Improving Investment Research for Small and Emerging Issuers Act

IIB 116TH CONGRESS 1ST SESSION H. R. 2919 IN THE SENATE OF THE UNITED STATES JULY 10, 2019 Received; read twice and referred to the Committee on Banking, Housing, and Urban Affairs AN ACT To require the Securities and Exchange Commission to carry out a study to evaluate the issues affecting the provision of and reliance upon investment research into small issuers. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 VerDate Sep 11 2014 22:43 Jul 10, 2019 Jkt 034408 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H2919.RFS H2919 pbinns on DSK79D2C42PROD with BILLS 2 HR 2919 RFS SECTION 1. SHORT TITLE. 1 This Act may be cited as the ‘‘Improving Investment 2 Research for Small and Emerging Issuers Act’’. 3 SEC. 2. RESEARCH STUDY. 4 (a) STUDY REQUIRED.—The Securities and Ex- 5 change Commission shall conduct a study to evaluate the 6 issues affecting the provision of and reliance upon invest- 7 ment research into small issuers, including emerging 8 growth companies and companies considering initial public 9 offerings. 10 (b) CONTENTS OF STUDY.—The study required 11 under subsection (a) shall consider— 12 (1) factors related to the demand for such re- 13 search by institutional and retail investors; 14 (2) the availability of such research, includ- 15 ing— 16 (A) the number and types of firms who 17 provide such research; 18 (B) the volume of such research over time; 19 and 20 (C) competition in the research market; 21 (3) conflicts of interest relating to the produc- 22 tion and distribution of investment research; 23 (4) the costs of such research; 24 VerDate Sep 11 2014 22:43 Jul 10, 2019 Jkt 034408 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H2919.RFS H2919 pbinns on DSK79D2C42PROD with BILLS 3 HR 2919 RFS (5) the impacts of different payment mecha- 1 nisms for investment research into small issuers, in- 2 cluding whether such research is paid for by— 3 (A) hard-dollar payments from research 4 clients; 5 (B) payments directed from the client’s 6 commission income (i.e., ‘‘soft dollars’’); or 7 (C) payments from the issuer that is the 8 subject of such research; 9 (6) any unique challenges faced by minority- 10 owned, women-owned, and veteran-owned small 11 issuers in obtaining research coverage; and 12 (7) the impact on the availability of research 13 coverage for small issuers due to— 14 (A) investment adviser concentration and 15 consolidation, including any potential impacts of 16 fund-size on demand for investment research of 17 small issuers; 18 (B) broker and dealer concentration and 19 consolidation, including any relationships be- 20 tween the size of the firm and allocation of re- 21 sources for investment research into small 22 issuers; 23 (C) Securities and Exchange Commission 24 rules; 25 VerDate Sep 11 2014 22:43 Jul 10, 2019 Jkt 034408 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H2919.RFS H2919 pbinns on DSK79D2C42PROD with BILLS 4 HR 2919 RFS (D) registered national securities associa- 1 tion rules; 2 (E) State and Federal liability concerns; 3 (F) the settlement agreements referenced 4 in Securities and Exchange Commission Litiga- 5 tion Release No. 18438 (i.e., the ‘‘Global Re- 6 search Analyst Settlement’’); and 7 (G) Directive 2014/65/EU of the European 8 Parliament and of the Council of 15 May 2014 9 on markets in financial instruments and 10 amending Directive 2002/92/EC and Directive 11 2011/61/EU, as implemented by the European 12 Union (‘‘EU’’) member states (‘‘MiFID II’’). 13 (c) REPORT REQUIRED.—Not later than 180 days 14 after the date of the enactment of this Act, the Securities 15 and Exchange Commission shall submit to Congress a re- 16 port that includes— 17 (1) the results of the study required by sub- 18 section (a); and 19 (2) recommendations to increase the demand 20 for, volume of, and quality of investment research 21 into small issuers, including emerging growth com- 22 VerDate Sep 11 2014 22:43 Jul 10, 2019 Jkt 034408 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H2919.RFS H2919 pbinns on DSK79D2C42PROD with BILLS 5 HR 2919 RFS panies and companies considering initial public of- 1 ferings. 2 Passed the House of Representatives July 9, 2019. Attest: CHERYL L. JOHNSON, Clerk. VerDate Sep 11 2014 22:43 Jul 10, 2019 Jkt 034408 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H2919.RFS H2919 pbinns on DSK79D2C42PROD with BILLS