H. Rpt. 119-573 accompanies the "Restoring the Secondary Trading Market Act" — legislation that falls within the Financial Services Committee's jurisdiction. Committee reports serve as the official legislative history of a bill, documenting what the legislation would do and why the committee recommends passage. Reports of this kind include the committee's section-by-section analysis, any amendments adopted during markup, the Congressional Budget Office cost estimate, dissenting views from minority members, and the legal basis for the legislation. Courts and agencies consult committee reports when interpreting enacted laws, making these documents important beyond the immediate legislative moment.
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House Report 119-573 - RESTORING THE SECONDARY TRADING MARKET ACT
[House Report 119-573]
[From the U.S. Government Publishing Office]
119th Congress } { Report
HOUSE OF REPRESENTATIVES
2d Session } { 119-573
=======================================================================
RESTORING THE SECONDARY TRADING MARKET ACT
----------------
March 25, 2026.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
----------------
Mr. Hill of Arkansas, from the Committee on Financial Services,
submitted the following
R E P O R T
together with
MINORITY VIEWS
[To accompany H.R. 7127]
The Committee on Financial Services, to whom was referred
the bill (H.R. 7127) to amend the Securities Act of 1933 to
exempt off-exchange secondary trading from State regulation
where such trading is with respect to securities of an issuer
that makes publicly available certain current information, and
for other purposes, having considered the same, reports
favorably thereon with an amendment and recommends that the
bill as amended do pass.
CONTENTS
Page
Purpose and Summary.............................................. 2
Background and Need for Legislation.............................. 2
Committee Consideration.......................................... 3
Related Hearings................................................. 3
Committee Votes.................................................. 4
Committee Oversight Findings..................................... 7
Performance Goals and Objectives................................. 7
Committee Cost Estimate.......................................... 7
New Budget Authority and CBO Cost Estimate....................... 7
Unfunded Mandates Statement...................................... 7
Earmark Statement................................................ 7
Federal Advisory Committee Act Statement......................... 8
Applicability to the Legislative Branch.......................... 8
Duplication of Federal Programs.................................. 8
Section-by-Section Analysis of the Legislation................... 8
Changes in Existing Law Made by the Bill, as Reported............ 8
Minority Views................................................... 13
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Restoring the Secondary Trading Market
Act''.
SEC. 2. EXEMPTION FROM STATE REGULATION.
Section 18(a) of the Securities Act of 1933 (15 U.S.C. 77r(a)) is
amended--
(1) in paragraph (2), by striking ``or'' at the end;
(2) in paragraph (3), by striking the period at the end and
inserting ``; or''; and
(3) by adding at the end the following:
``(4) shall directly or indirectly prohibit, limit, or impose
any conditions upon the off-exchange secondary trading (as such
term is defined by the Commission) in securities of an issuer
that makes current information publicly available, including--
``(A) the information required in the periodic and
current reports described under paragraph (b) of
section 230.257 of title 17, Code of Federal
Regulations; or
``(B) the documents and information specified in
paragraph (b) of section 15c2-11 of title 17, Code of
Federal Regulations.''.
Purpose and Summary
H.R. 7127, the Restoring the Secondary Trading Market Act,
was introduced on January 16, 2026, by Republican
Representative Dan Meuser (PA-09). H.R. 7127 amends the
Securities Act of 1933 to exempt off-exchange secondary trading
from state regulation for issuers that comply with Regulation A
or Rule 15c2-11.
Background and Need for Legislation
There are two types of markets to invest in securities:
primary markets and secondary markets. The primary market is
where companies sell new securities to investors for the first
time, usually through an IPO. The secondary market is where
investors buy and sell securities from other investors, where
transactions can take place on exchange or off exchange. The
New York Stock Exchange and the NASDAQ are examples of on-
exchange secondary markets. Off-exchange transactions are
carried out directly between two parties, instead of through an
exchange.
The sale of securities is regulated both on the federal and
state levels. Before the Securities and Exchange Commission
(SEC) was established in 1934, individual states had already
implemented ``blue sky laws'' aimed at addressing fraud. Thus,
securities regulation in the U.S. consisted of a nationwide
patchwork of federal and state securities laws, which often
duplicated each other. As securities markets grew and became
more complex, the federal and state laws regulating them became
more fragmented and burdensome.
In September 2025, the SEC's Office of the Advocate for
Small Business Capital Formation released a report to Congress
summarizing policy recommendations made during the SEC's 44th
Annual Small Business Forum. The Forum recommended that the SEC
preempt state blue sky laws for off-exchange secondary trading
in companies that make available robust, publicly accessible,
and timely public information, such as information required by
Regulation A Tier 2.
Despite past attempts to streamline federal and state laws
by providing exemptions from certain ``blue sky laws,''
securities regulation remains disjointed. H.R. 7127 prevents
states from prohibiting, limiting, or imposing any conditions
upon the off-exchange secondary trading markets in securities
of an issuer complying with their obligations under Regulation
A or Rule 15c2-11. This streamlined approach ensures that if a
company satisfies federal transparency standards, their shares
can be traded nationwide with the cost and complexity of
navigating a confusing array of state laws.
Committee Consideration
119TH CONGRESS
On January 16, 2026, Representative Meuser introduced H.R.
7127, the Restoring the Secondary Trading Market Act.
The bill was referred solely to the Committee on Financial
Services. The bill was attached to the February 26, 2025,
hearing titled ``The Future of American Capital: Strengthening
Public and Private Markets by Increasing Investor Access and
Facilitating Capital Formation'' and the March 25, 2025,
hearing titled, ``Beyond Silicon Valley: Expanding Access to
Capital Across America.''
On March 4, 2026, the Committee on Financial Services met
in open session to consider, among others, H.R. 7127. The
Committee ordered H.R. 7127, as amended, to be reported with a
favorable recommendation to the House of Representatives.
118TH CONGRESS
On April 6, 2023, Representative Meuser introduced H.R.
2506, the Restoring the Secondary Trading Market Act. The bill
is an earlier iteration of H.R. 7127. The bill was referred
solely to the Committee on Financial Services.
On April 24, 2023, Representative Patrick McHenry (R-NC)
introduced H.R. 2799, the Expanding Access to Capital Act of
2023. This package included the previously introduced H.R.
2506. On April 26, 2023, the Committee on Financial Services
ordered H.R. 2799, as amended, to be favorably reported to the
House of Representatives by a vote of 28 to 21. On March 8,
2024, H.R. 2799 was passed by the House by a vote of 212 to
205. The bill was received in the Senate and referred to the
Committee on Banking, Housing, and Urban Affairs. There was no
further legislative action on H.R. 2506 or H.R. 2799 in the
118th Congress.
Related Hearings
Pursuant to clause 3(c)(6) of rule XIII of the Rules of the
House of Representatives, the following hearings were used to
develop H.R. 7127:
On February 26, 2025, the Subcommittee on Capital Markets
held a hearing titled, ``The Future of American Capital:
Strengthening Public and Private Markets by Increasing Investor
Access and Facilitating Capital Formation.'' A discussion draft
of H.R. 7127 was attached the hearing. The Subcommittee heard
testimony from: Mr. Andrew Barnell, CEO and Co-Founder,
Geneoscopy; Mr. McKeever ``Mac'' Conwell, Founder and Managing
Partner, RareBreed Ventures; Ms. Rebecca Kacaba, CEO and Co-
Founder, DealMaker; Ms. Anna Pinedo, Partner, Mayer Brown; and
Ms. Alexandra Thornton, Senior Director, Financial Regulation,
Center for American Progress.
On March 25, 2025, the Committee on Financial Services held
a hearing titled ``Beyond Silicon Valley: Expanding Access to
Capital Across America.'' A discussion draft of H.R. 7127 was
attached the hearing. The Committee heard testimony from: Mr.
Steve Case, Chairman and CEO, Revolution LLC; Mr. Bill Newell,
Senior Business Advisor & Former CEO, Sutro Biopharma; Ms.
Candice Matthews Brackeen, General Partner, Lightship Capital;
Mr. Joel Trotter, Partner, Latham & Watkins LLP; and Ms. Amanda
Senn, Director of the Alabama Securities Commission.
Committee Votes
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee Report to include record
votes on the motion to report legislation and amendments
thereto.
On March 4, 2026, the Committee ordered H.R. 7127, as
amended, to be reported favorably to the House by a recorded
vote of 26 yeas and 17 nays. (Record Vote No. FC-254).
The Committee considered the following amendments to H.R.
7127:
Representative Meuser offered an amendment
in the nature of a substitute, which allows the SEC
define the term ``off exchange secondary trading.''
This amendment was adopted by a voice vote.
Ranking Member Maxine Waters (D-CA) offered
an amendment (No. 10), designated Amd1_H7127. This
requires that the exemption shall not apply to any
transaction that involves a person that has been found
to have committed a violation of any Federal or State
securities laws or regulations. This amendment failed
by a recorded vote of 17 yeas and 26 nays, a quorum
being present. (Record Vote No. FC-253).
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Committee Oversight Findings
Pursuant to clause 3(c) of rule XIII of the Rules of the
House of Representatives, the findings and recommendations of
the Committee, based on oversight activities under clause
2(b)(1) of rule X of the Rules of the House of Representatives
are incorporated in the descriptive portions of this report.
Performance Goals and Objectives
Pursuant to clause 3(c)(4) of rule XIII of the Rules of the
House of Representatives, the goal of H.R. 7127 prevents states
from prohibiting, limiting, or imposing any conditions upon the
off-exchange secondary trading markets in securities of an
issuer complying with their obligations under Regulation A or
Rule 15c2-11. This streamlined approach ensures that if a
company satisfies federal transparency standards, their shares
can be traded nationwide with the cost and complexity of
navigating a confusing array of state laws.
Committee Cost Estimate
Clause 3(d)(1) of rule XIII of the Rules of the House of
Representatives requires an estimate and a comparison of the
costs that would be incurred in carrying out H.R. 7127. The
Committee has requested but not received a cost estimate from
the Director of the Congressional Budget Office. However,
pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee will adopt as its own
the cost estimate by the Director of the Congressional Budget
Office once it has been prepared.
New Budget Authority and CBO Cost Estimate
With respect to the requirements of clause 3(c)(2) of rule
XIII of the Rules of the House of Representatives and section
308(a) of the Congressional Budget Act of 1974 and with respect
to requirements of clause 3(c)(3) of rule XIII of the Rules of
the House of Representatives and section 402 of the
Congressional Budget Act of 1974, the Committee will adopt as
its own the cost estimate for the bill prepared by the Director
of the Congressional Budget Office. However, a cost estimate
was not made available to the Committee in time for the filing
of this report. The Chairman of the Committee shall cause such
estimate to be printed in the Congressional Record upon its
receipt by the Committee.
Unfunded Mandates Statement
The Committee has requested but not received from the
Director of the Congressional Budget Office an estimate of the
Federal mandates pursuant to section 423 of the Unfunded
Mandates Reform Act. The Chairman of the Committee shall cause
such estimate to be printed in the Congressional Record upon
its receipt by the Committee.
Earmark Statement
In compliance with clause 9 of rule XXI of the Rules of the
House of Representatives, this bill, as reported, contains no
congressional earmarks, limited tax benefits, or limited tariff
benefits as defined in clause 9(e), 9(f), or 9(g) of rule XXI.
Federal Advisory Committee Act Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Applicability to the Legislative Branch
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of section
102(b)(3) of the Congressional Accountability Act.
Duplication of Federal Programs
Pursuant to clause 3(c)(5) of rule XIII of the Rules of the
House of Representatives, the Committee states that no
provision of the bill establishes or reauthorizes a program of
the Federal Government known to be duplicative of another
Federal program, including any program that was included in a
report to Congress pursuant to section 21 of the Public Law
111-139 or the most recent Catalog of Federal Domestic
Assistance.
Section-by-Section Analysis of the Legislation
Section 1. Short title
Section 1 provides the short title is the ``Restoring the
Secondary Trading Market Act''.
Section 2. Exemption from state regulation
Section 2 amends Section 18(a) of the Securities Act of
1933 to exempt off-exchange secondary trading from state
regulation for issuers that comply with Regulation A or Rule
15c2-11.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italics, and existing law in which no
change is proposed is shown in roman):
SECURITIES ACT OF 1933
TITLE I--
* * * * * * *
SEC. 18. EXEMPTION FROM STATE REGULATION OF SECURITIES OFFERINGS.
(a) Scope of Exemption.--Except as otherwise provided in this
section, no law, rule, regulation, or order, or other
administrative action of any State or any political subdivision
thereof--
(1) requiring, or with respect to, registration or
qualification of securities, or registration or
qualification of securities transactions, shall
directly or indirectly apply to a security that--
(A) is a covered security; or
(B) will be a covered security upon
completion of the transaction;
(2) shall directly or indirectly prohibit, limit, or
impose any conditions upon the use of--
(A) with respect to a covered security
described in subsection (b), any offering
document that is prepared by or on behalf of
the issuer; or
(B) any proxy statement, report to
shareholders, or other disclosure document
relating to a covered security or the issuer
thereof that is required to be and is filed
with the Commission or any national securities
organization registered under section 15A of
the Securities Exchange Act of 1934, except
that this subparagraph does not apply to the
laws, rules, regulations, or orders, or other
administrative actions of the State of
incorporation of the issuer; [or]
(3) shall directly or indirectly prohibit, limit, or
impose conditions, based on the merits of such offering
or issuer, upon the offer or sale of any security
described in paragraph (1)[.]; or
(4) shall directly or indirectly prohibit, limit, or
impose any conditions upon the off-exchange secondary
trading (as such term is defined by the Commission) in
securities of an issuer that makes current information
publicly available, including--
(A) the information required in the periodic
and current reports described under paragraph
(b) of section 230.257 of title 17, Code of
Federal Regulations; or
(B) the documents and information specified
in paragraph (b) of section 15c2-11 of title
17, Code of Federal Regulations.
(b) Covered Securities.--For purposes of this section, the
following are covered securities:
(1) Exclusive federal registration of nationally
traded securities.--A security is a covered security if
such security is--
(A) a security designated as qualified for
trading in the national market system pursuant
to section 11A(a)(2) of the Securities Exchange
Act of 1934 (15 U.S.C. 78k-1(a)(2)) that is
listed, or authorized for listing, on a
national securities exchange (or tier or
segment thereof); or
(B) a security of the same issuer that is
equal in seniority or that is a senior security
to a security described in subparagraph (A).
(2) Exclusive federal registration of investment
companies.--A security is a covered security if such
security is a security issued by an investment company
that is registered, or that has filed a registration
statement, under the Investment Company Act of 1940.
(3) Sales to qualified purchasers.--A security is a
covered security with respect to the offer or sale of
the security to qualified purchasers, as defined by the
Commission by rule. In prescribing such rule, the
Commission may define the term ``qualified purchaser''
differently with respect to different categories of
securities, consistent with the public interest and the
protection of investors.
(4) Exemption in connection with certain exempt
offerings.--A security is a covered security with
respect to a transaction that is exempt from
registration under this title pursuant to--
(A) paragraph (1) or (3) of section 4, and
the issuer of such security files reports with
the Commission pursuant to section 13 or 15(d)
of the Securities Exchange Act of 1934;
(B) section 4(4);
(C) section 4(6);
(D) a rule or regulation adopted pursuant to
section 3(b)(2) and such security is--
(i) offered or sold on a national
securities exchange; or
(ii) offered or sold to a qualified
purchaser, as defined by the Commission
pursuant to paragraph (3) with respect
to that purchase or sale;
(E) section 3(a), other than the offer or
sale of a security that is exempt from such
registration pursuant to paragraph (4), (10),
or (11) of such section, except that a
municipal security that is exempt from such
registration pursuant to paragraph (2) of such
section is not a covered security with respect
to the offer or sale of such security in the
State in which the issuer of such security is
located;
(F) Commission rules or regulations issued
under section 4(2), except that this
subparagraph does not prohibit a State from
imposing notice filing requirements that are
substantially similar to those required by rule
or regulation under section 4(2) that are in
effect on September 1, 1996; or
(G) section 4(a)(7).
(c) Preservation of Authority.--
(1) Fraud authority.--Consistent with this section,
the securities commission (or any agency or office
performing like functions) of any State shall retain
jurisdiction under the laws of such State to
investigate and bring enforcement actions, in
connection with securities or securities transactions
(A) with respect to--
(i) fraud or deceit; or
(ii) unlawful conduct by a broker or
dealer; and
(B) in connection to a transaction described
under section 4(6), with respect to--
(i) fraud or deceit; or
(ii) unlawful conduct by a broker,
dealer, funding portal, or issuer.
(2) Preservation of filing requirements.--
(A) Notice filings permitted.--Nothing in
this
section prohibits the securities commission (or
any agency or office performing like functions)
of any State from requiring the filing of any
document filed with the Commission pursuant to
this title, together with annual or periodic
reports of the value of securities sold or
offered to be sold to persons located in the
State (if such sales data is not included in
documents filed with the Commission), solely
for notice purposes and the assessment of any
fee, together with a consent to service of
process and any required fee.
(B) Preservation of fees.--
(i) In general.--Until otherwise
provided by law, rule, regulation, or
order, or other administrative action
of any State or any political
subdivision thereof, adopted after the
date of enactment of the National
Securities Markets Improvement Act of
1996, filing or registration fees with
respect to securities or securities
transactions shall continue to be
collected in amounts determined
pursuant to State law as in effect on
the day before such date.
(ii) Schedule.--The fees required by
this subparagraph shall be paid, and
all necessary supporting data on sales
or offers for sales required under
subparagraph (A), shall be reported on
the same
schedule as would have been applicable
had the issuer not relied on the
exemption provided in subsection (a).
(C) Availability of preemption contingent on
payment of fees.--
(i) In general.--During the period
beginning on the date of enactment of
the National Securities
Markets Improvement Act of 1996 and
ending 3 years after that date of
enactment, the securities commission
(or any agency or office performing
like functions) of any State may
require the registration of securities
issued by any issuer who refuses to pay
the fees required by subparagraph (B).
(ii) Delays.--For purposes of this
subparagraph, delays in payment of fees
or underpayments of fees that are
promptly remedied shall not constitute
a refusal to pay fees.
(D) Fees not permitted on listed
securities.--Notwithstanding subparagraphs (A),
(B), and (C), no filing or fee may be required
with respect to any security that is a covered
security pursuant to subsection (b)(1), or will
be such a covered security upon completion of
the transaction, or is a security of the same
issuer that is equal in seniority or that is a
senior security to a security that is a covered
security pursuant to subsection (b)(1).
(F) Fees not permitted on crowdfunded
securities.--Notwithstanding subparagraphs (A),
(B), and (C), no filing or fee may be required
with respect to any security that is a covered
security pursuant to subsection (b)(4)(B), or
will be such a covered security upon completion
of the transaction, except for the securities
commission (or any agency or office performing
like functions) of the State of the principal
place of business of the issuer, or any State
in which purchasers of 50 percent or greater of
the aggregate amount of the issue are
residents, provided that for purposes of this
subparagraph, the term ``State'' includes the
District of Columbia and the territories of the
United States.
(3) Enforcement of requirements.--Nothing in this
section shall prohibit the securities commission (or
any agency or office performing like functions) of any
State from suspending the offer or sale of securities
within such State as a result of the failure to submit
any filing or fee required under law and permitted
under this section.
(d) Definitions.--For purposes of this section, the following
definitions shall apply:
(1) Offering document.--The term ``offering
document''--
(A) has the meaning given the term
``prospectus'' in section 2(a)(10), but without
regard to the provisions of subparagraphs (a)
and (b) of that section; and
(B) includes a communication that is not
deemed to offer a security pursuant to a rule
of the Commission.
(2) Prepared by or on behalf of the issuer.--Not
later than 6 months after the date of enactment of the
National Securities Markets Improvement Act of 1996,
the Commission shall, by rule, define the term
``prepared by or on behalf of the issuer'' for purposes
of this section.
(3) State.--The term ``State'' has the same meaning
as in section 3 of the Securities Exchange Act of 1934.
(4) Senior security.--The term ``senior security''
means any bond, debenture, note, or similar obligation
or instrument constituting a security and evidencing
indebtedness, and any stock of a class having priority
over any other class as to distribution of assets or
payment of dividends.
* * * * * * *
MINORITY VIEWS
This bill would preempt state ``blue sky'' laws for off-
exchange, secondary trading for companies who make available
certain current public information, including information
required by Regulation A or SEC Rule 15c2-11. Blue sky laws are
important state-level, anti-fraud regulations that require
issuers of securities to register with the state securities
commissioner and disclose important details of their offerings,
and also creates liability for issuers by allowing investors to
bring lawsuits against them for blue sky law violations.
Preempting blue sky laws for these kinds of trades reduces the
types of recourse investors have against private issuers, and
also removes critical layers of oversight that protect retail
investors from fraud and high-risk speculative schemes.
There are several reasons why this bill could be
detrimental to investor protection. First, it would eliminate
the protections of state-level ``merit reviews,'' which many
state regulators conduct to ensure an offering is fair and
equitable. Critically, state regulators can actually block a
security from being sold if they think the company is a scam,
compared to the rules for federally registered securities which
generally allow any legal business to trade as long as they
file the paperwork, regardless of how bad the investment is. By
preempting these laws this bill would remove a vital safety net
that prevents predatory investment structures from reaching
unsophisticated retail investors in the secondary market.
Additionally, the bill would increase the risk of pump and dump
schemes, as state-level registration often serves as a
deterrent to bad actors seeking to manipulate low-volume, off-
exchange stocks. By removing state oversight for securities
that only meet the lower transparency thresholds of Rule 15c2-
11 or Regulation A, the bill could inadvertently facilitate
fraud in the over-the-counter markets where price manipulation
is most prevalent. Finally, it would weaken the enforcement of
local fraud violations, which state regulators are often the
first responders to as they are closer to the victims and can
act more quickly than the federal government. Preemption would
strip states of their ability to set specific standards for
secondary trading, potentially leaving local investors without
recourse until a scheme becomes large enough to attract limited
SEC resources.
Of note, the Alabama State Securities Commissioner
testified at the hearing that, ``this legislation is
unnecessary given the deliberate and conscientious efforts by
states to streamline certain processes while ensuring investors
have the information they need to make informed decisions.
Additionally, the bill ``would not solve the longstanding
illiquidity problems in the Regulation A market as [. . .]
secondary trading does not provide liquidity to the issuer but
to the selling security holder.'' Further, the Reg A market
``still suffers from a lack of demand among other reasons
because investors want to avoid high costs, high information
asymmetries, and high investment minimums associated with these
deals regardless of preemption.''44
This bill was previously included in H.R. 2799 in the 118th
Congress and received near unanimous Democratic opposition on
the House Floor. The North American Securities Administrators
Association (NASAA) currently opposes this bill, and it was
previously opposed in the 118th Congress by NASAA, along with
Consumer Federation of America (CFA), Americans for Financial
Reform (AFR), Public Citizen, Council of Institution Investors
(CII), and the Center for American Progress.
For these reasons, we oppose H.R. 7127.
Sincerely,
Maxine Waters,
Ranking Member.
Nydia M. Velazquez,
Brad Sherman,
Al Green,
Bill Foster,
Joyce Beatty,
Juan Vargas,
Sylvia R. Garcia,
Members of Congress.
[all]