Us Congress 2023-2024 Regular Session

Us Congress House Bill HB448 Compare Versions

Only one version of the bill is available at this time.

Old	New	Differences
1	1	I
2	2	118THCONGRESS
3	3	1
4	4	STSESSION H. R. 448
5	5	To amend the Securities Exchange Act of 1934 to require the registration
6	6	of proxy advisory firms, and for other purposes.
7	7	IN THE HOUSE OF REPRESENTATIVES
8	8	JANUARY24, 2023
9	9	Mr. S
10	10	TEIL(for himself, Mr. BARR, Mr. DAVIDSON, Mr. AMODEI, Mr.
11	11	G
12	12	IMENEZ, Mr. FERGUSON, Mr. FLOOD, Mr. JOYCEof Ohio, Mr. ROSE,
13	13	Mr. M
14	14	EUSER, Mr. FITZGERALD, Ms. STEFANIK, and Mr. HILL) intro-
15	15	duced the following bill; which was referred to the Committee on Finan-
16	16	cial Services
17	17	A BILL
18	18	To amend the Securities Exchange Act of 1934 to require
19	19	the registration of proxy advisory firms, and for other
20	20	purposes.
21	21	Be it enacted by the Senate and House of Representa-1
22	22	tives of the United States of America in Congress assembled, 2
23	23	SECTION 1. SHORT TITLE. 3
24	24	This Act may be cited as the ‘‘Putting Investors First 4
25	25	Act of 2023’’. 5
26	26	SEC. 2. DEFINITIONS. 6
27	27	(a) I
28	28	NGENERAL.—In this Act: 7
29	29	VerDate Sep 11 2014 00:54 Feb 02, 2023 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H448.IH H448
30	30	kjohnson on DSK79L0C42PROD with BILLS 2
31	31	•HR 448 IH
32	32	(1) COMMISSION.—The term ‘‘Commission’’ 1
33	33	means the Securities and Exchange Commission. 2
34	34	(2) P
35	35	ROXY ADVISORY FIRM.—The term ‘‘proxy 3
36	36	advisory firm’’ has the meaning given the term in 4
37	37	paragraph (81) of section 3(a) of the Securities Ex-5
38	38	change Act of 1934 (15 U.S.C. 78c(a)), as added by 6
39	39	this Act. 7
40	40	(3) S
41	41	TATE.—The term ‘‘State’’ has the mean-8
42	42	ing given the term in section 3(a) of the Securities 9
43	43	Exchange Act of 1934 (15 U.S.C. 78c(a)). 10
44	44	(b) S
45	45	ECURITIESEXCHANGEACT OF1934 DEFINI-11
46	46	TIONS.—Section 3(a) of the Securities Exchange Act of 12
47	47	1934 (15 U.S.C. 78c(a)) is amended by adding at the end 13
48	48	the following: 14
49	49	‘‘(81) P
50	50	ROXY ADVISORY FIRM .—The term 15
51	51	‘proxy advisory firm’— 16
52	52	‘‘(A) means any person who is primarily 17
53	53	engaged in the business of providing proxy vot-18
54	54	ing advice, research, analysis, ratings, or rec-19
55	55	ommendations to clients, which conduct con-20
56	56	stitutes a solicitation within the meaning of sec-21
57	57	tion 14; and 22
58	58	‘‘(B) does not include any person that is 23
59	59	exempt under law or regulation from the re-24
60	60	VerDate Sep 11 2014 00:54 Feb 02, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H448.IH H448
61	61	kjohnson on DSK79L0C42PROD with BILLS 3
62	62	•HR 448 IH
63	63	quirements otherwise applicable to persons en-1
64	64	gaged in such a solicitation. 2
65	65	‘‘(82) P
66	66	ERSON ASSOCIATED WITH A PROXY AD -3
67	67	VISORY FIRM.—The term ‘person associated’ with a 4
68	68	proxy advisory firm— 5
69	69	‘‘(A) means— 6
70	70	‘‘(i) any partner, officer, or director of 7
71	71	a proxy advisory firm (or any person occu-8
72	72	pying a similar status or performing simi-9
73	73	lar functions); 10
74	74	‘‘(ii) any person directly or indirectly 11
75	75	controlling, controlled by, or under com-12
76	76	mon control with a proxy advisory firm; 13
77	77	‘‘(iii) any employee of a proxy advi-14
78	78	sory firm; or 15
79	79	‘‘(iv) any person the Commission de-16
80	80	termines by rule is controlled by a proxy 17
81	81	advisory firm; and 18
82	82	‘‘(B) does not include any person that per-19
83	83	forms clerical or ministerial functions with re-20
84	84	spect to a proxy advisory firm.’’. 21
85	85	SEC. 3. REGISTRATION OF PROXY ADVISORY FIRMS. 22
86	86	(a) A
87	87	MENDMENT.—The Securities Exchange Act of 23
88	88	1934 (15 U.S.C. 78a et seq.) is amended by inserting after 24
89	89	section 15G the following new section: 25
90	90	VerDate Sep 11 2014 00:54 Feb 02, 2023 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H448.IH H448
91	91	kjohnson on DSK79L0C42PROD with BILLS 4
92	92	•HR 448 IH
93	93	‘‘SEC. 15H. REGISTRATION OF PROXY ADVISORY FIRMS. 1
94	94	‘‘(a) C
95	95	ONDUCTPROHIBITED.—It shall be unlawful 2
96	96	for a proxy advisory firm to make use of the mails or any 3
97	97	means or instrumentality of interstate commerce to pro-4
98	98	vide proxy voting advice, research, analysis, ratings or rec-5
99	99	ommendations to any client, unless such proxy advisory 6
100	100	firm is registered under this section. 7
101	101	‘‘(b) R
102	102	EGISTRATIONPROCEDURES.— 8
103	103	‘‘(1) A
104	104	PPLICATION FOR REGISTRATION .— 9
105	105	‘‘(A) I
106	106	N GENERAL.—A proxy advisory firm 10
107	107	shall file with the Commission an application 11
108	108	for registration, in such form as the Commis-12
109	109	sion shall require, by rule or regulation, and 13
110	110	containing the information described in sub-14
111	111	paragraph (B). 15
112	112	‘‘(B) R
113	113	EQUIRED INFORMATION .—An appli-16
114	114	cation for registration under this section shall 17
115	115	contain information regarding— 18
116	116	‘‘(i) a certification that the applicant 19
117	117	is able to consistently provide proxy advice 20
118	118	based on accurate information; 21
119	119	‘‘(ii) the procedures and methodolo-22
120	120	gies that the applicant uses in developing 23
121	121	proxy voting recommendations; 24
122	122	‘‘(iii) the organizational structure of 25
123	123	the applicant; 26
124	124	VerDate Sep 11 2014 00:54 Feb 02, 2023 Jkt 039200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H448.IH H448
125	125	kjohnson on DSK79L0C42PROD with BILLS 5
126	126	•HR 448 IH
127	127	‘‘(iv) whether or not the applicant has 1
128	128	in effect a code of ethics, and if not, the 2
129	129	reasons therefor; 3
130	130	‘‘(v) any potential or actual conflict of 4
131	131	interest relating to the provision of proxy 5
132	132	advisory services, including those arising 6
133	133	out of or resulting from the ownership 7
134	134	structure of the applicant or the provision 8
135	135	of other services by the applicant or any 9
136	136	person associated with the applicant; 10
137	137	‘‘(vi) the policies and procedures in 11
138	138	place to publicly disclose and manage con-12
139	139	flicts of interest under subsection (f); 13
140	140	‘‘(vii) information related to the pro-14
141	141	fessional and academic qualifications of 15
142	142	staff tasked with providing proxy advisory 16
143	143	services; and 17
144	144	‘‘(viii) any other information and doc-18
145	145	uments concerning the applicant and any 19
146	146	person associated with such applicant as 20
147	147	the Commission, by rule, may prescribe as 21
148	148	necessary or appropriate in the public in-22
149	149	terest or for the protection of investors. 23
150	150	‘‘(2) R
151	151	EVIEW OF APPLICATION.— 24
152	152	VerDate Sep 11 2014 00:54 Feb 02, 2023 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H448.IH H448
153	153	kjohnson on DSK79L0C42PROD with BILLS 6
154	154	•HR 448 IH
155	155	‘‘(A) INITIAL DETERMINATION .—Not later 1
156	156	than 90 days after the date on which the appli-2
157	157	cation for registration is filed with the Commis-3
158	158	sion under paragraph (1) (or within such longer 4
159	159	period as to which the applicant consents) the 5
160	160	Commission shall— 6
161	161	‘‘(i) by order, grant registration; or 7
162	162	‘‘(ii) institute proceedings to deter-8
163	163	mine whether registration should be de-9
164	164	nied. 10
165	165	‘‘(B) C
166	166	ONDUCT OF PROCEEDINGS .— 11
167	167	‘‘(i) C
168	168	ONTENT.—Proceedings referred 12
169	169	to in subparagraph (A)(ii) shall— 13
170	170	‘‘(I) include notice of the grounds 14
171	171	for denial under consideration and an 15
172	172	opportunity for hearing; and 16
173	173	‘‘(II) be concluded not later than 17
174	174	120 days after the date on which the 18
175	175	application for registration is filed 19
176	176	with the Commission under paragraph 20
177	177	(1). 21
178	178	‘‘(ii) D
179	179	ETERMINATION.—At the con-22
180	180	clusion of such proceedings, the Commis-23
181	181	sion, by order, shall grant or deny such ap-24
182	182	plication for registration. 25
183	183	VerDate Sep 11 2014 00:54 Feb 02, 2023 Jkt 039200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H448.IH H448
184	184	kjohnson on DSK79L0C42PROD with BILLS 7
185	185	•HR 448 IH
186	186	‘‘(iii) EXTENSION AUTHORIZED .—The 1
187	187	Commission may extend the time for con-2
188	188	clusion of such proceedings for not longer 3
189	189	than 90 days, if the Commission finds 4
190	190	good cause for such extension and pub-5
191	191	lishes its reasons for so finding, or for such 6
192	192	longer period as to which the applicant 7
193	193	consents. 8
194	194	‘‘(C) G
195	195	ROUNDS FOR DECISION .—The Com-9
196	196	mission shall grant registration under this sub-10
197	197	section— 11
198	198	‘‘(i) if the Commission finds that the 12
199	199	requirements of this section are satisfied; 13
200	200	and 14
201	201	‘‘(ii) unless the Commission finds (in 15
202	202	which case the Commission shall deny such 16
203	203	registration) that— 17
204	204	‘‘(I) the applicant has failed to 18
205	205	certify to the Commission’s satisfac-19
206	206	tion that it is able to consistently pro-20
207	207	vide proxy advice based on accurate 21
208	208	information and to materially comply 22
209	209	with the procedures and methodolo-23
210	210	gies disclosed under paragraph (1)(B) 24
211	211	and with subsections (f) and (g); or 25
212	212	VerDate Sep 11 2014 00:54 Feb 02, 2023 Jkt 039200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H448.IH H448
213	213	kjohnson on DSK79L0C42PROD with BILLS 8
214	214	•HR 448 IH
215	215	‘‘(II) if the applicant were so reg-1
216	216	istered, its registration would be sub-2
217	217	ject to suspension or revocation under 3
218	218	subsection (d). 4
219	219	‘‘(3) P
220	220	UBLIC AVAILABILITY OF INFORMATION .— 5
221	221	Subject to section 24, the Commission shall make 6
222	222	the information and documents submitted to the 7
223	223	Commission by a proxy advisory firm in its com-8
224	224	pleted application for registration, or in any amend-9
225	225	ment submitted under paragraph (1) or (2) of sub-10
226	226	section (c), publicly available on the Commission’s 11
227	227	website, or through another comparable, readily ac-12
228	228	cessible means. 13
229	229	‘‘(c) U
230	230	PDATE OFREGISTRATION.— 14
231	231	‘‘(1) U
232	232	PDATE.—Each registered proxy advisory 15
233	233	firm shall promptly amend and update its applica-16
234	234	tion for registration under this section if any infor-17
235	235	mation or document provided therein becomes mate-18
236	236	rially inaccurate, except that a registered proxy advi-19
237	237	sory firm is not required to amend the information 20
238	238	required to be filed under subsection (b)(1)(B)(i) by 21
239	239	filing information under this paragraph, but shall 22
240	240	amend such information in the annual submission of 23
241	241	the organization under paragraph (2) of this sub-24
242	242	section. 25
243	243	VerDate Sep 11 2014 00:54 Feb 02, 2023 Jkt 039200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H448.IH H448
244	244	kjohnson on DSK79L0C42PROD with BILLS 9
245	245	•HR 448 IH
246	246	‘‘(2) CERTIFICATION.—Not later than 90 cal-1
247	247	endar days after the end of each calendar year, each 2
248	248	registered proxy advisory firm shall file with the 3
249	249	Commission an amendment to its registration, in 4
250	250	such form as the Commission, by rule, may prescribe 5
251	251	as necessary or appropriate in the public interest or 6
252	252	for the protection of investors— 7
253	253	‘‘(A) certifying that the information and 8
254	254	documents in the application for registration of 9
255	255	such registered proxy advisory firm continue to 10
256	256	be accurate in all material respects; and 11
257	257	‘‘(B) listing any material change that oc-12
258	258	curred to such information or documents during 13
259	259	the previous calendar year. 14
260	260	‘‘(d) C
261	261	ENSURE, DENIAL, ORSUSPENSION OFREG-15
262	262	ISTRATION; NOTICE ANDHEARING.—The Commission, by 16
263	263	order, shall censure, place limitations on the activities, 17
264	264	functions, or operations of, suspend for a period not ex-18
265	265	ceeding 12 months, or revoke the registration of any reg-19
266	266	istered proxy advisory firm if the Commission finds, on 20
267	267	the record after notice and opportunity for hearing, that 21
268	268	such censure, placing of limitations, suspension, or revoca-22
269	269	tion is necessary for the protection of investors and in the 23
270	270	public interest and that such registered proxy advisory 24
271	271	firm, or any person associated with such an organization, 25
272	272	VerDate Sep 11 2014 00:54 Feb 02, 2023 Jkt 039200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H448.IH H448
273	273	kjohnson on DSK79L0C42PROD with BILLS 10
274	274	•HR 448 IH
275	275	whether prior to or subsequent to becoming so associ-1
276	276	ated— 2
277	277	‘‘(1) has committed or omitted any act, or is 3
278	278	subject to an order or finding, enumerated in sub-4
279	279	paragraph (A), (D), (E), (H), or (G) of section 5
280	280	15(b)(4), has been convicted of any offense specified 6
281	281	in section 15(b)(4)(B), or is enjoined from any ac-7
282	282	tion, conduct, or practice specified in subparagraph 8
283	283	(C) of section 15(b)(4), during the 10-year period 9
284	284	preceding the date of commencement of the pro-10
285	285	ceedings under this subsection, or at any time there-11
286	286	after; 12
287	287	‘‘(2) has been convicted during the 10-year pe-13
288	288	riod preceding the date on which an application for 14
289	289	registration is filed with the Commission under this 15
290	290	section, or at any time thereafter, of— 16
291	291	‘‘(A) any crime that is punishable by im-17
292	292	prisonment for 1 or more years, and that is not 18
293	293	described in section 15(b)(4)(B); or 19
294	294	‘‘(B) a substantially equivalent crime by a 20
295	295	foreign court of competent jurisdiction; 21
296	296	‘‘(3) is subject to any order of the Commission 22
297	297	barring or suspending the right of the person to be 23
298	298	associated with a registered proxy advisory firm; 24
299	299	VerDate Sep 11 2014 00:54 Feb 02, 2023 Jkt 039200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H448.IH H448
300	300	kjohnson on DSK79L0C42PROD with BILLS 11
301	301	•HR 448 IH
302	302	‘‘(4) fails to furnish the certifications required 1
303	303	under subsections (b)(2)(C)(ii)(I) and (c)(2); 2
304	304	‘‘(5) has engaged in one or more prohibited acts 3
305	305	enumerated in paragraph (1); 4
306	306	‘‘(6) fails to maintain adequate financial and 5
307	307	managerial resources to consistently offer advisory 6
308	308	services with integrity, including by failing to comply 7
309	309	with subsection (f) or (g); or 8
310	310	‘‘(7) engages in a prohibited act enumerated in 9
311	311	subsection (j). 10
312	312	‘‘(e) T
313	313	ERMINATION OFREGISTRATION.— 11
314	314	‘‘(1) V
315	315	OLUNTARY WITHDRAWAL .—A registered 12
316	316	proxy advisory firm may, upon such terms and con-13
317	317	ditions as the Commission may establish as nec-14
318	318	essary in the public interest or for the protection of 15
319	319	investors, which terms and conditions shall include 16
320	320	at a minimum that the registered proxy advisory 17
321	321	firm will no longer conduct such activities as to 18
322	322	bring it within the definition of proxy advisory firm 19
323	323	in section 3(a)(81), withdraw from registration by 20
324	324	filing a written notice of withdrawal to the Commis-21
325	325	sion. 22
326	326	‘‘(2) C
327	327	OMMISSION AUTHORITY .—In addition to 23
328	328	any other authority of the Commission under this 24
329	329	title, if the Commission finds that a registered proxy 25
330	330	VerDate Sep 11 2014 00:54 Feb 02, 2023 Jkt 039200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H448.IH H448
331	331	kjohnson on DSK79L0C42PROD with BILLS 12
332	332	•HR 448 IH
333	333	advisory firm is no longer in existence or has ceased 1
334	334	to do business as a proxy advisory firm, the Com-2
335	335	mission, by order, shall cancel the registration under 3
336	336	this section of such registered proxy advisory firm. 4
337	337	‘‘(f) M
338	338	ANAGEMENT OF CONFLICTS OFINTEREST.— 5
339	339	‘‘(1) O
340	340	RGANIZATION POLICIES AND PROCE -6
341	341	DURES.—Each registered proxy advisory firm shall 7
342	342	establish, maintain, and enforce written policies and 8
343	343	procedures reasonably designed, taking into consid-9
344	344	eration the nature of the business of such registered 10
345	345	proxy advisory firm and associated persons, to pub-11
346	346	licly disclose and manage any conflicts of interest 12
347	347	that arise or would reasonably be expected to arise 13
348	348	from such business. 14
349	349	‘‘(2) C
350	350	OMMISSION AUTHORITY .—The Commis-15
351	351	sion shall, within one year of enactment, issue final 16
352	352	rules to prohibit, or require the management and 17
353	353	public disclosure of, any conflicts of interest relating 18
354	354	to the offering of proxy advisory services by a reg-19
355	355	istered proxy advisory firm, including, without limi-20
356	356	tation, conflicts of interest relating to— 21
357	357	‘‘(A) the manner in which a registered 22
358	358	proxy advisory firm is compensated by the cli-23
359	359	ent, any affiliate of the client, or any other per-24
360	360	son for providing proxy advisory services; 25
361	361	VerDate Sep 11 2014 00:54 Feb 02, 2023 Jkt 039200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\H448.IH H448
362	362	kjohnson on DSK79L0C42PROD with BILLS 13
363	363	•HR 448 IH
364	364	‘‘(B) business relationships, ownership in-1
365	365	terests, or any other financial or personal inter-2
366	366	ests between a registered proxy advisory firm, 3
367	367	or any person associated with such registered 4
368	368	proxy advisory firm, and any client, or any af-5
369	369	filiate of such client; 6
370	370	‘‘(C) the formulation of proxy voting poli-7
371	371	cies; 8
372	372	‘‘(D) the execution, or assistance with the 9
373	373	execution, of proxy votes if such votes are based 10
374	374	upon recommendations made by the proxy advi-11
375	375	sory firm in which a person other than the 12
376	376	issuer is a proponent; and 13
377	377	‘‘(E) any other potential conflict of inter-14
378	378	est, as the Commission deems necessary or ap-15
379	379	propriate in the public interest or for the pro-16
380	380	tection of investors. 17
381	381	‘‘(3) D
382	382	ISCLOSURE.—Each registered proxy ad-18
383	383	visory firm shall annually disclose to the Commission 19
384	384	and make publicly available the economic and other 20
385	385	factors that a reasonable investor would expect to in-21
386	386	fluence the recommendations of such proxy advisory 22
387	387	firm, including the ownership composition of such 23
388	388	proxy advisory firm. 24
389	389	VerDate Sep 11 2014 00:54 Feb 02, 2023 Jkt 039200 PO 00000 Frm 00013 Fmt 6652 Sfmt 6201 E:\BILLS\H448.IH H448
390	390	kjohnson on DSK79L0C42PROD with BILLS 14
391	391	•HR 448 IH
392	392	‘‘(g) RELIABILITY OFPROXYADVISORYFIRMSERV-1
393	393	ICES.— 2
394	394	‘‘(1) I
395	395	N GENERAL.—Each registered proxy advi-3
396	396	sory firm shall— 4
397	397	‘‘(A) have staff and other resources suffi-5
398	398	cient to produce proxy voting recommendations 6
399	399	that are based on accurate and current infor-7
400	400	mation; 8
401	401	‘‘(B) implement procedures that permit 9
402	402	issuers that are the subject of proxy voting rec-10
403	403	ommendations— 11
404	404	‘‘(i) access in a reasonable time to 12
405	405	data and information used to make rec-13
406	406	ommendations; and 14
407	407	‘‘(ii) a reasonable opportunity to pro-15
408	408	vide meaningful comment and corrections 16
409	409	to such data and information, including 17
410	410	the opportunity to present (in person or 18
411	411	telephonically) details to the person re-19
412	412	sponsible for developing such data and in-20
413	413	formation prior to the publication of proxy 21
414	414	voting recommendations to clients; and 22
415	415	‘‘(C) employ an ombudsman to receive 23
416	416	complaints about the accuracy of information 24
417	417	used in making recommendations from the sub-25
418	418	VerDate Sep 11 2014 00:54 Feb 02, 2023 Jkt 039200 PO 00000 Frm 00014 Fmt 6652 Sfmt 6201 E:\BILLS\H448.IH H448
419	419	kjohnson on DSK79L0C42PROD with BILLS 15
420	420	•HR 448 IH
421	421	jects of the proxy advisory firm’s voting rec-1
422	422	ommendations and seek to resolve those com-2
423	423	plaints in a timely fashion and prior to the pub-3
424	424	lication of proxy voting recommendations to cli-4
425	425	ents; 5
426	426	‘‘(D) if such ombudsman is unable to re-6
427	427	solve such complaints prior to the publication of 7
428	428	proxy voting recommendations to clients, in-8
429	429	clude in the final report of the firm to clients 9
430	430	a statement detailing its complaints, if re-10
431	431	quested in writing by the company; and 11
432	432	‘‘(E) provide to clients receiving proxy ad-12
433	433	visory firm recommendations— 13
434	434	‘‘(i) information demonstrating that 14
435	435	draft recommendations (other than rec-15
436	436	ommendations relating to an issuer-spon-16
437	437	sored proposal or recommendations con-17
438	438	sistent with that of the majority of the 18
439	439	board of directors of the issuer) are in the 19
440	440	best economic interest of shareholders; and 20
441	441	‘‘(ii) a certification by the chief execu-21
442	442	tive officer, chief financial officer, and the 22
443	443	primary executive responsible for over-23
444	444	seeing the compilation and dissemination 24
445	445	of proxy voting advice that the draft rec-25
446	446	VerDate Sep 11 2014 00:54 Feb 02, 2023 Jkt 039200 PO 00000 Frm 00015 Fmt 6652 Sfmt 6201 E:\BILLS\H448.IH H448
447	447	kjohnson on DSK79L0C42PROD with BILLS 16
448	448	•HR 448 IH
449	449	ommendations (other than recommenda-1
450	450	tions relating to an issuer-sponsored pro-2
451	451	posal or recommendations consistent with 3
452	452	that of the majority of the board of direc-4
453	453	tors of the issuer)— 5
454	454	‘‘(I) are based on internal con-6
455	455	trols and procedures that are designed 7
456	456	to ensure accurate information; 8
457	457	‘‘(II) do not violate applicable 9
458	458	State or Federal law; and 10
459	459	‘‘(III) prioritize economic returns 11
460	460	to shareholders. 12
461	461	‘‘(2) D
462	462	EFINITIONS.—In this subsection: 13
463	463	‘‘(A) D
464	464	ATA AND INFORMATION USED TO 14
465	465	MAKE RECOMMENDATIONS .—The term ‘data 15
466	466	and information used to make voting rec-16
467	467	ommendations’— 17
468	468	‘‘(i) means the financial, operational, 18
469	469	or descriptive data and information on an 19
470	470	issuer used by proxy advisory firms and 20
471	471	any contextual or substantive analysis im-21
472	472	pacting the recommendation; and 22
473	473	‘‘(ii) does not include the entirety of 23
474	474	the proxy advisory firm’s final report to its 24
475	475	clients. 25
476	476	VerDate Sep 11 2014 00:54 Feb 02, 2023 Jkt 039200 PO 00000 Frm 00016 Fmt 6652 Sfmt 6201 E:\BILLS\H448.IH H448
477	477	kjohnson on DSK79L0C42PROD with BILLS 17
478	478	•HR 448 IH
479	479	‘‘(B) REASONABLE TIME.—The term ‘rea-1
480	480	sonable time’— 2
481	481	‘‘(i) means not less than 1 week be-3
482	482	fore the publication of proxy voting rec-4
483	483	ommendations for clients, unless otherwise 5
484	484	defined through a final rule issued by the 6
485	485	Commission; and 7
486	486	‘‘(ii) shall not otherwise interfere with 8
487	487	a proxy advisory firm’s ability to provide 9
488	488	its clients with timely access to accurate 10
489	489	proxy voting research, analysis, or rec-11
490	490	ommendations. 12
491	491	‘‘(h) P
492	492	RIVATERIGHT OFACTIONWITHRESPECT TO 13
493	493	I
494	494	LLEGALRECOMMENDATIONS .—Any proxy advisory firm 14
495	495	that endorses a proposal that is not supported by the 15
496	496	issuer but is approved and subsequently found by a court 16
497	497	of competent jurisdiction to violate State or Federal law 17
498	498	shall be liable to the applicable issuer for the costs associ-18
499	499	ated with the approval of such proposal, including imple-19
500	500	mentation costs and any penalties incurred by the issuer. 20
501	501	‘‘(i) D
502	502	ESIGNATION OFCOMPLIANCEOFFICER.—Each 21
503	503	registered proxy advisory firm shall designate an indi-22
504	504	vidual who reports directly to senior management as re-23
505	505	sponsible for administering the policies and procedures 24
506	506	that are required to be established pursuant to subsections 25
507	507	VerDate Sep 11 2014 00:54 Feb 02, 2023 Jkt 039200 PO 00000 Frm 00017 Fmt 6652 Sfmt 6201 E:\BILLS\H448.IH H448
508	508	kjohnson on DSK79L0C42PROD with BILLS 18
509	509	•HR 448 IH
510	510	(f) and (g), and for ensuring compliance with the securi-1
511	511	ties laws and the rules and regulations thereunder, includ-2
512	512	ing those promulgated by the Commission pursuant to this 3
513	513	section. 4
514	514	‘‘(j) P
515	515	ROHIBITEDCONDUCT.— 5
516	516	‘‘(1) P
517	517	ROHIBITED ACTS AND PRACTICES .—Not 6
518	518	later than one year after the date of enactment of 7
519	519	this section, the Commission shall issue final rules 8
520	520	to prohibit any act or practice relating to the offer-9
521	521	ing of proxy advisory services by a registered proxy 10
522	522	advisory firm that the Commission determines to be 11
523	523	unfair, coercive, or abusive, including any act or 12
524	524	practice relating to— 13
525	525	‘‘(A) advisory or consulting services (of-14
526	526	fered directly or indirectly, including through 15
527	527	an affiliate) related to corporate governance 16
528	528	issues; or 17
529	529	‘‘(B) modifying a voting recommendation 18
530	530	or otherwise departing from its adopted system-19
531	531	atic procedures and methodologies in the provi-20
532	532	sion of proxy advisory services, based on wheth-21
533	533	er an issuer, or affiliate thereof, subscribes or 22
534	534	will subscribe to other services or product of the 23
535	535	registered proxy advisory firm or any person as-24
536	536	sociated with such organization. 25
537	537	VerDate Sep 11 2014 00:54 Feb 02, 2023 Jkt 039200 PO 00000 Frm 00018 Fmt 6652 Sfmt 6201 E:\BILLS\H448.IH H448
538	538	kjohnson on DSK79L0C42PROD with BILLS 19
539	539	•HR 448 IH
540	540	‘‘(2) RULE OF CONSTRUCTION .—Nothing in 1
541	541	paragraph (1), or in any rules or regulations adopt-2
542	542	ed thereunder, may be construed to modify, impair, 3
543	543	or supersede the operation of any of the antitrust 4
544	544	laws (as defined in the first section of the Clayton 5
545	545	Act, except that such term includes section 5 of the 6
546	546	Federal Trade Commission Act, to the extent that 7
547	547	such section 5 applies to unfair methods of competi-8
548	548	tion). 9
549	549	‘‘(k) S
550	550	TATEMENTS OF FINANCIALCONDITION.— 10
551	551	Each registered proxy advisory firm shall, on a confiden-11
552	552	tial basis, file with the Commission, at intervals deter-12
553	553	mined by the Commission, such financial statements, cer-13
554	554	tified (if required by the rules or regulations of the Com-14
555	555	mission) by an independent public auditor, and informa-15
556	556	tion concerning its financial condition, as the Commission, 16
557	557	by rule, may prescribe as necessary or appropriate in the 17
558	558	public interest or for the protection of investors. 18
559	559	‘‘(l) A
560	560	NNUALREPORT.—Each registered proxy advi-19
561	561	sory firm shall, at the beginning of each fiscal year of such 20
562	562	firm, report to the Commission on the number of— 21
563	563	‘‘(1) shareholder proposals its staff reviewed in 22
564	564	the prior fiscal year; 23
565	565	‘‘(2) recommendations made in the prior fiscal 24
566	566	year; 25
567	567	VerDate Sep 11 2014 00:54 Feb 02, 2023 Jkt 039200 PO 00000 Frm 00019 Fmt 6652 Sfmt 6201 E:\BILLS\H448.IH H448
568	568	kjohnson on DSK79L0C42PROD with BILLS 20
569	569	•HR 448 IH
570	570	‘‘(3) staff who reviewed and made recommenda-1
571	571	tions on such proposals in the prior fiscal year (and 2
572	572	the qualifications of such staff); and 3
573	573	‘‘(4) recommendations made in the prior fiscal 4
574	574	year where the proponent of such recommendation 5
575	575	was a client of or received services from the proxy 6
576	576	advisory firm. 7
577	577	‘‘(m) T
578	578	RANSPARENT POLICIES.—Each registered 8
579	579	proxy advisory firm shall file with the Commission and 9
580	580	make publicly available its methodology for the formula-10
581	581	tion of proxy voting policies and voting recommendations. 11
582	582	‘‘(n) R
583	583	ULES OFCONSTRUCTION.—Registration under 12
584	584	and compliance with this section does not constitute a 13
585	585	waiver of, or otherwise diminish, any right, privilege, or 14
586	586	defense that a registered proxy advisory firm may other-15
587	587	wise have under any provision of State or Federal law, 16
588	588	including any rule, regulation, or order thereunder. 17
589	589	‘‘(o) R
590	590	EGULATIONS.— 18
591	591	‘‘(1) N
592	592	EW PROVISIONS.—Such rules and regula-19
593	593	tions as are required by this section or are otherwise 20
594	594	necessary to carry out this section, including the ap-21
595	595	plication form required under subsection (a)— 22
596	596	‘‘(A) shall be issued by the Commission, 23
597	597	not later than 180 days after the date of enact-24
598	598	ment of this section; and 25
599	599	VerDate Sep 11 2014 00:54 Feb 02, 2023 Jkt 039200 PO 00000 Frm 00020 Fmt 6652 Sfmt 6201 E:\BILLS\H448.IH H448
600	600	kjohnson on DSK79L0C42PROD with BILLS 21
601	601	•HR 448 IH
602	602	‘‘(B) shall become effective not later than 1
603	603	1 year after the date of enactment of this sec-2
604	604	tion. 3
605	605	‘‘(2) R
606	606	EVIEW OF EXISTING REGULATIONS .—Not 4
607	607	later than 270 days after the date of enactment of 5
608	608	this section, the Commission shall— 6
609	609	‘‘(A) review its existing rules and regula-7
610	610	tions which affect the operations of proxy advi-8
611	611	sory firms; and 9
612	612	‘‘(B) amend or revise such rules and regu-10
613	613	lations in accordance with the purposes of this 11
614	614	section, and issue such guidance as the Com-12
615	615	mission may prescribe as necessary or appro-13
616	616	priate in the public interest or for the protec-14
617	617	tion of investors. 15
618	618	‘‘(p) A
619	619	PPLICABILITY.—This section, other than sub-16
620	620	section (n), which shall apply on the date of enactment 17
621	621	of this section, shall apply on the earlier of— 18
622	622	‘‘(1) the date on which regulations are issued in 19
623	623	final form under subsection (o)(1); or 20
624	624	‘‘(2) 270 days after the date of enactment of 21
625	625	this section.’’. 22
626	626	(b) C
627	627	ONFORMINGAMENDMENT.—Section 17(a)(1) of 23
628	628	the Securities Exchange Act of 1934 (15 U.S.C. 24
629	629	78q(a)(1)) is amended by inserting ‘‘proxy advisory firm,’’ 25
630	630	VerDate Sep 11 2014 00:54 Feb 02, 2023 Jkt 039200 PO 00000 Frm 00021 Fmt 6652 Sfmt 6201 E:\BILLS\H448.IH H448
631	631	kjohnson on DSK79L0C42PROD with BILLS 22
632	632	•HR 448 IH
633	633	after ‘‘nationally recognized statistical rating organiza-1
634	634	tion,’’. 2
635	635	SEC. 4. DUTIES OF INVESTMENT ADVISORS, ASSET MAN-3
636	636	AGERS, AND PENSION FUNDS. 4
637	637	(a) R
638	638	EPORTINGREQUIREMENTS.—Not later than 1 5
639	639	year after the date of the enactment of this Act and annu-6
640	640	ally thereafter, any covered entity that retains the services 7
641	641	of a proxy advisory firm with respect to the preceding year 8
642	642	shall provide to the beneficiaries and customers of the cov-9
643	643	ered entity, as applicable, a report that includes— 10
644	644	(1) the percentage of votes cast on shareholder 11
645	645	proposals that follow proxy advisor firm rec-12
646	646	ommendations for each proxy advisory firm retained 13
647	647	by the covered entity; 14
648	648	(2) the percentage of votes cast on environ-15
649	649	mental-, social-, or governance-related shareholder 16
650	650	proposals that follow proxy advisory firm rec-17
651	651	ommendations for each proxy advisory firm retained 18
652	652	by the covered entity; and 19
653	653	(3) an explanation of— 20
654	654	(A) how proxy advisory firm recommenda-21
655	655	tions are used by the covered entity in making 22
656	656	voting decisions; 23
657	657	(B) how such recommendations are rec-24
658	658	onciled with the fiduciary duty of the covered 25
659	659	VerDate Sep 11 2014 00:54 Feb 02, 2023 Jkt 039200 PO 00000 Frm 00022 Fmt 6652 Sfmt 6201 E:\BILLS\H448.IH H448
660	660	kjohnson on DSK79L0C42PROD with BILLS 23
661	661	•HR 448 IH
662	662	entity to vote in the best economic interests of 1
663	663	shareholders; 2
664	664	(C) how frequently votes are changed when 3
665	665	an error occurs or due to new information from 4
666	666	issuers; and 5
667	667	(D) the degree to which investment profes-6
668	668	sionals of the covered entity are involved in 7
669	669	such voting decisions. 8
670	670	(b) R
671	671	EQUIREMENTS.—With respect to shareholder 9
672	672	proposals of an issuer, a covered entity with more than 10
673	673	$100,000,000,000 in assets under management shall— 11
674	674	(1) provide customers with a mechanism to in-12
675	675	dicate how the covered entity should vote on their 13
676	676	behalf; 14
677	677	(2) in any materials provided to customers and 15
678	678	related to customers voting their shares, clarify that 16
679	679	shareholders are not required to vote on every pro-17
680	680	posal; and 18
681	681	(3) with respect to each shareholder proposal 19
682	682	for which the covered entity voted (other than an 20
683	683	issuer-sponsored proposal or a vote consistent with 21
684	684	the recommendation of the majority of the board of 22
685	685	directors of the issuer), make publicly available the 23
686	686	economic analysis the covered entity conducted to 24
687	687	VerDate Sep 11 2014 00:54 Feb 02, 2023 Jkt 039200 PO 00000 Frm 00023 Fmt 6652 Sfmt 6201 E:\BILLS\H448.IH H448
688	688	kjohnson on DSK79L0C42PROD with BILLS 24
689	689	•HR 448 IH
690	690	determine that the vote is in the best economic inter-1
691	691	est of the customers. 2
692	692	(c) C
693	693	OVEREDENTITYDEFINED.—In this section, the 3
694	694	term ‘‘covered entity’’ means an investment advisor, asset 4
695	695	manager, or pension fund with more than $100,000,000 5
696	696	in assets under management. 6
697	697	SEC. 5. TRANSPARENCY REGARDING ESG FUNDS. 7
698	698	Section 10 of the Securities Act of 1933 (15 U.S.C. 8
699	699	77j) is amended by adding at the end the following: 9
700	700	‘‘(g) T
701	701	RANSPARENCYREGARDINGESG FUNDS.—An 10
702	702	investment company that holds itself out as offering an 11
703	703	index fund under which investments are made pursuant 12
704	704	to a set of environmental, social, or governance standards 13
705	705	shall disclose in tabular form on the first page of each 14
706	706	prospectus required pursuant to this section the 1-, 3-, 15
707	707	and 5-year annual returns and fees charged to investors 16
708	708	with respect to such fund compared with the annual re-17
709	709	turns and fees charged to investors for the most readily 18
710	710	comparable broad-based index fund offered by such invest-19
711	711	ment company under which investments are not made pur-20
712	712	suant to such standards, or if such investment company 21
713	713	does not offer a comparable index fund, a reasonably simi-22
714	714	lar comparison to a readily comparable broad-based index 23
715	715	fund.’’. 24
716	716	VerDate Sep 11 2014 00:54 Feb 02, 2023 Jkt 039200 PO 00000 Frm 00024 Fmt 6652 Sfmt 6201 E:\BILLS\H448.IH H448
717	717	kjohnson on DSK79L0C42PROD with BILLS 25
718	718	•HR 448 IH
719	719	SEC. 6. RESUBMISSION THRESHOLDS FOR SHAREHOLDER 1
720	720	PROPOSALS. 2
721	721	Section 14 of the Securities Exchange Act of 1934 3
722	722	(15 U.S.C. 78n) is amended by adding at the end the fol-4
723	723	lowing: 5
724	724	‘‘(k) E
725	725	XCLUSION OFCERTAINSHAREHOLDER PRO-6
726	726	POSALRESUBMISSIONS.—A shareholder proposal may be 7
727	727	excluded from any proxy or consent solicitation material 8
728	728	for an annual meeting of the shareholders of an issuer 9
729	729	if the proposal— 10
730	730	‘‘(1) is not germane (without regard to whether 11
731	731	the proposal involves a significant social policy 12
732	732	issue); or 13
733	733	‘‘(2) addresses substantially the same subject 14
734	734	matter (without regard to whether the proposal in-15
735	735	volves a significant social policy issue) as a proposal 16
736	736	previously included in the proxy or consent solicita-17
737	737	tion material for an annual meeting of the share-18
738	738	holders of an issuer— 19
739	739	‘‘(A) for a meeting of the shareholders con-20
740	740	ducted in the preceding 5 years; and 21
741	741	‘‘(B) if the most recent vote— 22
742	742	‘‘(i) occurred in the preceding 3 years; 23
743	743	and 24
744	744	VerDate Sep 11 2014 00:54 Feb 02, 2023 Jkt 039200 PO 00000 Frm 00025 Fmt 6652 Sfmt 6201 E:\BILLS\H448.IH H448
745	745	kjohnson on DSK79L0C42PROD with BILLS 26
746	746	•HR 448 IH
747	747	‘‘(ii)(I) if voted on once during such 1
748	748	period, received less than 5 percent of the 2
749	749	votes; 3
750	750	‘‘(II) if voted on twice during such pe-4
751	751	riod, received less than 15 percent of the 5
752	752	votes; or 6
753	753	‘‘(III) if voted on three or more times 7
754	754	during such period, received less 25 per-8
755	755	cent of the votes.’’. 9
756	756	SEC. 7. PROHIBITION ON ROBOVOTING. 10
757	757	Section 14 of the Securities Exchange Act of 1934 11
758	758	(15 U.S.C. 78n) is further amended by adding at the end 12
759	759	the following: 13
760	760	‘‘(l) P
761	761	ROHIBITION ONROBOVOTING.— 14
762	762	‘‘(1) I
763	763	N GENERAL.—The Commission shall issue 15
764	764	final rules prohibiting the use of robovoting with re-16
765	765	spect to votes related to proxy or consent solicitation 17
766	766	materials. 18
767	767	‘‘(2) R
768	768	OBOVOTING DEFINED .—The term 19
769	769	‘robovoting’ means the practice of automatically vot-20
770	770	ing in a manner consistent with the recommenda-21
771	771	tions of a proxy advisory firm.’’. 22
772	772	VerDate Sep 11 2014 00:54 Feb 02, 2023 Jkt 039200 PO 00000 Frm 00026 Fmt 6652 Sfmt 6201 E:\BILLS\H448.IH H448
773	773	kjohnson on DSK79L0C42PROD with BILLS 27
774	774	•HR 448 IH
775	775	SEC. 8. LIABILITY FOR CERTAIN FAILURES TO DISCLOSE 1
776	776	MATERIAL INFORMATION. 2
777	777	Section 14 of the Securities Exchange Act of 1934 3
778	778	(15 U.S.C. 78n) is further amended by adding at the end 4
779	779	the following: 5
780	780	‘‘(m) F
781	781	ALSE ORMISLEADINGSTATEMENTS.—For 6
782	782	purposes of section 18, failure to disclose material infor-7
783	783	mation regarding proxy voting advice that makes a rec-8
784	784	ommendation to a security holder as to its vote, consent, 9
785	785	or authorization on a specific matter for which security 10
786	786	holder approval is solicited, and that is furnished by a per-11
787	787	son that markets its expertise as a provider of such proxy 12
788	788	voting advice, separately from other forms of investment 13
789	789	advice, and sells such proxy voting advice for a fee, shall 14
790	790	be considered to be false or misleading with respect to a 15
791	791	material fact.’’. 16
792	792	SEC. 9. STUDY OF CERTAIN ISSUES WITH RESPECT TO 17
793	793	SHAREHOLDER PROPOSALS AND PROXY AD-18
794	794	VISORY FIRMS. 19
795	795	Not later than 180 days after the date of the enact-20
796	796	ment of this Act, and every 5 years thereafter, the Securi-21
797	797	ties and Exchange Commission, including the Office of the 22
798	798	Advocate for Small Business Capital Formation, shall 23
799	799	carry out a study and submit a report to the Committee 24
800	800	on Banking, Housing, and Urban Affairs of the Senate 25
801	801	and the Committee on Financial Services of the House of 26
802	802	VerDate Sep 11 2014 00:54 Feb 02, 2023 Jkt 039200 PO 00000 Frm 00027 Fmt 6652 Sfmt 6201 E:\BILLS\H448.IH H448
803	803	kjohnson on DSK79L0C42PROD with BILLS 28
804	804	•HR 448 IH
805	805	Representatives on shareholder proposals and proxy advi-1
806	806	sory firms that includes, with respect to, in the case of 2
807	807	the first report, the preceding 10 years, and in the case 3
808	808	of each subsequent report, the preceding 5 years, the fol-4
809	809	lowing: 5
810	810	(1) The costs that issuers incurred in respond-6
811	811	ing to— 7
812	812	(A) politically, environmentally, or socially 8
813	813	motivated shareholder proposals; and 9
814	814	(B) shareholder proposals that failed to be 10
815	815	agreed to more than once. 11
816	816	(2) The amount of fees that public companies 12
817	817	paid to proxy advisory firms and persons associated 13
818	818	with proxy advisory firms. 14
819	819	(3) The source of funds with respect to pay-15
820	820	ment of such fees. 16
821	821	(4) The academic or professional qualifications 17
822	822	of the staff members that provide proxy advisory 18
823	823	services at proxy advisory firms. 19
824	824	(5) The number of shareholder proposals that, 20
825	825	if adopted, would require an issuer to violate a State 21
826	826	or Federal law. 22
827	827	(6) An estimate of the costs that issuers would 23
828	828	incur if such proposals were adopted. 24
829	829	Æ
830	830	VerDate Sep 11 2014 00:54 Feb 02, 2023 Jkt 039200 PO 00000 Frm 00028 Fmt 6652 Sfmt 6301 E:\BILLS\H448.IH H448
831	831	kjohnson on DSK79L0C42PROD with BILLS