I 

116TH CONGRESS 

1ST SESSION H. R. 5336 

To amend the Securities Exchange Act of 1934 to prohibit mandatory 

predispute arbitration agreements, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

DECEMBER 6, 2019 

Mr. FOSTER (for himself, Mrs. CAROLYN B. MALONEY of New York, Mr. 

MEEKS, Mr. CASTEN of Illinois, Mr. LYNCH, Ms. SCHAKOWSKY, Mr. 

MCGOVERN, Mr. CLAY, Ms. DEAN, and Mr. HECK) 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 predispute arbitration agreements, and for 

other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Investor Choice Act 

5 of 2019’’. 

6 SEC. 2. FINDINGS. 

7 Congress makes the following findings: 

8 (1) Investor confidence in fair and equitable re9 course is essential to the health and stability of the 


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1 securities markets and to the participation of retail 

2 investors in such markets. 

3 (2) Brokers, dealers, and investment advisers 

4 hold powerful advantages over investors, and manda5 tory arbitration clauses, including contracts that 

6 force investors to submit claims to arbitration or to 

7 waive their right to participate in a class action, le8 verage these advantages to severely restrict the abil9 ity of defrauded investors to seek redress. 

10 (3) Investors should be free to choose arbitra11 tion to resolve disputes if they judge that arbitration 

12 truly offers them the best opportunity to efficiently 

13 and fairly settle disputes, and investors should also 

14 be free to pursue remedies in court should they view 

15 that option as superior to arbitration. 

16 SEC. 3. ARBITRATION AGREEMENTS IN THE SECURITIES 

17 EXCHANGE ACT OF 1934. 

18 (a) IN GENERAL.—The Securities Exchange Act of 

19 1934 is amended— 

20 (1) by amending section 15(o) (15 U.S.C. 

21 78o(o)) to read as follows: 

22 ‘‘(o) LIMITATIONS ON PRE-DISPUTE AGREE23 MENTS.—Notwithstanding any other provision of law, it 

24 shall be unlawful for any broker, dealer, funding portal, 

25 or municipal securities dealer to enter into, modify, or exVerDate Sep 11 2014 04:09 Dec 12, 2019 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H5336.IH H5336

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1 tend an agreement with customers or clients of such entity 

2 with respect to a future dispute between the parties that— 

3 ‘‘(1) mandates arbitration for such dispute; 

4 ‘‘(2) restricts, limits, or conditions the ability of 

5 a customer or client of such entity to select or des6 ignate a forum for resolution of such dispute; or 

7 ‘‘(3) restricts, limits, or conditions the ability of 

8 a customer or client to pursue a claim relating to 

9 such dispute in an individual or representative ca10 pacity or on a class action or consolidated basis.’’; 

11 and 

12 (2) in section 6(b) (15 U.S.C. 78f(b)), by add13 ing at the end the following: 

14 ‘‘(11) MANDATORY ARBITRATION.—The rules of 

15 the exchange prohibit the listing of any security if 

16 such issuer, in its bylaws, other governing docu17 ments, or any contract with a shareholder related to 

18 the parties as issuer and shareholder mandates arbi19 tration for any disputes between the issuer and the 

20 shareholders of the issuer.’’. 

21 (b) APPLICATION TO EXISTING AGREEMENTS.— 

22 (1) IN GENERAL.—With respect to an agree23 ment described in section 15(o) of the Securities Ex24 change Act of 1934 that was entered before the date 

25 of the enactment of this Act, any provision prohibVerDate Sep 11 2014 04:09 Dec 12, 2019 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H5336.IH H5336

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1 ited by section 15(o) of the Securities Exchange Act 

2 of 1934 is void. 

3 (2) ONGOING ARBITRATION.—A provision pro4 hibited by section 15(o) of the Securities Exchange 

5 Act of 1934 shall not be void under paragraph (1) 

6 if arbitration required by such provision was initi7 ated by any party on or before the date of the enact8 ment of this subsection. 

9 SEC. 4. ARBITRATION AGREEMENTS IN THE SECURITIES 

10 ACT OF 1933. 

11 Section 6 of the Securities Act of 1933 (15 U.S.C. 

12 77f) is amended by adding at the end the following: 

13 ‘‘(f) LIMITATION ON ARBITRATION REQUIRE14 MENTS.—A security may not be registered with the Com15 mission if the issuer of such security, in its bylaws, or 

16 other governing documents, or any contract with a share17 holder related to the parties as issuer and shareholder 

18 mandates arbitration for any disputes between the issuer 

19 and the shareholders of the issuer.’’. 

20 SEC. 5. ARBITRATION AGREEMENTS IN THE INVESTMENT 

21 ADVISERS ACT OF 1940. 

22 (a) IN GENERAL.—Section 205(f) of the Investment 

23 Advisers Act of 1940 (15 U.S.C. 80b–5(f)) is amended 

24 to read as follows: 


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1 ‘‘(f) Notwithstanding any other provision of law, it 

2 shall be unlawful for any investment adviser to enter into, 

3 modify, or extend an agreement with customers or clients 

4 of such entity with respect to a future dispute between 

5 the parties to such agreement that— 

6 ‘‘(1) mandates arbitration for such dispute; 

7 ‘‘(2) restricts, limits, or conditions the ability of 

8 a customer or client of such entity to select or des9 ignate a forum for resolution of such dispute; or 

10 ‘‘(3) restricts, limits, or conditions the ability of 

11 a customer or client to pursue a claim relating to 

12 such dispute in an individual or representative ca13 pacity or on a class action or consolidated basis.’’. 

14 (b) APPLICATION TO EXISTING AGREEMENTS.— 

15 (1) IN GENERAL.—With respect to an agree16 ment described in section 205(f) of the Investment 

17 Advisers Act of 1940 that was entered before the 

18 date of the enactment of this Act, any provision pro19 hibited by section 205(f) of the Investment Advisers 

20 Act of 1940 is void. 

21 (2) ONGOING ARBITRATION.—A provision pro22 hibited by section 205(f) of the Investment Advisers 

23 Act of 1940 shall not be void under paragraph (1) 

24 if arbitration required by such provision was initiVerDate Sep 11 2014 04:09 Dec 12, 2019 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H5336.IH H5336

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1 ated by any party on or before the date of the enact2 ment of this subsection. 

3 SEC. 6. APPLICATION. 

4 Except as otherwise stated, the amendments made by 

5 this Act shall apply with respect to any agreement entered 

6 into, modified, or extended after the date of the enactment 

7 of this Act. 

Æ 


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