To amend the Investment Advisers Act of 1940 to codify certain Securities and Exchange Commission no-action letters that exclude brokers and dealers compensated for certain research services from the definition of investment adviser, and for other purposes.

IIB 118TH CONGRESS 1ST SESSION H. R. 2622 IN THE SENATE OF THE UNITED STATES JULY 12, 2023 Received; read twice and referred to the Committee on Banking, Housing, and Urban Affairs AN ACT To amend the Investment Advisers Act of 1940 to codify certain Securities and Exchange Commission no-action letters that exclude brokers and dealers compensated for certain research services from the definition of invest- ment adviser, and for other purposes. 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 23:49 Jul 12, 2023 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H2622.RFS H2622 pbinns on DSKJLVW7X2PROD with $$_JOB 2 HR 2622 RFS SECTION 1. EXTENSION OF NO-ACTION LETTER; STUDY. 1 (a) FINDINGS.—Congress finds the following: 2 (1) The Securities and Exchange Commission 3 staff first granted temporary no-action relief in 4 2017, prior to the implementation of European rules 5 designed to protect European investors from exces- 6 sive costs and conflicts of interest. 7 (2) The Commission staff did not engage in any 8 meaningful cost-benefit analysis of the issues raised 9 by the no-action relief requested either prior to or 10 following the granting of no-action relief in 2017. 11 (3) The Commission staff revised and extended 12 the temporary no-action relief in 2019, again with- 13 out any meaningful cost-benefit analysis of the 14 issues raised by the no-action relief requested prior 15 to or following the granting of the relief. 16 (4) There are currently approximately 15,300 17 registered investment advisers, including affiliates 18 that provide the vast majority of investment re- 19 search. 20 (5) The Commission has received complaints 21 from investors and investor advocacy groups express- 22 ing concerns with the no-action relief, as it currently 23 exists. 24 VerDate Sep 11 2014 23:49 Jul 12, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H2622.RFS H2622 pbinns on DSKJLVW7X2PROD with $$_JOB 3 HR 2622 RFS (6) The Commission has received concerns from 1 broker-dealers related to the potential expiration of 2 the no-action relief. 3 (b) EXTENSION OF NO-ACTION LETTER.—The Com- 4 mission shall provide an additional 6-month extension of 5 the October 26, 2017, Securities Industry and Financial 6 Markets Association, SEC Staff No-Action Letter, set to 7 expire on July 3, 2023. 8 (c) STUDY REQUIRED.—After the announcement ex- 9 tending the expiration date of the no-action letter under 10 subsection (b), the Commission shall conduct, through no- 11 tice and comment, a study of the impact of allowing the 12 no-action letter’s expiration or maintenance of the no-ac- 13 tion letter, and give due regard to any comments received 14 in conducting the study. The Commission or delegated 15 staff shall report their findings and conclusions, including 16 findings related to the expiration of the no-action relief, 17 to the Committee on Financial Services of the House of 18 Representatives and the Committee on Banking, Housing, 19 and Urban Affairs of the Senate. 20 (d) CONTENTS OF STUDY.—The study required 21 under subsection (c) shall include potential impacts on the 22 research market for smaller issuers, including— 23 (1) the availability of such research, includ- 24 ing— 25 VerDate Sep 11 2014 23:49 Jul 12, 2023 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H2622.RFS H2622 pbinns on DSKJLVW7X2PROD with $$_JOB 4 HR 2622 RFS (A) the number and types of firms who 1 provide such research; 2 (B) the volume of such research over time; 3 and 4 (C) competition in the research market; 5 (2) any unique challenges faced by minority- 6 owned, women-owned, and veteran owned small 7 issuers in obtaining research coverage; 8 (3) the impact on the availability of research 9 coverage for small issuers due to Commission rules; 10 (4) a cost-benefit analysis of regulatory options 11 that will support research coverage of small entities 12 and increase transparency in the cost of research 13 provided by broker-dealers; 14 (5) the impact of the no-action relief on inves- 15 tors in registered investment companies and exempt 16 investment funds, pension funds, endowments, and 17 other asset owners, investment advisers, broker-deal- 18 ers that provide both investment research and trad- 19 ing services, independent investment advisers that do 20 not provide trading services, broker-dealers that do 21 not provide investment research, and other market 22 participants, including issuers of securities; and 23 (6) the potential impacts of the expiration of 24 the no-action relief on investors in registered invest- 25 VerDate Sep 11 2014 23:49 Jul 12, 2023 Jkt 039200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H2622.RFS H2622 pbinns on DSKJLVW7X2PROD with $$_JOB 5 HR 2622 RFS ment companies and exempt investment funds, pen- 1 sion funds, endowments, investment advisers, and 2 other asset owners, broker-dealers that provide both 3 investment research and trading services, inde- 4 pendent investment advisers that do not provide 5 trading services, broker-dealers that do not provide 6 investment research, and other market participants, 7 including issuers of securities. 8 Passed the House of Representatives July 11, 2023. Attest: KEVIN F. MCCUMBER, Clerk. VerDate Sep 11 2014 23:49 Jul 12, 2023 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H2622.RFS H2622 pbinns on DSKJLVW7X2PROD with $$_JOB