FAIR ACCESS TO INVESTMENT RESEARCH ACT OF 2017; Congressional Record Vol. 163, No. 155
(House of Representatives - September 27, 2017)

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[Pages H7547-H7549]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




             FAIR ACCESS TO INVESTMENT RESEARCH ACT OF 2017

  Mr. HILL. Mr. Speaker, I move to suspend the rules and pass the bill 
(S. 327) to direct the Securities and Exchange Commission to provide a 
safe harbor related to certain investment fund research reports, and 
for other purposes.
  The Clerk read the title of the bill.
  The text of the bill is as follows:

                                 S. 327

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Fair Access to Investment 
     Research Act of 2017''.

     SEC. 2. SAFE HARBOR FOR INVESTMENT FUND RESEARCH.

       (a) Expansion of the Safe Harbor.--Not later than the end 
     of the 180-day period beginning on the date of enactment of 
     this Act, the Securities and Exchange Commission shall 
     propose, and not later than the end of the 270-day period 
     beginning on such date, the Commission shall adopt, upon such 
     terms, conditions, or requirements as the Commission may 
     determine necessary or appropriate in the public interest, 
     for the protection of investors, and for the promotion of 
     capital formation, revisions to section 230.139 of title 17, 
     Code of Federal Regulations, to provide that a covered 
     investment fund research report that is published or 
     distributed by a broker or dealer, other than a broker or 
     dealer that is an investment adviser to the fund or an 
     affiliated person of the investment adviser to the fund--
       (1) shall be deemed, for purposes of sections 2(a)(10) and 
     5(c) of the Securities Act of 1933 (15 U.S.C. 77b(a)(10), 
     77e(c)), not to constitute an offer for sale or an offer to 
     sell a security that is the subject of an offering pursuant 
     to a registration statement that is effective, even if the 
     broker or dealer is participating or will participate in the 
     registered offering of the covered investment fund's 
     securities; and
       (2) shall be deemed to satisfy the conditions of paragraph 
     (1) or (2) of section 230.139(a) of title 17, Code of Federal 
     Regulations, or any successor provisions, for purposes of the 
     Commission's rules and regulations under the Federal 
     securities laws and the rules of any self-regulatory 
     organization.
       (b) Implementation of Safe Harbor.--In implementing the 
     safe harbor pursuant to subsection (a), the Commission 
     shall--
       (1) not, in the case of a covered investment fund with a 
     class of securities in substantially continuous distribution, 
     condition the safe harbor on whether the broker's or dealer's 
     publication or distribution of a covered investment fund 
     research report constitutes such broker's or dealer's 
     initiation or reinitiation of research coverage on such 
     covered investment fund or its securities;
       (2) not--
       (A) require the covered investment fund to have been 
     registered as an investment company under the Investment 
     Company Act of 1940 (15 U.S.C. 80a-1 et seq.) or subject to 
     the reporting requirements of section 13 or 15(d) of the 
     Securities Exchange Act of 1934 (15 U.S.C. 78m, 78o(d)) for 
     any period exceeding the period of time referenced under 
     section 230.139(a)(1)(i)(A)(1) of title 17, Code of Federal 
     Regulations; or
       (B) impose a minimum float provision exceeding that 
     referenced in section 230.139(a)(1)(i)(A)(1)(i) of title 17, 
     Code of Federal Regulations;
       (3) provide that a self-regulatory organization may not 
     maintain or enforce any rule that would--

[[Page H7548]]

       (A) prohibit the ability of a member to publish or 
     distribute a covered investment fund research report solely 
     because the member is also participating in a registered 
     offering or other distribution of any securities of such 
     covered investment fund; or
       (B) prohibit the ability of a member to participate in a 
     registered offering or other distribution of securities of a 
     covered investment fund solely because the member has 
     published or distributed a covered investment fund research 
     report about such covered investment fund or its securities; 
     and
       (4) provide that a covered investment fund research report 
     shall not be subject to section 24(b) of the Investment 
     Company Act of 1940 (15 U.S.C. 80a-24(b)) or the rules and 
     regulations thereunder, except that such report may still be 
     subject to such section and the rules and regulations 
     thereunder to the extent that it is otherwise not subject to 
     the content standards in the rules of any self-regulatory 
     organization related to research reports, including those 
     contained in the rules governing communications with the 
     public regarding investment companies or substantially 
     similar standards.
       (c) Rules of Construction.--Nothing in this Act shall be 
     construed as in any way limiting--
       (1) the applicability of the antifraud or antimanipulation 
     provisions of the Federal securities laws and rules adopted 
     thereunder to a covered investment fund research report, 
     including section 17 of the Securities Act of 1933 (15 U.S.C. 
     77q), section 34(b) of the Investment Company Act of 1940 (15 
     U.S.C. 80a-33(b)), and sections 9 and 10 of the Securities 
     Exchange Act of 1934 (15 U.S.C. 78i, 78j); or
       (2) the authority of any self-regulatory organization to 
     examine or supervise a member's practices in connection with 
     such member's publication or distribution of a covered 
     investment fund research report for compliance with 
     applicable provisions of the Federal securities laws or self-
     regulatory organization rules related to research reports, 
     including those contained in rules governing communications 
     with the public, or to require the filing of communications 
     with the public the purpose of which is not to provide 
     research and analysis of covered investment funds.
       (d) Interim Effectiveness of Safe Harbor.--
       (1) In general.--From and after the 270-day period 
     beginning on the date of enactment of this Act, if the 
     Commission has not adopted revisions to section 230.139 of 
     title 17, Code of Federal Regulations, as required by 
     subsection (a), and until such time as the Commission has 
     done so, a broker or dealer distributing or publishing a 
     covered investment fund research report after such date shall 
     be able to rely on the provisions of section 230.139 of title 
     17, Code of Federal Regulations, and the broker or dealer's 
     publication of such report shall be deemed to satisfy the 
     conditions of paragraph (1) or (2) of section 230.139(a) of 
     title 17, Code of Federal Regulations, if the covered 
     investment fund that is the subject of such report satisfies 
     the reporting history requirements (without regard to Form S-
     3 or Form F-3 eligibility) and minimum float provisions of 
     such subsections for purposes of the Commission's rules and 
     regulations under the Federal securities laws and the rules 
     of any self-regulatory organization, as if revised and 
     implemented in accordance with subsections (a) and (b).
       (2) Status of covered investment fund.--After such period 
     and until the Commission has adopted revisions to section 
     230.139 of title 17, Code of Federal Regulations, and FINRA 
     has revised rule 2210, for purposes of subsection (c)(7)(O) 
     of such rule, a covered investment fund shall be deemed to be 
     a security that is listed on a national securities exchange 
     and that is not subject to section 24(b) of the Investment 
     Company Act of 1940 (15 U.S.C. 80a-24(b)).
       (3) Covered investment funds communications.--
       (A) In general.--Except as provided in subparagraph (B), 
     communications that concern only covered investment funds 
     that fall within the scope of section 24(b) of the Investment 
     Company Act of 1940 (15 U.S.C. 80a-24(b)) shall not be 
     required to be filed with FINRA.
       (B) Exception.--FINRA may require the filing of 
     communications with the public if the purpose of those 
     communications is not to provide research and analysis of 
     covered investment funds.
       (e) Exception.--The safe harbor under subsection (a) shall 
     not apply to the publication or distribution by a broker or a 
     dealer of a covered investment fund research report, the 
     subject of which is a business development company or a 
     registered closed-end investment company, during the time 
     period described in section 230.139(a)(1)(i)(A)(1) of title 
     17, Code of Federal Regulations, except where expressly 
     permitted by the rules and regulations of the Securities and 
     Exchange Commission under the Federal securities laws.
       (f) Definitions.--For purposes of this Act:
       (1) The term ``affiliated person'' has the meaning given 
     the term in section 2(a) of the Investment Company Act of 
     1940 (15 U.S.C. 80a-2(a)).
       (2) The term ``covered investment fund'' means--
       (A) an investment company registered under, or that has 
     filed an election to be treated as a business development 
     company under, the Investment Company Act of 1940 (15 U.S.C. 
     80a-1 et seq.) and that has filed a registration statement 
     under the Securities Act of 1933 (15 U.S.C. 77a et seq.) for 
     the public offering of a class of its securities, which 
     registration statement has been declared effective by the 
     Commission; and
       (B) a trust or other person--
       (i) issuing securities in an offering registered under the 
     Securities Act of 1933 (15 U.S.C. 77a et seq.) and which 
     class of securities is listed for trading on a national 
     securities exchange;
       (ii) the assets of which consist primarily of commodities, 
     currencies, or derivative instruments that reference 
     commodities or currencies, or interests in the foregoing; and
       (iii) that provides in its registration statement under the 
     Securities Act of 1933 (15 U.S.C. 77a et seq.) that a class 
     of its securities are purchased or redeemed, subject to 
     conditions or limitations, for a ratable share of its assets.
       (3) The term ``covered investment fund research report'' 
     means a research report published or distributed by a broker 
     or dealer about a covered investment fund or any securities 
     issued by the covered investment fund, but does not include a 
     research report to the extent that the research report is 
     published or distributed by the covered investment fund or 
     any affiliate of the covered investment fund, or any research 
     report published or distributed by any broker or dealer that 
     is an investment adviser (or an affiliated person of an 
     investment adviser) for the covered investment fund.
       (4) The term ``FINRA'' means the Financial Industry 
     Regulatory Authority.
       (5) The term ``investment adviser'' has the meaning given 
     the term in section 2(a) of the Investment Company Act of 
     1940 (15 U.S.C. 80a-2(a)).
       (6) The term ``research report'' has the meaning given that 
     term under section 2(a)(3) of the Securities Act of 1933 (15 
     U.S.C. 77b(a)(3)), except that such term shall not include an 
     oral communication.
       (7) The term ``self-regulatory organization'' has the 
     meaning given that term under section 3(a)(26) of the 
     Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(26)).
  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Arkansas (Mr. Hill) and the gentleman from Illinois (Mr. Foster) each 
will control 20 minutes.
  The Chair recognizes the gentleman from Arkansas.


                             General Leave

  Mr. HILL. Mr. Speaker, I ask unanimous consent that all Members may 
have 5 legislative days in which to revise and extend their remarks and 
include extraneous material on the bill.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Arkansas?
  There was no objection.
  Mr. HILL. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I am pleased that the House is considering S. 327 today, 
the Fair Access to Investment Research Act.
  This is the Senate companion to my bill, H.R. 910, that I had the 
pleasure of working on with my friend from Illinois (Mr. Foster) in 
this Congress and our colleague in the last Congress, now Governor 
Carney of Delaware.
  Mr. Speaker, occasionally on this floor, we don't compliment our 
colleagues in the upper Chamber at the other end of the building, but 
we have to say today ``thank you'' to Senator Crapo and Senator Brown 
for advancing a number of securities-related bills in the last few days 
which we appreciate seeing coming back to the House, including S. 327.

                              {time}  1630

  This bill contains the same language as H.R. 910, which passed the 
House in May with overwhelming bipartisan support by a vote of 405-2.
  S. 327 also includes some Senate amendments that add some additional 
clarifications to the bill:
  First, it clarifies the conflict of interest provision by precluding 
dealers from issuing research on affiliated exchange-traded funds.
  Second, it carves out closed-end funds, including business 
development companies.
  Finally, it includes a specific definition of ``affiliated person,'' 
which matches the definition of an ``affiliated person'' in section 
2(a) of the Investment Company Act of 1940.
  Since starting an investment firm back in the late 1990s, I have 
watched exchange-traded funds grow amazingly. ETFs have grown from 
about 100 funds, in the late 1990s, with over $100 billion in assets, 
to now over 1,700 funds with over $3 trillion in assets. Exchange-
traded funds can average 30 percent of the trading volumes by value on 
any given day on our markets.
  Yet, despite their growing popularity and increasing importance to 
retail investors, most broker-dealers do not

[[Page H7549]]

publish research on ETFs. This is due to anomalies in our securities 
laws and regulations. S. 327 tackles those anomalies.
  Given the importance of ETFs to investors, and particularly retail 
investors, steps to facilitate research on exchange-traded funds are 
long overdue.
  The Fair Access to Investment Research Act is simple. It directs the 
SEC to provide a safe harbor for research reports that cover ETFs so 
that these reports are not considered offers under section 5 of the 
Securities Act of 1933. This allows ETF research to be issued just like 
stock research on a corporate issuer.
  This commonsense proposal, which mirrors other research safe harbors 
implemented by the SEC, would clarify the law and allow broker-dealers 
to publish exchange-traded fund research, thereby allowing investors to 
access that very useful and needed information in this rapidly growing 
and occasionally complex market of choices.
  This bill also holds the SEC accountable to follow Congress' 
direction. The bill requires the SEC to finalize the rules within 270 
days, and if the deadline is not met, an interim safe harbor rule will 
take effect until the SEC's rule is finalized.
  Mr. Speaker, this issue is not unfamiliar to the Commission, as this 
proposal has been raised both by the Commission and by industry many 
times over the last two decades. With close to 6 million U.S. 
households holding ETFs, investors need access to this important 
research.
  Having worked in the banking and investment industry for the past 
three decades, I appreciate Chairman Hensarling and the Congress' 
efforts to promote capital formation, reduce unnecessary burdens, and 
grow jobs and the economy. S. 327 is another step in that process.
  I also want to thank my friend, Mr. Foster of Illinois, for working 
on this legislation, and our colleague in the Senate, Senator Heller of 
Nevada, for working with me on this bipartisan, commonsense fix that we 
worked on together for over 2 years.
  Mr. Speaker, I urge my colleagues to support this bill, and I reserve 
the balance of my time.
  Mr. FOSTER. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I thank my colleague from Arkansas (Mr. Hill) for his 
years of bipartisan work that went into this bill.
  I am proud to support this bill today because I believe that it will 
strengthen the ability of investors to make informed decisions. 
Exchange-traded funds are valuable and popular tools for investors to 
diversify risks and returns through a single security at low cost. This 
bill will help investors understand the various ETF choices on the 
market.
  I was proud that the House passed our bill, H.R. 910, earlier this 
Congress by a vote of 405-2. This bill is essentially the same bill and 
incorporates, among other things, an amendment by Senator Elizabeth 
Warren to reiterate that the safe harbor will not be available to 
affiliates of the ETF, including the fund's registered investment 
adviser. I am really proud of the bipartisanship that went into this 
bill.
  Mr. Speaker, I urge my colleagues to support this bill, and I reserve 
the balance of my time.
  Mr. HILL. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I thank the gentleman for his comments, and I do 
appreciate the work in the Senate that improved this bill.
  I think it is important to note that this will make this research 
flow, and in no way will it, I think, confuse investors; in fact, it 
enhances their investment.
  Mr. Speaker, I reserve the balance of my time.
  Mr. FOSTER. Mr. Speaker, I yield myself the balance of my time.
  Mr. Speaker, I, again, thank my colleague from Arkansas (Mr. Hill) 
for working with us on this bill over the past years and look forward 
to it now being sent to the President's desk and signed into law.
  Mr. Speaker, I yield back the balance of my time.
  Mr. HILL. Mr. Speaker, I yield back the balance of my time.
  The SPEAKER pro tempore. The question is on the motion offered by the 
gentleman from Arkansas (Mr. Hill) that the House suspend the rules and 
pass the bill, S. 327.
  The question was taken; and (two-thirds being in the affirmative) the 
rules were suspended and the bill was passed.
  A motion to reconsider was laid on the table.

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