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HR 7187

Clarity for Compensation Act

119th Congress Introduced by Andrew Garbarino and 6 co-sponsors

The bill would exempt a personal services entity owned by a registered representative from broker status if strict supervision, records, agreements, and limits are maintained.

Introduced in House
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WeVote Research Nonpartisan
Bill Summary · HR 7187

Summary of HR 7187 — Clarity for Compensation Act

Purpose and intent

  • HR 7187, introduced January 21, 2026, seeks to amend the Securities Exchange Act of 1934 to create an exemption from the broker definition for a specific type of entity: a personal services entity owned by a registered representative.
  • The aim is to clarify that certain compensation arrangements involving a registered representative and a personal services entity should not cause the entity to be treated as a broker or dealer, provided specific conditions are met.

Key provisions and changes

  • New broker exclusion (Section 3(a)(4)(G)): Adds an exception for a personal services entity from being deemed a broker if:

    1. The broker (the registered representative’s employer) instructs or approves the amount and timing of payments to the personal services entity and keeps records of these payments.
    2. The personal services entity does not hold itself out as a broker.
    3. The personal services entity does not engage in broker or dealer activities beyond receiving compensation for the registered representative.
    4. The broker maintains adequate supervision and control over the registered representative.
    5. There is a written agreement governing the relationship and compensation responsibilities between the broker and the personal services entity.
    6. The personal services entity is owned only by:
      • the registered representative,
      • or immediate family members of the registered representative (or entities wholly owned by the representative or immediate family members).
    7. The personal services entity meets additional requirements as may be prescribed by the Commission through rulemaking.

  • Oversight and examination (within the same subsection):

    • The personal services entity must maintain and make available to the Commission and the relevant self-regulatory organization all books and records that the broker is required to maintain and any other records the Commission deems necessary to demonstrate continued compliance with the exemption.

  • Definitions (within the same subsection):

    • Clarifies terms critical to the exemption, including:
    • Applicable self-regulatory organization (SRO): each SRO with which the related broker is required to be registered.
    • Broker or dealer activity: activity undertaken by a broker or dealer who is registered or required to be registered under the Act.
    • Immediate family member: defined to include spouse, child, parent, sibling, grandparent, grandchild, and certain stepparents/stepchildren relationships.
    • Personal services entity: an entity established by a registered representative to receive compensation for the representative’s services and for related administrative purposes and benefits.
    • Registered representative: a person who is an associated person of a broker or dealer and registered with the applicable SRO.

  • Effective date (Section 2(b)):

    • The new exemption takes effect 180 days after the date of enactment.

Who is affected

  • Registered representatives who own or control personal services entities that receive compensation from the broker at the direction of the registered representative.
  • Broker-dealers and supervising brokers who employ or supervise registered representatives and manage compensation arrangements.
  • Self-regulatory organizations (SROs) that regulate brokers and dealers and would review records and compliance under the exemption.
  • Regulators (the Commission) which would retain authority to prescribe additional requirements and review compliance through requested books/records.

Procedural and timeline notes

  • Status: Introduced January 21, 2026 and referred to the House Committee on Financial Services.
  • Effective date: 180 days after enactment.
  • The Act contemplates future rulemaking by the Commission to define additional requirements for the exemption.

Practical implications and potential impact

  • If enacted, the bill would create a formal exemption from broker-dealer status for a specific arrangement where a personal services entity is owned by or linked to a registered representative and compensated via the broker’s direction, provided strict governance, recordkeeping, and supervision standards are met.
  • The change could reduce regulatory burdens for certain compensation structures while increasing oversight to prevent circumvention of broker-dealer registration requirements.
  • Stakeholders likely include registered representatives seeking flexible compensation arrangements and brokerages aiming to maintain compliance and supervisory controls; oversight agencies and SROs would gain a defined framework and reporting obligations.

Compiled from official sources — confirm details with the bill’s official record.

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