Restoring the Secondary Trading Market Act
- Bill Number
- H.R. 7127
- Origin Chamber
- House
- Congress
- 119th Congress, Session 2
- Policy Area
- Finance and Financial Sector
- Status
- Introduced
- Latest Action
- 2026-03-25: Placed on the Union Calendar, Calendar No. 493.
- Last Updated
- 2026-06-11T23:41:26Z
AI-Generated Summary
Purpose of the Legislation
The "Restoring the Secondary Trading Market Act" (H.R. 7127) aims to reduce state-level oversight of certain securities trading activities. Specifically, it seeks to exempt "off-exchange secondary trading" (trading in already-issued securities that occurs outside formal stock exchanges) from state regulations, provided the issuing company publicly shares up-to-date financial and operational information. This is intended to streamline trading for qualifying securities while maintaining federal oversight.
Key Provisions
- Amendment to Existing Law: The bill modifies Section 18(a) of the Securities Act of 1933, which outlines the limits on state authority over securities regulation.
- New Exemption (Paragraph 4): States cannot prohibit, limit, or add conditions to off-exchange secondary trading in securities issued by companies that make "current information" publicly available. This information includes:
- Periodic and current reports required under federal rules (17 CFR 230.257(b)), such as financial statements and material updates.
- Documents specified under another federal rule (17 CFR 15c2-11(b)), like annual reports and disclosures about the company's business and finances.
- Definition of Off-Exchange Secondary Trading: This term is defined by the U.S. Securities and Exchange Commission (SEC), the federal agency responsible for enforcing securities laws.
Significant Changes to Existing Law
- Federal Preemption Expansion: Previously, Section 18(a) allowed states limited roles in regulating certain securities (e.g., those covered by federal registration). The bill adds a fourth category of exemption, explicitly barring states from interfering with off-exchange secondary trading for issuers meeting the public disclosure requirements.
- No Changes to Federal Rules: The bill does not alter SEC requirements for disclosures; it only restricts state actions that could hinder trading compliant with those federal standards.
- Technical Edits: It makes minor grammatical adjustments to the existing paragraphs (2) and (3) of Section 18(a) to accommodate the new addition.
Potential Impacts
- On Government Agencies: The SEC gains indirect influence, as its definitions and disclosure rules become the key criteria for the exemption, potentially reducing the workload on state regulators for these trades. States may see a narrower scope for their "blue sky" laws (state securities regulations).
- On Citizens and Investors: Individual and institutional investors could benefit from easier access to secondary markets for qualifying securities, potentially lowering trading costs and increasing liquidity (ease of buying/selling without major price swings). However, it might reduce state-level protections against fraud in these markets.
- On International Relations: Minimal direct impact, though it could make U.S. markets more attractive to foreign issuers and investors by simplifying cross-border secondary trading, aligning with federal efforts to promote efficient capital markets.
- Broader Economic Effects: May encourage more companies to go public or maintain disclosures to access this exemption, boosting secondary trading activity in over-the-counter (OTC) markets.
Main Stakeholders Affected
- Securities Issuers (Companies): Benefit from reduced regulatory hurdles if they comply with federal disclosure rules, potentially making it easier to trade their shares in secondary markets.
- Investors and Traders: Gain from freer off-exchange trading, but rely more on federal (SEC) protections rather than state oversight.
- Broker-Dealers and Financial Firms: Facilitates operations in OTC markets, possibly increasing trading volume and revenue.
- State Regulators: Lose authority over specific trading activities, which could streamline enforcement but limit local consumer protections.
- SEC: Plays a central role in defining terms and ensuring disclosures, without new enforcement burdens.
Notable Legal, Constitutional, or Political Implications
- Legal Implications: Strengthens federal preemption under the Supremacy Clause of the U.S. Constitution (which prioritizes federal law over state law in conflicts), potentially leading to lawsuits if states challenge the exemption's scope. It preserves anti-fraud provisions but shifts reliance to federal standards.
- Constitutional Implications: Reinforces the balance between federal commerce regulation (securities as interstate commerce) and state police powers, without altering core constitutional frameworks.
- Political Implications: Reflects a push for deregulation in financial markets, possibly appealing to pro-business interests while drawing criticism from those favoring robust state protections against market risks. As a House-reported bill (Union Calendar No. 493, Report No. 119-573), it signals bipartisan or committee support but requires Senate approval and presidential action to become law.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Recent Actions
- 2026-03-25: Placed on the Union Calendar, Calendar No. 493.
- 2026-03-25: Reported (Amended) by the Committee on Financial Services. H. Rept. 119-573.
- 2026-03-25: Reported (Amended) by the Committee on Financial Services. H. Rept. 119-573.
- 2026-03-04: Ordered to be Reported by the Yeas and Nays: 26 - 17.
- 2026-03-04: Committee Consideration and Mark-up Session Held
- 2026-01-16: Referred to the House Committee on Financial Services.
- 2026-01-16: Introduced in House
- 2026-01-16: Introduced in House
Bill Versions
- Restoring the Secondary Trading Market Act — issued 2026-01-16 — PDF (2 pages)
- Restoring the Secondary Trading Market Act — issued 2026-03-25 — PDF (4 pages)