Securities Fraud Act of 2018
This bill amends various securities laws to:
[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5037 Introduced in House (IH)]
<DOC>
115th CONGRESS
2d Session
H. R. 5037
To provide for exclusive Federal jurisdiction over civil securities
fraud actions, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
February 15, 2018
Mr. MacArthur (for himself, Mr. Davidson, Ms. Tenney, and Mr. McHenry)
introduced the following bill; which was referred to the Committee on
Financial Services
_______________________________________________________________________
A BILL
To provide for exclusive Federal jurisdiction over civil securities
fraud actions, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Securities Fraud Act of 2018''.
SEC. 2. FINDINGS.
Congress finds the following:
(1) Companies engaged in interstate commerce and publicly
traded on national exchanges face unique challenges, operating
often in every United States jurisdiction, under a variety of
civil securities fraud statutes (``blue sky laws'') that can
overlap or contradict each other and Federal law.
(2) Civil and criminal fraud have inherent differences in
affect and burden of proof. States have a unique interest in
prosecuting criminal fraud that should be maintained.
(3) Imposing differing State regulatory requirements for
civil securities fraud on national markets increases risk,
creates inefficiencies, raises costs, and can harm the
efficient operation of these critical markets, without
providing material investor protection benefits.
(4) Complying with dual regulatory regimes places America's
public companies at a unique competitive disadvantage in an
increasing global marketplace.
(5) Reputational risk for United States publicly traded
companies accused of ``civil fraud'' in State civil enforcement
actions, often based on State law standards that differ from
Federal law that otherwise governs these national markets, can
cause immediate and irreparable financial harm to shareholders
and unnecessary loss of jobs, even after such allegations are
later found to be baseless.
(6) As of June 2017, there were 5,734 public companies,
little more than in 1982, when the economy was less than half
its current size. The lack of a uniform standard for public
companies is a contributing factor to the declining interest in
the United States public market, harming the United States
economy and reducing investment opportunities for the United
States public.
(7) The Commerce Clause, found in article I, section 8,
clause 3 of the Constitution, explicitly states that the United
States Congress shall have power ``To regulate Commerce with
foreign Nations, and among the several States, and with the
Indian Tribes''. Interstate Commerce is an explicitly Federal
responsibility, and companies actively engaging in commerce
across State lines and raising capital on national markets
should be primarily regulated by the Federal Government's
uniform anti-fraud standard.
(8) In the past, Congress has exercised this authority in
regards to State securities preemption with both the Private
Securities Litigation Reform Act (``PSLRA''), which was
designed to curb abusive Federal class actions (Public Law 104-
67), and the National Securities Markets Improvements Act
(``NSMIA'') to ensure that States could not impose their own
views of what should or should not be included in registration
statements filed in connection with nationally traded
securities (Public Law 104-290).
(9) It is in the public interest to establish preemption of
Federal regulators and courts over civil securities fraud,
eliminating concurrent Federal and State jurisdiction over the
specific companies covered by this Act.
SEC. 3. FEDERAL JURISDICTION OVER SECURITIES FRAUD.
(a) Securities Exchange Act of 1934.--The Securities Exchange Act
of 1934 is amended by inserting after section 21F (15 U.S.C. 78u-6) the
following:
``SEC. 21G. FEDERAL JURISDICTION OVER SECURITIES FRAUD.
``(a) In General.--No law, rule, regulation, judgment, agreement,
order, or other action of any State or political subdivision thereof,
shall regulate securities fraud with respect to an issuer.
``(b) Actions Brought Exclusively in Federal Court.--The district
courts of the United States shall have original and exclusive
jurisdiction over any civil action alleging securities fraud with
respect to an issuer, and any such action brought in any State court
shall be removable to the Federal district court for the district in
which the action is pending.
``(c) Preservation of State Authority.--Consistent with this
section, the securities commission (or agency or office performing like
functions) of any State shall retain jurisdiction under the laws of
such State to investigate and bring--
``(1) civil enforcement actions with respect to fraud or
deceit, or unlawful conduct in connection with securities or
securities transactions other than in connection with a covered
security or transactions of a covered security; and
``(2) criminal enforcement actions with respect to fraud or
deceit, or unlawful conduct in connection with a covered
security or transactions of a covered security provided such
State criminal enforcement actions shall comply in all respects
with the legal requirements for securities fraud under Federal
law.
``(d) Effect.--These provisions shall be effective notwithstanding
any other provision of law and shall supersede any previously enacted
conflicting provisions.
``(e) Definitions.--In this section--
``(1) Securities fraud.--The term `securities fraud' means
any misrepresentation, omission, or manipulative or deceptive
conduct knowingly or unknowingly made or engaged in connection
with a covered security or transaction of a covered security.
``(2) Covered security.--A security is a `covered security'
if such security is--
``(A)(i) listed, or authorized for listing, on the
New York Stock Exchange or the National Market System
of the Nasdaq Stock Market (or any successor to such
entities);
``(ii) listed, or authorized for listing, on a
national securities exchange (or tier or segment
thereof) that has listing standards that the Commission
determines by rule (on its own initiative or on the
basis of a petition) are substantially similar to the
listing standards applicable to securities described in
subparagraph (A); or
``(iii) a security of the same issuer that is equal
in seniority or that is a senior security to a security
described in subparagraph (A) or (B); and
``(B) issued by a company engaged in interstate
commerce.''.
(b) Securities Act of 1933.--The Securities Act of 1933 is amended
by inserting after section 28 (15 U.S.C. 77z-3) the following new
section:
``SEC. 29. FEDERAL JURISDICTION OVER SECURITIES FRAUD.
``(a) In General.--No law, rule, regulation, judgment, agreement,
order, or other action of any State or political subdivision thereof,
shall regulate securities fraud with respect to an issuer.
``(b) Actions Brought Exclusively in Federal Court.--The district
courts of the United States shall have original and exclusive
jurisdiction over any civil action alleging securities fraud with
respect to an issuer, and any such action brought in any State court
shall be removable to the Federal district court for the district in
which the action is pending.
``(c) Preservation of State Authority.--Consistent with this
section, the securities commission (or agency or office performing like
functions) of any State shall retain jurisdiction under the laws of
such State to investigate and bring--
``(1) civil enforcement actions with respect to fraud or
deceit, or unlawful conduct in connection with securities or
securities transactions other than in connection with a covered
security or transactions of a covered security; and
``(2) criminal enforcement actions with respect to fraud or
deceit, or unlawful conduct in connection with a covered
security or transactions of a covered security provided such
State criminal enforcement actions shall comply in all respects
with the legal requirements for securities fraud under Federal
law.
``(d) Effect.--These provisions shall be effective notwithstanding
any other provision of law and shall supersede any previously enacted
conflicting provisions.
``(e) Definitions.--In this section--
``(1) Securities fraud.--The term `securities fraud' means
any misrepresentation, omission, or manipulative or deceptive
conduct knowingly or unknowingly made or engaged in connection
with a covered security or transaction of a covered security.
``(2) Covered security.--A security is a `covered security'
if such security is--
``(A)(i) listed, or authorized for listing, on the
New York Stock Exchange or the National Market System
of the Nasdaq Stock Market (or any successor to such
entities);
``(ii) listed, or authorized for listing, on a
national securities exchange (or tier or segment
thereof) that has listing standards that the Commission
determines by rule (on its own initiative or on the
basis of a petition) are substantially similar to the
listing standards applicable to securities described in
subparagraph (A); or
``(iii) a security of the same issuer that is equal
in seniority or that is a senior security to a security
described in subparagraph (A) or (B); and
``(B) issued by a company engaged in interstate
commerce.''.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Financial Services.
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