House Financial Services Committee Advances Bills to Restructure SEC and Bar CAT Collection of Personal Data
Commentary by Steven Lofchie
The House Financial Services Committee has reported 10 bills to the full House and approved a resolution reauthorizing the Task Force on Monetary Policy, Treasury Market Resilience, and Economic Prosperity.
Three of the measures are of particular relevance to securities firms.
H.R. 1483, the Protecting Investors' Personally Identifiable Information Act
The bill would prohibit the SEC from requiring that personally identifiable information (PII) be collected under Consolidated Audit Trail (CAT) reporting requirements. The bill defines PII to include name, address, date of birth, Social Security and taxpayer identification numbers, financial account numbers, driver's license and alien registration numbers, telephone number, email address, IP address, and biometric records. It provides that the SEC cannot require a national securities exchange, a national securities association (currently, FINRA is the only one), or a member of such an exchange or association to provide such information to meet CAT requirements.
The bill would write into statute, and broaden, the SEC's recent CAT PII relief. The Commission's 2020 order addressed the reporting of Social Security and taxpayer identification numbers and other sensitive customer-identifying information, and its order dated February 10, 2025, eliminated the requirement to report names, addresses, and years of birth for U.S. natural persons. The bill's statutory PII definition sweeps more broadly than either order.
Sponsored by Rep. Barry Loudermilk (R-GA). Agreed to by a party-line vote of 27-21.
H.R. 9329, the SEC Reform and Restructuring Act
This multi-part bill reshapes how the SEC writes rules, reports to Congress and organizes itself.
Title I (Regulatory Accountability) adds a detailed cost-benefit process to the Exchange Act. Before proposing a regulation (a term the bill defines broadly to include rules, orders of general applicability, interpretive releases and other agency statements intended to have the force of law), the SEC would have to identify the problem it is solving and confirm that the regulation is within its jurisdiction and expertise. In issuing a proposed or final regulation, the SEC would have to identify who is affected, use its Chief Economist to weigh costs and benefits (individually and cumulatively with other rules), issue the regulation only if benefits justify costs, write the regulation in plain language and set a comment period matching the regulation's complexity. The SEC would also have to weigh alternatives (including not regulating), avoid duplicative rules and consider effects on investor choice, market liquidity, small businesses, competition and investor access. For "major rules," the SEC would have to build a post-adoption assessment plan. The Chief Economist would report back, generally within four years, on whether the rule worked, and the SEC would open that report to public comment.
Title II (Transparency) requires the SEC Chair to testify before the House Financial Services and Senate Banking Committees at least every six months on SEC activities, with the other Commissioners joining at least once a year.
Title III (Cybersecurity) directs GAO to audit SEC information technology infrastructure and data handling within a year. GAO would compare SEC information technology spending to that of other financial regulators, assess SEC contracting and cybersecurity, and examine any recent breaches, then report findings and recommendations to Congress.
Title IV (Review the Expansion of Government) amends the Securities Act, the Exchange Act, the Investment Company Act and the Advisers Act to require the SEC to consider rules "individually or cumulatively" with other related and recent rules when weighing whether the rules promote efficiency, competition and capital formation.
Title V (Streamlining Public Company Accounting Oversight) would terminate the Public Company Accounting Oversight Board (PCAOB) two years after enactment and transfer its functions to a new "Office of Public Accounting Oversight" inside the SEC Office of the Chief Accountant, with the Chief Accountant serving as Director. A similar PCAOB restructuring effort appeared in the 2025 reconciliation process but was blocked in the Senate under the Byrd Rule; H.R. 9329 would pursue the change through regular order.
Title VI (Study Regarding Major Rules) directs the GAO to study SEC major rules within one year of enactment and every three years after. The GAO would run its own cost-benefit analysis, compare that analysis to the SEC analysis, compare projected versus actual costs, and evaluate whether each rule aids capital formation, promotes fair and efficient markets and protects investors. Each review is capped at the 10 most significant rules, and a report is due within one year of completing each study.
Title VII (Minimum Public Comment Period) requires at least a 60-day public comment period for SEC rulemakings, or at least 30 days if the SEC finds that the rule addresses imminent investor harm. Federal holidays do not count, and the clock starts at Federal Register publication.
Title VIII (Enforcement Clarity) would amend the securities laws so that, in counting violations for penalties, separate acts of noncompliance count as a single violation when they stem from a common or substantially overlapping originating cause, the same misstatement or omission, or a continuing failure to comply.
Title IX (Modernization) requires the SEC Chair, within 180 days, to review the Commission's organizational structure, then reduce the number of offices and officials reporting directly to the Chair and report to Congress. It also lets the SEC consolidate its regional offices if it determines that consolidation is appropriate, while preserving the Commission's authority to reorganize later.
Sponsored by Rep. Ann Wagner (R-MO). Agreed to by a party-line vote of 28-23.
H.R. 7187, the Clarity for Compensation Act
This bill would amend the Exchange Act so that a qualifying "personal services entity" owned by a registered representative, or by the representative and immediate family members, is not deemed a broker solely because it receives the representative's compensation from the representative's broker-dealer at the representative's direction. The exemption is subject to conditions relating to supervision, ownership, written agreements, customer recovery and access to books and records.
The bill largely codifies the position taken in the SEC staff no-action letter issued to the Financial Services Institute on November 17, 2025, and modestly expands it, notably by permitting immediate-family ownership. A broker-dealer's registered representative might set up a company for tax, succession-planning, administrative or benefits reasons to receive the representative's compensation. The concern had long been that doing so could technically make that company a "broker" under the law.
Sponsored by Rep. Zach Nunn (R-IA) and Rep. Gregory Meeks (D-NY). Agreed to unanimously, 51-0.
Commentary
The first two of the bills are, for all practical purposes, in direct response to, and repudiation of, Mr. Gensler's term as Chair of the SEC.
CAT, the gargantuan trade reporting and data collection system that was championed by Mr. Gensler has, unsurprisingly, turned out to be far more expensive than the SEC estimated when the relevant rules were adopted. Further, with the change in Administrations, the concerns raised by Commissioner Peirce, among others, that it was dangerous for the regulators to collect and hold so much personal information have now been more broadly accepted.
The more significant bill, which is intended to significantly change the SEC's rule making process, is likewise in response to the broad criticism of the SEC's rule making process during Mr. Gensler's chairmanship: rules were adopted without meaningful consideration of the SEC's authority, leading to their being rejected by the courts; cost estimates seemed to be understated by many multiples; and time periods for commenting were far shorter than the complexity of the proposals seemed to demand. Even assuming that the bill is adopted, compliance will ultimately depend to some extent on the good will of the future Chairs of the SEC, as there is no real enforcement mechanism if cost estimates are too low.
One provision of the bill, which is definitely to be commended, is requiring that the SEC do real retrospective reviews of the cost and effectiveness of its rule makings. There is no justification for assuming that a rule once adopted should be immune from reconsideration.