II 116th CONGRESS 1st Session S. 2391 IN THE SENATE OF THE UNITED STATES July 31, 2019 Mr. Brown introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs A BILL To amend the Securities Exchange Act of 1934 to impose requirements relating to the purchase of certain equity securities by issuers, and for other purposes.

1. Short title This Act may be cited as the Stock Buyback Reform and Worker Dividend Act of 2019 . 2. Findings Congress finds the following: (1) Over the last several decades— (A) the volume and value of stock buybacks have increased significantly, with particularly large increases occurring in the 15 years preceding the date of enactment of this Act; and (B) the wealth gap in the United States has widened drastically, as corporate profits and executive compensation have skyrocketed, but, for workers, salaries and wages have barely increased and purchasing power has remained the same. (2) Between 2004 and 2013, some of the largest companies in the United States spent at least 100 percent of their net income on stock buybacks and, between 2010 and 2017, companies in the United States spent more than $3,000,000,000,000 on those buybacks. After the enactment of changes to the tax laws of the United States in December 2017, companies in the United States further increased stock buyback activity. (3) In 2018— (A) companies listed in the S&P 500 index spent $806,400,000,000 purchasing their own stock, an amount that is 55 percent higher than in 2017 and 36 percent higher than in 2007, the year that— (i) had previously held the record for the largest total buyback amount; and (ii) marked the beginning of the most significant financial crisis since the Great Depression; and (B) companies spent more money on stock buybacks than on debt payments, capital expenditures, research and development, or dividends. (4) Stock buybacks benefit large shareholders and corporate executives, the pay packages of whom include significant stock compensation. Those buybacks can also increase the earnings per share for a company and nearly 1/2 of the companies listed in the S&P 500 index link executive compensation to earnings per share. (5) Compared to the typical worker, the compensation for a chief executive officer (referred to in this paragraph as a CEO ) has increased significantly. In 1989, the ratio of CEO-to-worker compensation was 58 to 1, but, in 2017, that ratio was 312 to 1. Over roughly the same period of time, the wealth gap in the United States has widened considerably. Between 1989 and 2016, the share of wealth in the United States held by the top 1 percent of individuals in the United States with respect to annual income increased from just below 30 percent to nearly 39 percent, while the share of wealth held by the bottom 90 percent of individuals in the United States with respect to annual income dropped from slightly more than 33 percent to less than 23 percent. (6) Since 2000, corporate profits, as a percentage of total income in the United States, have increased by nearly 5 percentage points while workers’ salaries, as a percentage of that total income, have decreased by 4 percentage points. (7) The economic strength of the United States is undermined by the wealth gap described in this section. According to the Organisation for Economic Co-operation and Development, increasing income inequality in the United States between 1990 and 2010 reduced the per capita gross domestic product of the United States by approximately 5 percentage points. (8) Left unaddressed, the patterns of corporate excess and growing wealth inequality described in this section will worsen and workers will continue to contribute to corporate profits without sharing in those profits. 3. Repurchase of common stock (a) Repeal of safe harbor Section 240.10b–18 of title 17, Code of Federal Regulations, shall have no force or effect. (b) Disclosure and other requirements The Securities Exchange Act of 1934 ( 15 U.S.C. 78a et seq.) is amended by inserting after section 9 ( 15 U.S.C. 78i ) the following: 9A. Issuer common stock repurchases (a) Definitions (1) In general Except as provided in paragraph (2), in this section, the definitions of terms in section 240.10b–18(a) of title 17, Code of Federal Regulations, as in effect on the day before the date of enactment of this section, shall apply to any such term that appears in this section. (2) Covered purchase The term covered purchase — (A) means a purchase (or any bid or limit order that would effect such purchase) of the common stock of an issuer (or an equivalent interest, including a unit of beneficial interest in a trust or limited partnership or a depository share) by or for the issuer or any affiliated purchaser (including riskless principal transactions); (B) includes a purchase described in subparagraph (A) that is effected during a transaction described in subparagraph (C)(iv) in which the consideration is solely cash and there is no valuation period; and (C) does not include a purchase described in subparagraph (A) that is effected— (i) during the applicable restricted period of a distribution that is subject to section 242.102 of title 17, Code of Federal Regulations, or any successor regulation; (ii) by or for an issuer plan by an agent independent of the issuer; (iii) as a fractional share purchase (a fractional interest in a security) evidenced by a script certificate, order form, or similar document; (iv) during the period from the time of public announcement, as defined in section 230.165(f) of title 17, Code of Federal Regulations, or any successor regulation, of a merger, acquisition, or similar transaction involving a recapitalization, until the earlier of the completion of that transaction or the completion of the vote by target shareholders; (v) pursuant to section 240.13e–1 of title 17, Code of Federal Regulations, or any successor regulation; (vi) pursuant to a tender offer that is subject to or specifically excepted from section 240.13e–4 of title 17, Code of Regulations, or any successor regulation; or (vii) pursuant to a tender offer that is subject to section 14(d), and any rules or regulations prescribed by the Commission relating to that section. (b) Requirement (1) In general Except as provided in paragraph (2), it shall be unlawful as a fraudulent, deceptive, or manipulative act or practice under section 9(a)(2) or 10(b) of this Act or section 240.10b–5 of title 17, Code of Federal Regulations, or any successor regulation, for an issuer or affiliated purchaser of the issuer to effect a repurchase of the common stock of the issuer unless the issuer or affiliated purchaser, as applicable, complies with the requirements under this section. (2) Exceptions Paragraph (1) shall not apply— (A) to an issuer or affiliated purchaser of an issuer if— (i) a violation of the requirements under this section occurred solely by reason of the conduct of a broker, dealer, or other person acting for the issuer or affiliated purchaser; (ii) the issuer or affiliated purchaser did not know or have reason to know that the broker, dealer, or other person was engaging or would engage in that conduct; and (iii) the issuer or affiliated purchaser had taken reasonable steps to ensure that the broker, dealer, or other person would comply with the requirements under this section; or (B) to a broker, dealer, or other person acting for an issuer or affiliated purchaser of the issuer if— (i) a violation of the requirements under this section occurred solely by reason of the conduct of the issuer or affiliated purchaser; and (ii) the broker, dealer, or other person did not know or have reason to know that the issuer or affiliated purchaser was engaging or would engage in conduct that would violate the requirements under this section. (c) Disclosure (1) In general Any issuer or affiliated purchaser of the issuer that seeks to effect a plan or program to repurchase common stock of the issuer shall, on or before the date on which the issuer or affiliated purchaser begins repurchasing common stock under the plan or program, disclose to the Commission on a Form 8–K a filing that includes— (A) the economic rationale, long-term benefits, and reason for the repurchase; (B) the minimum and maximum number (if any) of shares of common stock to be repurchased, and the dollar value to be spent, under the plan or program; (C) the manner and method of repurchase, including any price guidelines or limitations, or contractual plan or arrangement; (D) the intended disposition or treatment of the repurchased common stock; (E) whether any executive officer of the issuer or affiliated purchaser is purchasing common stock during the pendency of the repurchase; (F) whether any executive officer of the issuer or affiliated purchaser is permitted, or intends, to sell common stock during the pendency of the repurchase; (G) a summary of any communications between the issuer and any holders of common stock of the issuer regarding the scope and implementation of the plan or program; and (H) the source of funds for the repurchase, specifying if any debt will be incurred by the issuer or affiliated purchaser. (2) Weekly disclosure (A) In general In addition to the requirement under paragraph (1), each issuer that effects a repurchase of common stock of the issuer in any calendar week shall, not later than the last business day of the following week, file with the Commission a public disclosure filing (in such form and manner as the Commission shall, by rule, establish) that identifies— (i) the number of shares of common stock of the issuer that the issuer repurchased; (ii) the average price paid per share during the week covered by the filing; and (iii) the identity of any broker-dealer that effected the purchase during the week covered by the filing. (B) No repurchase An issuer shall not be required to submit a filing under subparagraph (A) with respect to any calendar week in which the issuer does not repurchase the common stock of the issuer. (3) Definition In this subsection, the term executive officer has the meaning given the term in section 240.3b–7 of title 17, Code of Federal Regulations, as in effect on the day before the date of enactment of this section. (d) Purchasing requirements (1) One broker or dealer (A) In general Except as provided in subparagraph (B) and paragraph (2)(B)(ii), a covered purchase shall be effected from or through only 1 broker or dealer on any single day. (B) Exception Subparagraph (A) shall not apply to a covered purchase that is not solicited by or on behalf of an issuer or an affiliated purchaser of the issuer. (C) Same broker or dealer If a covered purchase is effected by or on behalf of not less than 1 affiliated purchaser of an issuer (or the issuer and not less than 1 of the affiliated purchasers of the issuer) on a single day, the issuer and all affiliated purchasers shall use the same broker or dealer. (D) Limited access to liquidity If a covered purchase is effected on behalf of an issuer by a broker-dealer that is not an electronic communication network or other alternative trading system, that broker-dealer can access electronic communication network or other alternative trading system liquidity in order to execute a repurchase of common stock on behalf of the issuer or any affiliated purchaser of the issuer on that day. (2) Time of purchases (A) In general A covered purchase effected by an issuer or an affiliated purchaser of an issuer shall not be— (i) the opening (regular way) purchase reported in the consolidated system; (ii) except as provided in subparagraph (B), effected during the 10 minutes before the scheduled close of the primary trading session in the principal market for the security, and the 10 minutes before the scheduled close of the primary trading session in the market where the purchase is effected, for a security that has an average daily trading volume reported for that security during the 4 calendar weeks preceding the week in which the purchase is to be effected of not less than $1,000,000 and a public float value of not less than $150,000,000; or (iii) effected during the 30 minutes before the scheduled close of the primary trading session in the principal market for the security, and the 30 minutes before the scheduled close of the primary trading session in the market where the purchase is effected, for all other securities. (B) Purchase following close of primary trading session (i) In general A covered purchase may be effected following the close of the primary trading session until the termination of the period in which last sale prices are reported in the consolidated system if— (I) the covered purchase is effected at a price that does not exceed the lower of— (aa) the closing price of the primary trading session in the principal market for the security; or (bb) any lower bids or sale prices subsequently reported in the consolidated system; and (II) all other applicable requirements under this section are met. (ii) Different brokers and dealers An issuer or an affiliated purchaser of an issuer may use 1 broker or dealer to effect a covered purchase during the period described in clause (i) that is different from the broker or dealer that the issuer or affiliated purchaser used during the primary trading session. (iii) Limitation A covered purchase effected during the period described in clause (i) may be not be the opening transaction of the session following the close of the primary trading session. (3) Price of purchases Any covered purchase shall be effected at a purchase price that— (A) does not exceed the highest independent bid or the last independent transaction price, whichever is higher, quoted or reported in the consolidated system at the time the covered purchase is effected; (B) for securities for which bids and transaction prices are not quoted or reported in the consolidated system, does not exceed the highest independent bid or the last independent transaction price, whichever is higher, displayed and disseminated on any national securities exchange or on any interdealer quotation system, as defined in section 240.15c2–11 of title 17, Code of Federal Regulations (or any successor regulation), that displays not less than 2 priced quotations for the security, at the time the covered purchase is effected; and (C) for any other security not described in subparagraph (B), is not higher than the highest independent bid obtained from 3 independent dealers. (4) Volume of purchases The total volume of covered purchases effected by or for an issuer and any affiliated purchaser of the issuer on any single day shall not exceed 15 percent of the average daily trading volume reported for that security during the 4 calendar weeks preceding the week in which the covered purchase is to be effected. (5) Alternative conditions The conditions of paragraphs (1) through (4) shall apply in connection with a covered purchase effected during a trading session following the imposition of a market-wide trading suspension, except that— (A) the time of covered purchases condition under paragraph (2) shall not apply either— (i) from the reopening of trading until the scheduled close of trading on the date on which that suspension is imposed; or (ii) at the opening of trading on the next trading day until the scheduled close of trading that day, if a market-wide trading suspension was in effect at the close of trading on the preceding day; and (B) the volume of covered purchases condition under paragraph (4) shall be modified so that the amount of covered purchases may not exceed 100 percent of the average daily trading volume for that security. (e) Prohibition on sales by executive officers (1) In general Except as provided in paragraph (2), upon the announcement by an issuer of the initiation, continuation, or increase in size of a repurchase plan for the common stock of the issuer, an executive officer of the issuer may not sell shares of the common stock of the issuer during the 7-day period beginning on the date of the announcement. (2) Exception An executive officer of an issuer may sell shares of the common stock of the issuer during the 7-day period described in paragraph (1) if the sale of the shares involves a sale of common stock that satisfies the conditions under section 240.10b5–1(c) of title 17, Code of Federal Regulations, or any successor regulation. (f) Additional regulation The Commission may, by rule, establish further disclosures, conditions, or requirements to increase the information provided by issuers with respect to repurchases of common stock. . (c) Form 8–K Not later than 1 year after the date of enactment of this Act, the Securities and Exchange Commission (referred to in this section as the Commission ) shall revise the form described in section 249.308 of title 17, Code of Federal Regulations, or any successor regulation (commonly known as Form 8–K ), to require the disclosure of the information described in section 9A(c) of the Securities Exchange Act of 1934, as added by subsection (b). (d) Study Not later than 1 year after the date of enactment of this Act, the Commission shall submit to Congress— (1) the results of a study conducted by the Commission regarding the impact of this section, and the amendments made by this section, on thinly traded securities; and (2) recommendations regarding any changes to paragraph (4) of section 9A(d) of the Securities Exchange Act of 1934, as added by subsection (b) of this section, that the Commission determines to be necessary. 4. Worker dividend (a) Definitions In this section— (1) the term Commission means the Securities and Exchange Commission; (2) the term covered issuer — (A) means an issuer, a class of equity securities of which is registered pursuant to section 12 of the Securities Exchange Act of 1934 ( 15 U.S.C. 78l ); and (B) includes a consolidated subsidiary of an issuer described in subparagraph (A); (3) the term eligible worker , with respect to a covered issuer, means a worker with respect to the covered issuer who, in a fiscal year— (A) performs services for the covered issuer for not fewer than 30 days; (B) as part of carrying out a contract described in paragraph (10)(A)(iv)(I)(cc), performs services or provides goods pursuant to that contract for not fewer than 30 days; or (C) performs services for an employer described in paragraph (10)(A)(v) for not fewer than 30 days; (4) the terms employ , employee , employer , and goods have the meanings given those terms in section 3 of the Fair Labor Standards Act of 1938 ( 29 U.S.C. 203 ); (5) the terms exchange and issuer have the meanings given those terms in section 3(a) of the Securities Exchange Act of 1934 ( 15 U.S.C. 78c(a) ); (6) the term executive officer , with respect to a covered issuer, means— (A) the president of the covered issuer; (B) any vice president of the covered issuer who is in charge of a principal business unit, division, or function of the covered issuer, such as sales, administration, or finance; (C) any other officer of the covered issuer who performs a policymaking function for the covered issuer; and (D) any other individual who performs a similar policymaking function to that described in subparagraph (C); (7) the term Form 10–K means the form described in section 249.310 of title 17, Code of Federal Regulations, or any successor regulation; (8) the term Form 10–Q means the form described in section 249.308a of title 17, Code of Federal Regulations, or any successor regulation; (9) the terms franchisee and franchisor have the meanings given those terms in section 436.1 of title 16, Code of Federal Regulations, as in effect on the date of enactment of this Act; and (10) the term worker — (A) means, with respect to a covered issuer— (i) an employee who is employed by the covered issuer; (ii) an individual, other than an employee described in clause (i), who is engaged by the covered issuer to perform services, including by working as an independent contractor, without regard to— (I) the label or classification assigned to the individual, or used to refer to the individual, by the covered issuer; and (II) whether the individual has established, and is the sole owner of, a single-member limited liability company; (iii) an employee who is— (I) employed by an employer— (aa) other than the covered issuer; and (bb) that is privately held; and (II) supplied by the employer described in subclause (I) to perform services for the covered issuer; (iv) an employee who— (I) is employed by an employer— (aa) other than the covered issuer; (bb) that is privately held; and (cc) with which the covered issuer enters into a contract, under which that employer performs services for, or provides goods to, the covered issuer; and (II) performs services or provides goods pursuant to the contract described in subclause (I)(cc); and (v) an employee who is employed by an employer— (I) other than the covered issuer; (II) that is privately held; and (III) that has a relationship or arrangement with the covered issuer such that the employer is a franchisee and the covered issuer is a franchisor; and (B) does not include an executive officer of a covered issuer. (b) Requirements (1) Calculation of worker dividend For the purposes of the requirements of this section, for a fiscal year (referred to in this section as the covered year ), the payment described in paragraph (3)(A) shall be calculated as follows: (A) Adding the following amounts: (i) In that covered year, the total amount spent by the covered issuer on the purchase of common stock (or an equivalent interest, including a unit of beneficial interest in a trust or limited partnership or a depository share) of the covered issuer, without regard to the means or method used by the covered issuer to effect that purchase. (ii) The total amount of any increase in ordinary dividends declared and paid by the covered issuer in the covered year with respect to the common stock of the covered issuer, as compared with that amount in the fiscal year preceding the covered year. (iii) The total amount spent by the covered issuer in the covered year on special or 1-time dividends with respect to the common stock of the covered issuer. (B) Dividing the sum obtained under subparagraph (A) by 1,000,000. (2) Reporting Each covered issuer shall— (A) in each Form 10–K submitted by the covered issuer, disclose, with respect to the covered year to which the submission applies— (i) each component of the calculation described in paragraph (1), and the total amount of that calculation, if that calculation results in an amount that is greater than zero; and (ii) the number of eligible workers with respect to the covered issuer, which the covered issuer shall identify by type of worker and employer; and (B) not later than 30 days after the last day of a covered year, provide to each worker with respect to the covered issuer a document, in physical or electronic form, that discloses the number of hours that the worker worked during the covered year. (3) Payment and verification (A) In general Not later than the last day of the first fiscal quarter that begins after the end of a covered year, if the calculation under paragraph (1) with respect to that covered year results in an amount that is greater than zero, each covered issuer shall issue to each eligible worker with respect to the covered issuer for that covered year a cash payment as follows: (i) An eligible worker who was employed, or otherwise engaged, to perform services for the covered issuer, perform services or provide goods pursuant to a contract described in subsection (a)(10)(A)(iv)(I)(cc), or perform services for an employer described in subsection (a)(10)(A)(v) for fewer than 520 hours during the covered year shall receive 25 percent of the amount calculated under paragraph (1). (ii) An eligible worker who was employed, or otherwise engaged, to perform services for the covered issuer, perform services or provide goods pursuant to a contract described in subsection (a)(10)(A)(iv)(I)(cc), or perform services for an employer described in subsection (a)(10)(A)(v) for not fewer than 520 hours and fewer than 1,040 hours during the covered year shall receive 50 percent of the amount calculated under paragraph (1). (iii) An eligible worker who was employed, or otherwise engaged, to perform services for the covered issuer, perform services or provide goods pursuant to a contract described in subsection (a)(10)(A)(iv)(I)(cc), or perform services for an employer described in subsection (a)(10)(A)(v) for not fewer than 1,040 hours and fewer than 1,560 hours during the covered year shall receive 75 percent of the amount calculated under paragraph (1). (iv) An eligible worker who was employed, or otherwise engaged, to perform services for the covered issuer, perform services or provide goods pursuant to a contract described in subsection (a)(10)(A)(iv)(I)(cc), or perform services for an employer described in subsection (a)(10)(A)(v) for not fewer than 1,560 hours during the covered year shall receive 100 percent of the amount calculated under paragraph (1). (B) Form 10–Q Each covered issuer that is required to issue payments under subparagraph (A) with respect to a covered year shall certify, in the first Form 10–Q submitted by the covered issuer after the date on which the covered issuer is required to make the payments, that the covered issuer made the payments. (C) Inability to make payments If a covered issuer is required to issue a payment under subparagraph (A) and is unable to issue the payment because the individual to whom the payment relates is, as of the date on which the payment is due, no longer a worker with respect to the covered issuer, the covered issuer shall— (i) in a manner that the Commission shall, by rule, establish, deposit in an escrow account the amount of the required payment; and (ii) in the submission under subparagraph (B) to which the payment relates, describe the efforts of the covered issuer to issue the payment. (c) Enforcement With respect to a covered issuer that is required to issue the payments described in subsection (b)(3)(A) and fails to issue those payments— (1) the covered issuer— (A) for the 5-year period beginning on the date on which the covered issuer was required to issue the payments, may not make a purchase to which section 9A of the Securities Exchange Act of 1934, as added by section 3(b) of this Act, applies, except to account for common stock that is issuable under an employee stock or option award in any such year; and (B) for each of the first 5 fiscal years after the covered year with respect to which the covered issuer was required to issue the payments, shall issue those payments in the amount required with respect to the covered year; and (2) the Commission may, in accordance with applicable laws and regulations, bring an enforcement action against the covered issuer. (d) Protections for workers (1) Prohibition No covered issuer may discharge or in any manner discriminate against any worker with respect to the covered issuer with respect to the compensation, terms, conditions, or other privileges of employment of the worker because the worker is eligible to receive a payment from the covered issuer under subsection (b)(3)(A). (2) Private right of action (A) In general Any covered issuer that fails to issue a payment to a worker with respect to the covered issuer that is required under subsection (b)(3)(A) shall be liable to that worker in the amount of that payment and in an additional amount as liquidated damages. (B) Jurisdiction An action to recover the liability described in subparagraph (A) may be maintained against a covered issuer described in that subparagraph in any Federal or State court of competent jurisdiction by any 1 or more workers described in that subparagraph for and on behalf of that worker or workers and other workers similarly situated, except that no worker shall be a party plaintiff to any such action unless the worker gives consent to become such a party and that consent is filed in the court in which the action is brought. (C) Attorney’s fees The court in which an action is brought under subparagraph (B) shall, in addition to any judgment awarded to the plaintiff or plaintiffs in the action, allow a reasonable attorney’s fee to be paid by the defendant and the costs of the action. (D) Arbitration Notwithstanding any other Federal or State law, rule, or regulation, any agreement to arbitrate any dispute involving a covered issuer and a worker with respect to the covered issuer shall not apply with respect to the right of the worker to bring an action under this paragraph. (e) Rules of construction (1) In general Nothing in this section may be construed to— (A) supersede any provision in any collective bargaining agreement to which a covered issuer is a party; or (B) prevent an individual from receiving multiple payments under subsection (b)(3)(A) for a covered year if the individual is an eligible worker with respect to more than 1 covered issuer in that covered year. (2) Other profit-sharing agreements No other profit-sharing agreement between a covered issuer and any worker with respect to the covered issuer, other than as specifically described in this section, may be construed to satisfy the requirements of this section. 5. Commission requirements (a) Definition In this section, the term Regulation S–K means part 229 of title 17, Code of Federal Regulations, or any successor regulations. (b) Updates Not later than 1 year after the date of enactment of this Act, the Securities and Exchange Commission shall make any updates to Regulation S–K that are required as a result of this Act and the amendments made by this Act.