Fair Access to Investment Research Act of 2017

Floor Speech

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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. 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Yet, despite their growing popularity and increasing importance to retail investors, most broker-dealers do not
publish research on ETFs.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.

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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.

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