House Committee OKs Measures on SEC’s Data-Handling

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By Rob Tricchinelli

The House Financial Services Committee Oct. 12 approved a pair of bills changing how the Securities and Exchange Commission handles industry data.

One bill, H.R. 3948, sponsored by Rep. Sean Duffy (R-Wis.), would require the SEC by statute to get a subpoena before it could acquire “algorithmic trading source code or similar intellectual property” from a person, investment adviser, or investment company. It was approved 46-14, with some Democratic support.

The SEC generally requires a subpoena to obtain such data. But a proposal by the Commodity Futures Trading Commission proposal to establish a lower threshold for agency access has raised concerns that other regulators could follow suit.

H.R. 3973, sponsored by Rep. Warren Davidson (R-Ohio), would require more stringent internal data security procedures at the agency and the Financial Industry Regulatory Authority before the Consolidated Audit Trail could be implemented. It was approved 59-1, with Rep. Stephen Lynch (D-Mass.) the lone vote against.

The CAT, years in the making, is envisioned as an extensive database of trading information to help the SEC diagnose trading problems and pursue wrongdoing. The procedures would also apply to Thesys Inc., the group tasked with implementing the CAT.

Given the approval by such broad margins, House passage is likely. The Senate has likewise passed a few noncontroversial tweaks to financial laws, and these bills could win approval in both chambers.

Other Bills

As part of the 22-bill markup that began Oct. 11, the panel also advanced a batch of other legislation making tweaks to federal securities laws that have a decent chance of becoming law, including:

  • H.R. 1585, approved 58-2, would expand the pool of “accredited investors” to include licensed securities professionals or those with appropriate experience or training, to be defined by the SEC. Accredited investors, who are allowed to partake in some unregistered securities offerings, now qualify by meeting asset and net-worth thresholds.
  • H.R. 3903, approved unanimously, would allow startups exploring an initial public offering to file confidential draft registrations with the SEC and to “test the waters” by gauging investor interest before filing.

To contact the reporter on this story: Rob Tricchinelli in Washington at

To contact the editor responsible for this story: Phyllis Diamond at

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