I 
115TH CONGRESS 
1ST SESSION H. R. 3857 
To amend the Securities Exchange Act of 1934 to establish standards of 
conduct for brokers and dealers that are in the best interest of their 
retail customers. 
IN THE HOUSE OF REPRESENTATIVES 
SEPTEMBER 27, 2017 
Mrs. WAGNER (for herself, Mr. BARR, Mr. MESSER, Mr. TROTT, Mr. POSEY, 
Mr. WILLIAMS, Mr. BUDD, Mr. HOLLINGSWORTH, and Mr. KUSTOFF of 
Tennessee) introduced the following bill; which was referred to the Com-
mittee on Financial Services, and in addition to the Committees on Ways 
and Means, and Education and the Workforce, for a period to be subse-
quently determined by the Speaker, in each case for consideration of such 
provisions as fall within the jurisdiction of the committee concerned 
A BILL 
To amend the Securities Exchange Act of 1934 to establish 
standards of conduct for brokers and dealers that are 
in the best interest of their retail customers. 
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 ‘‘Protecting Advice for 
Small Savers Act of 2017’’ or the ‘‘PASS Act of 2017’’. 
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SEC. 2. REPEAL OF DEPARTMENT OF LABOR FIDUCIARY 
RULE. 
The final rule of the Department of Labor titled 
‘‘Definition of the Term ‘Fiduciary’ Conflict of Interest 
Rule—Retirement Investment Advice’’ and related prohib-
ited transaction exemptions published April 8, 2016 (81 
Fed. Reg. 20946), shall have no force or effect. 
SEC. 3. STANDARDS OF CONDUCT FOR BROKERS AND 
DEALERS. 
(a) STANDARD
OF CONDUCT
FOR BROKERS
AND 
DEALERS WHEN MAKING RECOMMENDATIONS TO RETAIL 
CUSTOMERS.— 
(1) IN GENERAL.—The second subsection (k) of 
section 15 of the Securities Exchange Act of 1934 
(15 U.S.C. 78o(k)) (relating to standards of con-
duct) is amended to read as follows: 
‘‘(k) STANDARD OF CONDUCT FOR RECOMMENDA-
TIONS TO RETAIL CUSTOMERS.— 
‘‘(1) IN GENERAL.—The standard of conduct 
for a broker or dealer (or registered representative) 
when providing recommendations to a retail cus-
tomer is as follows: 
‘‘(A) RECOMMENDATION TO RETAIL CUS-
TOMER.—When a broker or dealer (or reg-
istered representative) makes a recommendation 
to a retail customer, the recommendation shall 
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be in the retail customer’s best interest at the 
time it is made by— 
‘‘(i) reflecting reasonable diligence; 
and 
‘‘(ii) reflecting the reasonable care, 
skill, and prudence that a broker or dealer 
(or registered representative) would exer-
cise based on the customer’s investment 
profile. 
‘‘(B) 
DISCLOSURE
TO
RETAIL
CUS-
TOMER.— 
‘‘(i) IN GENERAL.—Before a broker or 
dealer (or registered representative) exe-
cutes a transaction for the first time for 
each retail customer based on a rec-
ommendation to such retail customer, such 
broker or dealer (or registered representa-
tive) shall disclose prior to the point of sale 
to such customer, in a clear and concise 
manner— 
‘‘(I) the type and scope of serv-
ices the broker or dealer (or registered 
representative) provides; 
‘‘(II) the standard of conduct 
that applies to the relationship; 
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‘‘(III) the types of compensation 
the broker or dealer (or registered 
representative) receives; and 
‘‘(IV) any material conflict of in-
terest. 
‘‘(ii) CONTENT OF DISCLOSURE.—The 
Commission may issue regulations deter-
mining the content of the disclosure re-
quired in clause (i). Such regulations may 
provide for a disclosure of fees received by 
the broker or dealer, whether from the re-
tail customer or a third party, prior to the 
execution of the transaction. 
‘‘(C) MATERIAL
CONFLICT
OF
INTER-
EST.—A broker or dealer (or registered rep-
resentative) shall avoid, disclose, or otherwise 
reasonably manage any material conflict of in-
terest with a retail customer. 
‘‘(2) NONVIOLATION
OF
STANDARD
OF
CON-
DUCT.—The following is not, by itself, a violation of 
the standard of conduct described in paragraph (1): 
‘‘(A) The receipt of compensation, includ-
ing 
transaction-based 
compensation, 
by 
a 
broker or dealer (or registered representative) 
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or any affiliate of such broker or dealer (or reg-
istered representative). 
‘‘(B) The recommendation by a broker or 
dealer (or registered representative) to a retail 
customer of principal transactions (including 
cross transactions), or the recommendation of 
affiliated, unaffiliated, or proprietary products 
or services, or a limited range of products or 
services. 
‘‘(3) NO REQUIREMENT TO RECOMMEND LEAST 
EXPENSIVE PRODUCT.—Nothing in this subsection 
shall require a broker or dealer (or registered rep-
resentative) to recommend the least expensive secu-
rity or investment strategy (however quantified) or 
to analyze all possible securities, other products, or 
investment strategies before making a recommenda-
tion. 
‘‘(4) DEFINITIONS.—In this subsection: 
‘‘(A) COMPENSATION.—The term ‘com-
pensation’ 
includes 
commissions 
or 
sales 
charges, or other fees or variable compensation, 
for or related to the sale of securities or for the 
servicing of customer accounts, whether paid by 
the retail customer or received from a third 
party. 
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‘‘(B) 
CUSTOMER’S
INVESTMENT
PRO-
FILE.—The term ‘customer’s investment profile’ 
has the meaning of such term as described in 
Rule 2111 of the Financial Industry Regulatory 
Authority as of the date of the enactment of 
this subsection. 
‘‘(C) INSTITUTIONAL ACCOUNT.—The term 
‘institutional account’ has the same meaning 
given such term in Rule 4512 of the Financial 
Industry Regulatory Authority as of the date of 
the enactment of this subsection. 
‘‘(D) MATERIAL
CONFLICT
OF
INTER-
EST.—The term ‘material conflict of interest’ 
means a financial interest of a broker or dealer 
(or registered representative) that a reasonable 
person would expect to affect the impartiality of 
a recommendation. 
‘‘(E) REASONABLE DILIGENCE.—The term 
‘reasonable diligence’ has the meaning of such 
term as described in Rule 2111 of the Financial 
Industry Regulatory Authority as of the date of 
the enactment of this subsection. 
‘‘(F) RECOMMENDATION.—The term ‘rec-
ommendation’ means either of the following rec-
ommendations (under the meaning ascribed to 
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such term in Rule 2111 of the Financial Indus-
try Regulatory Authority) for which the broker 
or dealer (or registered representative) making 
the recommendation receives or will receive 
compensation: 
‘‘(i) A non-discretionary recommenda-
tion to buy, hold, or sell securities, or to 
follow an investment strategy involving se-
curities, for taxable or non-taxable ac-
counts. 
‘‘(ii) A non-discretionary recommenda-
tion to rollover or transfer assets in an em-
ployer-sponsored retirement plan to an in-
dividual retirement account. 
‘‘(G) RETAIL CUSTOMER.—The term ‘re-
tail customer’ means a natural person or legal 
entity, or the legal representative of such nat-
ural person or legal entity, in each case other 
than an institutional account, who— 
‘‘(i) receives a recommendation from a 
broker or dealer (or registered representa-
tive); and 
‘‘(ii) implements such recommenda-
tion with such broker or dealer primarily 
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for personal, family, retirement, or house-
hold purposes. 
‘‘(5) SUPERSESSION.—The provisions of this 
subsection shall supersede and preempt State law, 
other than a State law that regulates insurance 
products that are not securities, insofar as they may 
now or hereafter relate to a broker or dealer, or reg-
istered representative of a broker or dealer. 
‘‘(6) FIDUCIARY STATUS UNDER ERISA, THE IN-
TERNAL REVENUE CODE, THE INVESTMENT ADVIS-
ERS ACT OF 1940, OR OTHER FIDUCIARY REGIMES.— 
The fact that a person may owe, or may in fact com-
ply with, the standard of conduct under this sub-
section shall not mean or create any presumption 
that such person is a ‘fiduciary’ under the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 
1001 et seq.), section 4975 of the Internal Revenue 
Code of 1986, the Investment Advisers Act of 1940 
(15 U.S.C. 80b et seq.), or any other Federal, State, 
or local statutory or regulatory fiduciary regime.’’. 
(2) APPLICATION.—The amendment made by 
paragraph (1) shall apply to brokers and dealers (or 
registered representative) on the date that is 18 
months after the date of the enactment of this Act. 
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(b) RULEMAKING AUTHORITY.—Section 913 of the 
Dodd-Frank Wall Street Reform and Consumer Protec-
tion Act is amended to read as follows: 
‘‘SEC. 913. OBLIGATIONS OF BROKERS AND DEALERS AND 
OTHER PERSONS AND ENTITIES. 
‘‘(a) RULEMAKING.— 
‘‘(1) RULEMAKING BY THE COMMISSION.—The 
Commission may issue regulations as the Commis-
sion determines is necessary to facilitate compliance 
by brokers and dealers (including their registered 
representative) with the obligations of such brokers 
and dealers (and their registered representative) 
under the second subsection (k) of section 15 of the 
Securities Exchange Act of 1934 only if such rule-
making does not impose any obligation related to 
standard of care on a broker or dealer (or its reg-
istered representative) that is in addition to, duplica-
tive of, or inconsistent with, the obligations set forth 
in such subsection. 
‘‘(2) RULEMAKING
BY
THE
SECRETARY
OF 
LABOR AND THE SECRETARY OF THE TREASURY.— 
After the date of the enactment of the PASS Act of 
2017, the Secretary of Labor and the Secretary of 
the Treasury shall not promulgate any regulation 
under the Employee Retirement Income Security Act 
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of 1974 (29 U.S.C. 1001 et seq.) or section 4975 of 
the Internal Revenue Code of 1986, respectively, de-
fining the circumstances under which a person is 
considered a fiduciary that would impose any obliga-
tion on a broker or dealer (or its registered rep-
resentative) or on a life insurer fulfilling the term 
‘insurance company’ as defined in section 3(a)(2) of 
the Securities Act of 1933 (or its agents or distribu-
tors) that is in addition to, duplicative of, or incon-
sistent with, the obligations set forth in such sub-
section (k) of section 15 of the Securities Exchange 
Act of 1934 (15 U.S.C. 78o). 
‘‘(b) EXEMPTION AVAILABLE TO CERTAIN PERSONS 
WITH RESPECT TO MANUFACTURE OR SALE OF ANNU-
ITIES.— 
‘‘(1) EXEMPTION.—With respect to the manu-
facture or sale of annuities within paragraphs (2) or 
(8) of section 3(a) of the Securities Act of 1933 (15 
U.S.C. 77c(a)) or section 989J of the Dodd-Frank 
Wall Street Reform and Consumer Protection Act 
(15 U.S.C. 77c note), a person regulated by a State 
insurance regulator may rely on the exemptions in 
section 408(b)(21) of the Employee Retirement In-
come Security Act of 1974 (29 U.S.C. 1108(b)(21)) 
and section 4975(d)(24) of the Internal Revenue 
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Code of 1986 (as added by the PASS Act of 2017) 
only if— 
‘‘(A) such person adopts and implements 
practices on a nationwide basis for the sale of 
annuity contracts that meet or exceed the min-
imum requirements set forth in the second sub-
section (k) of section 15 of the Securities Ex-
change Act of 1934 (15 U.S.C. 78o) and such 
person is subject to regulation or examination 
by a State insurance regulator for purposes of 
assessing market conduct; or 
‘‘(B) such person complies with a standard 
substantially similar to such subsection (k) and 
is regulated by a State insurance regulator with 
respect to annuities within paragraphs (2) or 
(8) of section 3(a) of the Securities Act of 1933 
(15 U.S.C. 77c(a)) or section 989J of the 
Dodd-Frank Wall Street Reform and Consumer 
Protection Act (15 U.S.C. 77c note). 
‘‘(2) 
COORDINATION
AND
COOPERATION.— 
Upon the request of any State insurance regulator, 
the Commission or the Financial Industry Regu-
latory Authority shall provide such reasonable assist-
ance to the requesting Authority as needed in con-
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nection with the coordination or implementation of 
this section. 
‘‘(3) DEFINITION OF STATE INSURANCE REGU-
LATOR.—As used in this subsection, the term ‘State 
insurance regulator’ means the principal insurance 
regulatory authority of a State, the District of Co-
lumbia, any territory of the United States, Puerto 
Rico, Guam, American Samoa, the Trust Territory 
of the Pacific Islands, the Virgin Islands, and the 
Northern Mariana Islands. 
‘‘(c) ADDITIONAL EXEMPTIONS.—A person who com-
plies with a standard substantially similar to the second 
subsection (k) of section 15 of the Securities Exchange 
Act of 1934 (15 U.S.C. 78o) may rely on the exemptions 
in section 408(b)(21) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1108(b)(21)) and section 
4975(d)(24) of the Internal Revenue Code of 1986 (as 
added by the PASS Act of 2017) only if such person is— 
‘‘(1) registered as an investment adviser under 
the Investment Advisers Act of 1940 (15 U.S.C. 
80b–1 et seq.) or under the laws of the State in 
which the person maintains its principal office and 
place of business; or 
‘‘(2) a bank or similar financial institution su-
pervised by the United States or a State, or a sav-
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