plan, if--
(aa) the bank does
not solicit
transactions or provide
investment advice with
respect to the purchase
or sale of securities
in connection with the
plan; and
(bb) the bank does
not net shareholders'
buy and sell orders,
other than for programs
for odd-lot holders or
plans registered with
the Commission.
(III) Issuer plans.--The bank
effects transactions, as part
of its transfer agency
activities, in the securities
of an issuer as part of a plan
or program for the purchase or
sale of that issuer's shares,
if--
(aa) the bank does
not solicit
transactions or provide
investment advice with
respect to the purchase
or sale of securities
in connection with the
plan or program; and
(bb) the bank does
not net shareholders'
buy and sell orders,
other than for programs
for odd-lot holders or
plans registered with
the Commission.
(IV) Permissible delivery of
materials.--The exception to
being considered a broker for a
bank engaged in activities
described in subclauses (I),
(II), and (III) will not be
affected by delivery of written
or electronic plan materials by
a bank to employees of the
issuer, shareholders of the
issuer, or members of affinity
groups of the issuer, so long
as such materials are--
(aa) comparable in
scope or nature to that
permitted by the
Commission as of the
date of the enactment
of the Gramm-Leach-
Bliley Act; or
(bb) otherwise
permitted by the
Commission.
(v) Sweep accounts.--The bank effects
transactions as part of a program for
the investment or reinvestment of
deposit funds into any no-load, open-
end management investment company
registered under the Investment Company
Act of 1940 that holds itself out as a
money market fund.
(vi) Affiliate transactions.--The
bank effects transactions for the
account of any affiliate of the bank
(as defined in section 2 of the Bank
Holding Company Act of 1956) other
than--
(I) a registered broker or
dealer; or
(II) an affiliate that is
engaged in merchant banking, as
described in section 4(k)(4)(H)
of the Bank Holding Company Act
of 1956.
(vii) Private securities offerings.--
The bank--
(I) effects sales as part of
a primary offering of
securities not involving a
public offering, pursuant to
section 3(b), 4(2), or 4(5) of
the Securities Act of 1933 or
the rules and regulations
issued thereunder;
(II) at any time after the
date that is 1 year after the
date of the enactment of the
Gramm-Leach-Bliley Act, is not
affiliated with a broker or
dealer that has been registered
for more than 1 year in
accordance with this Act, and
engages in dealing, market
making, or underwriting
activities, other than with
respect to exempted securities;
and
(III) if the bank is not
affiliated with a broker or
dealer, does not effect any
primary offering described in
subclause (I) the aggregate
amount of which exceeds 25
percent of the capital of the
bank, except that the
limitation of this subclause
shall not apply with respect to
any sale of government
securities or municipal
securities.
(viii) Safekeeping and custody
activities.--
(I) In general.--The bank, as
part of customary banking
activities--
(aa) provides
safekeeping or custody
services with respect
to securities,
including the exercise
of warrants and other
rights on behalf of
customers;
(bb) facilitates the
transfer of funds or
securities, as a
custodian or a clearing
agency, in connection
with the clearance and
settlement of its
customers' transactions
in securities;
(cc) effects
securities lending or
borrowing transactions
with or on behalf of
customers as part of
services provided to
customers pursuant to
division (aa) or (bb)
or invests cash
collateral pledged in
connection with such
transactions;
(dd) holds securities
pledged by a customer
to another person or
securities subject to
purchase or resale
agreements involving a
customer, or
facilitates the
pledging or transfer of
such securities by book
entry or as otherwise
provided under
applicable law, if the
bank maintains records
separately identifying
the securities and the
customer; or
(ee) serves as a
custodian or provider
of other related
administrative services
to any individual
retirement account,
pension, retirement,
profit sharing, bonus,
thrift savings,
incentive, or other
similar benefit plan.
(II) Exception for carrying
broker activities.--The
exception to being considered a
broker for a bank engaged in
activities described in
subclause (I) shall not apply
if the bank, in connection with
such activities, acts in the
United States as a carrying
broker (as such term, and
different formulations thereof,
are used in section 15(c)(3) of
this title and the rules and
regulations thereunder) for any
broker or dealer, unless such
carrying broker activities are
engaged in with respect to
government securities (as
defined in paragraph (42) of
this subsection).
(ix) Identified banking products.--
The bank effects transactions in
identified banking products as defined
in section 206 of the Gramm-Leach-
Bliley Act.
(x) Municipal securities.--The bank
effects transactions in municipal
securities.
(xi) De minimis exception.--The bank
effects, other than in transactions
referred to in clauses (i) through (x),
not more than 500 transactions in
securities in any calendar year, and
such transactions are not effected by
an employee of the bank who is also an
employee of a broker or dealer.
(C) Execution by broker or dealer.--The
exception to being considered a broker for a
bank engaged in activities described in clauses
(ii), (iv), and (viii) of subparagraph (B)
shall not apply if the activities described in
such provisions result in the trade in the
United States of any security that is a
publicly traded security in the United States,
unless--
(i) the bank directs such trade to a
registered broker or dealer for
execution;
(ii) the trade is a cross trade or
other substantially similar trade of a
security that--
(I) is made by the bank or
between the bank and an
affiliated fiduciary; and
(II) is not in contravention
of fiduciary principles
established under applicable
Federal or State law; or
(iii) the trade is conducted in some
other manner permitted under rules,
regulations, or orders as the
Commission may prescribe or issue.
(D) Fiduciary capacity.--For purposes of
subparagraph (B)(ii), the term ``fiduciary
capacity'' means--
(i) in the capacity as trustee,
executor, administrator, registrar of
stocks and bonds, transfer agent,
guardian, assignee, receiver, or
custodian under a uniform gift to minor
act, or as an investment adviser if the
bank receives a fee for its investment
advice;
(ii) in any capacity in which the
bank possesses investment discretion on
behalf of another; or
(iii) in any other similar capacity.
(E) Exception for entities subject to section
15(e).--The term ``broker'' does not include a
bank that--
(i) was, on the day before the date
of enactment of the Gramm-Leach-Bliley
Act, subject to section 15(e); and
(ii) is subject to such restrictions
and requirements as the Commission
considers appropriate.
(F) Joint rulemaking required.--The
Commission and the Board of Governors of the
Federal Reserve System shall jointly adopt a
single set of rules or regulations to implement
the exceptions in subparagraph (B).
(5) Dealer.--
(A) In general.--The term ``dealer'' means
any person engaged in the business of buying
and selling securities (not including security-
based swaps, other than security-based swaps
with or for persons that are not eligible
contract participants) for such person's own
account through a broker or otherwise.
(B) Exception for person not engaged in the
business of dealing.--The term ``dealer'' does
not include a person that buys or sells
securities (not including security-based swaps,
other than security-based swaps with or for
persons that are not eligible contract
participants) for such person's own account,
either individually or in a fiduciary capacity,
but not as a part of a regular business.
(C) Exception for certain bank activities.--A
bank shall not be considered to be a dealer
because the bank engages in any of the
following activities under the conditions
described:
(i) Permissible securities
transactions.--The bank buys or sells--
(I) commercial paper, bankers
acceptances, or commercial
bills;
(II) exempted securities;
(III) qualified Canadian
government obligations as
defined in section 5136 of the
Revised Statutes of the United
States, in conformity with
section 15C of this title and
the rules and regulations
thereunder, or obligations of
the North American Development
Bank; or
(IV) any standardized, credit
enhanced debt security issued
by a foreign government
pursuant to the March 1989 plan
of then Secretary of the
Treasury Brady, used by such
foreign government to retire
outstanding commercial bank
loans.
(ii) Investment, trustee, and
fiduciary transactions.--The bank buys
or sells securities for investment
purposes--
(I) for the bank; or
(II) for accounts for which
the bank acts as a trustee or
fiduciary.
(iii) Asset-backed transactions.--The
bank engages in the issuance or sale to
qualified investors, through a grantor
trust or other separate entity, of
securities backed by or representing an
interest in notes, drafts, acceptances,
loans, leases, receivables, other
obligations (other than securities of
which the bank is not the issuer), or
pools of any such obligations
predominantly originated by--
(I) the bank;
(II) an affiliate of any such
bank other than a broker or
dealer; or
(III) a syndicate of banks of
which the bank is a member, if
the obligations or pool of
obligations consists of
mortgage obligations or
consumer-related receivables.
(iv) Identified banking products.--
The bank buys or sells identified
banking products, as defined in section
206 of the Gramm-Leach-Bliley Act.
(6) The term ``bank'' means (A) a banking institution
organized under the laws of the United States or a
Federal savings association, as defined in section 2(5)
of the Home Owners' Loan Act, (B) a member bank of the
Federal Reserve System, (C) any other banking
institution or savings association, as defined in
section 2(4) of the Home Owners' Loan Act, whether
incorporated or not, doing business under the laws of
any State or of the United States, a substantial
portion of the business of which consists of receiving
deposits or exercising fiduciary powers similar to
those permitted to national banks under the authority
of the Comptroller of the Currency pursuant to the
first section of Public Law 87-722 (12 U.S.C. 92a), and
which is supervised and examined by State or Federal
authority having supervision over banks or savings
associations, and which is not operated for the purpose
of evading the provisions of this title, and (D) a
receiver, conservator, or other liquidating agent of
any institution or firm included in clauses (A), (B),
or (C) of this paragraph.
(7) The term ``director'' means any director of a
corporation or any person performing similar functions
with respect to any organization, whether incorporated
or unincorporated.
(8) The term ``issuer'' means any person who issues
or proposes to issue any security; except that with
respect to certificates of deposit for securities,
voting-trust certificates, or collateral-trust
certificates, or with respect to certificates of
interest or shares in an unincorporated investment
trust not having a board of directors or of the fixed,
restricted management, or unit type, the term
``issuer'' means the person or persons performing the
acts and assuming the duties of depositor or manager
pursuant to the provisions of the trust or other
agreement or instrument under which such securities are
issued; and except that with respect to equipment-trust
certificates or like securities, the term ``issuer''
means the person by whom the equipment or property is,
or is to be, used.
(9) The term ``person'' means a natural person,
company, government, or political subdivision, agency,
or instrumentality of a government.
(10) The term ``security'' means any note, stock,
treasury stock, security future, security-based
swap,bond, debenture, certificate of interest or
participation in any profit-sharing agreement or in any
oil, gas, or other mineral royalty or lease, any
collateral-trust certificate, preorganization
certificate or subscription, transferable share,
investment contract, voting-trust certificate,
certificate of deposit for a security, any put, call,
straddle, option, or privilege on any security,
certificate of deposit, or group or index of securities
(including any interest therein or based on the value
thereof), or any put, call, straddle, option, or
privilege entered into on a national securities
exchange relating to foreign currency, or in general,
any instrument commonly known as a ``security''; or any
certificate of interest or participation in, temporary
or interim certificate for, receipt for, or warrant or
right to subscribe to or purchase, any of the
foregoing; but shall not include currency or any note,
draft, bill of exchange, or banker's acceptance which
has a maturity at the time of issuance of not exceeding
nine months, exclusive of days of grace, or any renewal
thereof the maturity of which is likewise limited.
(11) The term ``equity security'' means any stock or
similar security; or any security future on any such
security; or any security convertible, with or without
consideration, into such a security, or carrying any
warrant or right to subscribe to or purchase such a
security; or any such warrant or right; or any other
security which the Commission shall deem to be of
similar nature and consider necessary or appropriate,
by such rules and regulations as it may prescribe in
the public interest or for the protection of investors,
to treat as an equity security.
(12)(A) The term ``exempted security'' or ``exempted
securities'' includes--
(i) government securities, as defined in
paragraph (42) of this subsection;
(ii) municipal securities, as defined in
paragraph (29) of this subsection;
(iii) any interest or participation in any
common trust fund or similar fund that is
excluded from the definition of the term
``investment company'' under section 3(c)(3) of
the Investment Company Act of 1940;
(iv) any interest or participation in a
single trust fund, or a collective trust fund
maintained by a bank, or any security arising
out of a contract issued by an insurance
company, which interest, participation, or
security is issued in connection with a
qualified plan as defined in subparagraph (C)
of this paragraph;
(v) any security issued by or any interest or
participation in any pooled income fund,
collective trust fund, collective investment
fund, or similar fund that is excluded from the
definition of an investment company under
section 3(c)(10)(B) of the Investment Company
Act of 1940;
(vi) solely for purposes of sections 12, 13,
14, and 16 of this title, any security issued
by or any interest or participation in any
church plan, company, or account that is
excluded from the definition of an investment
company under section 3(c)(14) of the
Investment Company Act of 1940; and
(vii) such other securities (which may
include, among others, unregistered securities,
the market in which is predominantly
intrastate) as the Commission may, by such
rules and regulations as it deems consistent
with the public interest and the protection of
investors, either unconditionally or upon
specified terms and conditions or for stated
periods, exempt from the operation of any one
or more provisions of this title which by their
terms do not apply to an ``exempted security''
or to ``exempted securities''.
(B)(i) Notwithstanding subparagraph (A)(i) of this
paragraph, government securities shall not be deemed to
be ``exempted securities'' for the purposes of section
17A of this title.
(ii) Notwithstanding subparagraph (A)(ii) of this
paragraph, municipal securities shall not be deemed to
be ``exempted securities'' for the purposes of sections
15 and 17A of this title.
(C) For purposes of subparagraph (A)(iv) of this
paragraph, the term ``qualified plan'' means (i) a
stock bonus, pension, or profit-sharing plan which
meets the requirements for qualification under section
401 of the Internal Revenue Code of 1954, (ii) an
annuity plan which meets the requirements for the
deduction of the employer's contribution under section
404(a)(2) of such Code, (iii) a governmental plan as
defined in section 414(d) of such Code which has been
established by an employer for the exclusive benefit of
its employees or their beneficiaries for the purpose of
distributing to such employees or their beneficiaries
the corpus and income of the funds accumulated under
such plan, if under such plan it is impossible, prior
to the satisfaction of all liabilities with respect to
such employees and their beneficiaries, for any part of
the corpus or income to be used for, or diverted to,
purposes other than the exclusive benefit of such
employees or their beneficiaries, or (iv) a church
plan, company, or account that is excluded from the
definition of an investment company under section
3(c)(14) of the Investment Company Act of 1940, other
than any plan described in clause (i), (ii), or (iii)
of this subparagraph which (I) covers employees some or
all of whom are employees within the meaning of section
401(c) of such Code, or (II) is a plan funded by an
annuity contract described in section 403(b) of such
Code.
(13) The terms ``buy'' and ``purchase'' each include
any contract to buy, purchase, or otherwise acquire.
For security futures products, such term includes any
contract, agreement, or transaction for future
delivery. For security-based swaps, such terms include
the execution, termination (prior to its scheduled
maturity date), assignment, exchange, or similar
transfer or conveyance of, or extinguishing of rights
or obligations under, a security-based swap, as the
context may require.
(14) The terms ``sale'' and ``sell'' each include any
contract to sell or otherwise dispose of. For security
futures products, such term includes any contract,
agreement, or transaction for future delivery. For
security-based swaps, such terms include the execution,
termination (prior to its scheduled maturity date),
assignment, exchange, or similar transfer or conveyance
of, or extinguishing of rights or obligations under, a
security-based swap, as the context may require.
(15) The term ``Commission'' means the Securities and
Exchange Commission established by section 4 of this
title.
(16) The term ``State'' means any State of the United
States, the District of Columbia, Puerto Rico,
Philippine Islands, the Virgin Islands, or any other
possession of the United States.
(17) The term ``interstate commerce'' means trade,
commerce, transportation, or communication among the
several States, or between any foreign country and any
State, or between any State and any place or ship
outside thereof. The term also includes intrastate use
of (A) any facility of a national securities exchange
or of a telephone or other interstate means of
communication, or (B) any other interstate
instrumentality.
(18) The term ``person associated with a broker or
dealer'' or ``associated person of a broker or dealer''
means any partner, officer, director, or branch manager
of such broker or dealer (or any person occupying a
similar status or performing similar functions), any
person directly or indirectly controlling, controlled
by, or under common control with such broker or dealer,
or any employee of such broker or dealer, except that
any person associated with a broker or dealer whose
functions are solely clerical or ministerial shall not
be included in the meaning of such term for purposes of
section 15(b) of this title (other than paragraph (6)
thereof).
(19) The terms ``investment company,''``affiliated
person,''``insurance company,''``separate account,''
and ``company'' have the same meanings as in the
Investment Company Act of 1940.
(20) The terms ``investment adviser'' and
``underwriter'' have the same meanings as in the
Investment Advisers Act of 1940.
(21) The term ``persons associated with a member'' or
``associated person of a member'' when used with
respect to a member of a national securities exchange
or registered securities association means any partner,
officer, director, or branch manager of such member (or
any person occupying a similar status or performing
similar functions), any person directly or indirectly
controlling, controlled by, or under common control
with such member, or any employee of such member.
(22)(A) The term ``securities information processor''
means any person engaged in the business of (i)
collecting, processing, or preparing for distribution
or publication, or assisting, participating in, or
coordinating the distribution or publication of,
information with respect to transactions in or
quotations for any security (other than an exempted
security) or (ii) distributing or publishing (whether
by means of a ticker tape, a communications network, a
terminal display device, or otherwise) on a current and
continuing basis, information with respect to such
transactions or quotations. The term ``securities
information processor'' does not include any bona fide
newspaper, news magazine, or business or financial
publication of general and regular circulation, any
self-regulatory organization, any bank, broker, dealer,
building and loan, savings and loan, or homestead
association, or cooperative bank, if such bank, broker,
dealer, association, or cooperative bank would be
deemed to be a securities information processor solely
by reason of functions performed by such institutions
as part of customary banking, brokerage, dealing,
association, or cooperative bank activities, or any
common carrier, as defined in section 3 of the
Communications Act of 1934, subject to the jurisdiction
of the Federal Communications Commission or a State
commission, as defined in section 3 of that Act, unless
the Commission determines that such carrier is engaged
in the business of collecting, processing, or preparing
for distribution or publication, information with
respect to transactions in or quotations for any
security.
(B) The term ``exclusive processor'' means any
securities information processor or self-regulatory
organization which, directly or indirectly, engages on
an exclusive basis on behalf of any national securities
exchange or registered securities association, or any
national securities exchange or registered securities
association which engages on an exclusive basis on its
own behalf, in collecting, processing, or preparing for
distribution or publication any information with
respect to (i) transactions or quotations on or
effected or made by means of any facility of such
exchange or (ii) quotations distributed or published by
means of any electronic system operated or controlled
by such association.
(23)(A) The term ``clearing agency'' means any person
who acts as an intermediary in making payments or
deliveries or both in connection with transactions in
securities or who provides facilities for comparison of
data respecting the terms of settlement of securities
transactions, to reduce the number of settlements of
securities transactions, or for the allocation of
securities settlement responsibilities. Such term also
means any person, such as a securities depository, who
(i) acts as a custodian of securities in connection
with a system for the central handling of securities
whereby all securities of a particular class or series
of any issuer deposited within the system are treated
as fungible and may be transferred, loaned, or pledged
by bookkeeping entry without physical delivery of
securities certificates, or (ii) otherwise permits or
facilitates the settlement of securities transactions
or the hypothecation or lending of securities without
physical delivery of securities certificates.
(B) The term ``clearing agency'' does not include (i)
any Federal Reserve bank, Federal home loan bank, or
Federal land bank; (ii) any national securities
exchange or registered securities association solely by
reason of its providing facilities for comparison of
data respecting the terms of settlement of securities
transactions effected on such exchange or by means of
any electronic system operated or controlled by such
association; (iii) any bank, broker, dealer, building
and loan, savings and loan, or homestead association,
or cooperative bank if such bank, broker, dealer,
association, or cooperative bank would be deemed to be
a clearing agency solely by reason of functions
performed by such institution as part of customary
banking, brokerage, dealing, association, or
cooperative banking activities, or solely by reason of
acting on behalf of a clearing agency or a participant
therein in connection with the furnishing by the
clearing agency of services to its participants or the
use of services of the clearing agency by its
participants, unless the Commission, by rule, otherwise
provides as necessary or appropriate to assure the
prompt and accurate clearance and settlement of
securities transactions or to prevent evasion of this
title; (iv) any life insurance company, its registered
separate accounts, or a subsidiary of such insurance
company solely by reason of functions commonly
performed by such entities in connection with variable
annuity contracts or variable life policies issued by
such insurance company or its separate accounts; (v)
any registered open-end investment company or unit
investment trust solely by reason of functions commonly
performed by it in connection with shares in such
registered open-end investment company or unit
investment trust, or (vi) any person solely by reason
of its performing functions described in paragraph
25(E) of this subsection.
(24) The term ``participant'' when used with respect
to a clearing agency means any person who uses a
clearing agency to clear or settle securities
transactions or to transfer, pledge, lend, or
hypothecate securities. Such term does not include a
person whose only use of a clearing agency is (A)
through another person who is a participant or (B) as a
pledgee of securities.
(25) The term ``transfer agent'' means any person who
engages on behalf of an issuer of securities or on
behalf of itself as an issuer of securities in (A)
countersigning such securities upon issuance; (B)
monitoring the issuance of such securities with a view
to preventing unauthorized issuance, a function
commonly performed by a person called a registrar; (C)
registering the transfer of such securities; (D)
exchanging or converting such securities; or (E)
transferring record ownership of securities by
bookkeeping entry without physical issuance of
securities certificates. The term ``transfer agent''
does not include any insurance company or separate
account which performs such functions solely with
respect to variable annuity contracts or variable life
policies which it issues or any registered clearing
agency which performs such functions solely with
respect to options contracts which it issues.
(26) The term ``self-regulatory organization'' means
any national securities exchange, registered securities
association, or registered clearing agency, or (solely
for purposes of sections 19(b), 19(c), and 23(b) of
this title) the Municipal Securities Rulemaking Board
established by section 15B of this title.
(27) The term ``rules of an exchange'', ``rules of an
association'', or ``rules of a clearing agency'' means
the constitution, articles of incorporation, bylaws,
and rules, or instruments corresponding to the
foregoing, of an exchange, association of brokers and
dealers, or clearing agency, respectively, and such of
the stated policies, practices, and interpretations of
such exchange, association, or clearing agency as the
Commission, by rule, may determine to be necessary or
appropriate in the public interest or for the
protection of investors to be deemed to be rules of
such exchange, association, or clearing agency.
(28) The term ``rules of a self-regulatory
organization'' means the rules of an exchange which is
a national securities exchange, the rules of an
association of brokers and dealers which is a
registered securities association, the rules of a
clearing agency which is a registered clearing agency,
or the rules of the Municipal Securities Rulemaking
Board.
(29) The term ``municipal securities'' means
securities which are direct obligations of, or
obligations guaranteed as to principal or interest by,
a State or any political subdivision thereof, or any
agency or instrumentality of a State or any political
subdivision thereof, or any municipal corporate
instrumentality of one or more States, or any security
which is an industrial development bond (as defined in
section 103(c)(2) of the Internal Revenue Code of 1954)
the interest on which is excludable from gross income
under section 103(a)(1) of such Code if, by reason of
the application of paragraph (4) or (6) of section
103(c) of such Code (determined as if paragraphs
(4)(A), (5), and (7) were not included in such section
103(c)), paragraph (1) of such section 103(c) does not
apply to such security.
(30) The term ``municipal securities dealer'' means
any person (including a separately identifiable
department or division of a bank) engaged in the
business of buying and selling municipal securities for
his own account, through a broker or otherwise, but
does not include--
(A) any person insofar as he buys or sells
such securities for his own account, either
individually or in some fiduciary capacity, but
not as a part of a regular business; or
(B) a bank, unless the bank is engaged in the
business of buying and selling municipal
securities for its own account other than in a
fiduciary capacity, through a broker or
otherwise; Provided, however, That if the bank
is engaged in such business through a
separately identifiable department or division
(as defined by the Municipal Securities
Rulemaking Board in accordance with section
15B(b)(2)(H) of this title), the department or
division and not the bank itself shall be
deemed to be the municipal securities dealer.
(31) The term ``municipal securities broker'' means a
broker engaged in the business of effecting
transactions in municipal securities for the account of
others.
(32) The term ``person associated with a municipal
securities dealer'' when used with respect to a
municipal securities dealer which is a bank or a
division or department of a bank means any person
directly engaged in the management, direction,
supervision, or performance of any of the municipal
securities dealer's activities with respect to
municipal securities, and any person directly or
indirectly controlling such activities or controlled by
the municipal securities dealer in connection with such
activities.
(33) The term ``municipal securities investment
portfolio'' means all municipal securities held for
investment and not for sale as part of a regular
business by a municipal securities dealer or by a
person, directly or indirectly, controlling, controlled
by, or under common control with a municipal securities
dealer.
(34) The term ``appropriate regulatory agency''
means--
(A) When used with respect to a municipal
securities dealer:
(i) the Comptroller of the Currency,
in the case of a national bank, a
subsidiary or a department or division
of any such bank, a Federal savings
association (as defined in section
3(b)(2) of the Federal Deposit
Insurance Act (12 U.S.C. 1813(b)(2))),
the deposits of which are insured by
the Federal Deposit Insurance
Corporation, or a subsidiary or
department or division of any such
Federal savings association;
(ii) the Board of Governors of the
Federal Reserve System, in the case of
a State member bank of the Federal
Reserve System, a subsidiary or a
department or division thereof, a bank
holding company, a subsidiary of a bank
holding company which is a bank other
than a bank specified in clause (i),
(iii), or (iv) of this subparagraph, a
subsidiary or a department or division
of such subsidiary, or a savings and
loan holding company;
(iii) the Federal Deposit Insurance
Corporation, in the case of a bank
insured by the Federal Deposit
Insurance Corporation (other than a
member of the Federal Reserve System),
a subsidiary or department or division
of any such bank, a State savings
association (as defined in section
3(b)(3) of the Federal Deposit
Insurance Act (12 U.S.C. 1813(b)(3))),
the deposits of which are insured by
the Federal Deposit Insurance
Corporation, or a subsidiary or a
department or division of any such
State savings association; and
(iv) the Commission in the case of
all other municipal securities dealers.
(B) When used with respect to a clearing
agency or transfer agent:
(i) the Comptroller of the Currency,
in the case of a national bank, a
subsidiary of any such bank, a Federal
savings association (as defined in
section 3(b)(2) of the Federal Deposit
Insurance Act (12 U.S.C. 1813(b)(2))),
the deposits of which are insured by
the Federal Deposit Insurance
Corporation, or a subsidiary of any
such Federal savings association;
(ii) the Board of Governors of the
Federal Reserve System, in the case of
a State member bank of the Federal
Reserve System, a subsidiary thereof, a
bank holding company, a subsidiary of a
bank holding company that is a bank
other than a bank specified in clause
(i) or (iii) of this subparagraph, or a
savings and loan holding company;
(iii) the Federal Deposit Insurance
Corporation, in the case of a bank
insured by the Federal Deposit
Insurance Corporation (other than a
member of the Federal Reserve System),
a subsidiary of any such bank, a State
savings association (as defined in
section 3(b)(3) of the Federal Deposit
Insurance Act (12 U.S.C. 1813(b)(3))),
the deposits of which are insured by
the Federal Deposit Insurance
Corporation, or a subsidiary of any
such State savings association; and
(iv) the Commission in the case of
all other clearing agencies and
transfer agents.
(C) When used with respect to a participant
or applicant to become a participant in a
clearing agency or a person requesting or
having access to services offered by a clearing
agency:
(i) the Comptroller of the Currency,
in the case of a national bank or a
Federal savings association (as defined
in section 3(b)(2) of the Federal
Deposit Insurance Act (12 U.S.C.
1813(b)(2))), the deposits of which are
insured by the Federal Deposit
Insurance Corporation when the
appropriate regulatory agency for such
clearing agency is not the Commission;
(ii) the Board of Governors of the
Federal Reserve System in the case of a
State member bank of the Federal
Reserve System, a bank holding company,
or a subsidiary of a bank holding
company, a subsidiary of a bank holding
company that is a bank other than a
bank specified in clause (i) or (iii)
of this subparagraph, or a savings and
loan holding company when the
appropriate regulatory agency for such
clearing agency is not the Commission;
(iii) the Federal Deposit Insurance
Corporation, in the case of a bank
insured by the Federal Deposit
Insurance Corporation (other than a
member of the Federal Reserve System)
or a State savings association (as
defined in section 3(b)(3) of the
Federal Deposit Insurance Act (12
U.S.C. 1813(b)(3))), the deposits of
which are insured by the Federal
Deposit Insurance Corporation; and when
the appropriate regulatory agency for
such clearing agency is not the
Commission;
(iv) the Commission in all other
cases.
(D) When used with respect to an
institutional investment manager which is a
bank the deposits of which are insured in
accordance with the Federal Deposit Insurance
Act:
(i) the Comptroller of the Currency,
in the case of a national bank or a
Federal savings association (as defined
in section 3(b)(2) of the Federal
Deposit Insurance Act (12 U.S.C.
1813(b)(2))), the deposits of which are
insured by the Federal Deposit
Insurance Corporation;
(ii) the Board of Governors of the
Federal Reserve System, in the case of
any other member bank of the Federal
Reserve System; and
(iii) the Federal Deposit Insurance
Corporation, in the case of any other
insured bank or a State savings
association (as defined in section
3(b)(3) of the Federal Deposit
Insurance Act (12 U.S.C. 1813(b)(3))),
the deposits of which are insured by
the Federal Deposit Insurance
Corporation.
(E) When used with respect to a national
securities exchange or registered securities
association, member thereof, person associated
with a member thereof, applicant to become a
member thereof or to become associated with a
member thereof, or person requesting or having
access to services offered by such exchange or
association or member thereof, or the Municipal
Securities Rulemaking Board, the Commission.
(F) When used with respect to a person
exercising investment discretion with respect
to an account:
(i) the Comptroller of the Currency,
in the case of a national bank or a
Federal savings association (as defined
in section 3(b)(2) of the Federal
Deposit Insurance Act (12 U.S.C.
1813(b)(2))), the deposits of which are
insured by the Federal Deposit
Insurance Corporation;
(ii) the Board of Governors of the
Federal Reserve System in the case of
any other member bank of the Federal
Reserve System;
(iii) the Federal Deposit Insurance
Corporation, in the case of any other
bank the deposits of which are insured
in accordance with the Federal Deposit
Insurance Act or a State savings
association (as defined in section
3(b)(3) of the Federal Deposit
Insurance Act (12 U.S.C. 1813(b)(3))),
the deposits of which are insured by
the Federal Deposit Insurance
Corporation; and
(iv) the Commission in the case of
all other such persons.
(G) When used with respect to a government
securities broker or government securities
dealer, or person associated with a government
securities broker or government securities
dealer:
(i) the Comptroller of the Currency,
in the case of a national bank, a
Federal savings association (as defined
in section 3(b)(2) of the Federal
Deposit Insurance Act), the deposits of
which are insured by the Federal
Deposit Insurance Corporation, or a
Federal branch or Federal agency of a
foreign bank (as such terms are used in
the International Banking Act of 1978);
(ii) the Board of Governors of the
Federal Reserve System, in the case of
a State member bank of the Federal
Reserve System, a foreign bank, an
uninsured State branch or State agency
of a foreign bank, a commercial lending
company owned or controlled by a
foreign bank (as such terms are used in
the International Banking Act of 1978),
or a corporation organized or having an
agreement with the Board of Governors
of the Federal Reserve System pursuant
to section 25 or section 25A of the
Federal Reserve Act;
(iii) the Federal Deposit Insurance
Corporation, in the case of a bank
insured by the Federal Deposit
Insurance Corporation (other than a
member of the Federal Reserve System or
a Federal savings bank), a State
savings association (as defined in
section 3(b)(3) of the Federal Deposit
Insurance Act), the deposits of which
are insured by the Federal Deposit
Insurance Corporation, or an insured
State branch of a foreign bank (as such
terms are used in the International
Banking Act of 1978); and
(iv) the Commission, in the case of
all other government securities brokers
and government securities dealers.
(H) When used with respect to an institution
described in subparagraph (D), (F), or (G) of
section 2(c)(2), or held under section 4(f), of
the Bank Holding Company Act of 1956--
(i) the Comptroller of the Currency,
in the case of a national bank;
(ii) the Board of Governors of the
Federal Reserve System, in the case of
a State member bank of the Federal
Reserve System or any corporation
chartered under section 25A of the
Federal Reserve Act;
(iii) the Federal Deposit Insurance
Corporation, in the case of any other
bank the deposits of which are insured
in accordance with the Federal Deposit
Insurance Act; or
(iv) the Commission in the case of
all other such institutions.
As used in this paragraph, the terms ``bank holding
company'' and ``subsidiary of a bank holding company''
have the meanings given them in section 2 of the Bank
Holding Company Act of 1956. As used in this paragraph,
the term ``savings and loan holding company'' has the
same meaning as in section 10(a) of the Home Owners'
Loan Act (12 U.S.C. 1467a(a)).
(35) A person exercises ``investment discretion''
with respect to an account if, directly or indirectly,
such person (A) is authorized to determine what
securities or other property shall be purchased or sold
by or for the account, (B) makes decisions as to what
securities or other property shall be purchased or sold
by or for the account even though some other person may
have responsibility for such investment decisions, or
(C) otherwise exercises such influence with respect to
the purchase and sale of securities or other property
by or for the account as the Commission, by rule,
determines, in the public interest or for the
protection of investors, should be subject to the
operation of the provisions of this title and rules and
regulations thereunder.
(36) A class of persons or markets is subject to
``equal regulation'' if no member of the class has a
competitive advantage over any other member thereof
resulting from a disparity in their regulation under
this title which the Commission determines is unfair
and not necessary or appropriate in furtherance of the
purposes of this title.
(37) The term ``records'' means accounts,
correspondence, memorandums, tapes, discs, papers,
books, and other documents or transcribed information
of any type, whether expressed in ordinary or machine
language.
(38) The term ``market maker'' means any specialist
permitted to act as a dealer, any dealer acting in the
capacity of block positioner, and any dealer who, with
respect to a security, holds himself out (by entering
quotations in an inter-dealer communications system or
otherwise) as being willing to buy and sell such
security for his own account on a regular or continuous
basis.
(39) A person is subject to a ``statutory
disqualification'' with respect to membership or
participation in, or association with a member of, a
self-regulatory organization, if such person--
(A) has been and is expelled or suspended
from membership or participation in, or barred
or suspended from being associated with a
member of, any self-regulatory organization,
foreign equivalent of a self-regulatory
organization, foreign or international
securities exchange, contract market designated
pursuant to section 5 of the Commodity Exchange
Act (7 U.S.C. 7), or any substantially
equivalent foreign statute or regulation, or
futures association registered under section 17
of such Act (7 U.S.C. 21), or any substantially
equivalent foreign statute or regulation, or
has been and is denied trading privileges on
any such contract market or foreign equivalent;
(B) is subject to--
(i) an order of the Commission, other
appropriate regulatory agency, or foreign
financial regulatory authority--
(I) denying, suspending for a period
not exceeding 12 months, or revoking
his registration as a broker, dealer,
municipal securities dealer, government
securities broker, government
securities dealer, security-based swap
dealer, or major security-based swap
participant or limiting his activities
as a foreign person performing a
function substantially equivalent to
any of the above; or
(II) barring or suspending for a
period not exceeding 12 months his
being associated with a broker, dealer,
municipal securities dealer, government
securities broker, government
securities dealer, security-based swap
dealer, major security-based swap
participant, or foreign person
performing a function substantially
equivalent to any of the above;
(ii) an order of the Commodity Futures
Trading Commission denying, suspending, or
revoking his registration under the Commodity
Exchange Act (7 U.S.C. 1 et seq.); or
(iii) an order by a foreign financial
regulatory authority denying, suspending, or
revoking the person's authority to engage in
transactions in contracts of sale of a
commodity for future delivery or other
instruments traded on or subject to the rules
of a contract market, board of trade, or
foreign equivalent thereof;
(C) by his conduct while associated with a
broker, dealer, municipal securities dealer,
government securities broker, government
securities dealer, security-based swap dealer,
or major security-based swap participant, or
while associated with an entity or person
required to be registered under the Commodity
Exchange Act, has been found to be a cause of
any effective suspension, expulsion, or order
of the character described in subparagraph (A)
or (B) of this paragraph, and in entering such
a suspension, expulsion, or order, the
Commission, an appropriate regulatory agency,
or any such self-regulatory organization shall
have jurisdiction to find whether or not any
person was a cause thereof;
(D) by his conduct while associated with any
broker, dealer, municipal securities dealer,
government securities broker, government
securities dealer, security-based swap dealer,
major security-based swap participant, or any
other entity engaged in transactions in
securities, or while associated with an entity
engaged in transactions in contracts of sale of
a commodity for future delivery or other
instruments traded on or subject to the rules
of a contract market, board of trade, or
foreign equivalent thereof, has been found to
be a cause of any effective suspension,
expulsion, or order by a foreign or
international securities exchange or foreign
financial regulatory authority empowered by a
foreign government to administer or enforce its
laws relating to financial transactions as
described in subparagraph (A) or (B) of this
paragraph;
(E) has associated with him any person who is
known, or in the exercise of reasonable care
should be known, to him to be a person
described by subparagraph (A), (B), (C), or (D)
of this paragraph; or
(F) has committed or omitted any act, or is
subject to an order or finding, enumerated in
subparagraph (D), (E), (H), or (G) of paragraph
(4) of section 15(b) of this title, has been
convicted of any offense specified in
subparagraph (B) of such paragraph (4) or any
other felony within ten years of the date of
the filing of an application for membership or
participation in, or to become associated with
a member of, such self-regulatory organization,
is enjoined from any action, conduct, or
practice specified in subparagraph (C) of such
paragraph (4), has willfully made or caused to
be made in any application for membership or
participation in, or to become associated with
a member of, a self-regulatory organization,
report required to be filed with a self-
regulatory organization, or proceeding before a
self-regulatory organization, any statement
which was at the time, and in the light of the
circumstances under which it was made, false or
misleading with respect to any material fact,
or has omitted to state in any such
application, report, or proceeding any material
fact which is required to be stated therein.
(40) The term ``financial responsibility rules''
means the rules and regulations of the Commission or
the rules and regulations prescribed by any self-
regulatory organization relating to financial
responsibility and related practices which are
designated by the Commission, by rule or regulation, to
be financial responsibility rules.
(41) The term ``mortgage related security'' means a
security that meets standards of credit-worthiness as
established by the Commission, and either:
(A) represents ownership of one or more
promissory notes or certificates of interest or
participation in such notes (including any
rights designed to assure servicing of, or the
receipt or timeliness of receipt by the holders
of such notes, certificates, or participations
of amounts payable under, such notes,
certificates, or participations), which notes:
(i) are directly secured by a first
lien on a single parcel of real estate,
including stock allocated to a dwelling
unit in a residential cooperative
housing corporation, upon which is
located a dwelling or mixed residential
and commercial structure, on a
residential manufactured home as
defined in section 603(6) of the
National Manufactured Housing
Construction and Safety Standards Act
of 1974, whether such manufactured home
is considered real or personal property
under the laws of the State in which it
is to be located, or on one or more
parcels of real estate upon which is
located one or more commercial
structures; and
(ii) were originated by a savings and
loan association, savings bank,
commercial bank, credit union,
insurance company, or similar
institution which is supervised and
examined by a Federal or State
authority, or by a mortgage approved by
the Secretary of Housing and Urban
Development pursuant to sections 203
and 211 of the National Housing Act,
or, where such notes involve a lien on
the manufactured home, by any such
institution or by any financial
institution approved for insurance by
the Secretary of Housing and Urban
Development pursuant to section 2 of
the National Housing Act; or
(B) is secured by one or more promissory
notes or certificates of interest or
participations in such notes (with or without
recourse to the issuer thereof) and, by its
terms, provides for payments of principal in
relation to payments, or reasonable projections
of payments, on notes meeting the requirements
of subparagraphs (A) (i) and (ii) or
certificates of interest or participations in
promissory notes meeting such requirements.
For the purpose of this paragraph, the term
``promissory note'', when used in connection with a
manufactured home, shall also include a loan, advance,
or credit sale as evidence by a retail installment
sales contract or other instrument.
(42) The term ``government securities'' means--
(A) securities which are direct obligations
of, or obligations guaranteed as to principal
or interest by, the United States;
(B) securities which are issued or guaranteed
by the Tennessee Valley Authority or by
corporations in which the United States has a
direct or indirect interest and which are
designated by the Secretary of the Treasury for
exemption as necessary or appropriate in the
public interest or for the protection of
investors;
(C) securities issued or guaranteed as to
principal or interest by any corporation the
securities of which are designated, by statute
specifically naming such corporation, to
constitute exempt securities within the meaning
of the laws administered by the Commission;
(D) for purposes of sections 15C and 17A, any
put, call, straddle, option, or privilege on a
security described in subparagraph (A), (B), or
(C) other than a put, call, straddle, option,
or privilege--
(i) that is traded on one or more
national securities exchanges; or
(ii) for which quotations are
disseminated through an automated
quotation system operated by a
registered securities association; or
(E) for purposes of sections 15, 15C, and 17A
as applied to a bank, a qualified Canadian
government obligation as defined in section
5136 of the Revised Statutes of the United
States.
(43) The term ``government securities broker'' means
any person regularly engaged in the business of
effecting transactions in government securities for the
account of others, but does not include--
(A) any corporation the securities of which
are government securities under subparagraph
(B) or (C) of paragraph (42) of this
subsection; or
(B) any person registered with the Commodity
Futures Trading Commission, any contract market
designated by the Commodity Futures Trading
Commission, such contract market's affiliated
clearing organization, or any floor trader on
such contract market, solely because such
person effects transactions in government
securities that the Commission, after
consultation with the Commodity Futures Trading
Commission, has determined by rule or order to
be incidental to such person's futures-related
business.
(44) The term ``government securities dealer'' means
any person engaged in the business of buying and
selling government securities for his own account,
through a broker or otherwise, but does not include--
(A) any person insofar as he buys or sells
such securities for his own account, either
individually or in some fiduciary capacity, but
not as a part of a regular business;
(B) any corporation the securities of which
are government securities under subparagraph
(B) or (C) of paragraph (42) of this
subsection;
(C) any bank, unless the bank is engaged in
the business of buying and selling government
securities for its own account other than in a
fiduciary capacity, through a broker or
otherwise; or
(D) any person registered with the Commodity
Futures Trading Commission, any contract market
designated by the Commodity Futures Trading
Commission, such contract market's affiliated
clearing organization, or any floor trader on
such contract market, solely because such
person effects transactions in government
securities that the Commission, after
consultation with the Commodity Futures Trading
Commission, has determined by rule or order to
be incidental to such person's futures-related
business.
(45) The term ``person associated with a government
securities broker or government securities dealer''
means any partner, officer, director, or branch manager
of such government securities broker or government
securities dealer (or any person occupying a similar
status or performing similar functions), and any other
employee of such government securities broker or
government securities dealer who is engaged in the
management, direction, supervision, or performance of
any activities relating to government securities, and
any person directly or indirectly controlling,
controlled by, or under common control with such
government securities broker or government securities
dealer.
(46) The term ``financial institution'' means--
(A) a bank (as defined in paragraph (6) of
this subsection);
(B) a foreign bank (as such term is used in
the International Banking Act of 1978); and
(C) a savings association (as defined in
section 3(b) of the Federal Deposit Insurance
Act) the deposits of which are insured by the
Federal Deposit Insurance Corporation.
(47) The term ``securities laws'' means the
Securities Act of 1933 (15 U.S.C. 77a et seq.), the
Securities Exchange Act of 1934 (15 U.S.C. 78a et
seq.), the Sarbanes-Oxley Act of 2002, the Trust
Indenture Act of 1939 (15 U.S.C. 77aaa et seq.), the
Investment Company Act of 1940 (15 U.S.C. 80a-1 et
seq.), the Investment Advisers Act of 1940 (15 U.S.C.
80b et seq.), and the Securities Investor Protection
Act of 1970 (15 U.S.C. 78aaa et seq.).
(48) The term ``registered broker or dealer'' means a
broker or dealer registered or required to register
pursuant to section 15 or 15B of this title, except
that in paragraph (3) of this subsection and sections 6
and 15A the term means such a broker or dealer and a
government securities broker or government securities
dealer registered or required to register pursuant to
section 15C(a)(1)(A) of this title.
(49) The terms ``person associated with a transfer
agent'' and ``associated person of a transfer agent''
mean any person (except an employee whose functions are
solely clerical or ministerial) directly engaged in the
management, direction, supervision, or performance of
any of the transfer agent's activities with respect to
transfer agent functions, and any person directly or
indirectly controlling such activities or controlled by
the transfer agent in connection with such activities.
(50) The term ``foreign securities authority'' means
any foreign government, or any governmental body or
regulatory organization empowered by a foreign
government to administer or enforce its laws as they
relate to securities matters.
(51)(A) The term ``penny stock'' means any equity
security other than a security that is--
(i) registered or approved for registration
and traded on a national securities exchange
that meets such criteria as the Commission
shall prescribe by rule or regulation for
purposes of this paragraph;
(ii) authorized for quotation on an automated
quotation system sponsored by a registered
securities association, if such system (I) was
established and in operation before January 1,
1990, and (II) meets such criteria as the
Commission shall prescribe by rule or
regulation for purposes of this paragraph;
(iii) issued by an investment company
registered under the Investment Company Act of
1940;
(iv) excluded, on the basis of exceeding a
minimum price, net tangible assets of the
issuer, or other relevant criteria, from the
definition of such term by rule or regulation
which the Commission shall prescribe for
purposes of this paragraph; or
(v) exempted, in whole or in part,
conditionally or unconditionally, from the
definition of such term by rule, regulation, or
order prescribed by the Commission.
(B) The Commission may, by rule, regulation, or
order, designate any equity security or class of equity
securities described in clause (i) or (ii) of
subparagraph (A) as within the meaning of the term
``penny stock'' if such security or class of securities
is traded other than on a national securities exchange
or through an automated quotation system described in
clause (ii) of subparagraph (A).
(C) In exercising its authority under this paragraph
to prescribe rules, regulations, and orders, the
Commission shall determine that such rule, regulation,
or order is consistent with the public interest and the
protection of investors.
(52) The term ``foreign financial regulatory
authority'' means any (A) foreign securities authority,
(B) other governmental body or foreign equivalent of a
self-regulatory organization empowered by a foreign
government to administer or enforce its laws relating
to the regulation of fiduciaries, trusts, commercial
lending, insurance, trading in contracts of sale of a
commodity for future delivery, or other instruments
traded on or subject to the rules of a contract market,
board of trade, or foreign equivalent, or other
financial activities, or (C) membership organization a
function of which is to regulate participation of its
members in activities listed above.
(53)(A) The term ``small business related security''
means a security that meets standards of credit-
worthiness as established by the Commission, and
either--
(i) represents an interest in 1 or more
promissory notes or leases of personal property
evidencing the obligation of a small business
concern and originated by an insured depository
institution, insured credit union, insurance
company, or similar institution which is
supervised and examined by a Federal or State
authority, or a finance company or leasing
company; or
(ii) is secured by an interest in 1 or more
promissory notes or leases of personal property
(with or without recourse to the issuer or
lessee) and provides for payments of principal
in relation to payments, or reasonable
projections of payments, on notes or leases
described in clause (i).
(B) For purposes of this paragraph--
(i) an ``interest in a promissory note or a
lease of personal property'' includes ownership
rights, certificates of interest or
participation in such notes or leases, and
rights designed to assure servicing of such
notes or leases, or the receipt or timely
receipt of amounts payable under such notes or
leases;
(ii) the term ``small business concern''
means a business that meets the criteria for a
small business concern established by the Small
Business Administration under section 3(a) of
the Small Business Act;
(iii) the term ``insured depository
institution'' has the same meaning as in
section 3 of the Federal Deposit Insurance Act;
and
(iv) the term ``insured credit union'' has
the same meaning as in section 101 of the
Federal Credit Union Act.
(54) Qualified investor.--
(A) Definition.--Except as provided in
subparagraph (B), for purposes of this title,
the term ``qualified investor'' means--
(i) any investment company registered
with the Commission under section 8 of
the Investment Company Act of 1940;
(ii) any issuer eligible for an
exclusion from the definition of
investment company pursuant to section
3(c)(7) of the Investment Company Act
of 1940;
(iii) any bank (as defined in
paragraph (6) of this subsection),
savings association (as defined in
section 3(b) of the Federal Deposit
Insurance Act), broker, dealer,
insurance company (as defined in
section 2(a)(13) of the Securities Act
of 1933), or business development
company (as defined in section 2(a)(48)
of the Investment Company Act of 1940);
(iv) any small business investment
company licensed by the United States
Small Business Administration under
section 301 (c) or (d) of the Small
Business Investment Act of 1958;
(v) any State sponsored employee
benefit plan, or any other employee
benefit plan, within the meaning of the
Employee Retirement Income Security Act
of 1974, other than an individual
retirement account, if the investment
decisions are made by a plan fiduciary,
as defined in section 3(21) of that
Act, which is either a bank, savings
and loan association, insurance
company, or registered investment
adviser;
(vi) any trust whose purchases of
securities are directed by a person
described in clauses (i) through (v) of
this subparagraph;
(vii) any market intermediary exempt
under section 3(c)(2) of the Investment
Company Act of 1940;
(viii) any associated person of a
broker or dealer other than a natural
person;
(ix) any foreign bank (as defined in
section 1(b)(7) of the International
Banking Act of 1978);
(x) the government of any foreign
country;
(xi) any corporation, company, or
partnership that owns and invests on a
discretionary basis, not less than
$25,000,000 in investments;
(xii) any natural person who owns and
invests on a discretionary basis, not
less than $25,000,000 in investments;
(xiii) any government or political
subdivision, agency, or instrumentality
of a government who owns and invests on
a discretionary basis not less than
$50,000,000 in investments; or
(xiv) any multinational or
supranational entity or any agency or
instrumentality thereof.
(B) Altered thresholds for asset-backed
securities and loan participations.--For
purposes of section 3(a)(5)(C)(iii) of this
title and section 206(a)(5) of the Gramm-Leach-
Bliley Act, the term ``qualified investor'' has
the meaning given such term by subparagraph (A)
of this paragraph except that clauses (xi) and
(xii) shall be applied by substituting
``$10,000,000'' for ``$25,000,000''.
(C) Additional authority.--The Commission
may, by rule or order, define a ``qualified
investor'' as any other person, taking into
consideration such factors as the financial
sophistication of the person, net worth, and
knowledge and experience in financial matters.
(55)(A) The term ``security future'' means a contract
of sale for future delivery of a single security or of
a narrow-based security index, including any interest
therein or based on the value thereof, except an
exempted security under section 3(a)(12) of this title
as in effect on the date of the enactment of the
Futures Trading Act of 1982 (other than any municipal
security as defined in section 3(a)(29) as in effect on
the date of the enactment of the Futures Trading Act of
1982). The term ``security future'' does not include
any agreement, contract, or transaction excluded from
the Commodity Exchange Act under section 2(c), 2(d),
2(f), or 2(g) of the Commodity Exchange Act (as in
effect on the date of the enactment of the Commodity
Futures Modernization Act of 2000) or title IV of the
Commodity Futures Modernization Act of 2000.
(B) The term ``narrow-based security index'' means an
index--
(i) that has 9 or fewer component securities;
(ii) in which a component security comprises
more than 30 percent of the index's weighting;
(iii) in which the five highest weighted
component securities in the aggregate comprise
more than 60 percent of the index's weighting;
or
(iv) in which the lowest weighted component
securities comprising, in the aggregate, 25
percent of the index's weighting have an
aggregate dollar value of average daily trading
volume of less than $50,000,000 (or in the case
of an index with 15 or more component
securities, $30,000,000), except that if there
are two or more securities with equal weighting
that could be included in the calculation of
the lowest weighted component securities
comprising, in the aggregate, 25 percent of the
index's weighting, such securities shall be
ranked from lowest to highest dollar value of
average daily trading volume and shall be
included in the calculation based on their
ranking starting with the lowest ranked
security.
(C) Notwithstanding subparagraph (B), an index is not
a narrow-based security index if--
(i)(I) it has at least nine component
securities;
(II) no component security comprises more
than 30 percent of the index's weighting; and
(III) each component security is--
(aa) registered pursuant to section
12 of the Securities Exchange Act of
1934;
(bb) one of 750 securities with the
largest market capitalization; and
(cc) one of 675 securities with the
largest dollar value of average daily
trading volume;
(ii) a board of trade was designated as a
contract market by the Commodity Futures
Trading Commission with respect to a contract
of sale for future delivery on the index,
before the date of the enactment of the
Commodity Futures Modernization Act of 2000;
(iii)(I) a contract of sale for future
delivery on the index traded on a designated
contract market or registered derivatives
transaction execution facility for at least 30
days as a contract of sale for future delivery
on an index that was not a narrow-based
security index; and
(II) it has been a narrow-based security
index for no more than 45 business days over 3
consecutive calendar months;
(iv) a contract of sale for future delivery
on the index is traded on or subject to the
rules of a foreign board of trade and meets
such requirements as are jointly established by
rule or regulation by the Commission and the
Commodity Futures Trading Commission;
(v) no more than 18 months have passed since
the date of the enactment of the Commodity
Futures Modernization Act of 2000 and--
(I) it is traded on or subject to the
rules of a foreign board of trade;
(II) the offer and sale in the United
States of a contract of sale for future
delivery on the index was authorized
before the date of the enactment of the
Commodity Futures Modernization Act of
2000; and
(III) the conditions of such
authorization continue to be met; or
(vi) a contract of sale for future delivery
on the index is traded on or subject to the
rules of a board of trade and meets such
requirements as are jointly established by
rule, regulation, or order by the Commission
and the Commodity Futures Trading Commission.
(D) Within 1 year after the enactment of the
Commodity Futures Modernization Act of 2000, the
Commission and the Commodity Futures Trading Commission
jointly shall adopt rules or regulations that set forth
the requirements under clause (iv) of subparagraph (C).
(E) An index that is a narrow-based security index
solely because it was a narrow-based security index for
more than 45 business days over 3 consecutive calendar
months pursuant to clause (iii) of subparagraph (C)
shall not be a narrow-based security index for the 3
following calendar months.
(F) For purposes of subparagraphs (B) and (C) of this
paragraph--
(i) the dollar value of average daily trading
volume and the market capitalization shall be
calculated as of the preceding 6 full calendar
months; and
(ii) the Commission and the Commodity Futures
Trading Commission shall, by rule or
regulation, jointly specify the method to be
used to determine market capitalization and
dollar value of average daily trading volume.
(56) The term ``security futures product'' means a
security future or any put, call, straddle, option, or
privilege on any security future.
(57)(A) The term ``margin'', when used with respect
to a security futures product, means the amount, type,
and form of collateral required to secure any extension
or maintenance of credit, or the amount, type, and form
of collateral required as a performance bond related to
the purchase, sale, or carrying of a security futures
product.
(B) The terms ``margin level'' and ``level of
margin'', when used with respect to a security futures
product, mean the amount of margin required to secure
any extension or maintenance of credit, or the amount
of margin required as a performance bond related to the
purchase, sale, or carrying of a security futures
product.
(C) The terms ``higher margin level'' and ``higher
level of margin'', when used with respect to a security
futures product, mean a margin level established by a
national securities exchange registered pursuant to
section 6(g) that is higher than the minimum amount
established and in effect pursuant to section
7(c)(2)(B).
(58) Audit committee.--The term ``audit committee''
means--
(A) a committee (or equivalent body)
established by and amongst the board of
directors of an issuer for the purpose of
overseeing the accounting and financial
reporting processes of the issuer and audits of
the financial statements of the issuer; and
(B) if no such committee exists with respect
to an issuer, the entire board of directors of
the issuer.
(59) Registered public accounting firm.--The term
``registered public accounting firm'' has the same
meaning as in section 2 of the Sarbanes-Oxley Act of
2002.
(60) Credit rating.--The term ``credit rating'' means
an assessment of the creditworthiness of an obligor as
an entity or with respect to specific securities or
money market instruments.
(61) Credit rating agency.--The term ``credit rating
agency'' means any person--
(A) engaged in the business of issuing credit
ratings on the Internet or through another
readily accessible means, for free or for a
reasonable fee, but does not include a
commercial credit reporting company;
(B) employing either a quantitative or
qualitative model, or both, to determine credit
ratings; and
(C) receiving fees from either issuers,
investors, or other market participants, or a
combination thereof.
(62) Nationally recognized statistical rating
organization.--The term ``nationally recognized
statistical rating organization'' means a credit rating
agency that--
(A) issues credit ratings certified by
qualified institutional buyers, in accordance
with section 15E(a)(1)(B)(ix), with respect
to--
(i) financial institutions, brokers,
or dealers;
(ii) insurance companies;
(iii) corporate issuers;
(iv) issuers of asset-backed
securities (as that term is defined in
section 1101(c) of part 229 of title
17, Code of Federal Regulations, as in
effect on the date of enactment of this
paragraph);
(v) issuers of government securities,
municipal securities, or securities
issued by a foreign government; or
(vi) a combination of one or more
categories of obligors described in any
of clauses (i) through (v); and
(B) is registered under section 15E.
(63) Person associated with a nationally recognized
statistical rating organization.--The term ``person
associated with'' a nationally recognized statistical
rating organization means any partner, officer,
director, or branch manager of a nationally recognized
statistical rating organization (or any person
occupying a similar status or performing similar
functions), any person directly or indirectly
controlling, controlled by, or under common control
with a nationally recognized statistical rating
organization, or any employee of a nationally
recognized statistical rating organization.
(64) Qualified institutional buyer.--The term
``qualified institutional buyer'' has the meaning given
such term in section 230.144A(a) of title 17, Code of
Federal Regulations, or any successor thereto.
(79) Asset-backed security.--The term ``asset-backed
security''--
(A) means a fixed-income or other security
collateralized by any type of self-liquidating
financial asset (including a loan, a lease, a
mortgage, or a secured or unsecured receivable)
that allows the holder of the security to
receive payments that depend primarily on cash
flow from the asset, including--
(i) a collateralized mortgage
obligation;
(ii) a collateralized debt
obligation;
(iii) a collateralized bond
obligation;
(iv) a collateralized debt obligation
of asset-backed securities;
(v) a collateralized debt obligation
of collateralized debt obligations; and
(vi) a security that the Commission,
by rule, determines to be an asset-
backed security for purposes of this
section; and
(B) does not include a security issued by a
finance subsidiary held by the parent company
or a company controlled by the parent company,
if none of the securities issued by the finance
subsidiary are held by an entity that is not
controlled by the parent company.
(65) Eligible contract participant.--The term
``eligible contract participant'' has the same meaning
as in section 1a of the Commodity Exchange Act (7
U.S.C. 1a).
(66) Major swap participant.--The term ``major swap
participant'' has the same meaning as in section 1a of
the Commodity Exchange Act (7 U.S.C. 1a).
(67) Major security-based swap participant.--
(A) In general.--The term ``major security-
based swap participant'' means any person--
(i) who is not a security-based swap
dealer; and
(ii)(I) who maintains a substantial
position in security-based swaps for
any of the major security-based swap
categories, as such categories are
determined by the Commission, excluding
both positions held for hedging or
mitigating commercial risk and
positions maintained by any employee
benefit plan (or any contract held by
such a plan) as defined in paragraphs
(3) and (32) of section 3 of the
Employee Retirement Income Security Act
of 1974 (29 U.S.C. 1002) for the
primary purpose of hedging or
mitigating any risk directly associated
with the operation of the plan;
(II) whose outstanding security-based
swaps create substantial counterparty
exposure that could have serious
adverse effects on the financial
stability of the United States banking
system or financial markets; or
(III) that is a financial entity
that--
(aa) is highly leveraged
relative to the amount of
capital such entity holds and
that is not subject to capital
requirements established by an
appropriate Federal banking
agency; and
(bb) maintains a substantial
position in outstanding
security-based swaps in any
major security-based swap
category, as such categories
are determined by the
Commission.
(B) Definition of substantial position.--For
purposes of subparagraph (A), the Commission
shall define, by rule or regulation, the term
``substantial position'' at the threshold that
the Commission determines to be prudent for the
effective monitoring, management, and oversight
of entities that are systemically important or
can significantly impact the financial system
of the United States. In setting the definition
under this subparagraph, the Commission shall
consider the person's relative position in
uncleared as opposed to cleared security-based
swaps and may take into consideration the value
and quality of collateral held against
counterparty exposures.
(C) Scope of designation.--For purposes of
subparagraph (A), a person may be designated as
a major security-based swap participant for 1
or more categories of security-based swaps
without being classified as a major security-
based swap participant for all classes of
security-based swaps.
(68) Security-based swap.--
(A) In general.--Except as provided in
subparagraph (B), the term ``security-based
swap'' means any agreement, contract, or
transaction that--
(i) is a swap, as that term is
defined under section 1a of the
Commodity Exchange Act (without regard
to paragraph (47)(B)(x) of such
section); and
(ii) is based on--
(I) an index that is a
narrow-based security index,
including any interest therein
or on the value thereof;
(II) a single security or
loan, including any interest
therein or on the value
thereof; or
(III) the occurrence,
nonoccurrence, or extent of the
occurrence of an event relating
to a single issuer of a
security or the issuers of
securities in a narrow-based
security index, provided that
such event directly affects the
financial statements, financial
condition, or financial
obligations of the issuer.
(B) Rule of construction regarding master
agreements.--The term ``security-based swap''
shall be construed to include a master
agreement that provides for an agreement,
contract, or transaction that is a security-
based swap pursuant to subparagraph (A),
together with all supplements to any such
master agreement, without regard to whether the
master agreement contains an agreement,
contract, or transaction that is not a
security-based swap pursuant to subparagraph
(A), except that the master agreement shall be
considered to be a security-based swap only
with respect to each agreement, contract, or
transaction under the master agreement that is
a security-based swap pursuant to subparagraph
(A).
(C) Exclusions.--The term ``security-based
swap'' does not include any agreement,
contract, or transaction that meets the
definition of a security-based swap only
because such agreement, contract, or
transaction references, is based upon, or
settles through the transfer, delivery, or
receipt of an exempted security under paragraph
(12), as in effect on the date of enactment of
the Futures Trading Act of 1982 (other than any
municipal security as defined in paragraph (29)
as in effect on the date of enactment of the
Futures Trading Act of 1982), unless such
agreement, contract, or transaction is of the
character of, or is commonly known in the trade
as, a put, call, or other option.
(D) Mixed swap.--The term ``security-based
swap'' includes any agreement, contract, or
transaction that is as described in
subparagraph (A) and also is based on the value
of 1 or more interest or other rates,
currencies, commodities, instruments of
indebtedness, indices, quantitative measures,
other financial or economic interest or
property of any kind (other than a single
security or a narrow-based security index), or
the occurrence, non-occurrence, or the extent
of the occurrence of an event or contingency
associated with a potential financial,
economic, or commercial consequence (other than
an event described in subparagraph
(A)(ii)(III)).
(E) Rule of construction regarding use of the
term index.--The term ``index'' means an index
or group of securities, including any interest
therein or based on the value thereof.
(69) Swap.--The term ``swap'' has the same meaning as
in section 1a of the Commodity Exchange Act (7 U.S.C.
1a).
(70) Person associated with a security-based swap
dealer or major security-based swap participant.--
(A) In general.--The term ``person associated
with a security-based swap dealer or major
security-based swap participant'' or
``associated person of a security-based swap
dealer or major security-based swap
participant'' means--
(i) any partner, officer, director,
or branch manager of such security-
based swap dealer or major security-
based swap participant (or any person
occupying a similar status or
performing similar functions);
(ii) any person directly or
indirectly controlling, controlled by,
or under common control with such
security-based swap dealer or major
security-based swap participant; or
(iii) any employee of such security-
based swap dealer or major security-
based swap participant.
(B) Exclusion.--Other than for purposes of
section 15F(l)(2), the term ``person associated
with a security-based swap dealer or major
security-based swap participant'' or
``associated person of a security-based swap
dealer or major security-based swap
participant'' does not include any person
associated with a security-based swap dealer or
major security-based swap participant whose
functions are solely clerical or ministerial.
(71) Security-based swap dealer.--
(A) In general.--The term ``security-based
swap dealer'' means any person who--
(i) holds themself out as a dealer in
security-based swaps;
(ii) makes a market in security-based
swaps;
(iii) regularly enters into security-
based swaps with counterparties as an
ordinary course of business for its own
account; or
(iv) engages in any activity causing
it to be commonly known in the trade as
a dealer or market maker in security-
based swaps.
(B) Designation by type or class.--A person
may be designated as a security-based swap
dealer for a single type or single class or
category of security-based swap or activities
and considered not to be a security-based swap
dealer for other types, classes, or categories
of security-based swaps or activities.
(C) Exception.--The term ``security-based
swap dealer'' does not include a person that
enters into security-based swaps for such
person's own account, either individually or in
a fiduciary capacity, but not as a part of
regular business.
(D) De minimis exception.--The Commission
shall exempt from designation as a security-
based swap dealer an entity that engages in a
de minimis quantity of security-based swap
dealing in connection with transactions with or
on behalf of its customers. The Commission
shall promulgate regulations to establish
factors with respect to the making of any
determination to exempt.
(72) Appropriate federal banking agency.--The term
``appropriate Federal banking agency'' has the same
meaning as in section 3(q) of the Federal Deposit
Insurance Act (12 U.S.C. 1813(q)).
(73) Board.--The term ``Board'' means the Board of
Governors of the Federal Reserve System.
(74) Prudential regulator.--The term ``prudential
regulator'' has the same meaning as in section 1a of
the Commodity Exchange Act (7 U.S.C. 1a).
(75) Security-based swap data repository.--The term
``security-based swap data repository'' means any
person that collects and maintains information or
records with respect to transactions or positions in,
or the terms and conditions of, security-based swaps
entered into by third parties for the purpose of
providing a centralized recordkeeping facility for
security-based swaps.
(76) Swap dealer.--The term ``swap dealer'' has the
same meaning as in section 1a of the Commodity Exchange
Act (7 U.S.C. 1a).
(77) Security-based swap execution facility.--The
term ``security-based swap execution facility'' means a
trading system or platform in which multiple
participants have the ability to execute or trade
security-based swaps by accepting bids and offers made
by multiple participants in the facility or system,
through any means of interstate commerce, including any
trading facility, that--
(A) facilitates the execution of security-
based swaps between persons; and
(B) is not a national securities exchange.
(78) Security-based swap agreement.--
(A) In general.--For purposes of sections 9,
10, 16, 20, and 21A of this Act, and section 17
of the Securities Act of 1933 (15 U.S.C. 77q),
the term ``security-based swap agreement''
means a swap agreement as defined in section
206A of the Gramm-Leach-Bliley Act (15 U.S.C.
78c note) of which a material term is based on
the price, yield, value, or volatility of any
security or any group or index of securities,
or any interest therein.
(B) Exclusions.--The term ``security-based
swap agreement'' does not include any security-
based swap.
(80) Emerging growth company.--The term ``emerging
growth company'' means an issuer that had total annual
gross revenues of less than $1,000,000,000 (as such
amount is indexed for inflation every 5 years by the
Commission to reflect the change in the Consumer Price
Index for All Urban Consumers published by the Bureau
of Labor Statistics, setting the threshold to the
nearest 1,000,000) during its most recently completed
fiscal year. An issuer that is an emerging growth
company as of the first day of that fiscal year shall
continue to be deemed an emerging growth company until
the earliest of--
(A) the last day of the fiscal year of the
issuer during which it had total annual gross
revenues of $1,000,000,000 (as such amount is
indexed for inflation every 5 years by the
Commission to reflect the change in the
Consumer Price Index for All Urban Consumers
published by the Bureau of Labor Statistics,
setting the threshold to the nearest 1,000,000)
or more;
(B) the last day of the fiscal year of the
issuer following the fifth anniversary of the
date of the first sale of common equity
securities of the issuer pursuant to an
effective registration statement under the
Securities Act of 1933;
(C) the date on which such issuer has, during
the previous 3-year period, issued more than
$1,000,000,000 in non-convertible debt; or
(D) the date on which such issuer is deemed
to be a ``large accelerated filer'', as defined
in section 240.12b-2 of title 17, Code of
Federal Regulations, or any successor thereto.
[(80)] (81) Funding portal.--The term ``funding
portal'' means any person acting as an intermediary in
a transaction involving the offer or sale of securities
for the account of others, solely pursuant to section
4(6) of the Securities Act of 1933 (15 U.S.C. 77d(6)),
that does not--
(A) offer investment advice or
recommendations;
(B) solicit purchases, sales, or offers to
buy the securities offered or displayed on its
website or portal;
(C) compensate employees, agents, or other
persons for such solicitation or based on the
sale of securities displayed or referenced on
its website or portal;
(D) hold, manage, possess, or otherwise
handle investor funds or securities; or
(E) engage in such other activities as the
Commission, by rule, determines appropriate.
(82) Proxy advisory firm.--The term ``proxy advisory
firm''--
(A) means any person that--
(i) makes a recommendation to a
security holder as to the security
holder's vote, consent, or
authorization on a specific matter for
which security holder approval is
solicited;
(ii) markets the person's expertise
as a provider of such proxy voting
advice separately from other forms of
investment advice; and
(iii) sells such proxy voting advice
for a fee; and
(B) does not include--
(i) a registered investment adviser;
or
(ii) any person that is exempt under
law or regulation from the requirements
otherwise applicable to persons engaged
in such a solicitation.
(83) Person associated with a proxy advisory firm.--
With respect to a proxy advisory firm--
(A) a person is ``associated'' with the proxy
advisory firm if the person is--
(i) a partner, officer, or director
of the proxy advisory firm (or any
person occupying a similar status or
performing similar functions);
(ii) a person directly or indirectly
controlling, controlled by, or under
common control with the proxy advisory
firm;
(iii) an employee of the proxy
advisory firm; or
(iv) a person the Commission
determines by rule is controlled by the
proxy advisory firm; and
(B) a person is not ``associated'' with the
proxy advisory firm if the person only performs
clerical or ministerial functions with respect
to a proxy advisory firm.
(b) The Commission and the Board of Governors of the Federal
Reserve System, as to matters within their respective
jurisdictions, shall have power by rules and regulations to
define technical, trade, accounting, and other terms used in
this title, consistently with the provisions and purposes of
this title.
(c) No provision of this title shall apply to, or be deemed
to include, any executive department or independent
establishment of the United States, or any lending agency which
is wholly owned, directly or indirectly, by the United States,
or any officer, agent, or employee of any such department,
establishment, or agency, acting in the course of his official
duty as such, unless such provision makes specific reference to
such department, establishment, or agency.
(d) No issuer of municipal securities or officer or employee
thereof acting in the course of his official duties as such
shall be deemed to be a ``broker'', ``dealer'', or ``municipal
securities dealer'' solely by reason of buying, selling, or
effecting transactions in the issuer's securities.
(e) Charitable Organizations.--
(1) Exemption.--Notwithstanding any other provision
of this title, but subject to paragraph (2) of this
subsection, a charitable organization, as defined in
section 3(c)(10)(D) of the Investment Company Act of
1940, or any trustee, director, officer, employee, or
volunteer of such a charitable organization acting
within the scope of such person's employment or duties
with such organization, shall not be deemed to be a
``broker'', ``dealer'', ``municipal securities
broker'', ``municipal securities dealer'', ``government
securities broker'', or ``government securities
dealer'' for purposes of this title solely because such
organization or person buys, holds, sells, or trades in
securities for its own account in its capacity as
trustee or administrator of, or otherwise on behalf of
or for the account of--
(A) such a charitable organization;
(B) a fund that is excluded from the
definition of an investment company under
section 3(c)(10)(B) of the Investment Company
Act of 1940; or
(C) a trust or other donative instrument
described in section 3(c)(10)(B) of the
Investment Company Act of 1940, or the settlors
(or potential settlors) or beneficiaries of any
such trust or other instrument.
(2) Limitation on compensation.--The exemption
provided under paragraph (1) shall not be available to
any charitable organization, or any trustee, director,
officer, employee, or volunteer of such a charitable
organization, unless each person who, on or after 90
days after the date of enactment of this subsection,
solicits donations on behalf of such charitable
organization from any donor to a fund that is excluded
from the definition of an investment company under
section 3(c)(10)(B) of the Investment Company Act of
1940, is either a volunteer or is engaged in the
overall fund raising activities of a charitable
organization and receives no commission or other
special compensation based on the number or the value
of donations collected for the fund.
(f) Consideration of Promotion of Efficiency, Competition,
and Capital Formation; Limitation on Disclosure Requirements.--
[Whenever]
(1) In general._Whenever pursuant to this title the
Commission is engaged in rulemaking, or in the review
of a rule of a self-regulatory organization, and is
required to consider or determine whether an action is
necessary or appropriate in the public interest, the
Commission shall also consider, in addition to the
protection of investors, whether the action will
promote efficiency, competition, and capital formation.
(2) Limitation.--
(A) In general.--Whenever pursuant to this
title the Commission is engaged in rulemaking
regarding disclosure obligations of issuers,
the Commission shall expressly provide that an
issuer is only required to disclose information
in response to such disclosure obligations to
the extent the issuer has determined that such
information is material with respect to a
voting or investment decision regarding the
securities of such issuer.
(B) Applicability.--Subparagraph (A) shall
not apply with respect to the removal of any
disclosure requirement with respect to an
issuer.
(C) Rule of construction.--For the purposes
of this paragraph, information is considered
material with respect to a voting or investment
decision regarding the securities of an issuer
if there is a substantial likelihood that a
reasonable investor would view the failure to
disclose that information as having
significantly altered the total mix of
information made available to the investor.
(g) Church Plans.--No church plan described in section 414(e)
of the Internal Revenue Code of 1986, no person or entity
eligible to establish and maintain such a plan under the
Internal Revenue Code of 1986, no company or account that is
excluded from the definition of an investment company under
section 3(c)(14) of the Investment Company Act of 1940, and no
trustee, director, officer or employee of or volunteer for such
plan, company, account, person, or entity, acting within the
scope of that person's employment or activities with respect to
such plan, shall be deemed to be a ``broker'', ``dealer'',
``municipal securities broker'', ``municipal securities
dealer'', ``government securities broker'', ``government
securities dealer'', ``clearing agency'', or ``transfer agent''
for purposes of this title--
(1) solely because such plan, company, person, or
entity buys, holds, sells, trades in, or transfers
securities or acts as an intermediary in making
payments in connection with transactions in securities
for its own account in its capacity as trustee or
administrator of, or otherwise on behalf of, or for the
account of, any church plan, company, or account that
is excluded from the definition of an investment
company under section 3(c)(14) of the Investment
Company Act of 1940; and
(2) if no such person or entity receives a commission
or other transaction-related sales compensation in
connection with any activities conducted in reliance on
the exemption provided by this subsection.
(h) Limited Exemption for Funding Portals.--
(1) In general.--The Commission shall, by rule,
exempt, conditionally or unconditionally, a registered
funding portal from the requirement to register as a
broker or dealer under section 15(a)(1), provided that
such funding portal--
(A) remains subject to the examination,
enforcement, and other rulemaking authority of
the Commission;
(B) is a member of a national securities
association registered under section 15A; and
(C) is subject to such other requirements
under this title as the Commission determines
appropriate under such rule.
(2) National securities association membership.--For
purposes of sections 15(b)(8) and 15A, the term
``broker or dealer'' includes a funding portal and the
term ``registered broker or dealer'' includes a
registered funding portal, except to the extent that
the Commission, by rule, determines otherwise, provided
that a national securities association shall only
examine for and enforce against a registered funding
portal rules of such national securities association
written specifically for registered funding portals.
* * * * * * *
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) 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.
(j) Open Data Publication.--All public data assets published
by the Commission under the securities laws and the Dodd-Frank
Wall Street Reform and Consumer Protection Act (Public Law 111-
203; 124 Stat. 1376) shall be--
(1) made available as an open Government data asset
(as defined in section 3502 of title 44, United States
Code);
(2) freely available for download;
(3) rendered in a human-readable format; and
(4) accessible via application programming interface
where appropriate.
(k) Study of Certain Issues With Respect to Proxy Advisory
Firms and the Proxy Process.--
(1) In general.--Not later than 180 days after the
date of the enactment of this subsection, and every 5
years thereafter, the Commission shall conduct a
comprehensive study on proxy advisory firms and the
proxy process.
(2) Scope of study.--The studies required under
paragraph (1) shall cover--
(A) the previous 10 years, with respect to
the initial study; and
(B) the previous 5 years, with respect to
each other study.
(3) Contents.--Each study required under paragraph
(1) shall address the following issues:
(A) The financial and other incentives and
obligations of all groups involved in the proxy
process.
(B) A consideration of whether financial and
other incentives have created a process that no
longer serves the economic interests of retail
investors.
(C) An analysis of whether regulations and
financial incentives have created and protected
the outsized influence of proxy advisors or a
duopoly in proxy advice, and if so, what are
the benefits and costs of that outsized
influence or duopoly.
(D) The costs incurred by issuers in
responding to politically-, environmentally-,
or socially-motivated shareholder proposals.
(E) An analysis of the impact that
shareholder proposals have on discouraging
private companies from going public.
(F) A thorough assessment of the economic
analysis, if any, conducted by proxy advisory
firms and institutional shareholders when
recommending or voting in favor of shareholder
proposals.
(G) A review of the extent to which
institutional investors, who owe fiduciary
duties, rely on proxy advisory firm
recommendations.
(H) An assessment of whether, in light of
their significant influence on corporate
actions and vote outcomes, proxy advisors are
subject to sufficient and effective regulation
to ensure that their policies and
recommendations are accurate, free of
conflicts, and benefit the best economic
interest of shareholders at large.
(4) Report.--At the completion of each study required
under paragraph (1), the Commission shall issue a
report to the Committee on Banking, Housing, and Urban
Affairs of the Senate and the Committee on Financial
Services of the House of Representatives that includes
the results of the study.
* * * * * * *
periodical and other reports
Sec. 13. (a) Every issuer of a security registered pursuant
to section 12 of this title shall file with the Commission, in
accordance with such rules and regulations as the Commission
may prescribe as necessary or appropriate for the proper
protection of investors and to insure fair dealing in the
security--
(1) such information and documents (and such copies
thereof) as the Commission shall require to keep
reasonably current the information and documents
required to be included in or filed with an application
or registration statement filed pursuant to section 12,
except that the Commission may not require the filing
of any material contract wholly executed before July 1,
1962.
(2) such annual reports (and such copies thereof),
certified if required by the rules and regulations of
the Commission by independent public accountants, and
such quarterly reports (and such copies thereof), as
the Commission may prescribe.
Every issuer of a security registered on a national securities
exchange shall also file a duplicate original of such
information, documents, and reports with the exchange. In any
registration statement, periodic report, or other reports to be
filed with the Commission, an emerging growth company need not
present selected financial data in accordance with section
229.301 of title 17, Code of Federal Regulations, for any
period prior to the earliest audited period presented in
connection with its first registration statement that became
effective under this Act or the Securities Act of 1933 and,
with respect to any such statement or reports, an emerging
growth company may not be required to comply with any new or
revised financial accounting standard until such date that a
company that is not an issuer (as defined under section 2(a) of
the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7201(a))) is required
to comply with such new or revised accounting standard, if such
standard applies to companies that are not issuers.
(b)(1) The Commission may prescribe, in regard to reports
made pursuant to this title, the form or forms in which the
required information shall be set forth, the items or details
to be shown in the balance sheet and the earnings statement,
and the methods to be followed in the preparation of reports,
in the appraisal or valuation of assets and liabilities, in the
determination of depreciation and depletion, in the
differentiation of recurring and nonrecurring income, in the
differentiation of investment and operating income, and in the
preparation, where the Commission deems it necessary or
desirable, of separate and/or consolidated balance sheets or
income accounts of any person directly or indirectly
controlling or controlled by the issuer, or any person under
direct or indirect common control with the issuer; but in the
case of the reports of any person whose methods of accounting
are prescribed under the provisions of any law of the United
States, or any rule or regulation thereunder, the rules and
regulations of the Commission with respect to reports shall not
be inconsistent with the requirements imposed by such law or
rule or regulation in respect of the same subject matter
(except that such rules and regulations of the Commission may
be inconsistent with such requirements to the extent that the
Commission determines that the public interest or the
protection of investors so requires).
(2) Every issuer which has a class of securities registered
pursuant to section 12 of this title and every issuer which is
required to file reports pursuant to section 15(d) of this
title shall--
(A) make and keep books, records, and accounts,
which, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets
of the issuer;
(B) devise and maintain a system of internal
accounting controls sufficient to provide reasonable
assurances that--
(i) transactions are executed in accordance
with management's general or specific
authorization;
(ii) transactions are recorded as necessary
(I) to permit preparation of financial
statements in conformity with generally
accepted accounting principles or any other
criteria applicable to such statements, and
(II) to maintain accountability for assets;
(iii) access to assets is permitted only in
accordance with management's general or
specific authorization; and
(iv) the recorded accountability for assets
is compared with the existing assets at
reasonable intervals and appropriate action is
taken with respect to any differences; and
(C) notwithstanding any other provision of law, pay
the allocable share of such issuer of a reasonable
annual accounting support fee or fees, determined in
accordance with section 109 of the Sarbanes-Oxley Act
of 2002.
(3)(A) With respect to matters concerning the national
security of the United States, no duty or liability under
paragraph (2) of this subsection shall be imposed upon any
person acting in cooperation with the head of any Federal
department or agency responsible for such matters if such act
in cooperation with such head of a department or agency was
done upon the specific, written directive of the head of such
department or agency pursuant to Presidential authority to
issue such directives. Each directive issued under this
paragraph shall set forth the specific facts and circumstances
with respect to which the provisions of this paragraph are to
be invoked. Each such directive shall, unless renewed in
writing, expire one year after the date of issuance.
(B) Each head of a Federal department or agency of the United
States who issues a directive pursuant to this paragraph shall
maintain a complete file of all such directives and shall, on
October 1 of each year, transmit a summary of matters covered
by such directives in force at any time during the previous
year to the Permanent Select Committee on Intelligence of the
House of Representatives and the Select Committee on
Intelligence of the Senate.
(4) No criminal liability shall be imposed for failing to
comply with the requirements of paragraph (2) of this
subsection except as provided in paragraph (5) of this
subsection.
(5) No person shall knowingly circumvent or knowingly fail to
implement a system of internal accounting controls or knowingly
falsify any book, record, or account described in paragraph
(2).
(6) Where an issuer which has a class of securities
registered pursuant to section 12 of this title or an issuer
which is required to file reports pursuant to section 15(d) of
this title holds 50 per centum or less of the voting power with
respect to a domestic or foreign firm, the provisions of
paragraph (2) require only that the issuer proceed in good
faith to use its influence, to the extent reasonable under the
issuer's circumstances, to cause such domestic or foreign firm
to devise and maintain a system of internal accounting controls
consistent with paragraph (2). Such circumstances include the
relative degree of the issuer's ownership of the domestic or
foreign firm and the laws and practices governing the business
operations of the country in which such firm is located. An
issuer which demonstrates good faith efforts to use such
influence shall be conclusively presumed to have complied with
the requirements of paragraph (2).
(7) For the purpose of paragraph (2) of this subsection, the
terms ``reasonable assurances'' and ``reasonable detail'' mean
such level of detail and degree of assurance as would satisfy
prudent officials in the conduct of their own affairs.
(c) If in the judgment of the Commission any report required
under subsection (a) is inapplicable to any specified class or
classes of issuers, the Commission shall require in lieu
thereof the submission of such reports of comparable character
as it may deem applicable to such class or classes of issuers.
(d)(1) Any person who, after acquiring directly or indirectly
the beneficial ownership of any equity security of a class
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 or any equity security
issued by a Native Corporation pursuant to section 37(d)(6) of
the Alaska Native Claims Settlement Act, or otherwise becomes
or is deemed to become a beneficial owner of any of the
foregoing upon the purchase or sale of a security-based swap
that the Commission may define by rule, and is directly or
indirectly the beneficial owner of more than 5 per centum of
such class shall, within ten days after such acquisition or
within such shorter time as the Commission may establish by
rule, file with the Commission, a statement containing such of
the following information, 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--
(A) the background, and identity, residence, and
citizenship of, and the nature of such beneficial
ownership by, such person and all other persons by whom
or on whose behalf the purchases have been or are to be
effected;
(B) the source and amount of the funds or other
consideration used or to be used in making the
purchases, and if any part of the purchase price is
represented or is to be represented by funds or other
consideration borrowed or otherwise obtained for the
purpose of acquiring, holding, or trading such
security, a description of the transaction and the
names of the parties thereto, except that where a
source of funds is a loan made in the ordinary course
of business by a bank, as defined in section 3(a)(6) of
this title, if the person filing such statement so
requests, the name of the bank shall not be made
available to the public;
(C) if the purpose of the purchases or prospective
purchases is to acquire control of the business of the
issuer of the securities any plans or proposals which
such persons may have to liquidate such issuer, to sell
its assets to or merge it with any other persons, or to
make any other major change in its business or
corporate structure;
(D) the number of shares of such security which are
beneficially owned, and the number of shares concerning
which there is a right to acquire, directly or
indirectly, by (i) such person, and (ii) by each
associate of such person, giving the background,
identity, residence, and citizenship of each such
associate; and
(E) information as to any contracts, arrangements, or
understandings with any person with respect to any
securities of the issuer, including but not limited to
transfer of any of the securities, joint ventures, loan
or option arrangements, puts or calls, guaranties of
loans, guaranties against loss or guaranties of
profits, division of losses or profits, or the giving
or withholding of proxies, naming the persons with whom
such contracts, arrangements, or understandings have
been entered into, and giving the details thereof.
(2) If any material change occurs in the facts set forth in
the statement filed with the Commission, an amendment shall be
filed with the Commission, 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.
(3) 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 the
purposes of this subsection.
(4) 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.
(5) The Commission, by rule or regulation or by order, may
permit any person to file in lieu of the statement required by
paragraph (1) of this subsection or the rules and regulations
thereunder, a notice stating the name of such person, the
number of shares of any equity securities subject to paragraph
(1) which are owned by him, the date of their acquisition and
such other information as the Commission may specify, if it
appears to the Commission that such securities were acquired by
such person in the ordinary course of his business and were not
acquired for the purpose of and do not have the effect of
changing or influencing the control of the issuer nor in
connection with or as a participant in any transaction having
such purpose or effect.
(6) The provisions of this subsection shall not apply to--
(A) any acquisition or offer to acquire securities
made or proposed to be made by means of a registration
statement under the Securities Act of 1933;
(B) any acquisition of the beneficial ownership of a
security which, together with all other acquisitions by
the same person of securities of the same class during
the preceding twelve months, does not exceed 2 per
centum of that class;
(C) any acquisition of an equity security by the
issuer of such security;
(D) any acquisition or proposed acquisition of a
security 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)(1) It shall be unlawful for an issuer which has a class
of equity securities registered pursuant to section 12 of this
title, or which is a closed-end investment company registered
under the Investment Company Act of 1940, to purchase any
equity security issued by it if such purchase is in
contravention of such rules and regulations as the Commission,
in the public interest or for the protection of investors, may
adopt (A) to define acts and practices which are fraudulent,
deceptive, or manipulative, and (B) to prescribe means
reasonably designed to prevent such acts and practices. Such
rules and regulations may require such issuer to provide
holders of equity securities of such class with such
information relating to the reasons for such purchase, the
source of funds, the number of shares to be purchased, the
price to be paid for such securities, the method of purchase,
and such additional information, as the Commission deems
necessary or appropriate in the public interest or for the
protection of investors, or which the Commission deems to be
material to a determination whether such security should be
sold.
(2) For the purpose of this subsection, a purchase by or for
the issuer or any person controlling, controlled by, or under
common control with the issuer, or a purchase subject to
control of the issuer or any such person, shall be deemed to be
a purchase by the issuer. The Commission shall have power to
make rules and regulations implementing this paragraph in the
public interest and for the protection of investors, including
exemptive rules and regulations covering situations in which
the Commission deems it unnecessary or inappropriate that a
purchase of the type described in this paragraph shall be
deemed to be a purchase by the issuer for purposes of some or
all of the provisions of paragraph (1) of this subsection.
(3) At the time of filing such statement as the Commission
may require by rule pursuant to paragraph (1) of this
subsection, 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 value of securities proposed
to be purchased. The fee shall be reduced with respect to
securities in an amount equal to any fee paid with respect to
any securities issued in connection with the proposed
transaction under section 6(b) of the Securities Act of 1933,
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 paragraph.
(4) Annual adjustment.--For each fiscal year, the
Commission shall by order adjust the rate required by
paragraph (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 for such fiscal year.
(5) Fee collections.--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) 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.
(f)(1) Every institutional investment manager which uses the
mails, or any means or instrumentality of interstate commerce
in the course of its business as an institutional investment
manager and which exercises investment discretion with respect
to accounts holding equity securities of a class described in
section 13(d)(1) of this title having an aggregate fair market
value on the last trading day in any of the preceding twelve
months of at least $100,000,000 or such lesser amount (but in
no case less than $10,000,000) as the Commission, by rule, may
determine, shall file reports with the Commission in such form,
for such periods, and at such times after the end of such
periods as the Commission, by rule, may prescribe, but in no
event shall such reports be filed for periods longer than one
year or shorter than one quarter. Such reports shall include
for each such equity security held on the last day of the
reporting period by accounts (in aggregate or by type as the
Commission, by rule, may prescribe) with respect to which the
institutional investment manager exercises investment
discretion (other than securities held in amounts which the
Commission, by rule, determines to be insignificant for
purposes of this subsection), the name of the issuer and the
title, class, CUSIP number, number of shares or principal
amount, and aggregate fair market value of each such security.
Such reports may also include for accounts (in aggregate or by
type) with respect to which the institutional investment
manager exercises investment discretion such of the following
information as the Commission, by rule, prescribes--
(A) the name of the issuer and the title, class,
CUSIP number, number of shares or principal amount, and
aggregate fair market value or cost or amortized cost
of each other security (other than an exempted
security) held on the last day of the reporting period
by such accounts;
(B) the aggregate fair market value or cost or
amortized cost of exempted securities (in aggregate or
by class) held on the last day of the reporting period
by such accounts;
(C) the number of shares of each equity security of a
class described in section 13(d)(1) of this title held
on the last day of the reporting period by such
accounts with respect to which the institutional
investment manager possesses sole or shared authority
to exercise the voting rights evidenced by such
securities;
(D) the aggregate purchases and aggregate sales
during the reporting period of each security (other
than an exempted security) effected by or for such
accounts; and
(E) with respect to any transaction or series of
transactions having a market value of at least $500,000
or such other amount as the Commission, by rule, may
determine, effected during the reporting period by or
for such accounts in any equity security of a class
described in section 13(d)(1) of this title--
(i) the name of the issuer and the title,
class, and CUSIP number of the security;
(ii) the number of shares or principal amount
of the security involved in the transaction;
(iii) whether the transaction was a purchase
or sale;
(iv) the per share price or prices at which
the transaction was effected;
(v) the date or dates of the transaction;
(vi) the date or dates of the settlement of
the transaction;
(vii) the broker or dealer through whom the
transaction was effected;
(viii) the market or markets in which the
transaction was effected; and
(ix) such other related information as the
Commission, by rule, may prescribe.
(2) The Commission shall prescribe rules providing
for the public disclosure of the name of the issuer and
the title, class, CUSIP number, aggregate amount of the
number of short sales of each security, and any
additional information determined by the Commission
following the end of the reporting period. At a
minimum, such public disclosure shall occur every
month.
(3) The Commission, by rule or order, may exempt,
conditionally or unconditionally, any institutional investment
manager or security or any class of institutional investment
managers or securities from any or all of the provisions of
this subsection or the rules thereunder.
(4) The Commission shall make available to the public for a
reasonable fee a list of all equity securities of a class
described in section 13(d)(1) of this title, updated no less
frequently than reports are required to be filed pursuant to
paragraph (1) of this subsection. The Commission shall tabulate
the information contained in any report filed pursuant to this
subsection in a manner which will, in the view of the
Commission, maximize the usefulness of the information to other
Federal and State authorities and the public. Promptly after
the filing of any such report, the Commission shall make the
information contained therein conveniently available to the
public for a reasonable fee in such form as the Commission, by
rule, may prescribe, except that the Commission, as it
determines to be necessary or appropriate in the public
interest or for the protection of investors, may delay or
prevent public disclosure of any such information in accordance
with section 552 of title 5, United States Code.
Notwithstanding the preceding sentence, any such information
identifying the securities held by the account of a natural
person or an estate or trust (other than a business trust or
investment company) shall not be disclosed to the public.
(5) In exercising its authority under this subsection, the
Commission shall determine (and so state) that its action is
necessary or appropriate in the public interest and for the
protection of investors or to maintain fair and orderly markets
or, in granting an exemption, that its action is consistent
with the protection of investors and the purposes of this
subsection. In exercising such authority the Commission shall
take such steps as are within its power, including consulting
with the Comptroller General of the United States, the Director
of the Office of Management and Budget, the appropriate
regulatory agencies, Federal and State authorities which,
directly or indirectly, require reports from institutional
investment managers of information substantially similar to
that called for by this subsection, national securities
exchanges, and registered securities associations, (A) to
achieve uniform, centralized reporting of information
concerning the securities holdings of and transactions by or
for accounts with respect to which institutional investment
managers exercise investment discretion, and (B) consistently
with the objective set forth in the preceding subparagraph, to
avoid unnecessarily duplicative reporting by, and minimize the
compliance burden on, institutional investment managers.
Federal authorities which, directly or indirectly, require
reports from institutional investment managers of information
substantially similar to that called for by this subsection
shall cooperate with the Commission in the performance of its
responsibilities under the preceding sentence. An institutional
investment manager which is a bank, the deposits of which are
insured in accordance with the Federal Deposit Insurance Act,
shall file with the appropriate regulatory agency a copy of
every report filed with the Commission pursuant to this
subsection.
(6)(A) For purposes of this subsection the term
``institutional investment manager'' includes any person, other
than a natural person, investing in or buying and selling
securities for its own account, and any person exercising
investment discretion with respect to the account of any other
person.
(B) The Commission shall adopt such rules as it deems
necessary or appropriate to prevent duplicative reporting
pursuant to this subsection by two or more institutional
investment managers exercising investment discretion with
respect to the same amount.
(7) Disclosures by institutional investment managers
in connection with proxy advisory firms.--
(A) In general.--Every institutional
investment manager which uses the mails, or any
means or instrumentality of interstate commerce
in the course of its business as an
institutional investment manager, which engages
a proxy advisory firm, and which exercises
voting power with respect to accounts holding
equity securities of a class described in
subsection (d)(1) or otherwise becomes or is
deemed to become a beneficial owner of any
security of a class described in subsection
(d)(1) upon the purchase or sale of a security-
based swap that the Commission may define by
rule, shall file an annual report with the
Commission containing--
(i) an explanation of how the
institutional investment manager voted
with respect to each shareholder
proposal;
(ii) the percentage of votes cast on
shareholder proposals that were
consistent with proxy advisory firm
recommendations, for each proxy
advisory firm retained by the
institutional investment manager;
(iii) an explanation of--
(I) how the institutional
investment manager took into
consideration proxy advisory
firm recommendations in making
voting decisions, including the
degree to which the
institutional investment
manager used those
recommendations in making
voting decisions;
(II) how often the
institutional investment
manager voted consistent with a
recommendation made by a proxy
advisory firm, expressed as a
percentage;
(III) how such votes are
reconciled with the fiduciary
duty of the institutional
investment manager to vote in
the best economic interests of
shareholders;
(IV) how frequently votes
were changed when an error
occurred or due to new
information from issuers; and
(V) the degree to which
investment professionals of the
institutional investment
manager were involved in proxy
voting decisions; and
(iv) a certification that the voting
decisions of the institutional
investment manager were based solely on
the best economic interest of the
shareholders on behalf of whom the
institutional investment manager holds
shares.
(B) Requirements for larger institutional
investment managers.--Every institutional
investment manager described in subparagraph
(A) that has regulatory assets under management
with an aggregate fair market value on the last
trading day in any of the preceding twelve
months of at least $100,000,000,000 shall--
(i) in any materials provided to
customers and related to customers
voting their shares, clarify that
shareholders are not required to vote
on every proposal;
(ii) with respect to each shareholder
proposal for which the institutional
investment manager votes (other than
votes consistent with the
recommendation of a board of directors
composed of a majority of independent
directors) perform an economic analysis
before making such vote, to determine
that the vote is in the best economic
interest of the shareholders on behalf
of whom the institutional investment
manager holds shares; and
(iii) include each economic analysis
required under clause (ii) in the
annual report required under
subparagraph (A).
(C) Best economic interest defined.--In this
paragraph, the term ``best economic interest''
means decisions that seek to maximize
investment returns over a time horizon
consistent with the investment objectives and
risk management profile of the fund in which
shareholders are invested.
(g)(1) Any person who is directly or indirectly the
beneficial owner of more than 5 per centum of any security of a
class described in subsection (d)(1) of this section or
otherwise becomes or is deemed to become a beneficial owner of
any security of a class described in subsection (d)(1) upon the
purchase or sale of a security-based swap that the Commission
may define by ruleshall file with the Commission a statement
setting forth, in such form and at such time as the Commission
may, by rule, prescribe--
(A) such person's identity, residence, and
citizenship; and
(B) the number and description of the shares in which
such person has an interest and the nature of such
interest.
(2) If any material change occurs in the facts set forth in
the statement filed with the Commission, an amendment shall be
filed with the Commission, 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.
(3) 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 the
purposes of this subsection.
(4) 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.
(5) In exercising its authority under this subsection, the
Commission shall take such steps as it deems necessary or
appropriate in the public interest or for the protection of
investors (A) to achieve centralized reporting of information
regarding ownership, (B) to avoid unnecessarily duplicative
reporting by and minimize the compliance burden on persons
required to report, and (C) to tabulate and promptly make
available the information contained in any report filed
pursuant to this subsection in a manner which will, in the view
of the Commission, maximize the usefulness of the information
to other Federal and State agencies and the public.
(6) The Commission may, by rule or order, exempt, in whole or
in part, any person or class of persons from any or all of the
reporting requirements of this subsection as it deems necessary
or appropriate in the public interest or for the protection of
investors.
(h) Large Trader Reporting.--
(1) Identification requirements for large traders.--
For the purpose of monitoring the impact on the
securities markets of securities transactions involving
a substantial volume or a large fair market value or
exercise value and for the purpose of otherwise
assisting the Commission in the enforcement of this
title, each large trader shall--
(A) provide such information to the
Commission as the Commission may by rule or
regulation prescribe as necessary or
appropriate, identifying such large trader and
all accounts in or through which such large
trader effects such transactions; and
(B) identify, in accordance with such rules
or regulations as the Commission may prescribe
as necessary or appropriate, to any registered
broker or dealer by or through whom such large
trader directly or indirectly effects
securities transactions, such large trader and
all accounts directly or indirectly maintained
with such broker or dealer by such large trader
in or through which such transactions are
effected.
(2) Recordkeeping and reporting requirements for
brokers and dealers.--Every registered broker or dealer
shall make and keep for prescribed periods such records
as the Commission by rule or regulation prescribes as
necessary or appropriate in the public interest, for
the protection of investors, or otherwise in
furtherance of the purposes of this title, with respect
to securities transactions that equal or exceed the
reporting activity level effected directly or
indirectly by or through such registered broker or
dealer of or for any person that such broker or dealer
knows is a large trader, or any person that such broker
or dealer has reason to know is a large trader on the
basis of transactions in securities effected by or
through such broker or dealer. Such records shall be
available for reporting to the Commission, or any self-
regulatory organization that the Commission shall
designate to receive such reports, on the morning of
the day following the day the transactions were
effected, and shall be reported to the Commission or a
self-regulatory organization designated by the
Commission immediately upon request by the Commission
or such a self-regulatory organization. Such records
and reports shall be in a format and transmitted in a
manner prescribed by the Commission (including, but not
limited to, machine readable form).
(3) Aggregation rules.--The Commission may prescribe
rules or regulations governing the manner in which
transactions and accounts shall be aggregated for the
purpose of this subsection, including aggregation on
the basis of common ownership or control.
(4) Examination of broker and dealer records.--All
records required to be made and kept by registered
brokers and dealers pursuant to this subsection with
respect to transactions effected by large traders are
subject at any time, or from time to time, to such
reasonable periodic, special, or other examinations by
representatives of the Commission as the Commission
deems necessary or appropriate in the public interest,
for the protection of investors, or otherwise in
furtherance of the purposes of this title.
(5) Factors to be considered in commission actions.--
In exercising its authority under this subsection, the
Commission shall take into account--
(A) existing reporting systems;
(B) the costs associated with maintaining
information with respect to transactions
effected by large traders and reporting such
information to the Commission or self-
regulatory organizations; and
(C) the relationship between the United
States and international securities markets.
(6) Exemptions.--The Commission, by rule, regulation,
or order, consistent with the purposes of this title,
may exempt any person or class of persons or any
transaction or class of transactions, either
conditionally or upon specified terms and conditions or
for stated periods, from the operation of this
subsection, and the rules and regulations thereunder.
(7) Authority of commission to limit disclosure of
information.--Notwithstanding any other provision of
law, the Commission shall not be compelled to disclose
any information required to be kept or reported under
this subsection. Nothing in this subsection shall
authorize the Commission to withhold information from
Congress, or prevent the Commission from complying with
a request for information from any other Federal
department or agency requesting information for
purposes within the scope of its jurisdiction, or
complying with an order of a court of the United States
in an action brought by the United States or the
Commission. For purposes of section 552 of title 5,
United States Code, this subsection shall be considered
a statute described in subsection (b)(3)(B) of such
section 552.
(8) Definitions.--For purposes of this subsection--
(A) the term ``large trader'' means every
person who, for his own account or an account
for which he exercises investment discretion,
effects transactions for the purchase or sale
of any publicly traded security or securities
by use of any means or instrumentality of
interstate commerce or of the mails, or of any
facility of a national securities exchange,
directly or indirectly by or through a
registered broker or dealer in an aggregate
amount equal to or in excess of the identifying
activity level;
(B) the term ``publicly traded security''
means any equity security (including an option
on individual equity securities, and an option
on a group or index of such securities) listed,
or admitted to unlisted trading privileges, on
a national securities exchange, or quoted in an
automated interdealer quotation system;
(C) the term ``identifying activity level''
means transactions in publicly traded
securities at or above a level of volume, fair
market value, or exercise value as shall be
fixed from time to time by the Commission by
rule or regulation, specifying the time
interval during which such transactions shall
be aggregated;
(D) the term ``reporting activity level''
means transactions in publicly traded
securities at or above a level of volume, fair
market value, or exercise value as shall be
fixed from time to time by the Commission by
rule, regulation, or order, specifying the time
interval during which such transactions shall
be aggregated; and
(E) the term ``person'' has the meaning given
in section 3(a)(9) of this title and also
includes two or more persons acting as a
partnership, limited partnership, syndicate, or
other group, but does not include a foreign
central bank.
(i) Accuracy of Financial Reports.--Each financial report
that contains financial statements, and that is required to be
prepared in accordance with (or reconciled to) generally
accepted accounting principles under this title and filed with
the Commission shall reflect all material correcting
adjustments that have been identified by a registered public
accounting firm in accordance with generally accepted
accounting principles and the rules and regulations of the
Commission.
(j) Off-Balance Sheet Transactions.--Not later than 180 days
after the date of enactment of the Sarbanes-Oxley Act of 2002,
the Commission shall issue final rules providing that each
annual and quarterly financial report required to be filed with
the Commission shall disclose all material off-balance sheet
transactions, arrangements, obligations (including contingent
obligations), and other relationships of the issuer with
unconsolidated entities or other persons, that may have a
material current or future effect on financial condition,
changes in financial condition, results of operations,
liquidity, capital expenditures, capital resources, or
significant components of revenues or expenses.
(k) Prohibition on Personal Loans to Executives.--
(1) In general.--It shall be unlawful for any issuer
(as defined in section 2 of the Sarbanes-Oxley Act of
2002), directly or indirectly, including through any
subsidiary, to extend or maintain credit, to arrange
for the extension of credit, or to renew an extension
of credit, in the form of a personal loan to or for any
director or executive officer (or equivalent thereof)
of that issuer. An extension of credit maintained by
the issuer on the date of enactment of this subsection
shall not be subject to the provisions of this
subsection, provided that there is no material
modification to any term of any such extension of
credit or any renewal of any such extension of credit
on or after that date of enactment.
(2) Limitation.--Paragraph (1) does not preclude any
home improvement and manufactured home loans (as that
term is defined in section 5 of the Home Owners' Loan
Act (12 U.S.C. 1464)), consumer credit (as defined in
section 103 of the Truth in Lending Act (15 U.S.C.
1602)), or any extension of credit under an open end
credit plan (as defined in section 103 of the Truth in
Lending Act (15 U.S.C. 1602)), or a charge card (as
defined in section 127(c)(4)(e) of the Truth in Lending
Act (15 U.S.C. 1637(c)(4)(e)), or any extension of
credit by a broker or dealer registered under section
15 of this title to an employee of that broker or
dealer to buy, trade, or carry securities, that is
permitted under rules or regulations of the Board of
Governors of the Federal Reserve System pursuant to
section 7 of this title (other than an extension of
credit that would be used to purchase the stock of that
issuer), that is--
(A) made or provided in the ordinary course
of the consumer credit business of such issuer;
(B) of a type that is generally made
available by such issuer to the public; and
(C) made by such issuer on market terms, or
terms that are no more favorable than those
offered by the issuer to the general public for
such extensions of credit.
(3) Rule of construction for certain loans.--
Paragraph (1) does not apply to any loan made or
maintained by an insured depository institution (as
defined in section 3 of the Federal Deposit Insurance
Act (12 U.S.C. 1813)), if the loan is subject to the
insider lending restrictions of section 22(h) of the
Federal Reserve Act (12 U.S.C. 375b).
(l) Real Time Issuer Disclosures.--Each issuer reporting
under section 13(a) or 15(d) shall disclose to the public on a
rapid and current basis such additional information concerning
material changes in the financial condition or operations of
the issuer, in plain English, which may include trend and
qualitative information and graphic presentations, as the
Commission determines, by rule, is necessary or useful for the
protection of investors and in the public interest.
(m) Public Availability of Security-based Swap Transaction
Data.--
(1) In general.--
(A) Definition of real-time public
reporting.--In this paragraph, the term ``real-
time public reporting'' means to report data
relating to a security-based swap transaction,
including price and volume, as soon as
technologically practicable after the time at
which the security-based swap transaction has
been executed.
(B) Purpose.--The purpose of this subsection
is to authorize the Commission to make
security-based swap transaction and pricing
data available to the public in such form and
at such times as the Commission determines
appropriate to enhance price discovery.
(C) General rule.--The Commission is
authorized to provide by rule for the public
availability of security-based swap
transaction, volume, and pricing data as
follows:
(i) With respect to those security-
based swaps that are subject to the
mandatory clearing requirement
described in section 3C(a)(1)
(including those security-based swaps
that are excepted from the requirement
pursuant to section 3C(g)), the
Commission shall require real-time
public reporting for such transactions.
(ii) With respect to those security-
based swaps that are not subject to the
mandatory clearing requirement
described in section 3C(a)(1), but are
cleared at a registered clearing
agency, the Commission shall require
real-time public reporting for such
transactions.
(iii) With respect to security-based
swaps that are not cleared at a
registered clearing agency and which
are reported to a security-based swap
data repository or the Commission under
section 3C(a)(6), the Commission shall
require real-time public reporting for
such transactions, in a manner that
does not disclose the business
transactions and market positions of
any person.
(iv) With respect to security-based
swaps that are determined to be
required to be cleared under section
3C(b) but are not cleared, the
Commission shall require real-time
public reporting for such transactions.
(D) Registered entities and public
reporting.--The Commission may require
registered entities to publicly disseminate the
security-based swap transaction and pricing
data required to be reported under this
paragraph.
(E) Rulemaking required.--With respect to the
rule providing for the public availability of
transaction and pricing data for security-based
swaps described in clauses (i) and (ii) of
subparagraph (C), the rule promulgated by the
Commission shall contain provisions--
(i) to ensure such information does
not identify the participants;
(ii) to specify the criteria for
determining what constitutes a large
notional security-based swap
transaction (block trade) for
particular markets and contracts;
(iii) to specify the appropriate time
delay for reporting large notional
security-based swap transactions (block
trades) to the public; and
(iv) that take into account whether
the public disclosure will materially
reduce market liquidity.
(F) Timeliness of reporting.--Parties to a
security-based swap (including agents of the
parties to a security-based swap) shall be
responsible for reporting security-based swap
transaction information to the appropriate
registered entity in a timely manner as may be
prescribed by the Commission.
(G) Reporting of swaps to registered
security-based swap data repositories.--Each
security-based swap (whether cleared or
uncleared) shall be reported to a registered
security-based swap data repository.
(H) Registration of clearing agencies.--A
clearing agency may register as a security-
based swap data repository.
(2) Semiannual and annual public reporting of
aggregate security-based swap data.--
(A) In general.--In accordance with
subparagraph (B), the Commission shall issue a
written report on a semiannual and annual basis
to make available to the public information
relating to--
(i) the trading and clearing in the
major security-based swap categories;
and
(ii) the market participants and
developments in new products.
(B) Use; consultation.--In preparing a report
under subparagraph (A), the Commission shall--
(i) use information from security-
based swap data repositories and
clearing agencies; and
(ii) consult with the Office of the
Comptroller of the Currency, the Bank
for International Settlements, and such
other regulatory bodies as may be
necessary.
(C) Authority of commission.--The Commission
may, by rule, regulation, or order, delegate
the public reporting responsibilities of the
Commission under this paragraph in accordance
with such terms and conditions as the
Commission determines to be appropriate and in
the public interest.
(n) Security-based Swap Data Repositories.--
(1) Registration requirement.--It shall be unlawful
for any person, unless registered with the Commission,
directly or indirectly, to make use of the mails or any
means or instrumentality of interstate commerce to
perform the functions of a security-based swap data
repository.
(2) Inspection and examination.--Each registered
security-based swap data repository shall be subject to
inspection and examination by any representative of the
Commission.
(3) Compliance with core principles.--
(A) In general.--To be registered, and
maintain registration, as a security-based swap
data repository, the security-based swap data
repository shall comply with--
(i) the requirements and core
principles described in this
subsection; and
(ii) any requirement that the
Commission may impose by rule or
regulation.
(B) Reasonable discretion of security-based
swap data repository.--Unless otherwise
determined by the Commission, by rule or
regulation, a security-based swap data
repository described in subparagraph (A) shall
have reasonable discretion in establishing the
manner in which the security-based swap data
repository complies with the core principles
described in this subsection.
(4) Standard setting.--
(A) Data identification.--
(i) In general.--In accordance with
clause (ii), the Commission shall
prescribe standards that specify the
data elements for each security-based
swap that shall be collected and
maintained by each registered security-
based swap data repository.
(ii) Requirement.--In carrying out
clause (i), the Commission shall
prescribe consistent data element
standards applicable to registered
entities and reporting counterparties.
(B) Data collection and maintenance.--The
Commission shall prescribe data collection and
data maintenance standards for security-based
swap data repositories.
(C) Comparability.--The standards prescribed
by the Commission under this subsection shall
be comparable to the data standards imposed by
the Commission on clearing agencies in
connection with their clearing of security-
based swaps.
(5) Duties.--A security-based swap data repository
shall--
(A) accept data prescribed by the Commission
for each security-based swap under subsection
(b);
(B) confirm with both counterparties to the
security-based swap the accuracy of the data
that was submitted;
(C) maintain the data described in
subparagraph (A) in such form, in such manner,
and for such period as may be required by the
Commission;
(D)(i) provide direct electronic access to
the Commission (or any designee of the
Commission, including another registered
entity); and
(ii) provide the information described in
subparagraph (A) in such form and at such
frequency as the Commission may require to
comply with the public reporting requirements
set forth in subsection (m);
(E) at the direction of the Commission,
establish automated systems for monitoring,
screening, and analyzing security-based swap
data;
(F) maintain the privacy of any and all
security-based swap transaction information
that the security-based swap data repository
receives from a security-based swap dealer,
counterparty, or any other registered entity;
and
(G) on a confidential basis pursuant to
section 24, upon request, and after notifying
the Commission of the request, make available
security-based swap data obtained by the
security-based swap data repository, including
individual counterparty trade and position
data, to--
(i) each appropriate prudential
regulator;
(ii) the Financial Stability
Oversight Council;
(iii) the Commodity Futures Trading
Commission;
(iv) the Department of Justice; and
(v) any other person that the
Commission determines to be
appropriate, including--
(I) foreign financial
supervisors (including foreign
futures authorities);
(II) foreign central banks;
(III) foreign ministries; and
(IV) other foreign
authorities.
(H) Confidentiality agreement.--Before the
security-based swap data repository may share
information with any entity described in
subparagraph (G), the security-based swap data
repository shall receive a written agreement
from each entity stating that the entity shall
abide by the confidentiality requirements
described in section 24 relating to the
information on security-based swap transactions
that is provided.
(6) Designation of chief compliance officer.--
(A) In general.--Each security-based swap
data repository shall designate an individual
to serve as a chief compliance officer.
(B) Duties.--The chief compliance officer
shall--
(i) report directly to the board or
to the senior officer of the security-
based swap data repository;
(ii) review the compliance of the
security-based swap data repository
with respect to the requirements and
core principles described in this
subsection;
(iii) in consultation with the board
of the security-based swap data
repository, a body performing a
function similar to the board of the
security-based swap data repository, or
the senior officer of the security-
based swap data repository, resolve any
conflicts of interest that may arise;
(iv) be responsible for administering
each policy and procedure that is
required to be established pursuant to
this section;
(v) ensure compliance with this title
(including regulations) relating to
agreements, contracts, or transactions,
including each rule prescribed by the
Commission under this section;
(vi) establish procedures for the
remediation of noncompliance issues
identified by the chief compliance
officer through any--
(I) compliance office review;
(II) look-back;
(III) internal or external
audit finding;
(IV) self-reported error; or
(V) validated complaint; and
(vii) establish and follow
appropriate procedures for the
handling, management response,
remediation, retesting, and closing of
noncompliance issues.
(C) Annual reports.--
(i) In general.--In accordance with
rules prescribed by the Commission, the
chief compliance officer shall annually
prepare and sign a report that contains
a description of--
(I) the compliance of the
security-based swap data
repository of the chief
compliance officer with respect
to this title (including
regulations); and
(II) each policy and
procedure of the security-based
swap data repository of the
chief compliance officer
(including the code of ethics
and conflict of interest
policies of the security-based
swap data repository).
(ii) Requirements.--A compliance
report under clause (i) shall--
(I) accompany each
appropriate financial report of
the security-based swap data
repository that is required to
be furnished to the Commission
pursuant to this section; and
(II) include a certification
that, under penalty of law, the
compliance report is accurate
and complete.
(7) Core principles applicable to security-based swap
data repositories.--
(A) Antitrust considerations.--Unless
necessary or appropriate to achieve the
purposes of this title, the swap data
repository shall not--
(i) adopt any rule or take any action
that results in any unreasonable
restraint of trade; or
(ii) impose any material
anticompetitive burden on the trading,
clearing, or reporting of transactions.
(B) Governance arrangements.--Each security-
based swap data repository shall establish
governance arrangements that are transparent--
(i) to fulfill public interest
requirements; and
(ii) to support the objectives of the
Federal Government, owners, and
participants.
(C) Conflicts of interest.--Each security-
based swap data repository shall--
(i) establish and enforce rules to
minimize conflicts of interest in the
decision-making process of the
security-based swap data repository;
and
(ii) establish a process for
resolving any conflicts of interest
described in clause (i).
(D) Additional duties developed by
commission.--
(i) In general.--The Commission may
develop 1 or more additional duties
applicable to security-based swap data
repositories.
(ii) Consideration of evolving
standards.--In developing additional
duties under subparagraph (A), the
Commission may take into consideration
any evolving standard of the United
States or the international community.
(iii) Additional duties for
commission designees.--The Commission
shall establish additional duties for
any registrant described in section
13(m)(2)(C) in order to minimize
conflicts of interest, protect data,
ensure compliance, and guarantee the
safety and security of the security-
based swap data repository.
(8) Required registration for security-based swap
data repositories.--Any person that is required to be
registered as a security-based swap data repository
under this subsection shall register with the
Commission, regardless of whether that person is also
licensed under the Commodity Exchange Act as a swap
data repository.
(9) Rules.--The Commission shall adopt rules
governing persons that are registered under this
subsection.
(o) Beneficial ownership.--For purposes ofthis section and
section 16, a person shall be deemed to acquire
beneficialownership of an equity security based on the purchase
or sale of asecurity-based swap, only to the extent that the
Commission, by rule,determines after consultation with the
prudential regulators and the Secretaryof the Treasury, that
the purchase or sale of the security-based swap, or classof
security-based swap, provides incidents of ownership comparable
to directownership of the equity security, and that it is
necessary to achieve thepurposes of this section that the
purchase or sale of the security-based swaps,or class of
security-based swap, be deemed the acquisition of
beneficialownership of the equitysecurity.
(p) Disclosures Relating to Conflict Minerals Originating in
the Democratic Republic of the Congo.--
(1) Regulations.--
(A) In general.--Not later than 270 days
after the date of the enactment of this
subsection, the Commission shall promulgate
regulations requiring any person described in
paragraph (2) to disclose annually, beginning
with the person's first full fiscal year that
begins after the date of promulgation of such
regulations, whether conflict minerals that are
necessary as described in paragraph (2)(B), in
the year for which such reporting is required,
did originate in the Democratic Republic of the
Congo or an adjoining country and, in cases in
which such conflict minerals did originate in
any such country, submit to the Commission a
report that includes, with respect to the
period covered by the report--
(i) a description of the measures
taken by the person to exercise due
diligence on the source and chain of
custody of such minerals, which
measures shall include an independent
private sector audit of such report
submitted through the Commission that
is conducted in accordance with
standards established by the
Comptroller General of the United
States, in accordance with rules
promulgated by the Commission, in
consultation with the Secretary of
State; and
(ii) a description of the products
manufactured or contracted to be
manufactured that are not DRC conflict
free (``DRC conflict free'' is defined
to mean the products that do not
contain minerals that directly or
indirectly finance or benefit armed
groups in the Democratic Republic of
the Congo or an adjoining country), the
entity that conducted the independent
private sector audit in accordance with
clause (i), the facilities used to
process the conflict minerals, the
country of origin of the conflict
minerals, and the efforts to determine
the mine or location of origin with the
greatest possible specificity.
(B) Certification.--The person submitting a
report under subparagraph (A) shall certify the
audit described in clause (i) of such
subparagraph that is included in such report.
Such a certified audit shall constitute a
critical component of due diligence in
establishing the source and chain of custody of
such minerals.
(C) Unreliable determination.--If a report
required to be submitted by a person under
subparagraph (A) relies on a determination of
an independent private sector audit, as
described under subparagraph (A)(i), or other
due diligence processes previously determined
by the Commission to be unreliable, the report
shall not satisfy the requirements of the
regulations promulgated under subparagraph
(A)(i).
(D) DRC conflict free.--For purposes of this
paragraph, a product may be labeled as ``DRC
conflict free'' if the product does not contain
conflict minerals that directly or indirectly
finance or benefit armed groups in the
Democratic Republic of the Congo or an
adjoining country.
(E) Information available to the public.--
Each person described under paragraph (2) shall
make available to the public on the Internet
website of such person the information
disclosed by such person under subparagraph
(A).
(2) Person described.--A person is described in this
paragraph if--
(A) the person is required to file reports
with the Commission pursuant to paragraph
(1)(A); and
(B) conflict minerals are necessary to the
functionality or production of a product
manufactured by such person.
(3) Revisions and waivers.--The Commission shall
revise or temporarily waive the requirements described
in paragraph (1) if the President transmits to the
Commission a determination that--
(A) such revision or waiver is in the
national security interest of the United States
and the President includes the reasons
therefor; and
(B) establishes a date, not later than 2
years after the initial publication of such
exemption, on which such exemption shall
expire.
(4) Termination of disclosure requirements.--The
requirements of paragraph (1) shall terminate on the
date on which the President determines and certifies to
the appropriate congressional committees, but in no
case earlier than the date that is one day after the
end of the 5-year period beginning on the date of the
enactment of this subsection, that no armed groups
continue to be directly involved and benefitting from
commercial activity involving conflict minerals.
(5) Definitions.--For purposes of this subsection,
the terms ``adjoining country'', ``appropriate
congressional committees'', ``armed group'', and
``conflict mineral'' have the meaning given those terms
under section 1502 of the Dodd-Frank Wall Street Reform
and Consumer Protection Act.
(q) Disclosure of Payments by Resource Extraction Issuers.--
(1) Definitions.--In this subsection--
(A) the term ``commercial development of oil,
natural gas, or minerals'' includes
exploration, extraction, processing, export,
and other significant actions relating to oil,
natural gas, or minerals, or the acquisition of
a license for any such activity, as determined
by the Commission;
(B) the term ``foreign government'' means a
foreign government, a department, agency, or
instrumentality of a foreign government, or a
company owned by a foreign government, as
determined by the Commission;
(C) the term ``payment''--
(i) means a payment that is--
(I) made to further the
commercial development of oil,
natural gas, or minerals; and
(II) not de minimis; and
(ii) includes taxes, royalties, fees
(including license fees), production
entitlements, bonuses, and other
material benefits, that the Commission,
consistent with the guidelines of the
Extractive Industries Transparency
Initiative (to the extent practicable),
determines are part of the commonly
recognized revenue stream for the
commercial development of oil, natural
gas, or minerals;
(D) the term ``resource extraction issuer''
means an issuer that--
(i) is required to file an annual
report with the Commission; and
(ii) engages in the commercial
development of oil, natural gas, or
minerals;
(E) the term ``interactive data format''
means an electronic data format in which pieces
of information are identified using an
interactive data standard; and
(F) the term ``interactive data standard''
means standardized list of electronic tags that
mark information included in the annual report
of a resource extraction issuer.
(2) Disclosure.--
(A) Information required.--Not later than 270
days after the date of enactment of the Dodd-
Frank Wall Street Reform and Consumer
Protection Act, the Commission shall issue
final rules that require each resource
extraction issuer to include in an annual
report of the resource extraction issuer
information relating to any payment made by the
resource extraction issuer, a subsidiary of the
resource extraction issuer, or an entity under
the control of the resource extraction issuer
to a foreign government or the Federal
Government for the purpose of the commercial
development of oil, natural gas, or minerals,
including--
(i) the type and total amount of such
payments made for each project of the
resource extraction issuer relating to
the commercial development of oil,
natural gas, or minerals; and
(ii) the type and total amount of
such payments made to each government.
(B) Consultation in rulemaking.--In issuing
rules under subparagraph (A), the Commission
may consult with any agency or entity that the
Commission determines is relevant.
(C) Interactive data format.--The rules
issued under subparagraph (A) shall require
that the information included in the annual
report of a resource extraction issuer be
submitted in an interactive data format.
(D) Interactive data standard.--
(i) In general.--The rules issued
under subparagraph (A) shall establish
an interactive data standard for the
information included in the annual
report of a resource extraction issuer.
(ii) Electronic tags.--The
interactive data standard shall include
electronic tags that identify, for any
payments made by a resource extraction
issuer to a foreign government or the
Federal Government--
(I) the total amounts of the
payments, by category;
(II) the currency used to
make the payments;
(III) the financial period in
which the payments were made;
(IV) the business segment of
the resource extraction issuer
that made the payments;
(V) the government that
received the payments, and the
country in which the government
is located;
(VI) the project of the
resource extraction issuer to
which the payments relate; and
(VII) such other information
as the Commission may determine
is necessary or appropriate in
the public interest or for the
protection of investors.
(E) International transparency efforts.--To
the extent practicable, the rules issued under
subparagraph (A) shall support the commitment
of the Federal Government to international
transparency promotion efforts relating to the
commercial development of oil, natural gas, or
minerals.
(F) Effective date.--With respect to each
resource extraction issuer, the final rules
issued under subparagraph (A) shall take effect
on the date on which the resource extraction
issuer is required to submit an annual report
relating to the fiscal year of the resource
extraction issuer that ends not earlier than 1
year after the date on which the Commission
issues final rules under subparagraph (A).
(3) Public availability of information.--
(A) In general.--To the extent practicable,
the Commission shall make available online, to
the public, a compilation of the information
required to be submitted under the rules issued
under paragraph (2)(A).
(B) Other information.--Nothing in this
paragraph shall require the Commission to make
available online information other than the
information required to be submitted under the
rules issued under paragraph (2)(A).
(4) Authorization of appropriations.--There are
authorized to be appropriated to the Commission such
sums as may be necessary to carry out this subsection.
(r) Disclosure of Certain Activities Relating to Iran.--
(1) In general.--Each issuer required to file an
annual or quarterly report under subsection (a) shall
disclose in that report the information required by
paragraph (2) if, during the period covered by the
report, the issuer or any affiliate of the issuer--
(A) knowingly engaged in an activity
described in subsection (a) or (b) of section 5
of the Iran Sanctions Act of 1996 (Public Law
104-172; 50 U.S.C. 1701 note);
(B) knowingly engaged in an activity
described in subsection (c)(2) of section 104
of the Comprehensive Iran Sanctions,
Accountability, and Divestment Act of 2010 (22
U.S.C. 8513) or a transaction described in
subsection (d)(1) of that section;
(C) knowingly engaged in an activity
described in section 105A(b)(2) of that Act; or
(D) knowingly conducted any transaction or
dealing with--
(i) any person the property and
interests in property of which are
blocked pursuant to Executive Order No.
13224 (66 Fed. Reg. 49079; relating to
blocking property and prohibiting
transactions with persons who commit,
threaten to commit, or support
terrorism);
(ii) any person the property and
interests in property of which are
blocked pursuant to Executive Order No.
13382 (70 Fed. Reg. 38567; relating to
blocking of property of weapons of mass
destruction proliferators and their
supporters); or
(iii) any person or entity identified
under section 560.304 of title 31, Code
of Federal Regulations (relating to the
definition of the Government of Iran)
without the specific authorization of a
Federal department or agency.
(2) Information required.--If an issuer or an
affiliate of the issuer has engaged in any activity
described in paragraph (1), the issuer shall disclose a
detailed description of each such activity, including--
(A) the nature and extent of the activity;
(B) the gross revenues and net profits, if
any, attributable to the activity; and
(C) whether the issuer or the affiliate of
the issuer (as the case may be) intends to
continue the activity.
(3) Notice of disclosures.--If an issuer reports
under paragraph (1) that the issuer or an affiliate of
the issuer has knowingly engaged in any activity
described in that paragraph, the issuer shall
separately file with the Commission, concurrently with
the annual or quarterly report under subsection (a), a
notice that the disclosure of that activity has been
included in that annual or quarterly report that
identifies the issuer and contains the information
required by paragraph (2).
(4) Public disclosure of information.--Upon receiving
a notice under paragraph (3) that an annual or
quarterly report includes a disclosure of an activity
described in paragraph (1), the Commission shall
promptly--
(A) transmit the report to--
(i) the President;
(ii) the Committee on Foreign Affairs
and the Committee on Financial Services
of the House of Representatives; and
(iii) the Committee on Foreign
Relations and the Committee on Banking,
Housing, and Urban Affairs of the
Senate; and
(B) make the information provided in the
disclosure and the notice available to the
public by posting the information on the
Internet website of the Commission.
(5) Investigations.--Upon receiving a report under
paragraph (4) that includes a disclosure of an activity
described in paragraph (1) (other than an activity
described in subparagraph (D)(iii) of that paragraph),
the President shall--
(A) initiate an investigation into the
possible imposition of sanctions under the Iran
Sanctions Act of 1996 (Public Law 104-172; 50
U.S.C. 1701 note), section 104 or 105A of the
Comprehensive Iran Sanctions, Accountability,
and Divestment Act of 2010, an Executive order
specified in clause (i) or (ii) of paragraph
(1)(D), or any other provision of law relating
to the imposition of sanctions with respect to
Iran, as applicable; and
(B) not later than 180 days after initiating
such an investigation, make a determination
with respect to whether sanctions should be
imposed with respect to the issuer or the
affiliate of the issuer (as the case may be).
(6) Sunset.--The provisions of this subsection shall
terminate on the date that is 30 days after the date on
which the President makes the certification described
in section 401(a) of the Comprehensive Iran Sanctions,
Accountability, and Divestment Act of 2010 (22 U.S.C.
8551(a)).
(s) Data Standards.--
(1) Requirement.--The Commission shall, by rule,
adopt data standards for all collections of information
with respect to periodic and current reports required
to be filed or furnished under this section or under
section 15(d), 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.
* * * * * * *
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) 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.
(l) False or Misleading Statements.--For purposes of
subsection (a) and Rule 14a-9 (17 CFR 240.14a-9) and any
successor rule, the failure to disclose material information
(such as a proxy voting advice business's methodology, sources
of information, or conflicts of interest) or the making of a
material misstatement regarding proxy voting advice that makes
a recommendation to a security holder as to the security
holder's vote, consent, or authorization on a specific matter
for which security holder approval is solicited, and that is
furnished by a person that markets the person's expertise as a
provider of such proxy voting advice separately from other
forms of investment advice, and sells such proxy voting advice
for a fee, shall be considered to be false or misleading with
respect to a material fact.
(m) Prohibition on Robovoting.--
(1) In general.--The Commission shall issue final
rules prohibiting the use of robovoting with respect to
votes related to proxy or consent solicitation
materials.
(2) Robovoting defined.--In this subsection, the term
``robovoting'' means the practice of automatically
voting in a manner consistent with the recommendations
of a proxy advisory firm or on a proxy advisory firm's
electronic voting platform with the proxy advisory
firm's recommendations, in either case, without
independent review and analysis.
(n) Prohibition on Outsourcing Voting Decisions by
Institutional Investors.--With respect to votes related to
proxy or consent solicitation materials, an institutional
investor may not outsource voting decisions to any person other
than an investment adviser or a broker or dealer that is
registered with the Commission, or is exempt from such
registration, and has a fiduciary or best interest duty to the
institutional investor.
(o) No Requirement to Vote.--No person may be required to
cast votes related to proxy or consent solicitation materials,
unless obligated by their fiduciary duty or Rule 206(4)-6 (17
CFR 275.206(4)-6).
* * * * * * *
SEC. 15H. REGISTRATION OF PROXY ADVISORY FIRMS.
(a) Conduct Prohibited.--It shall be unlawful for a proxy
advisory firm to make use of the mails or any means or
instrumentality of interstate commerce to provide proxy voting
advice, research, analysis, ratings or recommendations to any
client, unless such proxy advisory firm is registered under
this section.
(b) Registration Procedures.--
(1) Application for registration.--
(A) In general.--A proxy advisory firm shall
file with the Commission an application for
registration, in such form as the Commission
shall require, by rule, and containing the
information described in subparagraph (B).
(B) Required information.--An application for
registration under this section shall contain--
(i) a certification that the
applicant is able to consistently
provide proxy advice based on accurate
information;
(ii) with respect to clients of the
applicant that vote shares held on
behalf of shareholders, a certification
that the applicant--
(I) will provide proxy voting
advice only in the best
economic interest of those
shareholders;
(II) has the requisite
expertise to ensure that voting
recommendations are in the best
economic interest of those
shareholders unless otherwise
specified; and
(III) does not violate State
or Federal law;
(iii) information on the procedures
and methodologies that the applicant
uses to ensure that proxy voting
recommendations are in the best
economic interest of the ultimate
shareholders;
(iv) information on the
organizational structure of the
applicant;
(v) an explanation of whether or not
the applicant has in effect a code of
ethics, and if not, the reasons
therefor;
(vi) a description of any potential
or actual conflict of interest relating
to the provision of proxy advisory
services, including those arising out
of or resulting from the ownership
structure of the applicant or the
provision of other services by the
applicant or any person associated with
the applicant;
(vii) the policies and procedures in
place to publicly disclose and manage
conflicts of interest under subsection
(f);
(viii) information related to the
professional and academic
qualifications of staff tasked with
providing proxy advisory services; and
(ix) any other information and
documents concerning the applicant and
any person associated with such
applicant as the Commission, by rule,
may prescribe as necessary or
appropriate in the public interest or
for the protection of investors.
(2) Review of application.--
(A) Initial determination.--Not later than 90
days after the date on which the application
for registration is filed with the Commission
under paragraph (1) (or within such longer
period as to which the applicant consents) the
Commission shall--
(i) by order, grant registration; or
(ii) institute proceedings to
determine whether registration should
be denied.
(B) Conduct of proceedings.--
(i) Content.--Proceedings referred to
in subparagraph (A)(ii) shall--
(I) include notice of the
grounds for denial under
consideration and an
opportunity for hearing; and
(II) be concluded not later
than 120 days after the date on
which the application for
registration is filed with the
Commission under paragraph (1).
(ii) Determination.--At the
conclusion of such proceedings, the
Commission, by order, shall grant or
deny such application for registration.
(iii) Extension authorized.--The
Commission may extend the time for
conclusion of such proceedings for not
longer than 90 days, if the Commission
finds good cause for such extension and
publishes its reasons for so finding,
or for such longer period as to which
the applicant consents.
(C) Grounds for decision.--The Commission
shall grant registration under this
subsection--
(i) if the Commission finds that the
requirements of this section are
satisfied; and
(ii) unless the Commission finds (in
which case the Commission shall deny
such registration) that--
(I) the applicant has failed
to certify to the Commission's
satisfaction that it is able to
consistently provide proxy
advice based on accurate
information and to materially
comply with the procedures and
methodologies disclosed under
paragraph (1)(B) and with
subsections (f) and (g); or
(II) if the applicant were so
registered, its registration
would be subject to suspension
or revocation under subsection
(d).
(3) Public availability of information.--Subject to
section 24, the Commission shall make the information
and documents submitted to the Commission by a proxy
advisory firm in its completed application for
registration, or in any amendment submitted under
paragraph (1) or (2) of subsection (c), publicly
available on the Commission's website, or through
another comparable, readily accessible means.
(c) Update of Registration.--
(1) Update.--Each registered proxy advisory firm
shall promptly amend and update its application for
registration under this section if any information or
document provided therein becomes materially
inaccurate, except that a registered proxy advisory
firm is not required to amend the information required
to be filed under subsection (b)(1)(B)(i) by filing
information under this paragraph, but shall amend such
information in the annual submission of the
organization under paragraph (2) of this subsection.
(2) Certification.--Not later than 90 calendar days
after the end of each calendar year, each registered
proxy advisory firm shall file with the Commission an
amendment to its registration, in such form as the
Commission, by rule, may prescribe as necessary or
appropriate in the public interest or for the
protection of investors--
(A) certifying that the information and
documents in the application for registration
of such registered proxy advisory firm continue
to be accurate in all material respects; and
(B) listing any material change that occurred
to such information or documents during the
previous calendar year.
(d) Censure, Denial, or Suspension of Registration; Notice
and Hearing.--The Commission, by order, shall censure, place
limitations on the activities, functions, or operations of,
suspend for a period not exceeding 12 months, or revoke the
registration of any registered proxy advisory firm if the
Commission finds, on the record after notice and opportunity
for hearing, that such censure, placing of limitations,
suspension, or revocation is necessary for the protection of
investors and in the public interest and that such registered
proxy advisory firm, or any person associated with such firm,
whether prior to or subsequent to becoming so associated--
(1) has committed or omitted any act, or is subject
to an order or finding, enumerated in subparagraph (A),
(D), (E), (H), or (G) of section 15(b)(4), has been
convicted of any offense specified in section
15(b)(4)(B), or is enjoined from any action, conduct,
or practice specified in subparagraph (C) of section
15(b)(4), during the 10-year period preceding the date
of commencement of the proceedings under this
subsection, or at any time thereafter;
(2) has been convicted during the 10-year period
preceding the date on which an application for
registration is filed with the Commission under this
section, or at any time thereafter, of--
(A) any crime that is punishable by
imprisonment for 1 or more years, and that is
not described in section 15(b)(4)(B); or
(B) a substantially equivalent crime by a
foreign court of competent jurisdiction;
(3) is subject to any order of the Commission barring
or suspending the right of the person to be associated
with a registered proxy advisory firm;
(4) fails to furnish the certifications required
under subsections (b)(2)(C)(ii)(I) and (c)(2);
(5) has engaged in one or more prohibited acts
enumerated in paragraph (1);
(6) fails to maintain adequate financial and
managerial resources to consistently offer advisory
services to clients that vote shares held on behalf of
shareholders consistent with the best economic interest
of those shareholders, including by failing to comply
with subsections (f) or (g);
(7) fails to maintain adequate expertise to ensure
that proxy advisory services for clients that vote
shares held on behalf of shareholders are tied to the
best economic interest of those shareholders; or
(8) engages in a prohibited act enumerated in
subsection (j).
(e) Termination of Registration.--
(1) Voluntary withdrawal.--A registered proxy
advisory firm may, upon such terms and conditions as
the Commission may establish as necessary in the public
interest or for the protection of investors, which
terms and conditions shall include at a minimum that
the registered proxy advisory firm will no longer
conduct such activities as to bring it within the
definition of proxy advisory firm in section 3(a)(82),
withdraw from registration by filing a written notice
of withdrawal to the Commission.
(2) Commission authority.--In addition to any other
authority of the Commission under this title, if the
Commission finds that a registered proxy advisory firm
is no longer in existence or has ceased to do business
as a proxy advisory firm, the Commission, by order,
shall cancel the registration under this section of
such registered proxy advisory firm.
(f) Management of Conflicts of Interest.--
(1) Organization policies and procedures.--Each
registered proxy advisory firm shall establish,
maintain, and enforce written policies and procedures
reasonably designed, taking into consideration the
nature of the business of such registered proxy
advisory firm and associated persons, to publicly
disclose and manage any conflicts of interest that
arise or would reasonably be expected to arise from
such business.
(2) Commission authority.--The Commission shall,
within one year of the date of enactment of this
section, issue final rules to prohibit, or require the
management and public disclosure of, any conflicts of
interest relating to the offering of proxy advisory
services by a registered proxy advisory firm,
including, without limitation, conflicts of interest
relating to--
(A) the manner in which a registered proxy
advisory firm is compensated by the client, any
affiliate of the client, or any other person
for providing proxy advisory services;
(B) business relationships, ownership
interests, or any other financial or personal
interests between a registered proxy advisory
firm, or any person associated with such
registered proxy advisory firm, and any client,
or any affiliate of such client;
(C) the formulation of proxy voting policies;
(D) the execution, or assistance with the
execution, of proxy votes if such votes are
based upon recommendations made by the proxy
advisory firm in which a person other than the
issuer is a proponent; and
(E) any other potential conflict of interest,
as the Commission deems necessary or
appropriate in the public interest or for the
protection of investors.
(3) Disclosure on factors influencing
recommendations.--Each registered proxy advisory firm
shall annually disclose to the Commission and make
publicly available the economic and other factors that
a reasonable investor would expect to influence the
recommendations of such proxy advisory firm, including
the ownership composition of such proxy advisory firm
and any meetings with, or feedback received from,
outside entities.
(g) Reliability of Proxy Advisory Firm Services.--
(1) In general.--Each registered proxy advisory firm
shall--
(A) have staff and other resources sufficient
to produce proxy voting recommendations that
are based on accurate and current information
and designed for clients that vote shares held
on behalf of shareholders to advance the best
economic interest of those shareholders unless
otherwise specified;
(B) implement procedures that permit issuers
that are the subject of proxy voting
recommendations--
(i) access in a reasonable time to
data and information used to make
recommendations; and
(ii) a reasonable opportunity to
provide meaningful comment and
corrections to such data and
information, including the opportunity
to present (in person or
telephonically) details to the person
responsible for developing such data
and information prior to the
publication of proxy voting
recommendations to clients;
(C) employ an ombudsman to receive complaints
about the accuracy of information used in
making recommendations from the companies that
are the subject of the proxy advisory firm's
voting recommendations and seek to resolve
those complaints in a timely fashion and prior
to the publication of proxy voting
recommendations to clients; and
(D) if the ombudsman is unable to resolve a
complaint to a company's satisfaction prior to
the publication of proxy voting recommendations
to clients, include in the final report of the
firm to clients--
(i) a statement detailing the
company's complaints, if requested in
writing by the company; and
(ii) a statement explaining why the
proxy voting recommendation is in the
best economic interest of shareholders.
(2) Definitions.--In this subsection:
(A) Data and information used to make
recommendations.--The term ``data and
information used to make voting
recommendations''--
(i) means the financial, operational,
or descriptive data and information on
an issuer used by proxy advisory firms
and any contextual or substantive
analysis impacting the recommendation;
and
(ii) does not include the entirety of
the proxy advisory firm's final report
to its clients.
(B) Reasonable time.--The term ``reasonable
time''--
(i) means not less than 1 week before
the publication of proxy voting
recommendations for clients; and
(ii) shall not otherwise interfere
with a proxy advisory firm's ability to
provide its clients with timely access
to accurate proxy voting research,
analysis, or recommendations.
(h) Private Right of Action With Respect to Illegal
Recommendations.--Any proxy advisory firm that endorses a
proposal that is not supported by the issuer but is approved
and subsequently found by a court of competent jurisdiction to
violate State or Federal law shall be liable to the applicable
issuer for the costs associated with the approval of such
proposal, including implementation costs and any penalties
incurred by the issuer, and any issuer seeking to enforce such
liability may sue at law or in equity in any court of competent
jurisdiction.
(i) Designation of Compliance Officer.--Each registered proxy
advisory firm shall designate an individual who reports
directly to senior management as responsible for administering
the policies and procedures that are required to be established
pursuant to subsections (f) and (g), and for ensuring
compliance with the securities laws and the rules and
regulations thereunder, including those promulgated by the
Commission pursuant to this section.
(j) Prohibited Conduct.--
(1) Prohibited acts and practices.--Not later than
one year after the date of enactment of this section,
the Commission shall issue final rules to prohibit any
act or practice relating to the offering of proxy
advisory services by a registered proxy advisory firm
that the Commission determines to be unfair, coercive,
or abusive, including any act or practice relating to--
(A) advisory or consulting services (offered
directly or indirectly, including through an
affiliate) related to corporate governance
issues; or
(B) modifying a voting recommendation or
otherwise departing from its adopted systematic
procedures and methodologies in the provision
of proxy advisory services, based on whether an
issuer, or affiliate thereof, subscribes or
will subscribe to other services or product of
the registered proxy advisory firm or any
person associated with such organization.
(2) Rule of construction.--Nothing in paragraph (1),
or in any rules or regulations adopted thereunder, may
be construed to modify, impair, or supersede the
operation of any of the antitrust laws (as defined in
the first section of the Clayton Act, except that such
term includes section 5 of the Federal Trade Commission
Act, to the extent that such section 5 applies to
unfair methods of competition).
(k) Annual Report.--
(1) In general.--Each registered proxy advisory firm
shall, not later than 90 calendar days after the end of
each fiscal year, file with the Commission and make
publicly available an annual report in such form as the
Commission, by rule, may prescribe as necessary or
appropriate in the public interest or for the
protection of investors.
(2) Contents.--Each annual report required under
paragraph (1) shall include, at a minimum, disclosure
by the registered proxy advisory firm of the following:
(A) A list of shareholder proposals the staff
of the registered proxy advisory firm reviewed
in the prior fiscal year.
(B) A list of the recommendations made in the
prior fiscal year.
(C) The economic analysis conducted to
determine that final recommendations provided
in the prior fiscal year (other than
recommendations relating to an issuer-sponsored
proposal or recommendations consistent with
that of a board of directors composed of a
majority of independent directors) delivered to
clients that vote shares held on behalf of
shareholders were in the best economic interest
of those shareholders.
(D) The staff who reviewed and made
recommendations on such proposals in the prior
fiscal year.
(E) The qualifications of such staff to
ensure that each of the recommendations for
clients that vote shares held on behalf of
shareholders were tied to the best economic
interest of those shareholders.
(F) The recommendations made in the prior
fiscal year where the proponent of such
recommendation was a client of or received
services from the proxy advisory firm.
(G) A certification by the chief executive
officer, chief financial officer, and the
primary executive responsible for overseeing
the compilation and dissemination of proxy
voting advice that the final recommendations
(other than recommendations relating to an
issuer-sponsored proposal or recommendations
consistent with that of a board of directors
composed of a majority of independent
directors) delivered to clients that vote
shares held on behalf of shareholders in the
last fiscal year--
(i) were based on internal controls
and procedures that are designed to
ensure accurate information and that
such internal controls and procedures
are effective; and
(ii) were based on the best economic
interest of those shareholders unless
otherwise specified.
(H) The economic and other factors that a
reasonable investor would expect to influence
the recommendations of such proxy advisory
firm, including the ownership composition of
such proxy advisory firm.
(3) Report format.--Each annual report required under
paragraph (1) shall be made available in a structured,
machine-readable format, consistent with existing
electronic reporting standards.
(l) Transparent Policies.--Each registered proxy advisory
firm shall file with the Commission and make publicly available
its methodology for the formulation of proxy voting policies
and voting recommendations to clients that vote shares held on
behalf of shareholders and how that methodology ensures that
the firm's voting recommendations are in the best economic
interest of those shareholders unless otherwise specified.
(m) Rules of Construction.--Registration under and compliance
with this section does not constitute a waiver of, or otherwise
diminish, any right, privilege, or defense that a registered
proxy advisory firm may otherwise have under any provision of
State or Federal law, including any rule, regulation, or order
thereunder.
(n) Regulations.--
(1) New provisions.--Such rules and regulations as
are required by this section or are otherwise necessary
to carry out this section, including the application
form required under subsection (a)--
(A) shall be issued by the Commission, not
later than 180 days after the date of enactment
of this section; and
(B) shall become effective not later than 1
year after the date of enactment of this
section.
(2) Review of existing regulations.--Not later than
270 days after the date of enactment of this section,
the Commission shall--
(A) review its existing rules and regulations
which affect the operations of proxy advisory
firms; and
(B) amend or revise such rules and
regulations in accordance with the purposes of
this section, and issue such guidance as the
Commission may prescribe as necessary or
appropriate in the public interest or for the
protection of investors.
(o) Applicability.--This section, other than subsection (m),
which shall apply on the date of enactment of this section,
shall apply on the earlier of--
(1) the date on which regulations are issued in final
form under subsection (n)(1); or
(2) 270 days after the date of enactment of this
section.
(p) Best Economic Interest Defined.--In this section, the
term ``best economic interest'' means decisions that seek to
maximize investment returns over a time horizon consistent with
the investment objectives and risk management profile of the
fund in which the shareholders are invested.
* * * * * * *
accounts and records, examinations of exchanges, members, and others
Sec. 17. (a)(1) Every national securities exchange, member
thereof, broker or dealer who transacts a business in
securities through the medium of any such member, registered
securities association, registered broker or dealer, registered
municipal securities dealer municipal advisor,, registered
securities information processor, registered transfer agent,
nationally recognized statistical rating organization, proxy
advisory firm, and registered clearing agency and the Municipal
Securities Rulemaking Board shall make and keep for prescribed
periods such records, furnish such copies thereof, and make and
disseminate such reports as the Commission, by rule, prescribes
as necessary or appropriate in the public interest, for the
protection of investors, or otherwise in furtherance of the
purposes of this title. Any report that a nationally recognized
statistical rating organization is required by Commission rules
under this paragraph to make and disseminate to the Commission
shall be deemed furnished to the Commission.
(2) Every registered clearing agency shall also make and keep
for prescribed periods such records, furnish such copies
thereof, and make and disseminate such reports, as the
appropriate regulatory agency for such clearing agency, by
rule, prescribes as necessary or appropriate for the
safeguarding of securities and funds in the custody or control
of such clearing agency or for which it is responsible.
(3) Every registered transfer agent shall also make and keep
for prescribed periods such records, furnish such copies
thereof, and make such reports as the appropriate regulatory
agency for such transfer agent, by rule, prescribes as
necessary or appropriate in furtherance of the purposes of
section 17A of this title.
(b) Records Subject to Examination.--
(1) Procedures for cooperation with other agencies.--
All records of persons described in subsection (a) of
this section are subject at any time, or from time to
time, to such reasonable periodic, special, or other
examinations by representatives of the Commission and
the appropriate regulatory agency for such persons as
the Commission or the appropriate regulatory agency for
such persons deems necessary or appropriate in the
public interest, for the protection of investors, or
otherwise in furtherance of the purposes of this title:
Provided, however, That the Commission shall, prior to
conducting any such examination of a--
(A) registered clearing agency, registered
transfer agent, or registered municipal
securities dealer for which it is not the
appropriate regulatory agency, give notice to
the appropriate regulatory agency for such
clearing agency, transfer agent, or municipal
securities dealer of such proposed examination
and consult with such appropriate regulatory
agency concerning the feasibility and
desirability of coordinating such examination
with examinations conducted by such appropriate
regulatory agency with a view to avoiding
unnecessary regulatory duplication or undue
regulatory burdens for such clearing agency,
transfer agent, or municipal securities dealer;
or
(B) broker or dealer registered pursuant to
section 15(b)(11), exchange registered pursuant
to section 6(g), or national securities
association registered pursuant to section
15A(k), give notice to the Commodity Futures
Trading Commission of such proposed examination
and consults with the Commodity Futures Trading
Commission concerning the feasibility and
desirability of coordinating such examination
with examinations conducted by the Commodity
Futures Trading Commission in order to avoid
unnecessary regulatory duplication or undue
regulatory burdens for such broker or dealer or
exchange.
(2) Furnishing data and reports to cftc.--The
Commission shall notify the Commodity Futures Trading
Commission of any examination conducted of any broker
or dealer registered pursuant to section 15(b)(11),
exchange registered pursuant to section 6(g), or
national securities association registered pursuant to
section 15A(k) and, upon request, furnish to the
Commodity Futures Trading Commission any examination
report and data supplied to, or prepared by, the
Commission in connection with such examination.
(3) Use of cftc reports.--Prior to conducting an
examination under paragraph (1), the Commission shall
use the reports of examinations, if the information
available therein is sufficient for the purposes of the
examination, of--
(A) any broker or dealer registered pursuant
to section 15(b)(11);
(B) exchange registered pursuant to section
6(g); or
(C) national securities association
registered pursuant to section 15A(k);
that is made by the Commodity Futures Trading
Commission, a national securities association
registered pursuant to section 15A(k), or an exchange
registered pursuant to section 6(g).
(4) Rules of construction.--
(A) Notwithstanding any other provision of
this subsection, the records of a broker or
dealer registered pursuant to section
15(b)(11), an exchange registered pursuant to
section 6(g), or a national securities
association registered pursuant to section
15A(k) described in this subparagraph shall not
be subject to routine periodic examinations by
the Commission.
(B) Any recordkeeping rules adopted under
this subsection for a broker or dealer
registered pursuant to section 15(b)(11), an
exchange registered pursuant to section 6(g),
or a national securities association registered
pursuant to section 15A(k) shall be limited to
records with respect to persons, accounts,
agreements, contracts, and transactions
involving security futures products.
(C) Nothing in the proviso in paragraph (1)
shall be construed to impair or limit (other
than by the requirement of prior consultation)
the power of the Commission under this
subsection to examine any clearing agency,
transfer agent, or municipal securities dealer
or to affect in any way the power of the
Commission under any other provision of this
title or otherwise to inspect, examine, or
investigate any such clearing agency, transfer
agent, or municipal securities dealer.
(c)(1) Every clearing agency, transfer agent, and municipal
securities dealer for which the Commission is not the
appropriate regulatory agency shall (A) file with the
appropriate regulatory agency for such clearing agency,
transfer agent, or municipal securities dealer a copy of any
application, notice, proposal, report, or document filed with
the Commission by reason of its being a clearing agency,
transfer agent, or municipal securities dealer and (B) file
with the Commission a copy of any application, notice,
proposal, report, or document filed with such appropriate
regulatory agency by reason of its being a clearing agency,
transfer agent, or municipal securities dealer. The Municipal
Securities Rulemaking Board shall file with each agency
enumerated in section 3(a)(34)(A) of this title copies of every
proposed rule change filed with the Commission pursuant to
section 19(b) of this title.
(2) The appropriate regulatory agency for a clearing agency,
transfer agent, or municipal securities dealer for which the
Commission is not the appropriate regulatory agency shall file
with the Commission notice of the commencement of any
proceeding and a copy of any order entered by such appropriate
regulatory agency against any clearing agency, transfer agent,
municipal securities dealer, or person associated with a
transfer agent or municipal securities dealer, and the
Commission shall file with such appropriate regulatory agency,
if any, notice of the commencement of any proceeding and a copy
of any order entered by the Commission against the clearing
agency, transfer agent, or municipal securities dealer, or
against any person associated with a transfer agent or
municipal securities dealer for which the agency is the
appropriate regulatory agency.
(3) The Commission and the appropriate regulatory agency for
a clearing agency, transfer agent, or municipal securities
dealer for which the Commission is not the appropriate
regulatory agency shall each notify the other and make a report
of any examination conducted by it of such clearing agency,
transfer agent, or municipal securities dealer, and, upon
request, furnish to the other a copy of such report and any
data supplied to it in connection with such examination.
(4) The Commission or the appropriate regulatory agency may
specify that documents required to be filed pursuant to this
subsection with the Commission or such agency, respectively,
may be retained by the originating clearing agency, transfer
agent, or municipal securities dealer, or filed with another
appropriate regulatory agency. The Commission or the
appropriate regulatory agency (as the case may be) making such
a specification shall continue to have access to the document
on request.
(d)(1) The Commission, by rule or order, as it deems
necessary or appropriate in the public interest and for the
protection of investors, to foster cooperation and coordination
among self-regulatory organizations, or to remove impediments
to and foster the development of a national market system and
national system for the clearance and settlement of securities
transactions, may--
(A) with respect to any person who is a member of or
participant in more than one self-regulatory
organization, relieve any such self-regulatory
organization of any responsibility under this title (i)
to receive regulatory reports from such person, (ii) to
examine such person for compliance, or to enforce
compliance by such person, with specified provisions of
this title, the rules and regulations thereunder, and
its own rules, or (iii) to carry out other specified
regulatory functions with respect to such person, and
(B) allocate among self-regulatory organizations the
authority to adopt rules with respect to matters as to
which, in the absence of such allocation, such self-
regulatory organizations share authority under this
title.
In making any such rule or entering any such order, the
Commission shall take into consideration the regulatory
capabilities and procedures of the self-regulatory
organizations, availability of staff, convenience of location,
unnecessary regulatory duplication, and such other factors as
the Commission may consider germane to the protection of
investors, cooperation and coordination among self-regulatory
organizations, and the development of a national market system
and a national system for the clearance and settlement of
securities transactions. The Commission, by rule or order, as
it deems necessary or appropriate in the public interest and
for the protection of investors, may require any self-
regulatory organization relieved of any responsibility pursuant
to this paragraph, and any person with respect to whom such
responsibility relates, to take such steps as are specified in
any such rule or order to notify customers of, and persons
doing business with, such person of the limited nature of such
self-regulatory organization's responsibility for such person's
acts, practices, and course of business.
(2) A self-regulatory organization shall furnish copies of
any report of examination of any person who is a member of or a
participant in such self-regulatory organization to any other
self-regulatory organization of which such person is a member
or in which such person is a participant upon the request of
such person, such other self-regulatory organization, or the
Commission.
(e)(1)(A) Every registered broker or dealer shall annually
file with the Commission a balance sheet and income statement
certified by a independent public accounting firm, or by a
registered public accounting firm if the firm is required to be
registered under the Sarbanes-Oxley Act of 2002,, prepared on a
calendar or fiscal year basis, and such other financial
statements (which shall, as the Commission specifies, be
certified) and information concerning its financial condition
as the Commission, by rule may prescribe as necessary or
appropriate in the public interest or for the protection of
investors.
(B) Every registered broker and dealer shall annually send to
its customers its certified balance sheet and such other
financial statements and information concerning its financial
condition as the Commission, by rule, may prescribe pursuant to
subsection (a) of this section.
(C) The Commission, by rule or order, may conditionally or
unconditionally exempt any registered broker or dealer, or
class of such brokers or dealers, from any provision of this
paragraph if the Commission determines that such exemption is
consistent with the public interest and the protection of
investors.
(2) The Commission, by rule, as it deems necessary or
appropriate in the public interest or for the protection of
investors, may prescribe the form and content of financial
statements filed pursuant to this title and the accounting
principles and accounting standards used in their preparation.
(f)(1) Every national securities exchange, member thereof,
registered securities association, broker, dealer, municipal
securities dealer, government securities broker, government
securities dealer, registered transfer agent, registered
clearing agency, participant therein, member of the Federal
Reserve System, and bank whose deposits are insured by the
Federal Deposit Insurance Corporation shall--
(A) report to the Commission or other person
designated by the Commission and, in the case of
securities issued pursuant to chapter 31 of title 31,
United States Code, to the Secretary of the Treasury
such information about securities that are missing,
lost, counterfeit, stolen, or cancelled, in such form
and within such time as the Commission, by rule,
determines is necessary or appropriate in the public
interest or for the protection of investors; such
information shall be available on request for a
reasonable fee, to any such exchange, member,
association, broker, dealer, municipal securities
dealer, transfer agent, clearing agency, participant,
member of the Federal Reserve System, or insured bank,
and such other persons as the Commission, by rule,
designates; and
(B) make such inquiry with respect to information
reported pursuant to this subsection as the Commission,
by rule, prescribes as necessary or appropriate in the
public interest or for the protection of investors, to
determine whether securities in their custody or
control, for which they are responsible, or in which
they are effecting, clearing, or settling a transaction
have been reported as missing, lost, counterfeit,
stolen, cancelled, or reported in such other manner as
the Commission, by rule, may prescribe.
(2) Every member of a national securities exchange, broker,
dealer, registered transfer agent, registered clearing agency,
registered securities information processor, national
securities exchange, and national securities association shall
require that each of its partners, directors, officers, and
employees be fingerprinted and shall submit such fingerprints,
or cause the same to be submitted, to the Attorney General of
the United States for identification and appropriate
processing. The Commission, by rule, may exempt from the
provisions of this paragraph upon specified terms, conditions,
and periods, any class of partners, directors, officers, or
employees of any such member, broker, dealer, transfer agent,
clearing agency, securities information processor, national
securities exchange, or national securities association, if the
Commission finds that such action is not inconsistent with the
public interest or the protection of investors. Notwithstanding
any other provision of law, in providing identification and
processing functions, the Attorney General shall provide the
Commission and self-regulatory organizations designated by the
Commission with access to all criminal history record
information.
(3)(A) In order to carry out the authority under paragraph
(1) above, the Commission or its designee may enter into
agreement with the Attorney General to use the facilities of
the National Crime Information Center (``NCIC'') to receive,
store, and disseminate information in regard to missing, lost,
counterfeit, or stolen securities and to permit direct inquiry
access to NCIC's file on such securities for the financial
community.
(B) In order to carry out the authority under paragraph (1)
of this subsection, the Commission or its designee and the
Secretary of the Treasury shall enter into an agreement whereby
the Commission or its designee will receive, store, and
disseminate information in the possession, and which comes into
the possession, of the Department of the Treasury in regard to
missing, lost, counterfeit, or stolen securities.
(4) In regard to paragraphs (1), (2), and (3), above insofar
as such paragraphs apply to any bank or member of the Federal
Reserve System, the Commission may delegate its authority to:
(A) the Comptroller of the Currency as to national
banks;
(B) the Federal Reserve Board in regard to any member
of the Federal Reserve System which is not a national
bank; and
(C) the Federal Deposit Insurance Corporation for any
State bank which is insured by the Federal Deposit
Insurance Corporation but which is not a member of the
Federal Reserve System.
(5) The Commission shall encourage the insurance industry to
require their insured to report expeditiously instances of
missing, lost, counterfeit, or stolen securities to the
Commission or to such other person as the Commission may, by
rule, designate to receive such information.
(g) Any broker, dealer, or other person extending credit who
is subject to the rules and regulations prescribed by the Board
of Governors of the Federal Reserve System pursuant to this
title shall make such reports to the Board as it may require as
necessary or appropriate to enable it to perform the functions
conferred upon it by this title. If any such broker, dealer, or
other person shall fail to make any such report or fail to
furnish full information therein, or, if in the judgment of the
Board it is otherwise necessary, such broker, dealer, or other
person shall permit such inspections to be made by the Board
with respect to the business operations of such broker, dealer,
or other person as the Board may deem necessary to enable it to
obtain the required information.
(h) Risk Assessment for Holding Company Systems.--
(1) Obligations to obtain, maintain, and report
information.--Every person who is (A) a registered
broker or dealer, or (B) a registered municipal
securities dealer for which the Commission is the
appropriate regulatory agency, shall obtain such
information and make and keep such records as the
Commission by rule prescribes concerning the registered
person's policies, procedures, or systems for
monitoring and controlling financial and operational
risks to it resulting from the activities of any of its
associated persons, other than a natural person. Such
records shall describe, in the aggregate, each of the
financial and securities activities conducted by, and
the customary sources of capital and funding of, those
of its associated persons whose business activities are
reasonably likely to have a material impact on the
financial or operational condition of such registered
person, including its net capital, its liquidity, or
its ability to conduct or finance its operations. The
Commission, by rule, may require summary reports of
such information to be filed with the Commission no
more frequently than quarterly.
(2) Authority to require additional information.--If,
as a result of adverse market conditions or based on
reports provided to the Commission pursuant to
paragraph (1) of this subsection or other available
information, the Commission reasonably concludes that
it has concerns regarding the financial or operational
condition of (A) any registered broker or dealer, or
(B) any registered municipal securities dealer,
government securities broker, or government securities
dealer for which the Commission is the appropriate
regulatory agency, the Commission may require the
registered person to make reports concerning the
financial and securities activities of any of such
person's associated persons, other than a natural
person, whose business activities are reasonably likely
to have a material impact on the financial or
operational condition of such registered person. The
Commission, in requiring reports pursuant to this
paragraph, shall specify the information required, the
period for which it is required, the time and date on
which the information must be furnished, and whether
the information is to be furnished directly to the
Commission or to a self-regulatory organization with
primary responsibility for examining the registered
person's financial and operational condition.
(3) Special provisions with respect to associated
persons subject to federal banking agency regulation.--
(A) Cooperation in implementation.--In
developing and implementing reporting
requirements pursuant to paragraph (1) of this
subsection with respect to associated persons
subject to examination by or reporting
requirements of a Federal banking agency, the
Commission shall consult with and consider the
views of each such Federal banking agency. If a
Federal banking agency comments in writing on a
proposed rule of the Commission under this
subsection that has been published for comment,
the Commission shall respond in writing to such
written comment before adopting the proposed
rule. The Commission shall, at the request of
the Federal banking agency, publish such
comment and response in the Federal Register at
the time of publishing the adopted rule.
(B) Use of banking agency reports.--A
registered broker, dealer, or municipal
securities dealer shall be in compliance with
any recordkeeping or reporting requirement
adopted pursuant to paragraph (1) of this
subsection concerning an associated person that
is subject to examination by or reporting
requirements of a Federal banking agency if
such broker, dealer, or municipal securities
dealer utilizes for such recordkeeping or
reporting requirement copies of reports filed
by the associated person with the Federal
banking agency pursuant to section 5211 of the
Revised Statutes, section 9 of the Federal
Reserve Act, section 7(a) of the Federal
Deposit Insurance Act, section 10(b) of the
Home Owners' Loan Act, or section 8 of the Bank
Holding Company Act of 1956. The Commission
may, however, by rule adopted pursuant to
paragraph (1), require any broker, dealer, or
municipal securities dealer filing such reports
with the Commission to obtain, maintain, or
report supplemental information if the
Commission makes an explicit finding that such
supplemental information is necessary to inform
the Commission regarding potential risks to
such broker, dealer, or municipal securities
dealer. Prior to requiring any such
supplemental information, the Commission shall
first request the Federal banking agency to
expand its reporting requirements to include
such information.
(C) Procedure for requiring additional
information.--Prior to making a request
pursuant to paragraph (2) of this subsection
for information with respect to an associated
person that is subject to examination by or
reporting requirements of a Federal banking
agency, the Commission shall--
(i) notify such agency of the
information required with respect to
such associated person; and
(ii) consult with such agency to
determine whether the information
required is available from such agency
and for other purposes, unless the
Commission determines that any delay
resulting from such consultation would
be inconsistent with ensuring the
financial and operational condition of
the broker, dealer, municipal
securities dealer, government
securities broker, or government
securities dealer or the stability or
integrity of the securities markets.
(D) Exclusion for examination reports.--
Nothing in this subsection shall be construed
to permit the Commission to require any
registered broker or dealer, or any registered
municipal securities dealer, government
securities broker, or government securities
dealer for which the Commission is the
appropriate regulatory agency, to obtain,
maintain, or furnish any examination report of
any Federal banking agency or any supervisory
recommendations or analysis contained therein.
(E) Confidentiality of information
provided.--No information provided to or
obtained by the Commission from any Federal
banking agency pursuant to a request by the
Commission under subparagraph (C) of this
paragraph regarding any associated person which
is subject to examination by or reporting
requirements of a Federal banking agency may be
disclosed to any other person (other than a
self-regulatory organization), without the
prior written approval of the Federal banking
agency. Nothing in this subsection shall
authorize the Commission to withhold
information from Congress, or prevent the
Commission from complying with a request for
information from any other Federal department
or agency requesting the information for
purposes within the scope of its jurisdiction,
or complying with an order of a court of the
United States in an action brought by the
United States or the Commission.
(F) Notice to banking agencies concerning
financial and operational condition concerns.--
The Commission shall notify the Federal banking
agency of any concerns of the Commission
regarding significant financial or operational
risks resulting from the activities of any
registered broker or dealer, or any registered
municipal securities dealer, government
securities broker, or government securities
dealer for which the Commission is the
appropriate regulatory agency, to any
associated person thereof which is subject to
examination by or reporting requirements of the
Federal banking agency.
(G) Definition.--For purposes of this
paragraph, the term ``Federal banking agency''
shall have the same meaning as the term
``appropriate Federal bank agency'' in section
3(q) of the Federal Deposit Insurance Act (12
U.S.C. 1813(q)).
(4) Exemptions.--The Commission by rule or order may
exempt any person or class of persons, under such terms
and conditions and for such periods as the Commission
shall provide in such rule or order, from the
provisions of this subsection, and the rules
thereunder. In granting such exemptions, the Commission
shall consider, among other factors--
(A) whether information of the type required
under this subsection is available from a
supervisory agency (as defined in section
1101(6) of the Right to Financial Privacy Act
of 1978 (12 U.S.C. 3401(6))), a State insurance
commission or similar State agency, the
Commodity Futures Trading Commission, or a
similar foreign regulator;
(B) the primary business of any associated
person;
(C) the nature and extent of domestic or
foreign regulation of the associated person's
activities;
(D) the nature and extent of the registered
person's securities activities; and
(E) with respect to the registered person and
its associated persons, on a consolidated
basis, the amount and proportion of assets
devoted to, and revenues derived from,
activities in the United States securities
markets.
(5) Authority to limit disclosure of information.--
Notwithstanding any other provision of law, the
Commission shall not be compelled to disclose any
information required to be reported under this
subsection, or any information supplied to the
Commission by any domestic or foreign regulatory agency
that relates to the financial or operational condition
of any associated person of a registered broker,
dealer, government securities broker, government
securities dealer, or municipal securities dealer.
Nothing in this subsection shall authorize the
Commission to withhold information from Congress, or
prevent the Commission from complying with a request
for information from any other Federal department or
agency requesting the information for purposes within
the scope of its jurisdiction, or complying with an
order of a court of the United States in an action
brought by the United States or the Commission. For
purposes of section 552 of title 5, United States Code,
this subsection shall be considered a statute described
in subsection (b)(3)(B) of such section 552. In
prescribing regulations to carry out the requirements
of this subsection, the Commission shall designate
information described in or obtained pursuant to
subparagraph (B) or (C) of paragraph (3) of this
subsection as confidential information for purposes of
section 24(b)(2) of this title.
(i) Authority To Limit Disclosure of Information.--
Notwithstanding any other provision of law, the Commission
shall not be compelled to disclose any information required to
be reported under subsection (h) or (i) or any information
supplied to the Commission by any domestic or foreign
regulatory agency that relates to the financial or operational
condition of any associated person of a broker or dealer,
investment bank holding company, or any affiliate of an
investment bank holding company. Nothing in this subsection
shall authorize the Commission to withhold information from
Congress, or prevent the Commission from complying with a
request for information from any other Federal department or
agency or any self-regulatory organization requesting the
information for purposes within the scope of its jurisdiction,
or complying with an order of a court of the United States in
an action brought by the United States or the Commission. For
purposes of section 552 of title 5, United States Code, this
subsection shall be considered a statute described in
subsection (b)(3)(B) of such section 552. In prescribing
regulations to carry out the requirements of this subsection,
the Commission shall designate information described in or
obtained pursuant to subparagraphs (A), (B), and (C) of
subsection (i)(5) as confidential information for purposes of
section 24(b)(2) of this title.
(j) Coordination of Examining Authorities.--
(1) Elimination of duplication.--The Commission and
the examining authorities, through cooperation and
coordination of examination and oversight activities,
shall eliminate any unnecessary and burdensome
duplication in the examination process.
(2) Coordination of examinations.--The Commission and
the examining authorities shall share such information,
including reports of examinations, customer complaint
information, and other nonpublic regulatory
information, as appropriate to foster a coordinated
approach to regulatory oversight of brokers and dealers
that are subject to examination by more than one
examining authority.
(3) Examinations for cause.--At any time, any
examining authority may conduct an examination for
cause of any broker or dealer subject to its
jurisdiction.
(4) Confidentiality.--
(A) In general.--Section 24 shall apply to
the sharing of information in accordance with
this subsection. The Commission shall take
appropriate action under section 24(c) to
ensure that such information is not
inappropriately disclosed.
(B) Appropriate disclosure not prohibited.--
Nothing in this paragraph authorizes the
Commission or any examining authority to
withhold information from the Congress, or
prevent the Commission or any examining
authority from complying with a request for
information from any other Federal department
or agency requesting the information for
purposes within the scope of its jurisdiction,
or complying with an order of a court of the
United States in an action brought by the
United States or the Commission.
(5) Definition.--For purposes of this subsection, the
term ``examining authority'' means a self-regulatory
organization registered with the Commission under this
title (other than a registered clearing agency) with
the authority to examine, inspect, and otherwise
oversee the activities of a registered broker or
dealer.
* * * * * * *
SEC. 40A. PUBLIC COMPANY ADVISORY COMMITTEE.
(a) Establishment and Purpose.--
(1) Establishment.--There is established within the
Commission the Public Company Advisory Committee
(referred to in this section as the ``Committee'').
(2) Purpose.--The Committee shall--
(A) provide the Commission with advice on the
rules, regulations, and policies of the
Commission with regard to the Commission's
mission of protecting investors, maintaining
fair, orderly, and efficient markets, and
facilitating capital formation, as they relate
to--
(i) existing and emerging regulatory
priorities of the Commission;
(ii) issues relating to the public
reporting and corporate governance of
public companies;
(iii) issues relating to the proxy
process for shareholder meetings held
by public companies;
(iv) issues relating to trading in
the securities of public companies; and
(v) issues relating to capital
formation;
(B) not provide any advice with respect to
any policies, practices, actions, or decisions
concerning the Commission's enforcement
program; and
(C) submit to the Commission such findings
and recommendations as the Committee determines
are appropriate, including recommendations for
proposed regulatory and legislative changes.
(b) Membership.--
(1) In general.--The membership of the Committee
shall be not fewer than 10, and not more than 20,
members appointed by the Commission from among
individuals who--
(A) are officers, directors, or senior
officials of public companies registered with
the Commission under the Securities Act of 1933
and this Act, except for those public companies
that own asset management, fixed income,
investment advisory, broker-dealer, or proxy
services businesses;
(B) are executives or other individuals with
senior managerial responsibility in business,
professional, trade, and industry associations
that represent the interests of such public
companies; and
(C) are professional advisers and service
providers to such public companies (including
attorneys, accountants, investment bankers, and
financial advisers).
(2) Qualifications.--At least 50 percent of the
Committee membership shall be drawn from individuals
who would qualify for membership under paragraph
(1)(A).
(3) Term.--Each member of the Committee appointed
under paragraph (1) shall serve for a term of 4 years.
Vacancies among the members, whether caused by the
resignation, death, removal, expiration of a term, or
otherwise, shall be filled consistent with the
Commission's procedures then in effect.
(4) Staggered terms.--The members of the Committee
shall serve staggered terms, with half of the initial
members of the Committee each serving for 2 years and
half serving for 4 years.
(5) Members not on other advisory committees.--Public
companies and other organizations that are currently
represented on any other Commission Advisory Committee
are not eligible to have representatives also serve on
the Public Company Advisory Committee.
(6) Members not commission employees.--Members
appointed under paragraph (1) shall not be considered
to be employees or agents of the Commission solely
because of membership on the Committee.
(c) Chair; Vice Chair; Secretary; Assistant Secretary.--
(1) In general.--The members of the Committee shall
elect, from among the members of the Committee--
(A) a Chair;
(B) a Vice Chair;
(C) a Secretary; and
(D) an Assistant Secretary.
(2) Term.--Each member elected under paragraph (1)
shall serve for a term of 2 years in the capacity the
member was elected under paragraph (1).
(3) Subcommittees.--The Chair may create
subcommittees that hold public or non-public meetings
and provide recommendations to the full Committee.
(d) Meetings.--
(1) Frequency of meetings.--The Committee shall
meet--
(A) not less frequently than twice annually,
at the call of the chair of the Committee; and
(B) from time to time, at the call of the
Commission.
(2) Notice.--The Chair of the Committee shall give
the members of the Committee written notice of each
meeting, not later than 2 weeks before the date of the
meeting.
(e) Staff.--The Commission shall make available to the
Committee such staff as the Chair of the Committee determines
are necessary to carry out this section.
(f) Review by Commission.--The Commission shall--
(1) review the findings and recommendations of the
Committee; and
(2) each time the Committee submits a finding or
recommendation to the Commission, promptly issue a
public statement--
(A) assessing the finding or recommendation
of the Committee; and
(B) disclosing the action, if any, the
Commission intends to take with respect to the
finding or recommendation.
(g) Committee Findings.--Nothing in this section shall
require the Commission to agree to or act upon any finding or
recommendation of the Committee.
(h) Nonapplicability of the Federal Advisory Committee Act.--
Chapter 10 of part I of title 5, United States Code, shall not
apply to the Committee and the activities of the Committee.
* * * * * * *
----------
INVESTMENT ADVISERS ACT OF 1940
TITLE II--INVESTMENT ADVISERS
* * * * * * *
SEC. 208A. PROXY VOTING OF PASSIVELY MANAGED FUNDS.
(a) Investment Adviser Proxy Voting.--
(1) In general.--An investment adviser that holds
authority to vote a proxy solicited by an issuer
pursuant to section 14 of the Securities Exchange Act
of 1934 (15 U.S.C. 78n) in connection with any vote of
covered securities held by a passively managed fund
shall--
(A) vote in accordance with the instructions
(which may include the selection or default
choice of a published voting policy) of the
beneficial owner (or fiduciary or other
designee with investment and proxy voting
authority on their behalf) of a voting security
of the passively managed fund;
(B) vote in accordance with the voting
recommendations of the board of directors (or
similar governing body) of such issuer;
(C) abstain from voting such securities but
make reasonable efforts to be considered
present for purposes of establishing a quorum;
or
(D) pursuant to rules issued by the
Commission, instruct vote tabulators to make a
reasonable effort to mirror vote shares to
reflect the elections of the other shareholders
in the covered security.
(2) Exception.--Paragraph (1) shall not apply with
respect to a vote on a routine matter.
(b) Safe Harbor.--With respect to a routine or non-routine
vote, voted in the manner required by subsection (a)(1), an
investment adviser shall not be liable to any person under any
law or regulation of the United States, any constitution, law,
or regulation of any State or political subdivision thereof, or
under any contract or other legally enforceable agreement
(including any arbitration agreement), for any of the
following:
(1) Voting in accordance with the instructions of the
beneficial owner (or that beneficial owner's designee
with investment and proxy voting authority) of a voting
security of the passively managed fund.
(2) Not soliciting voting instructions from any
person.
(3) Voting in accordance with the voting
recommendations of an issuer under subsection (a)(1)(B)
with respect to such vote.
(4) Abstaining from voting in accordance with
subsection (a)(1)(C) with respect to such vote.
(5) Instructing vote tabulators to make a reasonable
effort to mirror vote shares to reflect the elections
of the other shareholders in a covered security,
pursuant to rules issued by the Commission described in
subsection (a)(1)(D).
(c) Foreign Private Issuers Exemption.--Subsection (a) shall
not apply with respect to a foreign private issuer if the
published voting policy of the investment advisor with respect
to such foreign private issuer is fully and fairly disclosed to
beneficial owners, including the extent to which such policy
differs from the published voting policy for non-exempt
issuers.
(d) Dissemination of Information.--
(1) In general.--Any investment adviser subject to
the requirements of subsection (a)(1) shall, with
respect to the dissemination of information and other
material to a voting person, comply with the following
requirements, unless the voting person affirmatively
declines to receive that information and other
material:
(A) Provide the voting person (or the
relevant intermediary with whom the investment
adviser has access) with a form to select a
published voting policy.
(B) Provide the voting person with not less
than 5 business days after the date on which
the voting person receives the form described
under subparagraph (A) to return that form to
the investment adviser.
(2) Electronic delivery.--All, or any portion, of the
materials that an investment adviser is required to
provide under paragraph (1)(A) may be provided
electronically, including through--
(A) an internet website;
(B) another digital, internet, or electronic-
based information repository; or
(C) a mobile application.
(e) Definitions.--In this section:
(1) Covered security.--The term ``covered
security''--
(A) means a voting security, as that term is
defined in section 2(a) of the Investment
Company Act of 1940 (15 U.S.C. 80a-2(a)), in
which a qualified fund is invested; and
(B) does not include any voting security (as
defined in subparagraph (A)) of an issuer
registered with the Commission as an investment
company under section 8 of the Investment
Company Act of 1940 (15 U.S.C. 80a-8).
(2) Passively managed fund.--The term ``passively
managed fund'' means a qualified fund--
(A) that--
(i) is designed to track, or is
derived from, an index of securities or
a portion of such an index;
(ii) discloses that the qualified
fund is a passive index fund; or
(iii) allocates not less than 60
percent of the total assets of the
qualified fund to an investment
strategy that is designed to track, or
is derived from, an index of securities
or a portion of such an index fund; and
(B) that commits to refrain from exercising
control over an issuer through voting or
investment authority.
(3) Published voting policy.--The term ``published
voting policy'' means--
(A) a policy that--
(i) articulates how proportionate
shares would be expected to be voted in
anticipated proxy voting matters; and
(ii) is made available to investors,
including via website or other
electronic means; and
(B) in the case of a policy of a passively
managed fund or an investment adviser, a policy
that does not--
(i) seek to set the strategy or day-
to-day management decisions of the
issuer;
(ii) involve submitting shareholder
proposals;
(iii) seek to nominate directors; and
(iv) coordinate votes with other
index managers.
(4) Qualified fund.--The term ``qualified fund''
means--
(A) an investment company;
(B) a private fund;
(C) an eligible deferred compensation plan,
as that term is defined in section 457(b) of
the Internal Revenue Code of 1986;
(D) a trust, plan, account, or other entity
described in section 3(c)(11) of the Investment
Company Act of 1940 (15 U.S.C. 80a-3(c)(11));
(E) a plan maintained by an employer
described in clause (i), (ii), or (iii) of
section 403(b)(1)(A) of the Internal Revenue
Code of 1986 to provide annuity contracts
described in section 403(b) of such Code;
(F) a common trust fund, or similar fund,
maintained by a bank;
(G) any fund established under section
8438(b)(1) of title 5, United States Code; or
(H) any separate managed account of a client
of an investment adviser.
(5) Routine matter.--The term ``routine matter''--
(A) includes a proposal that relates to--
(i) an election with respect to the
board of directors of a registrant;
(ii) the compensation of management
or the board of directors of a
registrant;
(iii) the selection of auditors; or
(iv) declassification; and
(B) does not include--
(i) a proposal that is not submitted
to a holder of covered securities by
means of a proxy statement comparable
to that described in section 240.14a-
101 of title 17, Code of Federal
Regulations, or any successor
regulation; or
(ii) a proposal that is--
(I) the subject of a counter-
solicitation; or
(II) part of a proposal made
by a person other than the
applicable registrant.
* * * * * * *
rules, regulations, and orders
Sec. 211. (a) The Commission shall have authority from time
to time to make, issue, amend, and rescind such rules and
regulations and such orders as are necessary or appropriate to
the exercise of the functions and powers conferred upon the
Commission elsewhere in this title, including rules and
regulations defining technical, trade, and other terms used in
this title, except that the Commission may not define the term
``client'' for purposes of paragraphs (1) and (2) of section
206 to include an investor in a private fund managed by an
investment adviser, if such private fund has entered into an
advisory contract with such adviser. For the purposes of its
rules or regulations the Commission may classify persons and
matters within its jurisdiction and prescribe different
requirements for different classes of persons or matters.
(b) Subject to the provisions of chapter 15 of title 44,
United States Code, and regulations prescribed under the
authority thereof, the rules and regulations of the Commission
under this title, and amendments thereof, shall be effective
upon publication in the manner which the Commission shall
prescribe, or upon such later date as may be provided in such
rules and regulations.
(c) Orders of the Commission under this title shall be issued
only after appropriate notice and opportunity for hearing.
Notice to the parties to a proceeding before the Commission
shall be given by personal service upon each party or by
registered mail or certified mail or confirmed telegraphic
notice to the party's last known business address. Notice to
interested persons, if any, other than parties may be given in
the same manner or by publication in the Federal Register.
(d) No provision of this title imposing any liability shall
apply to any act done or omitted in good faith in conformity
with any rule, regulation, or order of the Commission,
notwithstanding that such rule, regulation, or order may, after
such act or omission, be amended or rescinded or be determined
by judicial or other authority to be invalid for any reason.
(e) Disclosure Rules on Private Funds.--The Commission and
the Commodity Futures Trading Commission shall, after
consultation with the Council but not later than 12 months
after the date of enactment of the Private Fund Investment
Advisers Registration Act of 2010, jointly promulgate rules to
establish the form and content of the reports required to be
filed with the Commission under subsection 204(b) and with the
Commodity Futures Trading Commission by investment advisers
that are registered both under this title and the Commodity
Exchange Act (7 U.S.C. 1a et seq.).
(g) Standard of Conduct.--
(1) In general.--The Commission may promulgate rules
to provide that the standard of conduct for all
brokers, dealers, and investment advisers, when
providing personalized investment advice about
securities to retail customers (and such other
customers as the Commission may by rule provide), shall
be to act in the best interest of the customer without
regard to the financial or other interest of the
broker, dealer, or investment adviser providing the
advice. In accordance with such rules, any material
conflicts of interest shall be disclosed and may be
consented to by the customer. Such rules shall provide
that such standard of conduct shall be no less
stringent than the standard applicable to investment
advisers under section 206(1) and (2) of this Act when
providing personalized investment advice about
securities, except the Commission shall not ascribe a
meaning to the term ``customer'' that would include an
investor in a private fund managed by an investment
adviser, where such private fund has entered into an
advisory contract with such adviser. The receipt of
compensation based on commission or fees shall not, in
and of itself, be considered a violation of such
standard applied to a broker, dealer, or investment
adviser.
(2) Retail customer defined.--For purposes of this
subsection, the term ``retail customer'' means a
natural person, or the legal representative of such
natural person, who--
(A) receives personalized investment advice
about securities from a broker, dealer, or
investment adviser; and
(B) uses such advice primarily for personal,
family, or household purposes.
(3) Best interest based on pecuniary factors.--
(A) In general.--For purposes of paragraph
(1), when providing personalized investment
advice, the best interest of a customer shall
be determined using pecuniary factors, which,
subject to applicable law, may not be
subordinated to or limited by non-pecuniary
factors, unless--
(i) the customer provides informed
consent, whether by e-delivery or e-
sign, that such non-pecuniary factors
be considered; or
(ii) the personalized investment
advice is consistent with the
customer's written investment profile
information.
(B) Disclosure of pecuniary effects.--If a
customer provides a broker, dealer, or
investment adviser with the informed consent to
consider non-pecuniary factors described under
subparagraph (A), the broker, dealer, or
investment adviser shall provide qualitative
disclosure of the potential pecuniary effects
to the customer of prioritizing non-pecuniary
factors over pecuniary factors in making
investment decisions.
(C) Pecuniary factor defined.--In this
paragraph, the term ``pecuniary factor'' means
a factor that a fiduciary prudently determines
is expected to have a material effect on the
risk or return of an investment based on
investment objectives, risk tolerance, and time
horizon.
(h) Other Matters.--The Commission shall--
(1) facilitate the provision of simple and clear
disclosures to investors regarding the terms of their
relationships with brokers, dealers, and investment
advisers, including any material conflicts of interest;
and
(2) examine and, where appropriate, promulgate rules
prohibiting or restricting certain sales practices,
conflicts of interest, and compensation schemes for
brokers, dealers, and investment advisers that the
Commission deems contrary to the public interest and
the protection of investors.
(i) Harmonization of Enforcement.--The enforcement authority
of the Commission with respect to violations of the standard of
conduct applicable to an investment adviser shall include--
(1) the enforcement authority of the Commission with
respect to such violations provided under this Act; and
(2) the enforcement authority of the Commission with
respect to violations of the standard of conduct
applicable to a broker or dealer providing personalized
investment advice about securities to a retail customer
under the Securities Exchange Act of 1934, including
the authority to impose sanctions for such violations,
and
the Commission shall seek to prosecute and sanction violators
of the standard of conduct applicable to an investment adviser
under this Act to same extent as the Commission prosecutes and
sanctions violators of the standard of conduct applicable to a
broker or dealer providing personalized investment advice about
securities to a retail customer under the Securities Exchange
Act of 1934.
* * * * * * *
MINORITY VIEWS
H.R. 8286 includes several provisions that make it more
difficult for shareholders to offer shareholder proposals,
thereby limiting their ability to have a say in how the
corporations they own are managed and giving more power to
corporate management. Specifically, this bill limits investor
voices by silencing proxy advisory firms. These firms provide
independent analysis of the impact of shareholder proposals to
shareholders and their representatives to help them make
informed voting decisions at a company's annual meeting. In
this way, proxy advisory firms ensure investors have an outside
perspective that may differ from what management is
recommending on specific proposals. Among its provisions
limiting the role of proxy advisors are provisions: mandating
that investment advisers, asset managers, and pension funds
that use proxy advisors file an annual report with the SEC to
disclose the use of such services; requiring the SEC to issue
final rules prohibiting investors from allowing their
fiduciaries to automatically vote on their behalf based on
common-sense proxy advisor analysis and recommendations; and
preventing investment advisers that vote on behalf of
shareholders of passively managed funds to rely on and use
analysis from proxy advisors. This bill would also impede the
use of the systems proxy advisors have created to help fund
managers vote on behalf of their fund's shareholders.
Additionally, H.R. 8286 would allow issuers, rather than
investors, to determine which types of information get
disclosed in a company's SEC filings. The legal concept for
determining what information is important enough for a company
to be required to disclose it is known as ``materiality''.
Under current case law and SEC precedent, information is
``material'' if there is a substantial likelihood a reasonable
investor would find it important in determining whether or not
to invest in the issuer's securities. This particular provision
of H.R. 8286 amends the law to require issuers to only disclose
information ``to the extent the issuer has determined that such
information is material'' (emphasis added). In doing so, the
entity whose conduct is being disclosed now gets to decide what
investors need to know about that conduct. This is the opposite
of how a disclosure regime works, and flies in the face of how
courts and the SEC have conducted the materiality analysis--
which has long treated investors, rather than issuers, as the
primary determiners of the types of information that a company
should disclose to the public.
Furthermore, the bill would restrict the SEC's ability to
require public companies disclose critical information about
climate risk and political spending--depriving markets and
investors of information needed to make sound and fully
informed investment decisions. H.R. 8286 would also create a
Public Company Advisory Committee that would give companies,
their attorneys, and lobbyists an additional insider avenue to
influence SEC policy.
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\9\NCRC, Over 200+ Organizations Urge House Financial Services
Committee to Oppose Any Amendment to Delay or Weaken Small Business and
Farm Fair Lending Law (Apr. 21, 2026).
---------------------------------------------------------------------------
Many of the titles in this bill were included in a package
offered in the 118th Congress, which Financial Services
Committee Democrats unanimously opposed at markup. That package
went on to receive near-unanimous Democratic opposition when it
was considered on the full House floor.
Various titles within this package were also opposed in the
118th and/or 119th Congress by the following groups: AFL CIO;
Americans for Financial Reform; Better Markets; US SIF;
Interfaith Center on Corporate Responsibility; Ceres; OUT
Leadership; US Impact Investing Alliance; Shareholder Rights
Group; Green America; PRI; Family Farm Defenders; Food and
Water Watch; Institute for Agriculture and Trade Policy; and
Union for Concerned Scientists. In a letter submitted by AFL
CIO in opposition to the bill, the authors stated:
``this bill will undermine corporate accountability to
investors--including the retirement savings of working
people--by undermining our nation's public company
disclosure rules and the ability of retirement plans to
vote proxies in the best interests of their
participants and beneficiaries . . . [it will also]
restrict the ability of the [SEC] to adopt effective
disclosure rules by allowing public companies to opt
out of disclosure if the company determines that such
information is not material to its investors [thereby
making] corporate disclosure[s] less comparable and
less consistent, and will allow corporate bad actors to
conceal information from their investors. In effect,
allowing public companies to determine whether they
must comply with disclosure rules is letting the fox
guard the henhouse. H.R. 8286 also will interfere with
the rights of investors to vote proxies at company
shareholder meetings by putting the thumb on the scale
in favor of corporate CEOs and boards of directors. In
sum, H.R. 8286 would insulate corporate CEOs from
accountability to their own investors, reduce corporate
transparency, and restrict investors' access to
information and their freedom to make their own
investment and proxy voting decisions, all to the
detriment of working people's hard earned retirement
savings.''\10\
---------------------------------------------------------------------------
\10\AFL-CIO, Letter Opposing Legislation That Would Undermine
Corporate Accountability to Investors (Apr. 21, 2026).
In another letter in opposition, Americans for Financial Reform
---------------------------------------------------------------------------
stated:
``this bill would reduce transparency, weaken investor
protections, and make it even more difficult for
shareholders to hold corporations accountable [and]
would undermine the ability of the [SEC] to equip
investors with information needed to make sound
investment decisions. It would do so by allowing
companies themselves to determine what information they
need to provide to investors--even in the context of
SEC disclosure rules--by creating an advisory entity
within the SEC to represent the interests of corporate
boards and executives, and by mandating studies and
reports biased in favor of management interests. These
changes would undermine the SEC's statutory investor
protection mission and distort it into a corporate
management-protection mission. The bill would also
further tilt the playing field in favor of corporate
boards and executives by creating strong and
inappropriate incentives for asset managers to either
cast votes in favor of management or not vote at all.
Similarly, other provisions would strongly
disincentivize proxy advisors from making voting
recommendations against management. This would
undermine the ability of these service providers to act
in the best interests of the investors who hire
them.''\11\
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\11\AFR, Re: Opposition to H.R. 8286, the Protecting Americans'
Retirement Savings from Politics Act (Apr. 20, 2026).
A coalition of over 30 investors, labor unions, and public
interest organizations also wrote to oppose a similar bill last
Congress.\12\
---------------------------------------------------------------------------
\12\AFR, Coalition Letter Re: Opposition to anti-ESG bills that
threaten workers' retirement security and our financial system, and
weaken tools of corporate accountability (Nov. 7, 2023).
---------------------------------------------------------------------------
For these reasons, we oppose H.R. 8286.
Sincerely,
Maxine Waters,
Ranking Member.
Nydia M. Velazquez,
Brad Sherman,
Stephen F. Lynch,
Al Green,
Emanuel Cleaver, II,
Bill Foster,
Joyce Beatty,
Rashida Tlaib,
Sylvia R. Garcia,
Cleo Fields,
Members of Congress.
[all]