114TH CONGRESS 

2D SESSION H. R. 1675 

AN ACT 

To direct the Securities and Exchange Commission to revise 

its rules so as to increase the threshold amount for 

requiring issuers to provide certain disclosures relating 

to compensatory benefit plans. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 
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1 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

2 (a) SHORT TITLE.—This Act may be cited as the 

3 ‘‘Capital Markets Improvement Act of 2016’’. 

4 (b) TABLE OF CONTENTS.—The table of contents for 

5 this Act is as follows: 

Sec. 1. Short title; table of contents. 

TITLE I—ENCOURAGING EMPLOYEE OWNERSHIP 

Sec. 101. Increased threshold for disclosures relating to compensatory benefit 

plans. 

TITLE II—FAIR ACCESS TO INVESTMENT RESEARCH 

Sec. 201. Safe harbor for investment fund research. 

TITLE III—SMALL BUSINESS MERGERS, ACQUISITIONS, SALES, 

AND BROKERAGE SIMPLIFICATION 

Sec. 301. Registration exemption for merger and acquisition brokers. 

Sec. 302. Effective date. 

TITLE IV—SMALL COMPANY DISCLOSURE SIMPLIFICATION 

Sec. 401. Exemption from XBRL requirements for emerging growth companies 

and other smaller companies. 

Sec. 402. Analysis by the SEC. 

Sec. 403. Report to Congress. 

Sec. 404. Definitions. 

TITLE V—STREAMLINING EXCESSIVE AND COSTLY REGULATIONS 

REVIEW 

Sec. 501. Regulatory review. 

6 TITLE I—ENCOURAGING 

7 EMPLOYEE OWNERSHIP 

8 SEC. 101. INCREASED THRESHOLD FOR DISCLOSURES RE9 LATING TO COMPENSATORY BENEFIT PLANS. 

10 Not later than 60 days after the date of the enact11 ment of this Act, the Securities and Exchange Commission 

12 shall revise section 230.701(e) of title 17, Code of Federal 

13 Regulations, so as to increase from $5,000,000 to 
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1 $10,000,000 the aggregate sales price or amount of secu2 rities sold during any consecutive 12-month period in ex3 cess of which the issuer is required under such section to 

4 deliver an additional disclosure to investors. The Commis5 sion shall index for inflation such aggregate sales price 

6 or amount every 5 years to reflect the change in the Con7 sumer Price Index for All Urban Consumers published by 

8 the Bureau of Labor Statistics, rounding to the nearest 

9 $1,000,000. 

10 TITLE II—FAIR ACCESS TO 

11 INVESTMENT RESEARCH 

12 SEC. 201. SAFE HARBOR FOR INVESTMENT FUND RE13 SEARCH. 

14 (a) EXPANSION OF SAFE HARBOR.—Not later than 

15 the end of the 45-day period beginning on the date of en16 actment of this Act, the Securities and Exchange Commis17 sion shall propose, and not later than the end of the 120- 

18 day period beginning on such date, the Commission shall 

19 adopt, upon such terms, conditions, or requirements as the 

20 Commission may determine necessary or appropriate in 

21 the public interest, for the protection of investors, and for 

22 the promotion of capital formation, revisions to section 

23 230.139 of title 17, Code of Federal Regulations, to pro24 vide that a covered investment fund research report— 
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1 (1) shall be deemed, for purposes of sections 

2 2(a)(10) and 5(c) of the Securities Act of 1933, not 

3 to constitute an offer for sale or an offer to sell a 

4 security that is the subject of an offering pursuant 

5 to a registration statement that the issuer proposes 

6 to file, or has filed, or that is effective, even if the 

7 broker or dealer is participating or will participate 

8 in the registered offering of the covered investment 

9 fund’s securities; and 

10 (2) shall be deemed to satisfy the conditions of 

11 subsection (a)(1) or (a)(2) of section 230.139 of title 

12 17, Code of Federal Regulations, or any successor 

13 provisions, for purposes of the Commission’s rules 

14 and regulations under the Federal securities laws 

15 and the rules of any self-regulatory organization. 

16 (b) IMPLEMENTATION OF SAFE HARBOR.—In imple17 menting the safe harbor pursuant to subsection (a), the 

18 Commission shall— 

19 (1) not, in the case of a covered investment 

20 fund with a class of securities in substantially con21 tinuous distribution, condition the safe harbor on 

22 whether the broker’s or dealer’s publication or dis23 tribution of a covered investment fund research re24 port constitutes such broker’s or dealer’s initiation 
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1 or reinitiation of research coverage on such covered 

2 investment fund or its securities; 

3 (2) not— 

4 (A) require the covered investment fund to 

5 have been registered as an investment company 

6 under the Investment Company Act of 1940 or 

7 subject to the reporting requirements of section 

8 13 or 15(d) of the Securities Exchange Act of 

9 1934 for any period exceeding twelve months; 

10 or 

11 (B) impose a minimum float provision ex12 ceeding that referenced in subsection 

13 (a)(1)(i)(A)(1)(i) of section 230.139 of title 17, 

14 Code of Federal Regulations; 

15 (3) provide that a self-regulatory organization 

16 may not maintain or enforce any rule that would— 

17 (A) condition the ability of a member to 

18 publish or distribute a covered investment fund 

19 research report on whether the member is also 

20 participating in a registered offering or other 

21 distribution of any securities of such covered in22 vestment fund; 

23 (B) condition the ability of a member to 

24 participate in a registered offering or other dis25 tribution of securities of a covered investment 
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1 fund on whether the member has published or 

2 distributed a covered investment fund research 

3 report about such covered investment fund or 

4 its securities; or 

5 (C) require the filing of a covered invest6 ment fund research report with such self-regu7 latory organization; and 

8 (4) provide that a covered investment fund re9 search report shall not be subject to sections 24(b) 

10 or 34(b) of the Investment Company Act of 1940 or 

11 the rules and regulations thereunder. 

12 (c) RULES OF CONSTRUCTION.—Nothing in this sec13 tion shall be construed as in any way limiting— 

14 (1) the applicability of the antifraud provisions 

15 of the Federal securities laws; or 

16 (2) the authority of any self-regulatory organi17 zation to examine or supervise a member’s practices 

18 in connection with such member’s publication or dis19 tribution of a covered investment fund research re20 port for compliance with otherwise applicable provi21 sions of the Federal securities laws or self-regulatory 

22 organization rules. 

23 (d) INTERIM EFFECTIVENESS OF SAFE HARBOR.— 

24 From and after the 120-day period beginning on the date 

25 of enactment of this Act, if the Commission has not met 
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1 its obligations pursuant to subsection (a) to adopt revi2 sions to section 230.139 of title 17, Code of Federal Regu3 lations, and until such time as the Commission has done 

4 so, a covered investment fund research report published 

5 or distributed by a broker or dealer after such date shall 

6 be deemed to meet the requirements of section 230.139 

7 of title 17, Code of Federal Regulations, and to satisfy 

8 the conditions of subsection (a)(1) or (a)(2) thereof for 

9 purposes of the Commission’s rules and regulations under 

10 the Federal securities laws and the rules of any self-regu11 latory organization, as if revised and implemented in ac12 cordance with subsections (a) and (b). 

13 (e) DEFINITIONS.—For purposes of this section: 

14 (1) COVERED INVESTMENT FUND RESEARCH

15 REPORT.—The term ‘‘covered investment fund re16 search report’’ means a research report published or 

17 distributed by a broker or dealer about a covered in18 vestment fund or any of its securities. 

19 (2) COVERED INVESTMENT FUND.—The term 

20 ‘‘covered investment fund’’ means— 

21 (A) an investment company registered 

22 under, or that has filed an election to be treated 

23 as a business development company under, the 

24 Investment Company Act of 1940 and that has 

25 filed a registration statement under the Securi-
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1 ties Act of 1933 for the public offering of a 

2 class of its securities, which registration state3 ment has been declared effective by the Com4 mission; and 

5 (B) a trust or other person— 

6 (i) that has a class of securities listed 

7 for trading on a national securities ex8 change; 

9 (ii) the assets of which consist pri10 marily of commodities, currencies, or deriv11 ative instruments that reference commod12 ities or currencies, or interests in the fore13 going; and 

14 (iii) that allows its securities to be 

15 purchased or redeemed, subject to condi16 tions or limitations, for a ratable share of 

17 its assets. 

18 (3) RESEARCH REPORT.—The term ‘‘research 

19 report’’ has the meaning given to that term under 

20 section 2(a)(3) of the Securities Act of 1933, except 

21 that such term shall not include an oral communica22 tion. 

23 (4) SELF-REGULATORY ORGANIZATION.—The 

24 term ‘‘self-regulatory organization’’ has the meaning 
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1 given to that term under section 3(a)(26) of the Se2 curities Exchange Act of 1934. 

3 TITLE III—SMALL BUSINESS 

4 MERGERS, ACQUISITIONS, 

5 SALES, AND BROKERAGE SIM6 PLIFICATION 

7 SEC. 301. REGISTRATION EXEMPTION FOR MERGER AND 

8 ACQUISITION BROKERS. 

9 Section 15(b) of the Securities Exchange Act of 1934 

10 (15 U.S.C. 78o(b)) is amended by adding at the end the 

11 following: 

12 ‘‘(13) REGISTRATION EXEMPTION FOR MERGER

13 AND ACQUISITION BROKERS.— 

14 ‘‘(A) IN GENERAL.—Except as provided in 

15 subparagraph (B), an M&A broker shall be ex16 empt from registration under this section. 

17 ‘‘(B) EXCLUDED ACTIVITIES.—An M&A 

18 broker is not exempt from registration under 

19 this paragraph if such broker does any of the 

20 following: 

21 ‘‘(i) Directly or indirectly, in connec22 tion with the transfer of ownership of an 

23 eligible privately held company, receives, 

24 holds, transmits, or has custody of the 
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1 funds or securities to be exchanged by the 

2 parties to the transaction. 

3 ‘‘(ii) Engages on behalf of an issuer in 

4 a public offering of any class of securities 

5 that is registered, or is required to be reg6 istered, with the Commission under section 

7 12 or with respect to which the issuer files, 

8 or is required to file, periodic information, 

9 documents, and reports under subsection 

10 (d). 

11 ‘‘(iii) Engages on behalf of any party 

12 in a transaction involving a public shell 

13 company. 

14 ‘‘(C) DISQUALIFICATIONS.—An M&A 

15 broker is not exempt from registration under 

16 this paragraph if such broker is subject to— 

17 ‘‘(i) suspension or revocation of reg18 istration under paragraph (4); 

19 ‘‘(ii) a statutory disqualification de20 scribed in section 3(a)(39); 

21 ‘‘(iii) a disqualification under the 

22 rules adopted by the Commission under 

23 section 926 of the Investor Protection and 

24 Securities Reform Act of 2010 (15 U.S.C. 

25 77d note); or 
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1 ‘‘(iv) a final order described in para2 graph (4)(H). 

3 ‘‘(D) RULE OF CONSTRUCTION.—Nothing 

4 in this paragraph shall be construed to limit 

5 any other authority of the Commission to ex6 empt any person, or any class of persons, from 

7 any provision of this title, or from any provision 

8 of any rule or regulation thereunder. 

9 ‘‘(E) DEFINITIONS.—In this paragraph: 

10 ‘‘(i) CONTROL.—The term ‘control’ 

11 means the power, directly or indirectly, to 

12 direct the management or policies of a 

13 company, whether through ownership of 

14 securities, by contract, or otherwise. There 

15 is a presumption of control for any person 

16 who— 

17 ‘‘(I) is a director, general part18 ner, member or manager of a limited 

19 liability company, or officer exercising 

20 executive responsibility (or has similar 

21 status or functions); 

22 ‘‘(II) has the right to vote 20 

23 percent or more of a class of voting 

24 securities or the power to sell or direct 
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1 the sale of 20 percent or more of a 

2 class of voting securities; or 

3 ‘‘(III) in the case of a partner4 ship or limited liability company, has 

5 the right to receive upon dissolution, 

6 or has contributed, 20 percent or 

7 more of the capital. 

8 ‘‘(ii) ELIGIBLE PRIVATELY HELD

9 COMPANY.—The term ‘eligible privately 

10 held company’ means a privately held com11 pany that meets both of the following con12 ditions: 

13 ‘‘(I) The company does not have 

14 any class of securities registered, or 

15 required to be registered, with the 

16 Commission under section 12 or with 

17 respect to which the company files, or 

18 is required to file, periodic informa19 tion, documents, and reports under 

20 subsection (d). 

21 ‘‘(II) In the fiscal year ending 

22 immediately before the fiscal year in 

23 which the services of the M&A broker 

24 are initially engaged with respect to 

25 the securities transaction, the com-
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1 pany meets either or both of the fol2 lowing conditions (determined in ac3 cordance with the historical financial 

4 accounting records of the company): 

5 ‘‘(aa) The earnings of the 

6 company before interest, taxes, 

7 depreciation, and amortization 

8 are less than $25,000,000. 

9 ‘‘(bb) The gross revenues of 

10 the company are less than 

11 $250,000,000. 

12 ‘‘(iii) M&A BROKER.—The term ‘M&A 

13 broker’ means a broker, and any person 

14 associated with a broker, engaged in the 

15 business of effecting securities transactions 

16 solely in connection with the transfer of 

17 ownership of an eligible privately held com18 pany, regardless of whether the broker acts 

19 on behalf of a seller or buyer, through the 

20 purchase, sale, exchange, issuance, repur21 chase, or redemption of, or a business com22 bination involving, securities or assets of 

23 the eligible privately held company, if the 

24 broker reasonably believes that— 
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1 ‘‘(I) upon consummation of the 

2 transaction, any person acquiring se3 curities or assets of the eligible pri4 vately held company, acting alone or 

5 in concert, will control and, directly or 

6 indirectly, will be active in the man7 agement of the eligible privately held 

8 company or the business conducted 

9 with the assets of the eligible privately 

10 held company; and 

11 ‘‘(II) if any person is offered se12 curities in exchange for securities or 

13 assets of the eligible privately held 

14 company, such person will, prior to 

15 becoming legally bound to consum16 mate the transaction, receive or have 

17 reasonable access to the most recent 

18 fiscal year-end financial statements of 

19 the issuer of the securities as custom20 arily prepared by the management of 

21 the issuer in the normal course of op22 erations and, if the financial state23 ments of the issuer are audited, re24 viewed, or compiled, any related state25 ment by the independent accountant, 
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1 a balance sheet dated not more than 

2 120 days before the date of the offer, 

3 and information pertaining to the 

4 management, business, results of op5 erations for the period covered by the 

6 foregoing financial statements, and 

7 material loss contingencies of the 

8 issuer. 

9 ‘‘(iv) PUBLIC SHELL COMPANY.—The 

10 term ‘public shell company’ is a company 

11 that at the time of a transaction with an 

12 eligible privately held company— 

13 ‘‘(I) has any class of securities 

14 registered, or required to be reg15 istered, with the Commission under 

16 section 12 or that is required to file 

17 reports pursuant to subsection (d); 

18 ‘‘(II) has no or nominal oper19 ations; and 

20 ‘‘(III) has— 

21 ‘‘(aa) no or nominal assets; 

22 ‘‘(bb) assets consisting solely 

23 of cash and cash equivalents; or 

24 ‘‘(cc) assets consisting of 

25 any amount of cash and cash 
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1 equivalents and nominal other as2 sets. 

3 ‘‘(F) INFLATION ADJUSTMENT.— 

4 ‘‘(i) IN GENERAL.—On the date that 

5 is 5 years after the date of the enactment 

6 of the Small Business Mergers, Acquisi7 tions, Sales, and Brokerage Simplification 

8 Act of 2015, and every 5 years thereafter, 

9 each dollar amount in subparagraph 

10 (E)(ii)(II) shall be adjusted by— 

11 ‘‘(I) dividing the annual value of 

12 the Employment Cost Index For 

13 Wages and Salaries, Private Industry 

14 Workers (or any successor index), as 

15 published by the Bureau of Labor 

16 Statistics, for the calendar year pre17 ceding the calendar year in which the 

18 adjustment is being made by the an19 nual value of such index (or suc20 cessor) for the calendar year ending 

21 December 31, 2012; and 

22 ‘‘(II) multiplying such dollar 

23 amount by the quotient obtained 

24 under subclause (I). 
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1 ‘‘(ii) ROUNDING.—Each dollar 

2 amount determined under clause (i) shall 

3 be rounded to the nearest multiple of 

4 $100,000.’’. 

5 SEC. 302. EFFECTIVE DATE. 

6 This title and any amendment made by this title shall 

7 take effect on the date that is 90 days after the date of 

8 the enactment of this Act. 

9 TITLE IV—SMALL COMPANY 

10 DISCLOSURE SIMPLIFICATION 

11 SEC. 401. EXEMPTION FROM XBRL REQUIREMENTS FOR 

12 EMERGING GROWTH COMPANIES AND OTHER 

13 SMALLER COMPANIES. 

14 (a) EXEMPTION FOR EMERGING GROWTH COMPA15 NIES.—Emerging growth companies are exempted from 

16 the requirements to use Extensible Business Reporting 

17 Language (XBRL) for financial statements and other 

18 periodic reporting required to be filed with the Commis19 sion under the securities laws. Such companies may elect 

20 to use XBRL for such reporting. 

21 (b) EXEMPTION FOR OTHER SMALLER COMPA22 NIES.—Issuers with total annual gross revenues of less 

23 than $250,000,000 are exempt from the requirements to 

24 use XBRL for financial statements and other periodic re25 porting required to be filed with the Commission under 
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1 the securities laws. Such issuers may elect to use XBRL 

2 for such reporting. An exemption under this subsection 

3 shall continue in effect until— 

4 (1) the date that is 5 years after the date of en5 actment of this Act; or 

6 (2) the date that is 2 years after a determina7 tion by the Commission, by order after conducting 

8 the analysis required by section 402, that the bene9 fits of such requirements to such issuers outweigh 

10 the costs, but no earlier than three years after en11 actment of this Act. 

12 (c) MODIFICATIONS TO REGULATIONS.—Not later 

13 than 60 days after the date of enactment of this Act, the 

14 Commission shall revise its regulations under parts 229, 

15 230, 232, 239, 240, and 249 of title 17, Code of Federal 

16 Regulations, to reflect the exemptions set forth in sub17 sections (a) and (b). 

18 SEC. 402. ANALYSIS BY THE SEC. 

19 The Commission shall conduct an analysis of the 

20 costs and benefits to issuers described in section 401(b) 

21 of the requirements to use XBRL for financial statements 

22 and other periodic reporting required to be filed with the 

23 Commission under the securities laws. Such analysis shall 

24 include an assessment of— 
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1 (1) how such costs and benefits may differ from 

2 the costs and benefits identified by the Commission 

3 in the order relating to interactive data to improve 

4 financial reporting (dated January 30, 2009; 74 

5 Fed. Reg. 6776) because of the size of such issuers; 

6 (2) the effects on efficiency, competition, capital 

7 formation, and financing and on analyst coverage of 

8 such issuers (including any such effects resulting 

9 from use of XBRL by investors); 

10 (3) the costs to such issuers of— 

11 (A) submitting data to the Commission in 

12 XBRL; 

13 (B) posting data on the website of the 

14 issuer in XBRL; 

15 (C) software necessary to prepare, submit, 

16 or post data in XBRL; and 

17 (D) any additional consulting services or 

18 filing agent services; 

19 (4) the benefits to the Commission in terms of 

20 improved ability to monitor securities markets, as21 sess the potential outcomes of regulatory alter22 natives, and enhance investor participation in cor23 porate governance and promote capital formation; 

24 and 
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1 (5) the effectiveness of standards in the United 

2 States for interactive filing data relative to the 

3 standards of international counterparts. 

4 SEC. 403. REPORT TO CONGRESS. 

5 Not later than 1 year after the date of enactment 

6 of this Act, the Commission shall provide the Committee 

7 on Financial Services of the House of Representatives and 

8 the Committee on Banking, Housing, and Urban Affairs 

9 of the Senate a report regarding— 

10 (1) the progress in implementing XBRL report11 ing within the Commission; 

12 (2) the use of XBRL data by Commission offi13 cials; 

14 (3) the use of XBRL data by investors; 

15 (4) the results of the analysis required by sec16 tion 402; and 

17 (5) any additional information the Commission 

18 considers relevant for increasing transparency, de19 creasing costs, and increasing efficiency of regu20 latory filings with the Commission. 

21 SEC. 404. DEFINITIONS. 

22 As used in this title, the terms ‘‘Commission’’, 

23 ‘‘emerging growth company’’, ‘‘issuer’’, and ‘‘securities 

24 laws’’ have the meanings given such terms in section 3 

25 of the Securities Exchange Act of 1934 (15 U.S.C. 78c). 
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1 TITLE V—STREAMLINING EXCES2 SIVE AND COSTLY REGULA3 TIONS REVIEW 

4 SEC. 501. REGULATORY REVIEW. 

5 (a) REVIEW AND ACTION.—Not later than 5 years 

6 after the date of enactment of this Act, and at least once 

7 within each 10-year period thereafter, the Securities and 

8 Exchange Commission shall— 

9 (1) review each significant regulation issued by 

10 the Commission; 

11 (2) determine by Commission vote whether each 

12 such regulation— 

13 (A) is outmoded, ineffective, insufficient, 

14 or excessively burdensome; or 

15 (B) is no longer necessary in the public in16 terest or consistent with the Commission’s man17 date to protect investors, maintain fair, orderly, 

18 and efficient markets, and facilitate capital for19 mation; 

20 (3) provide notice and solicit public comment as 

21 to whether a regulation described in subparagraph 

22 (A) or (B) of paragraph (2) (as determined by Com23 mission vote pursuant to such paragraph) should be 

24 amended to improve or modernize such regulation so 
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1 that such regulation is in the public interest, or 

2 whether such regulation should be repealed; and 

3 (4) amend or repeal any regulation described in 

4 subparagraph (A) or (B) of paragraph (2), as deter5 mined by Commission vote pursuant to such para6 graph. 

7 (b) DEFINITION.—As used in this section and for 

8 purposes of the review required by subsection (a) the term 

9 ‘‘significant regulation’’ has the meaning given the term 

10 ‘‘major rule’’ in section 804(2) of title 5, United States 

11 Code. 

12 (c) REPORT TO CONGRESS.—Not later than 45 days 

13 after any final Commission vote described in subsection 

14 (a)(2), the Commission shall transmit a report to the 

15 Committee on Financial Services of the House of Rep16 resentatives and the Committee on Banking, Housing, and 

17 Urban Affairs of the Senate describing the Commission’s 

18 review under subsection (a), its vote or votes, and the ac19 tions taken pursuant to paragraph (3) of such subsection. 

20 If the Commission determines that legislation is necessary 

21 to amend or repeal any regulation described in subpara22 graph (A) or (B) of subsection (a)(2), the Commission 

23 shall include in the report recommendations for such legis24 lation. 
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1 (d) NOT SUBJECT TO JUDICIAL REVIEW.—Any vote 

2 by the Commission made pursuant to subsection (a)(2) 

3 shall be final and not subject to judicial review. 

Passed the House of Representatives February 3, 

2016. 

Attest: 

Clerk. 
114TH CONGRESS 

2D SESSION H. R. 1675 

AN ACT 

To direct the Securities and Exchange Commission 

plans. disclosures relating to compensatory benefit amount for requiring issuers to provide certain to revise its rules so as to increase the threshold