Title: Index Provider Transparency and Accountability Act
Policy area: Finance and Financial Sector

Summary:
Index Provider Transparency and Accountability Act
This bill establishes requirements for an investment company related to its (1) use of market indices, and (2) investment in Chinese securities.
The bill requires an investment company to disclose information related to the company's use of a market index. (A market index is calculated based on a set of investments for the purpose of tracking the changes in the market represented by the investments. For example, the S&P 500 Index is generally used as an indicator of the U.S. stock market. Investment companies may use these indices for developing index funds, among other uses.) Specifically, an investment company must disclose whether it intends to track the returns of, or benchmark against, a specific market index and if so, disclose certain interactions between the company and the index provider.
Additionally, the bill requires an authorizing vote by the board of directors of the investment company in the event of certain deviations from investment policy relating to an index, including a deviation involving securities issued by a company headquartered or incorporated in China or listed on a Chinese exchange.
Finally, an investment company must annually disclose to stockholders specific information regarding securities owned by the company and issued by a company headquartered or incorporated in China or listed on a Chinese exchange.


[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[S. 1743 Introduced in Senate (IS)]

<DOC>






117th CONGRESS
  1st Session
                                S. 1743

     To amend the Investment Company Act of 1940 to impose certain 
   requirements relating to the use of market indexes, and for other 
                               purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                              May 20, 2021

   Mr. Rubio introduced the following bill; which was read twice and 
    referred to the Committee on Banking, Housing, and Urban Affairs

_______________________________________________________________________

                                 A BILL


 
     To amend the Investment Company Act of 1940 to impose certain 
   requirements relating to the use of market indexes, and for other 
                               purposes.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Index Provider Transparency and 
Accountability Act''.

SEC. 2. MARKET INDEXES.

    (a) In General.--The Investment Company Act of 1940 (15 U.S.C. 80a-
1 et seq.) is amended--
            (1) in section 8(b) (15 U.S.C. 80a-8(b))--
                    (A) in paragraph (4), by striking ``and'' at the 
                end;
                    (B) in paragraph (5), by striking the period at the 
                end and inserting ``; and''; and
                    (C) by adding at the end the following:
            ``(6) a disclosure of--
                    ``(A) whether the registrant intends to track the 
                returns of, or benchmark against, a specific index of 
                securities; and
                    ``(B) if the registrant intends to track the 
                returns of, or benchmark against, a specific index of 
                securities--
                            ``(i) the identity of the index provider;
                            ``(ii) any involvement of the registrant in 
                        designing the index;
                            ``(iii) any ability of the registrant to 
                        influence the construction or composition of 
                        the index; and
                            ``(iv) any licensing fees paid by the 
                        registrant to the index provider.'';
            (2) in section 13 (15 U.S.C. 80a-13)--
                    (A) by redesignating subsection (c) as subsection 
                (d); and
                    (B) by inserting after subsection (b) the 
                following:
    ``(c) Change in Investment Policy Relating to Indexing.--
            ``(1) In general.--With respect to a registered investment 
        company that tracks the returns of, or benchmarks against, a 
        specific index of securities, if a deviation with respect to 
        that index occurs such that the deviation would be permitted 
        under subsection (a)(3) if made directly by the investment 
        company only if authorized by the vote of a majority of the 
        outstanding voting securities of the investment company, the 
        investment company may not continue to so track, or benchmark 
        against, the index, unless so authorized by such a vote or by a 
        vote by the board of directors of the investment company.
            ``(2) Rule of construction.--For the purposes of paragraph 
        (1), a deviation with respect to an index that requires a vote, 
        as described in that paragraph, includes such a deviation that 
        adds new, or increases the weighting of, securities--
                    ``(A) of issuers that are headquartered or 
                incorporated in the People's Republic of China; or
                    ``(B) that are listed on exchanges in the People's 
                Republic of China.''; and
            (3) in section 30 (15 U.S.C. 80a-29)--
                    (A) in subsection (b)(1), by striking ``this title; 
                and'' and inserting the following: ``this title, which 
                shall include--
                    ``(A) information regarding whether the registered 
                investment company tracks the returns of, or benchmarks 
                against (or intends to track, or benchmark against), a 
                specific index of securities; and
                    ``(B) if the registered investment company engages 
                in, or intends to engage in, the action described in 
                subparagraph (A), the information described in section 
                8(b)(6)(B) with respect to the index described in 
                subparagraph (A) of this paragraph; and''; and
                    (B) by adding at the end the following:
    ``(k) Annual Disclosure Regarding Chinese Securities.--
            ``(1) In general.--Each registered investment company shall 
        annually transmit to the stockholders of the investment company 
        a report containing information regarding, with respect to any 
        security owned by the investment company that is issued by an 
        issuer that is headquartered or incorporated in the People's 
        Republic of China or listed on an exchange in the People's 
        Republic of China--
                    ``(A) the percentage of the securities of that 
                issuer that are owned by governmental entities in the 
                People's Republic of China;
                    ``(B) whether the entities described in 
                subparagraph (A) have a controlling financial interest 
                with respect to the issuer;
                    ``(C) the name of any official of the Chinese 
                Communist Party who is a member of the board of 
                directors of--
                            ``(i) the issuer; or
                            ``(ii) the operating entity with respect to 
                        the issuer;
                    ``(D) whether the articles of incorporation of the 
                issuer (or equivalent organizing document) contains any 
                charter of the Chinese Communist Party, including the 
                text of any such charter; and
                    ``(E) whether the investment company was unable to 
                obtain any of the information required under any of 
                subparagraphs (A) through (D).
            ``(2) Inclusion permitted.--A report that a registered 
        investment company is required to transmit under paragraph (1) 
        may be included in a report that the investment company is 
        required to transmit under subsection (e).''.
    (b) Technical and Conforming Amendment.--Section 401(a) of the 
Comprehensive Iran Sanctions, Accountability, and Divestment Act of 
2010 (22 U.S.C. 8551(a)) is amended, in the matter preceding paragraph 
(1), by striking ``section 13(c)(1)(B)'' and inserting ``section 
13(d)(1)(B)''.
    (c) Updates to Rules.--Not later than 1 year after the date of 
enactment of this Act, the Securities and Exchange Commission shall 
make any updates to the rules of the Commission that are necessary as a 
result of this section and the amendments made by this section.
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