Bill Overview
Title: To except quotations of fixed-income securities from certain regulatory requirements, and for other purposes.
Description: This bill excepts quotations of fixed-income securities from rules requiring broker-dealers to review issuer information for accuracy before providing quotations for that issuer's security in the over-the-counter securities market. Fixed-income securities, such as bonds, provide returns in fixed periodic interest payments and return the principal at maturity.
Sponsors: Rep. Kustoff, David [R-TN-8]
Target Audience
Population: People who invest in fixed-income securities.
Estimated Size: 50000000
- Fixed-income securities are widely held by institutional investors like pension funds, insurance companies, and investment funds worldwide.
- Individual investors, including retirees, may hold fixed-income securities in their portfolios for predictable income.
- Broker-dealers operating in the over-the-counter securities market will be directly impacted by the change in regulatory requirements.
- The over-the-counter market where these securities are traded does not have the same regulatory oversight as public exchanges.
- Any shortcoming in the review of issuer information could potentially affect the investors holding these securities.
Reasoning
- The majority of fixed-income securities are held by institutional investors, meaning that individual investors—especially those who actively engage in the over-the-counter market—could be rarer in the population and thus affected differently.
- Broker-dealers will see a material change to their operations, which could influence their efficiency and costs, indirectly reflecting on investor engagement and costs.
- Long-term effects include potential changes to how risk is assessed in the market if issuer information is not thoroughly reviewed, impacting the perceived security of investments.
Simulated Interviews
Retired School Teacher (New York, NY)
Age: 65 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 3.0 years
Commonness: 15/20
Statement of Opinion:
- I rely on bonds for predictable income. Any change in regulations worries me about the safety of these investments.
- I hope this change doesn't mean sacrificing the security of my investments.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 6 | 7 |
| Year 10 | 5 | 6 |
| Year 20 | 5 | 6 |
Financial Analyst (Chicago, IL)
Age: 29 | Gender: male
Wellbeing Before Policy: 8
Duration of Impact: 5.0 years
Commonness: 8/20
Statement of Opinion:
- Lifting these requirements reduces some of our workload, which will allow us to focus elsewhere, but I'm concerned about the potential risk if the securities aren't thoroughly checked.
- The trade-off here seems risky when it involves people's investments.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 8 |
| Year 2 | 8 | 8 |
| Year 3 | 8 | 7 |
| Year 5 | 8 | 7 |
| Year 10 | 7 | 6 |
| Year 20 | 6 | 6 |
Insurance Fund Manager (Los Angeles, CA)
Age: 44 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 0.0 years
Commonness: 12/20
Statement of Opinion:
- I'm concerned that without better oversight, there's potential for bad actors to misprice securities.
- As a manager responsible for others' money, it's crucial that transparency remains high.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 6 | 6 |
| Year 5 | 6 | 6 |
| Year 10 | 6 | 6 |
| Year 20 | 5 | 5 |
Pension Fund Administrator (Boston, MA)
Age: 53 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 5.0 years
Commonness: 10/20
Statement of Opinion:
- Consistency in fund performance is vital for our beneficiaries.
- This change will mean we need to be more diligent on our own in evaluating the security of our investments.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 7 |
| Year 2 | 6 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 7 | 7 |
| Year 10 | 6 | 6 |
| Year 20 | 5 | 6 |
Independent Investor (Austin, TX)
Age: 38 | Gender: other
Wellbeing Before Policy: 7
Duration of Impact: 3.0 years
Commonness: 15/20
Statement of Opinion:
- Understanding risks is an integral part of my investment strategy.
- This policy might reduce transparency, increasing risk if information is not properly checked.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 7 |
| Year 2 | 6 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 6 | 6 |
| Year 10 | 5 | 6 |
| Year 20 | 5 | 5 |
Retired Military (Miami, FL)
Age: 60 | Gender: male
Wellbeing Before Policy: 8
Duration of Impact: 3.0 years
Commonness: 14/20
Statement of Opinion:
- I'm not happy about relaxing these requirements.
- The changes seem aimed at broker-dealers' convenience over investor security.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 8 |
| Year 2 | 7 | 8 |
| Year 3 | 7 | 7 |
| Year 5 | 6 | 7 |
| Year 10 | 6 | 6 |
| Year 20 | 6 | 6 |
Tech Startup Employee (Seattle, WA)
Age: 32 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 0.0 years
Commonness: 16/20
Statement of Opinion:
- I don't understand all the complexities here, but I count on my investments to be safe.
- I hope this regulatory change doesn't mean I need to worry more.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 6 | 6 |
| Year 10 | 6 | 6 |
| Year 20 | 5 | 5 |
Broker Dealer Specialist (San Francisco, CA)
Age: 57 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 4.0 years
Commonness: 9/20
Statement of Opinion:
- While this will ease some burdens on my role, I worry about the long-term trust in the market.
- Balancing workload and ensuring investor security should be our priority.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 7 | 7 |
| Year 10 | 6 | 6 |
| Year 20 | 5 | 6 |
Bank Treasury Officer (Dallas, TX)
Age: 41 | Gender: female
Wellbeing Before Policy: 8
Duration of Impact: 5.0 years
Commonness: 10/20
Statement of Opinion:
- There could be a risk that we might overlook critical issuer information.
- We'll have to compensate with more internal checks, which raises operational costs.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 8 |
| Year 2 | 7 | 8 |
| Year 3 | 7 | 8 |
| Year 5 | 6 | 7 |
| Year 10 | 6 | 7 |
| Year 20 | 5 | 6 |
University Professor (Philadelphia, PA)
Age: 65 | Gender: other
Wellbeing Before Policy: 9
Duration of Impact: 5.0 years
Commonness: 10/20
Statement of Opinion:
- Regulations exist for a reason—lifting them shouldn't be taken lightly.
- I believe this could eventually reduce investor confidence.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 9 |
| Year 2 | 8 | 9 |
| Year 3 | 8 | 9 |
| Year 5 | 7 | 8 |
| Year 10 | 7 | 8 |
| Year 20 | 6 | 7 |
Cost Estimates
Year 1: $5000000 (Low: $2000000, High: $8000000)
Year 2: $5000000 (Low: $2000000, High: $8000000)
Year 3: $5500000 (Low: $2500000, High: $8500000)
Year 5: $6000000 (Low: $3000000, High: $9000000)
Year 10: $7000000 (Low: $4000000, High: $10000000)
Year 100: $15000000 (Low: $10000000, High: $20000000)
Key Considerations
- Ensuring investor protection is paramount; the lack of review on issuer information might increase the risk of misinformation.
- Balancing regulatory efficiency with market transparency and investor protection is critical.
- Monitoring and risk management practices need to be upgraded in the absence of the regulatory requirement.