Investor Choice Act of 2024
This bill prohibits broker-dealers and investment advisers from including mandatory arbitration, forum selection restrictions, or bans on class action suits in customer or client agreements. Issuers of securities are also prohibited from mandating arbitration in shareholder agreements.
[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[H.R. 7168 Introduced in House (IH)]
<DOC>
118th CONGRESS
2d Session
H. R. 7168
To amend the Securities Exchange Act of 1934 to prohibit mandatory pre-
dispute arbitration agreements, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
January 31, 2024
Mr. Foster (for himself, Ms. Schakowsky, Mr. Casten, Mr. Meeks, Ms.
Velazquez, and Ms. Dean of Pennsylvania) introduced the following bill;
which was referred to the Committee on Financial Services
_______________________________________________________________________
A BILL
To amend the Securities Exchange Act of 1934 to prohibit mandatory pre-
dispute arbitration agreements, 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 ``Investor Choice Act of 2024''.
SEC. 2. FINDINGS.
Congress finds the following:
(1) Investor confidence in fair and equitable recourse is
essential to the health and stability of the securities markets
and to the participation of retail investors in those markets.
(2) Issuers, brokers, dealers, and investment advisers hold
powerful advantages over investors, and mandatory arbitration
clauses, including contracts that force investors to submit
claims to arbitration or to waive the right of investors to
participate in a class action lawsuit, leverage those
advantages to severely restrict the ability of defrauded
investors to seek redress.
(3) Investors should be free to--
(A) choose arbitration to resolve disputes if they
judge that arbitration truly offers them the best
opportunity to efficiently and fairly settle disputes;
and
(B) pursue remedies in court should they view that
option as superior to arbitration.
SEC. 3. ARBITRATION AGREEMENTS IN THE SECURITIES EXCHANGE ACT OF 1934.
(a) In General.--The Securities Exchange Act of 1934 (15 U.S.C. 78a
et seq.) is amended--
(1) in section 6(b) (15 U.S.C. 78f(b)), by adding at the
end the following:
``(11) The rules of the exchange prohibit the listing of
any security if the issuer of the security, in the bylaws of
the issuer, other governing documents, or any contract with a
shareholder relating to the parties as issuer and shareholder,
mandates arbitration for any dispute between the issuer and the
shareholders of the issuer, without regard to whether such a
provision in the bylaws, documents, or contract is otherwise
permissible under title 9, United States Code.''; and
(2) in section 15 (15 U.S.C. 78o), by amending subsection
(o) to read as follows:
``(o) Limitations on Pre-Dispute Agreements.--Notwithstanding any
other provision of law, including any provision of title 9, United
States Code, it shall be unlawful for any broker, dealer, funding
portal, or municipal securities dealer to enter into, modify, or extend
an agreement with customers or clients of that entity with respect to a
future dispute between the parties that--
``(1) mandates arbitration for that dispute;
``(2) restricts, limits, or conditions the ability of a
customer or client of that entity to select or designate a
forum for resolution of that dispute; or
``(3) restricts, limits, or conditions the ability of a
customer or client of that entity to pursue a claim relating to
that dispute in an individual or representative capacity or on
a class action or consolidated basis.''.
(b) Application to Existing Agreements.--
(1) In general.--With respect to an agreement described in
section 15(o) of the Securities Exchange Act of 1934 (15 U.S.C.
78o(o)), as amended by subsection (a) of this section, that was
entered into before the date of enactment of this Act, any
provision of that agreement that is prohibited by such section
15(o), as amended by subsection (a) of this section, is void.
(2) Ongoing arbitration.--A provision of an agreement
prohibited by section 15(o) of the Securities Exchange Act of
1934 (15 U.S.C. 78o(o)), as amended by subsection (a) of this
section, shall not be void under paragraph (1) if arbitration
required by that provision was initiated by any party on or
before the date of enactment of this Act.
SEC. 4. ARBITRATION AGREEMENTS IN THE SECURITIES ACT OF 1933.
Section 6 of the Securities Act of 1933 (15 U.S.C. 77f) is amended
by adding at the end the following:
``(f) Limitation on Arbitration Requirements.--A security may not
be registered with the Commission if the issuer of the security, in the
bylaws of the issuer, other governing documents, or any contract with a
shareholder relating to the parties as issuer and shareholder, mandates
arbitration for any dispute between the issuer and the shareholders of
the issuer, without regard to whether such a provision in the bylaws,
documents, or contract is otherwise permissible under title 9, United
States Code.''.
SEC. 5. ARBITRATION AGREEMENTS IN THE INVESTMENT ADVISERS ACT OF 1940.
(a) In General.--Section 205(f) of the Investment Advisers Act of
1940 (15 U.S.C. 80b-5(f)) is amended to read as follows:
``(f) Notwithstanding any other provision of law, including any
provision of title 9, United States Code, it shall be unlawful for any
investment adviser to enter into, modify, or extend an agreement with
customers or clients of the investment adviser with respect to a future
dispute between the parties to that agreement that--
``(1) mandates arbitration for that dispute;
``(2) restricts, limits, or conditions the ability of a
customer or client of the investment adviser to select or
designate a forum for resolution of that dispute; or
``(3) restricts, limits, or conditions the ability of a
customer or client of the investment adviser to pursue a claim
relating to that dispute in an individual or representative
capacity or on a class action or consolidated basis.''.
(b) Application to Existing Agreements.--
(1) In general.--With respect to an agreement described in
section 205(f) of the Investment Advisers Act of 1940 (15
U.S.C. 80b-5(f)), as amended by subsection (a) of this section,
that was entered into before the date of enactment of this Act,
any provision prohibited by such section 205(f), as amended by
subsection (a) of this section, is void.
(2) Ongoing arbitration.--A provision of an agreement
prohibited by section 205(f) of the Investment Advisers Act of
1940 (15 U.S.C. 80b-5(f)), as amended by subsection (a) of this
section, shall not be void under paragraph (1) if arbitration
required by that provision was initiated by any party on or
before the date of enactment of this Act.
SEC. 6. APPLICATION.
Except as otherwise stated, the amendments made by this Act shall
apply with respect to any agreement entered into, modified, or extended
after the date of enactment of this Act.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Financial Services.
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