I 
115TH CONGRESS 
2D SESSION 
H. R. 5037 
To provide for exclusive Federal jurisdiction over civil securities fraud actions, 
and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
FEBRUARY 15, 2018 
Mr. MACARTHUR (for himself, Mr. DAVIDSON, Ms. TENNEY, and Mr. 
MCHENRY) introduced the following bill; which was referred to the Com-
mittee on Financial Services 
A BILL 
To provide for exclusive Federal jurisdiction over civil 
securities fraud actions, and for other purposes. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Securities Fraud Act 
of 2018’’. 
SEC. 2. FINDINGS. 
Congress finds the following: 
(1) Companies engaged in interstate commerce 
and publicly traded on national exchanges face 
unique challenges, operating often in every United 
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States jurisdiction, under a variety of civil securities 
fraud statutes (‘‘blue sky laws’’) that can overlap or 
contradict each other and Federal law. 
(2) Civil and criminal fraud have inherent dif-
ferences in affect and burden of proof. States have 
a unique interest in prosecuting criminal fraud that 
should be maintained. 
(3) Imposing differing State regulatory require-
ments for civil securities fraud on national markets 
increases risk, creates inefficiencies, raises costs, and 
can harm the efficient operation of these critical 
markets, without providing material investor protec-
tion benefits. 
(4) Complying with dual regulatory regimes 
places America’s public companies at a unique com-
petitive disadvantage in an increasing global market-
place. 
(5) Reputational risk for United States publicly 
traded companies accused of ‘‘civil fraud’’ in State 
civil enforcement actions, often based on State law 
standards that differ from Federal law that other-
wise governs these national markets, can cause im-
mediate and irreparable financial harm to share-
holders and unnecessary loss of jobs, even after such 
allegations are later found to be baseless. 
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(6) As of June 2017, there were 5,734 public 
companies, little more than in 1982, when the econ-
omy was less than half its current size. The lack of 
a uniform standard for public companies is a con-
tributing factor to the declining interest in the 
United States public market, harming the United 
States economy and reducing investment opportuni-
ties for the United States public. 
(7) The Commerce Clause, found in article I, 
section 8, clause 3 of the Constitution, explicitly 
states that the United States Congress shall have 
power ‘‘To regulate Commerce with foreign Nations, 
and among the several States, and with the Indian 
Tribes’’. Interstate Commerce is an explicitly Fed-
eral responsibility, and companies actively engaging 
in commerce across State lines and raising capital 
on national markets should be primarily regulated 
by the Federal Government’s uniform anti-fraud 
standard. 
(8) In the past, Congress has exercised this au-
thority in regards to State securities preemption 
with both the Private Securities Litigation Reform 
Act (‘‘PSLRA’’), which was designed to curb abusive 
Federal class actions (Public Law 104–67), and the 
National Securities Markets Improvements Act 
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(‘‘NSMIA’’) to ensure that States could not impose 
their own views of what should or should not be in-
cluded in registration statements filed in connection 
with nationally traded securities (Public Law 104– 
290). 
(9) It is in the public interest to establish pre-
emption of Federal regulators and courts over civil 
securities fraud, eliminating concurrent Federal and 
State jurisdiction over the specific companies cov-
ered by this Act. 
SEC. 3. FEDERAL JURISDICTION OVER SECURITIES FRAUD. 
(a) SECURITIES EXCHANGE ACT OF 1934.—The Se-
curities Exchange Act of 1934 is amended by inserting 
after section 21F (15 U.S.C. 78u–6) the following: 
‘‘SEC. 21G. FEDERAL JURISDICTION OVER SECURITIES 
FRAUD. 
‘‘(a) IN GENERAL.—No law, rule, regulation, judg-
ment, agreement, order, or other action of any State or 
political subdivision thereof, shall regulate securities fraud 
with respect to an issuer. 
‘‘(b) ACTIONS BROUGHT EXCLUSIVELY IN FEDERAL 
COURT.—The district courts of the United States shall 
have original and exclusive jurisdiction over any civil ac-
tion alleging securities fraud with respect to an issuer, and 
any such action brought in any State court shall be remov-
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able to the Federal district court for the district in which 
the action is pending. 
‘‘(c) PRESERVATION OF STATE AUTHORITY.—Con-
sistent with this section, the securities commission (or 
agency or office performing like functions) of any State 
shall retain jurisdiction under the laws of such State to 
investigate and bring— 
‘‘(1) civil enforcement actions with respect to 
fraud or deceit, or unlawful conduct in connection 
with securities or securities transactions other than 
in connection with a covered security or transactions 
of a covered security; and 
‘‘(2) criminal enforcement actions with respect 
to fraud or deceit, or unlawful conduct in connection 
with a covered security or transactions of a covered 
security provided such State criminal enforcement 
actions shall comply in all respects with the legal re-
quirements for securities fraud under Federal law. 
‘‘(d) EFFECT.—These provisions shall be effective 
notwithstanding any other provision of law and shall su-
persede any previously enacted conflicting provisions. 
‘‘(e) DEFINITIONS.—In this section— 
‘‘(1) SECURITIES FRAUD.—The term ‘securities 
fraud’ means any misrepresentation, omission, or 
manipulative or deceptive conduct knowingly or un-
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knowingly made or engaged in connection with a 
covered security or transaction of a covered security. 
‘‘(2) COVERED SECURITY.—A security is a ‘cov-
ered security’ if such security is— 
‘‘(A)(i) listed, or authorized for listing, on 
the New York Stock Exchange or the National 
Market System of the Nasdaq Stock Market (or 
any successor to such entities); 
‘‘(ii) listed, or authorized for listing, on a 
national securities exchange (or tier or segment 
thereof) that has listing standards that the 
Commission determines by rule (on its own ini-
tiative or on the basis of a petition) are sub-
stantially similar to the listing standards appli-
cable to securities described in subparagraph 
(A); or 
‘‘(iii) a security of the same issuer that is 
equal in seniority or that is a senior security to 
a security described in subparagraph (A) or 
(B); and 
‘‘(B) issued by a company engaged in 
interstate commerce.’’. 
(b) SECURITIES ACT OF 1933.—The Securities Act 
of 1933 is amended by inserting after section 28 (15 
U.S.C. 77z–3) the following new section: 
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