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House advances controversial slate of SEC rule changes

Joe Mont | February 16, 2016

A legislative package passed by the House of Representatives is drawing fire from Democrats and the White House amid fears they would erode investor protections.

The bills, bundled as the Capital Markets Improvement Act of 2016, include the Encouraging Employee Ownership Act. Under the current SEC Rule 701 all private companies must disclose certain information to employee investors if the value of certain securities issued by the company exceeds $5 million. The legislation directs the SEC to raise that amount from $5 million to $10 million and to adjust the threshold every five years for inflation.

The Fair Access to Investment Research Act (H.R. 2356) establishes a safe harbor that would allow broker-dealers to issue research reports that cover Exchange Traded Funds so that these reports are not considered “offers” under the securities law. The research reports would need to meet certain requirements to...

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