Fair Access to Investment Research Act of 2016

Floor Speech

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Mr. HILL. Mr. Speaker, I thank the gentleman from New Jersey for his leadership of the Subcommittee on Capital Markets and Government Sponsored Enterprises. I appreciate greatly the kind comments, sponsorship, and good work of my friend, the gentleman from Delaware (Mr. Carney).

Mr. Speaker, today I rise in support of H.R. 5019, the FAIR Act, Fair Access to Investment Research Act. This bill is similar to a bill that I introduced with Mr. Carney that passed the House as a part of H.R. 1675 and passed our committee by a strong bipartisan vote.

As my friend from Delaware said, we have worked diligently to improve this legislation and we have worked carefully with our colleagues in the minority to make sure that this bill fully represents the bipartisan consensus on the intent of the FAIR Act.

This bill is very simple: it allows broker-dealers involved in a distribution to issue research reports on the rapidly growing medium of the exchange-traded funds, or the ETF, market.

Since I started my most recent investment firm in the late 1990s, I have personally seen the ETF market grow from about 100 funds and $100 billion in assets to over 1,400 funds and nearly $2 trillion in assets. And some reports predict an additional $1 trillion might shift into ETFs should the Department of Labor's recent fiduciary rule actually go into effect.

Further, today's ETFs frequently are more complicated and require more analysis on the part of investors. Yet despite their rapid appreciation and growth in popularity and increasing importance to retail investors, most broker-dealers do not publish research on ETFs due to anomalies in the securities laws and regulations that Mr. Garrett so ably discussed.

Throughout this process, there has been essentially universal support for increasing investor knowledge and access to information on ETFs-- that a safe harbor in this regard simply makes good sense.

As Mr. Carney said, this issue is not unfamiliar to the Commission, as it has been raised both to the SEC and by the SEC several times over the past 17 years, most recently in 2004.

As a part of its Securities Offering Reform proposal, the Commission requested comment on whether ``reliance on proposed rule 139 should be permitted if the issuer is an open-end management investment company or other investment company.'' The comments were universally supported, but the rule was never adopted.

Given the importance of ETFs to today's market, steps to facilitate research and allow investors access to this useful information is long overdue.

The FAIR Act directs the SEC to provide a safe harbor for research reports that cover ETFs so that these reports are not considered ``offers'' under section 5 of the Securities Act of 1933. This mirrors other research safe harbors implemented by the SEC for other categories.

The bill also helps the SEC organize, in my view, its ``50 front burners'' and holds it accountable to follow Congress' direction by requiring the Commission to finalize rules within 180 days or an interim safe harbor will take effect until the rule is proposed and finalized. With close to 6 million U.S. households holding ETFs, investors need access to this research to be better informed and make better long-term investment decisions.

Again, I would like to thank the chairman, Mr. Carney; Mrs. Maloney, the ranking member; and all of the staff on both the majority and minority side for working to develop this commonsense proposal to provide more information to American investors. I encourage all of my colleagues to support this commonsense bill.

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