National Securities Exchange Regulatory Parity Act of 2016

Floor Speech

Mr. Speaker, I would like to first thank my Republican colleagues for amending H.R. 5421 in an attempt to improve the status quo for the benefit of securities exchanges and the investors that trade on them and provide the Securities and Exchange Commission with additional discretion in a currently inflexible process.

H.R. 5421 would modernize a 1996 law that governs the process used by the SEC in determining whether an approved listing standard of a national securities exchange should be exempt from State regulation and oversight. That outdated process currently requires the SEC to compare listing standards to an imperfect baseline--the standards of the New York Stock Exchange, the American Stock Exchange, and the NASDAQ Stock Market.

Twenty years later, that baseline does not make much sense, as the American Stock Exchange no longer exists, and we have six other exchanges that are approved to list securities without State oversight. It neither seems fair to the other exchanges nor sufficiently protective of investors to allow the three named exchanges to effectively dictate listing standards.

However imperfect, the current standard has guided the SEC to create an informal framework to consider certain core listing standards, such as minimum revenue, market capitalization, number of shareholders, and share price.

Now, the bill that we marked up in committee would have upended this framework and preempted States for any approval listing standard. I opposed that bill, as I believe it would have removed a valuable analysis that protects investors and ensures appropriate State oversight of smaller companies that may, in the future, list on a venture exchange.

Since that time, however, my Republican colleagues have worked to take into account these concerns and have amended the bill for the better. I want to thank Mr. Royce for his leadership and for the work that he has done on this issue and the time that his staff has spent with my staff.

Under the bill before us today, the SEC would have nearly a year to engage in a rulemaking to establish minimum core quantitative listing standards that protect investors and the public interest. That rulemaking would provide clarity and transparency to the preemption process and leave the issue of State oversight over small company trading on venture exchanges with the SEC. Most importantly, it would provide investors and interested members of the public the opportunity to comment on the overall process in a space where investors and the public do not have the resources to comment on each of the 1,000 rules proposed each year.

I do have some remaining concerns that the bill directs the SEC to implement only core quantitative standards and does not mention qualitative standards. However, under the bill, the quantitative standards are to be informed by qualitative factors like investor protection and the public interest, and the SEC retains its authority to apply other qualitative factors, as it does now, in its initial rule approval and the preemption process.

Moreover, I would expect the SEC, in its rulemaking, to establish quantitative standards for some of the qualitative factors that it currently considers, such as the number or percentage of independent board directors and certain shareholder meeting requirements.

So I would like to thank Mr. Royce and my Republican colleagues for amending H.R. 5421.

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