" ! HOUSE OF REPRESENTATIVES 

111TH CONGRESS

2d Session 

REPORT

111–517 

DODD-FRANK WALL STREET REFORM AND 

CONSUMER PROTECTION ACT 

CONFERENCE REPORT 

TO ACCOMPANY

H.R. 4173 

JUNE 29, 2010.—Ordered to be printed 


sroberts on DSKD5P82C1PROD with HEARINGE:\Seals\Congress.#13
DODD-FRANK WALL STREET REFORM 

AND CONSUMER PROTECTION ACT 


sroberts on DSKD5P82C1PROD with HEARING
U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

1 

57–098 

" ! HOUSE OF REPRESENTATIVES 

111TH CONGRESS

2d Session 

REPORT

2010

111–517 

DODD-FRANK WALL STREET REFORM AND 

CONSUMER PROTECTION ACT 

CONFERENCE REPORT 

TO ACCOMPANY

H.R. 4173 

JUNE 29, 2010.—Ordered to be printed 


sroberts on DSKD5P82C1PROD with HEARINGE:\Seals\Congress.#13

sroberts on DSKD5P82C1PROD with HEARING
111TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 111–517 

DODD-FRANK WALL STREET REFORM AND CONSUMER 

PROTECTION ACT 

JUNE 29, 2010.—Ordered to be printed 

Mr. FRANK, from the Committee of Conference, 

submitted the following 

CONFERENCE REPORT 

[To accompany H.R. 4173] 

The committee of conference on the disagreeing votes of the 

two Houses on the amendments of the Senate to the bill (H.R. 

4173), to provide for financial regulatory reform, to protect consumers and investors, to enhance Federal understanding of insurance issues, to regulate the over-the-counter derivatives markets, 

and for other purposes, having met, after full and free conference, 

have agreed to recommend and do recommend to their respective 

Houses as follows: 

That the House recede from its disagreement to the amendment of the Senate to the text of the bill and agree to the same 

with an amendment as follows: 

In lieu of the matter proposed to be inserted by the Senate 

amendment, insert the following: 

SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

(a) SHORT TITLE.—This Act may be cited as the ‘‘Dodd-Frank 

Wall Street Reform and Consumer Protection Act’’. 

(b) TABLE OF CONTENTS.—The table of contents for this Act is 

as follows: 

Sec. 1. Short title; table of contents. 

Sec. 2. Definitions. 

Sec. 3. Severability. 

Sec. 4. Effective date. 

Sec. 5. Budgetary effects. 

Sec. 6. Antitrust savings clause. 

TITLE I—FINANCIAL STABILITY 

Sec. 101. Short title. 

Sec. 102. Definitions. 


sroberts on DSKD5P82C1PROD with HEARING
2 

Subtitle A—Financial Stability Oversight Council 

Sec. 111. Financial Stability Oversight Council established. 

Sec. 112. Council authority. 

Sec. 113. Authority to require supervision and regulation of certain nonbank financial companies. 

Sec. 114. Registration of nonbank financial companies supervised by the Board of 

Governors. 

Sec. 115. Enhanced supervision and prudential standards for nonbank financial 

companies supervised by the Board of Governors and certain bank holding companies. 

Sec. 116. Reports. 

Sec. 117. Treatment of certain companies that cease to be bank holding companies. 

Sec. 118. Council funding. 

Sec. 119. Resolution of supervisory jurisdictional disputes among member agencies. 

Sec. 120. Additional standards applicable to activities or practices for financial stability purposes. 

Sec. 121. Mitigation of risks to financial stability. 

Sec. 122. GAO Audit of Council. 

Sec. 123. Study of the effects of size and complexity of financial institutions on capital market efficiency and economic growth. 

Subtitle B—Office of Financial Research 

Sec. 151. Definitions. 

Sec. 152. Office of Financial Research established. 

Sec. 153. Purpose and duties of the Office. 

Sec. 154. Organizational structure; responsibilities of primary programmatic units. 

Sec. 155. Funding. 

Sec. 156. Transition oversight. 

Subtitle C—Additional Board of Governors Authority for Certain Nonbank Financial 

Companies and Bank Holding Companies 

Sec. 161. Reports by and examinations of nonbank financial companies by the 

Board of Governors. 

Sec. 162. Enforcement. 

Sec. 163. Acquisitions. 

Sec. 164. Prohibition against management interlocks between certain financial companies. 

Sec. 165. Enhanced supervision and prudential standards for nonbank financial 

companies supervised by the Board of Governors and certain bank holding companies. 

Sec. 166. Early remediation requirements. 

Sec. 167. Affiliations. 

Sec. 168. Regulations. 

Sec. 169. Avoiding duplication. 

Sec. 170. Safe harbor. 

Sec. 171. Leverage and risk-based capital requirements. 

Sec. 172. Examination and enforcement actions for insurance and orderly liquidation purposes. 

Sec. 173. Access to United States financial market by foreign institutions. 

Sec. 174. Studies and reports on holding company capital requirements. 

Sec. 175. International policy coordination. 

Sec. 176. Rule of construction. 

TITLE II—ORDERLY LIQUIDATION AUTHORITY 

Sec. 201. Definitions. 

Sec. 202. Judicial review. 

Sec. 203. Systemic risk determination. 

Sec. 204. Orderly liquidation of covered financial companies. 

Sec. 205. Orderly liquidation of covered brokers and dealers. 

Sec. 206. Mandatory terms and conditions for all orderly liquidation actions. 

Sec. 207. Directors not liable for acquiescing in appointment of receiver. 

Sec. 208. Dismissal and exclusion of other actions. 

Sec. 209. Rulemaking; non-conflicting law. 

Sec. 210. Powers and duties of the Corporation. 

Sec. 211. Miscellaneous provisions. 

Sec. 212. Prohibition of circumvention and prevention of conflicts of interest. 

Sec. 213. Ban on certain activities by senior executives and directors. 

Sec. 214. Prohibition on taxpayer funding. 


sroberts on DSKD5P82C1PROD with HEARING
3 

Sec. 215. Study on secured creditor haircuts. 

Sec. 216. Study on bankruptcy process for financial and nonbank financial institutions. 

Sec. 217. Study on international coordination relating to bankruptcy process for 

nonbank financial institutions. 

TITLE III—TRANSFER OF POWERS TO THE COMPTROLLER OF THE 

CURRENCY, THE CORPORATION, AND THE BOARD OF GOVERNORS 

Sec. 300. Short title. 

Sec. 301. Purposes. 

Sec. 302. Definition. 

Subtitle A—Transfer of Powers and Duties 

Sec. 311. Transfer date. 

Sec. 312. Powers and duties transferred. 

Sec. 313. Abolishment. 

Sec. 314. Amendments to the Revised Statutes. 

Sec. 315. Federal information policy. 

Sec. 316. Savings provisions. 

Sec. 317. References in Federal law to Federal banking agencies. 

Sec. 318. Funding. 

Sec. 319. Contracting and leasing authority. 

Subtitle B—Transitional Provisions 

Sec. 321. Interim use of funds, personnel, and property of the Office of Thrift Supervision. 

Sec. 322. Transfer of employees. 

Sec. 323. Property transferred. 

Sec. 324. Funds transferred. 

Sec. 325. Disposition of affairs. 

Sec. 326. Continuation of services. 

Sec. 327. Implementation plan and reports. 

Subtitle C—Federal Deposit Insurance Corporation 

Sec. 331. Deposit insurance reforms. 

Sec. 332. Elimination of procyclical assessments. 

Sec. 333. Enhanced access to information for deposit insurance purposes. 

Sec. 334. Transition reserve ratio requirements to reflect new assessment base. 

Sec. 335. Permanent increase in deposit and share insurance. 

Sec. 336. Management of the Federal Deposit Insurance Corporation. 

Subtitle D—Other Matters 

Sec. 341. Branching. 

Sec. 342. Office of Minority and Women Inclusion. 

Sec. 343. Insurance of transaction accounts. 

Subtitle E—Technical and Conforming Amendments 

Sec. 351. Effective date. 

Sec. 352. Balanced Budget and Emergency Deficit Control Act of 1985. 

Sec. 353. Bank Enterprise Act of 1991. 

Sec. 354. Bank Holding Company Act of 1956. 

Sec. 355. Bank Holding Company Act Amendments of 1970. 

Sec. 356. Bank Protection Act of 1968. 

Sec. 357. Bank Service Company Act. 

Sec. 358. Community Reinvestment Act of 1977. 

Sec. 359. Crime Control Act of 1990. 

Sec. 360. Depository Institution Management Interlocks Act. 

Sec. 361. Emergency Homeowners’ Relief Act. 

Sec. 362. Federal Credit Union Act. 

Sec. 363. Federal Deposit Insurance Act. 

Sec. 364. Federal Home Loan Bank Act. 

Sec. 365. Federal Housing Enterprises Financial Safety and Soundness Act of 1992. 

Sec. 366. Federal Reserve Act. 

Sec. 367. Financial Institutions Reform, Recovery, and Enforcement Act of 1989. 

Sec. 368. Flood Disaster Protection Act of 1973. 

Sec. 369. Home Owners’ Loan Act. 

Sec. 370. Housing Act of 1948. 

Sec. 371. Housing and Community Development Act of 1992. 


sroberts on DSKD5P82C1PROD with HEARING
4 

Sec. 372. Housing and Urban-Rural Recovery Act of 1983. 

Sec. 373. National Housing Act. 

Sec. 374. Neighborhood Reinvestment Corporation Act. 

Sec. 375. Public Law 93–100. 

Sec. 376. Securities Exchange Act of 1934. 

Sec. 377. Title 18, United States Code. 

Sec. 378. Title 31, United States Code. 

TITLE IV—REGULATION OF ADVISERS TO HEDGE FUNDS AND OTHERS 

Sec. 401. Short title. 

Sec. 402. Definitions. 

Sec. 403. Elimination of private adviser exemption; limited exemption for foreign 

private advisers; limited intrastate exemption. 

Sec. 404. Collection of systemic risk data; reports; examinations; disclosures. 

Sec. 405. Disclosure provision amendment. 

Sec. 406. Clarification of rulemaking authority. 

Sec. 407. Exemption of venture capital fund advisers. 

Sec. 408. Exemption of and record keeping by private equity fund advisers. 

Sec. 409. Family offices. 

Sec. 410. State and Federal responsibilities; asset threshold for Federal registration 

of investment advisers. 

Sec. 411. Custody of client assets. 

Sec. 412. Adjusting the accredited investor standard. 

Sec. 413. GAO study and report on accredited investors. 

Sec. 414. GAO study on self-regulatory organization for private funds. 

Sec. 415. Commission study and report on short selling. 

Sec. 416. Transition period. 

TITLE V—INSURANCE 

Subtitle A—Office of National Insurance 

Sec. 501. Short title. 

Sec. 502. Federal Insurance Office. 

Subtitle B—State-Based Insurance Reform 

Sec. 511. Short title. 

Sec. 512. Effective date. 

PART I—NONADMITTED INSURANCE

Sec. 521. Reporting, payment, and allocation of premium taxes. 

Sec. 522. Regulation of nonadmitted insurance by insured’s home State. 

Sec. 523. Participation in national producer database. 

Sec. 524. Uniform standards for surplus lines eligibility. 

Sec. 525. Streamlined application for commercial purchasers. 

Sec. 526. GAO study of nonadmitted insurance market. 

Sec. 527. Definitions. 

PART II—REINSURANCE

Sec. 531. Regulation of credit for reinsurance and reinsurance agreements. 

Sec. 532. Regulation of reinsurer solvency. 

Sec. 533. Definitions. 

PART III—RULE OF CONSTRUCTION

Sec. 541. Rule of construction. 

Sec. 542. Severability. 

TITLE VI—IMPROVEMENTS TO REGULATION OF BANK AND SAVINGS 

ASSOCIATION HOLDING COMPANIES AND DEPOSITORY INSTITUTIONS 

Sec. 601. Short title. 

Sec. 602. Definition. 

Sec. 603. Moratorium and study on treatment of credit card banks, industrial loan 

companies, and certain other companies under the Bank Holding Company Act of 1956. 

Sec. 604. Reports and examinations of holding companies; regulation of functionally 

regulated subsidiaries. 

Sec. 605. Assuring consistent oversight of permissible activities of depository institution subsidiaries of holding companies. 


sroberts on DSKD5P82C1PROD with HEARING
5 

Sec. 606. Requirements for financial holding companies to remain well capitalized 

and well managed. 

Sec. 607. Standards for interstate acquisitions. 

Sec. 608. Enhancing existing restrictions on bank transactions with affiliates. 

Sec. 609. Eliminating exceptions for transactions with financial subsidiaries. 

Sec. 610. Lending limits applicable to credit exposure on derivative transactions, repurchase agreements, reverse repurchase agreements, and securities 

lending and borrowing transactions. 

Sec. 611. Consistent treatment of derivative transactions in lending limits. 

Sec. 612. Restriction on conversions of troubled banks. 

Sec. 613. De novo branching into States. 

Sec. 614. Lending limits to insiders. 

Sec. 615. Limitations on purchases of assets from insiders. 

Sec. 616. Regulations regarding capital levels. 

Sec. 617. Elimination of elective investment bank holding company framework. 

Sec. 618. Securities holding companies. 

Sec. 619. Prohibitions on proprietary trading and certain relationships with hedge 

funds and private equity funds. 

Sec. 620. Study of bank investment activities. 

Sec. 621. Conflicts of interest. 

Sec. 622. Concentration limits on large financial firms. 

Sec. 623. Interstate merger transactions. 

Sec. 624. Qualified thrift lenders. 

Sec. 625. Treatment of dividends by certain mutual holding companies. 

Sec. 626. Intermediate holding companies. 

Sec. 627. Interest-bearing transaction accounts authorized. 

Sec. 628. Credit card bank small business lending. 

TITLE VII—WALL STREET TRANSPARENCY AND ACCOUNTABILITY 

Sec. 701. Short title. 

Subtitle A—Regulation of Over-the-Counter Swaps Markets 

PART I—REGULATORY AUTHORITY

Sec. 711. Definitions. 

Sec. 712. Review of regulatory authority. 

Sec. 713. Portfolio margining conforming changes. 

Sec. 714. Abusive swaps. 

Sec. 715. Authority to prohibit participation in swap activities. 

Sec. 716. Prohibition against Federal Government bailouts of swaps entities. 

Sec. 717. New product approval CFTC—SEC process. 

Sec. 718. Determining status of novel derivative products. 

Sec. 719. Studies. 

Sec. 720. Memorandum. 

PART II—REGULATION OF SWAP MARKETS

Sec. 721. Definitions. 

Sec. 722. Jurisdiction. 

Sec. 723. Clearing. 

Sec. 724. Swaps; segregation and bankruptcy treatment. 

Sec. 725. Derivatives clearing organizations. 

Sec. 726. Rulemaking on conflict of interest. 

Sec. 727. Public reporting of swap transaction data. 

Sec. 728. Swap data repositories. 

Sec. 729. Reporting and recordkeeping. 

Sec. 730. Large swap trader reporting. 

Sec. 731. Registration and regulation of swap dealers and major swap participants. 

Sec. 732. Conflicts of interest. 

Sec. 733. Swap execution facilities. 

Sec. 734. Derivatives transaction execution facilities and exempt boards of trade. 

Sec. 735. Designated contract markets. 

Sec. 736. Margin. 

Sec. 737. Position limits. 

Sec. 738. Foreign boards of trade. 

Sec. 739. Legal certainty for swaps. 

Sec. 740. Multilateral clearing organizations. 

Sec. 741. Enforcement. 

Sec. 742. Retail commodity transactions. 

Sec. 743. Other authority. 


sroberts on DSKD5P82C1PROD with HEARING
6 

Sec. 744. Restitution remedies. 

Sec. 745. Enhanced compliance by registered entities. 

Sec. 746. Insider trading. 

Sec. 747. Antidisruptive practices authority. 

Sec. 748. Commodity whistleblower incentives and protection. 

Sec. 749. Conforming amendments. 

Sec. 750. Study on oversight of carbon markets. 

Sec. 751. Energy and environmental markets advisory committee. 

Sec. 752. International harmonization. 

Sec. 753. Anti-manipulation authority. 

Sec. 754. Effective date. 

Subtitle B—Regulation of Security-Based Swap Markets 

Sec. 761. Definitions under the Securities Exchange Act of 1934. 

Sec. 762. Repeal of prohibition on regulation of security-based swap agreements. 

Sec. 763. Amendments to the Securities Exchange Act of 1934. 

Sec. 764. Registration and regulation of security-based swap dealers and major security-based swap participants. 

Sec. 765. Rulemaking on conflict of interest. 

Sec. 766. Reporting and recordkeeping. 

Sec. 767. State gaming and bucket shop laws. 

Sec. 768. Amendments to the Securities Act of 1933; treatment of security-based 

swaps. 

Sec. 769. Definitions under the Investment Company Act of 1940. 

Sec. 770. Definitions under the Investment Advisers Act of 1940. 

Sec. 771. Other authority. 

Sec. 772. Jurisdiction. 

Sec. 773. Civil penalties. 

Sec. 774. Effective date. 

TITLE VIII—PAYMENT, CLEARING, AND SETTLEMENT SUPERVISION 

Sec. 801. Short title. 

Sec. 802. Findings and purposes. 

Sec. 803. Definitions. 

Sec. 804. Designation of systemic importance. 

Sec. 805. Standards for systemically important financial market utilities and payment, clearing, or settlement activities. 

Sec. 806. Operations of designated financial market utilities. 

Sec. 807. Examination of and enforcement actions against designated financial market utilities. 

Sec. 808. Examination of and enforcement actions against financial institutions subject to standards for designated activities. 

Sec. 809. Requests for information, reports, or records. 

Sec. 810. Rulemaking. 

Sec. 811. Other authority. 

Sec. 812. Consultation. 

Sec. 813. Common framework for designated clearing entity risk management. 

Sec. 814. Effective date. 

TITLE IX—INVESTOR PROTECTIONS AND IMPROVEMENTS TO THE 

REGULATION OF SECURITIES 

Sec. 901. Short title. 

Subtitle A—Increasing Investor Protection 

Sec. 911. Investor Advisory Committee established. 

Sec. 912. Clarification of authority of the Commission to engage in investor testing. 

Sec. 913. Study and rulemaking regarding obligations of brokers, dealers, and investment advisers. 

Sec. 914. Study on enhancing investment adviser examinations. 

Sec. 915. Office of the Investor Advocate. 

Sec. 916. Streamlining of filing procedures for self-regulatory organizations. 

Sec. 917. Study regarding financial literacy among investors. 

Sec. 918. Study regarding mutual fund advertising. 

Sec. 919. Clarification of Commission authority to require investor disclosures before 

purchase of investment products and services. 

Sec. 919A. Study on conflicts of interest. 

Sec. 919B. Study on improved investor access to information on investment advisers 

and broker-dealers. 


sroberts on DSKD5P82C1PROD with HEARING
7 

Sec. 919C. Study on financial planners and the use of financial designations. 

Sec. 919D. Ombudsman. 

Subtitle B—Increasing Regulatory Enforcement and Remedies 

Sec. 921. Authority to restrict mandatory pre-dispute arbitration. 

Sec. 922. Whistleblower protection. 

Sec. 923. Conforming amendments for whistleblower protection. 

Sec. 924. Implementation and transition provisions for whistleblower protection. 

Sec. 925. Collateral bars. 

Sec. 926. Disqualifying felons and other ‘‘bad actors’’ from Regulation D offerings. 

Sec. 927. Equal treatment of self-regulatory organization rules. 

Sec. 928. Clarification that section 205 of the Investment Advisers Act of 1940 does 

not apply to State-registered advisers. 

Sec. 929. Unlawful margin lending. 

Sec. 929A. Protection for employees of subsidiaries and affiliates of publicly traded 

companies. 

Sec. 929B. Fair Fund amendments. 

Sec. 929C. Increasing the borrowing limit on Treasury loans. 

Sec. 929D. Lost and stolen securities. 

Sec. 929E. Nationwide service of subpoenas. 

Sec. 929F. Formerly associated persons. 

Sec. 929G. Streamlined hiring authority for market specialists. 

Sec. 929H. SIPC Reforms. 

Sec. 929I. Protecting confidentiality of materials submitted to the Commission. 

Sec. 929J. Expansion of audit information to be produced and exchanged. 

Sec. 929K. Sharing privileged information with other authorities. 

Sec. 929L. Enhanced application of antifraud provisions. 

Sec. 929M. Aiding and abetting authority under the Securities Act and the Investment Company Act. 

Sec. 929N. Authority to impose penalties for aiding and abetting violations of the 

Investment Advisers Act. 

Sec. 929O. Aiding and abetting standard of knowledge satisfied by recklessness. 

Sec. 929P. Strengthening enforcement by the Commission. 

Sec. 929Q. Revision to recordkeeping rule. 

Sec. 929R. Beneficial ownership and short-swing profit reporting. 

Sec. 929S. Fingerprinting. 

Sec. 929T. Equal treatment of self-regulatory organization rules. 

Sec. 929U. Deadline for completing examinations, inspections and enforcement actions. 

Sec. 929V. Security Investor Protection Act amendments. 

Sec. 929W. Notice to missing security holders. 

Sec. 929X. Short sale reforms. 

Sec. 929Y. Study on extraterritorial private rights of action. 

Sec. 929Z. GAO study on securities litigation. 

Subtitle C—Improvements to the Regulation of Credit Rating Agencies 

Sec. 931. Findings. 

Sec. 932. Enhanced regulation, accountability, and transparency of nationally recognized statistical rating organizations. 

Sec. 933. State of mind in private actions. 

Sec. 934. Referring tips to law enforcement or regulatory authorities. 

Sec. 935. Consideration of information from sources other than the issuer in rating 

decisions. 

Sec. 936. Qualification standards for credit rating analysts. 

Sec. 937. Timing of regulations. 

Sec. 938. Universal ratings symbols. 

Sec. 939. Removal of statutory references to credit ratings. 

Sec. 939A. Review of reliance on ratings. 

Sec. 939B. Elimination of exemption from fair disclosure rule. 

Sec. 939C. Securities and Exchange Commission study on strengthening credit rating agency independence. 

Sec. 939D. Government Accountability Office study on alternative business models. 

Sec. 939E. Government Accountability Office study on the creation of an independent professional analyst organization. 

Sec. 939F. Study and rulemaking on assigned credit ratings. 

Sec. 939G. Effect of Rule 436(g). 

Sec. 939H. Sense of Congress. 


sroberts on DSKD5P82C1PROD with HEARING
8 

Subtitle D—Improvements to the Asset-Backed Securitization Process 

Sec. 941. Regulation of credit risk retention. 

Sec. 942. Disclosures and reporting for asset-backed securities. 

Sec. 943. Representations and warranties in asset-backed offerings. 

Sec. 944. Exempted transactions under the Securities Act of 1933. 

Sec. 945. Due diligence analysis and disclosure in asset-backed securities issues. 

Sec. 946. Study on the macroeconomic effects of risk retention requirements. 

Subtitle E—Accountability and Executive Compensation 

Sec. 951. Shareholder vote on executive compensation disclosures. 

Sec. 952. Compensation committee independence. 

Sec. 953. Executive compensation disclosures. 

Sec. 954. Recovery of erroneously awarded compensation. 

Sec. 955. Disclosure regarding employee and director hedging. 

Sec. 956. Enhanced compensation structure reporting. 

Sec. 957. Voting by brokers. 

Subtitle F—Improvements to the Management of the Securities and Exchange 

Commission 

Sec. 961. Report and certification of internal supervisory controls. 

Sec. 962. Triennial report on personnel management. 

Sec. 963. Annual financial controls audit. 

Sec. 964. Report on oversight of national securities associations. 

Sec. 965. Compliance examiners. 

Sec. 966. Suggestion program for employees of the Commission. 

Sec. 967. Commission organizational study and reform. 

Sec. 968. Study on SEC revolving door. 

Subtitle G—Strengthening Corporate Governance 

Sec. 971. Proxy access. 

Sec. 972. Disclosures regarding chairman and CEO structures. 

Subtitle H—Municipal Securities 

Sec. 975. Regulation of municipal securities and changes to the board of the MSRB. 

Sec. 976. Government Accountability Office study of increased disclosure to investors. 

Sec. 977. Government Accountability Office study on the municipal securities markets. 

Sec. 978. Funding for Governmental Accounting Standards Board. 

Sec. 979. Commission Office of Municipal Securities. 

Subtitle I—Public Company Accounting Oversight Board, Portfolio Margining, and 

Other Matters 

Sec. 981. Authority to share certain information with foreign authorities. 

Sec. 982. Oversight of brokers and dealers. 

Sec. 983. Portfolio margining. 

Sec. 984. Loan or borrowing of securities. 

Sec. 985. Technical corrections to Federal securities laws. 

Sec. 986. Conforming amendments relating to repeal of the Public Utility Holding 

Company Act of 1935. 

Sec. 987. Amendment to definition of material loss and nonmaterial losses to the 

Deposit Insurance Fund for purposes of Inspector General reviews. 

Sec. 988. Amendment to definition of material loss and nonmaterial losses to the 

National Credit Union Share Insurance Fund for purposes of Inspector 

General reviews. 

Sec. 989. Government Accountability Office study on proprietary trading. 

Sec. 989A. Senior investor protections. 

Sec. 989B. Designated Federal entity inspectors general independence. 

Sec. 989C. Strengthening Inspector General accountability. 

Sec. 989D. Removal of Inspectors General of designated Federal entities. 

Sec. 989E. Additional oversight of financial regulatory system. 

Sec. 989F. GAO study of person to person lending. 

Sec. 989G. Exemption for nonaccelerated filers. 

Sec. 989H. Corrective responses by heads of certain establishments to deficiencies 

identified by Inspectors General. 

Sec. 989I. GAO study regarding exemption for smaller issuers. 

Sec. 989J. Further promoting the adoption of the NAIC Model Regulations that enhance protection of seniors and other consumers. 


sroberts on DSKD5P82C1PROD with HEARING
9 

Subtitle J—Securities and Exchange Commission Match Funding 

Sec. 991. Securities and Exchange Commission match funding. 

TITLE X—BUREAU OF CONSUMER FINANCIAL PROTECTION 

Sec. 1001. Short title. 

Sec. 1002. Definitions. 

Subtitle A—Bureau of Consumer Financial Protection 

Sec. 1011. Establishment of the Bureau of Consumer Financial Protection. 

Sec. 1012. Executive and administrative powers. 

Sec. 1013. Administration. 

Sec. 1014. Consumer Advisory Board. 

Sec. 1015. Coordination. 

Sec. 1016. Appearances before and reports to Congress. 

Sec. 1017. Funding; penalties and fines. 

Sec. 1018. Effective date. 

Subtitle B—General Powers of the Bureau 

Sec. 1021. Purpose, objectives, and functions. 

Sec. 1022. Rulemaking authority. 

Sec. 1023. Review of Bureau regulations. 

Sec. 1024. Supervision of nondepository covered persons. 

Sec. 1025. Supervision of very large banks, savings associations, and credit unions. 

Sec. 1026. Other banks, savings associations, and credit unions. 

Sec. 1027. Limitations on authorities of the Bureau; preservation of authorities. 

Sec. 1028. Authority to restrict mandatory pre-dispute arbitration. 

Sec. 1029. Exclusion for auto dealers. 

Sec. 1029A. Effective date. 

Subtitle C—Specific Bureau Authorities 

Sec. 1031. Prohibiting unfair, deceptive, or abusive acts or practices. 

Sec. 1032. Disclosures. 

Sec. 1033. Consumer rights to access information. 

Sec. 1034. Response to consumer complaints and inquiries. 

Sec. 1035. Private education loan ombudsman. 

Sec. 1036. Prohibited acts. 

Sec. 1037. Effective date. 

Subtitle D—Preservation of State Law 

Sec. 1041. Relation to State law. 

Sec. 1042. Preservation of enforcement powers of States. 

Sec. 1043. Preservation of existing contracts. 

Sec. 1044. State law preemption standards for national banks and subsidiaries 

clarified. 

Sec. 1045. Clarification of law applicable to nondepository institution subsidiaries. 

Sec. 1046. State law preemption standards for Federal savings associations and 

subsidiaries clarified. 

Sec. 1047. Visitorial standards for national banks and savings associations. 

Sec. 1048. Effective date. 

Subtitle E—Enforcement Powers 

Sec. 1051. Definitions. 

Sec. 1052. Investigations and administrative discovery. 

Sec. 1053. Hearings and adjudication proceedings. 

Sec. 1054. Litigation authority. 

Sec. 1055. Relief available. 

Sec. 1056. Referrals for criminal proceedings. 

Sec. 1057. Employee protection. 

Sec. 1058. Effective date. 

Subtitle F—Transfer of Functions and Personnel; Transitional Provisions 

Sec. 1061. Transfer of consumer financial protection functions. 

Sec. 1062. Designated transfer date. 

Sec. 1063. Savings provisions. 

Sec. 1064. Transfer of certain personnel. 

Sec. 1065. Incidental transfers. 


sroberts on DSKD5P82C1PROD with HEARING
10 

Sec. 1066. Interim authority of the Secretary. 

Sec. 1067. Transition oversight. 

Subtitle G—Regulatory Improvements 

Sec. 1071. Small business data collection. 

Sec. 1072. Assistance for economically vulnerable individuals and families. 

Sec. 1073. Remittance transfers. 

Sec. 1074. Department of the Treasury study on ending the conservatorship of 

Fannie Mae, Freddie Mac, and reforming the housing finance system. 

Sec. 1075. Reasonable fees and rules for payment card transactions. 

Sec. 1076. Reverse mortgage study and regulations. 

Sec. 1077. Report on private education loans and private educational lenders. 

Sec. 1078. Study and report on credit scores. 

Sec. 1079. Review, report, and program with respect to exchange facilitators. 

Sec. 1079A. Financial fraud provisions. 

Subtitle H—Conforming Amendments 

Sec. 1081. Amendments to the Inspector General Act. 

Sec. 1082. Amendments to the Privacy Act of 1974. 

Sec. 1083. Amendments to the Alternative Mortgage Transaction Parity Act of 1982. 

Sec. 1084. Amendments to the Electronic Fund Transfer Act. 

Sec. 1085. Amendments to the Equal Credit Opportunity Act. 

Sec. 1086. Amendments to the Expedited Funds Availability Act. 

Sec. 1087. Amendments to the Fair Credit Billing Act. 

Sec. 1088. Amendments to the Fair Credit Reporting Act and the Fair and Accurate 

Credit Transactions Act of 2003. 

Sec. 1089. Amendments to the Fair Debt Collection Practices Act. 

Sec. 1090. Amendments to the Federal Deposit Insurance Act. 

Sec. 1091. Amendment to Federal Financial Institutions Examination Council Act of 

1978. 

Sec. 1092. Amendments to the Federal Trade Commission Act. 

Sec. 1093. Amendments to the Gramm-Leach-Bliley Act. 

Sec. 1094. Amendments to the Home Mortgage Disclosure Act of 1975. 

Sec. 1095. Amendments to the Homeowners Protection Act of 1998. 

Sec. 1096. Amendments to the Home Ownership and Equity Protection Act of 1994. 

Sec. 1097. Amendments to the Omnibus Appropriations Act, 2009. 

Sec. 1098. Amendments to the Real Estate Settlement Procedures Act of 1974. 

Sec. 1098A. Amendments to the Interstate Land Sales Full Disclosure Act. 

Sec. 1099. Amendments to the Right to Financial Privacy Act of 1978. 

Sec. 1100. Amendments to the Secure and Fair Enforcement for Mortgage Licensing 

Act of 2008. 

Sec. 1100A. Amendments to the Truth in Lending Act. 

Sec. 1100B. Amendments to the Truth in Savings Act. 

Sec. 1100C. Amendments to the Telemarketing and Consumer Fraud and Abuse 

Prevention Act. 

Sec. 1100D. Amendments to the Paperwork Reduction Act. 

Sec. 1100E. Adjustments for inflation in the Truth in Lending Act. 

Sec. 1100F. Use of consumer reports. 

Sec. 1100G. Small business fairness and regulatory transparency. 

Sec. 1100H. Effective date. 

TITLE XI—FEDERAL RESERVE SYSTEM PROVISIONS 

Sec. 1101. Federal Reserve Act amendments on emergency lending authority. 

Sec. 1102. Reviews of special Federal reserve credit facilities. 

Sec. 1103. Public access to information. 

Sec. 1104. Liquidity event determination. 

Sec. 1105. Emergency financial stabilization. 

Sec. 1106. Additional related amendments. 

Sec. 1107. Federal Reserve Act amendments on Federal reserve bank governance. 

Sec. 1108. Federal Reserve Act amendments on supervision and regulation policy. 

Sec. 1109. GAO audit of the Federal Reserve facilities; publication of Board actions. 

TITLE XII—IMPROVING ACCESS TO MAINSTREAM FINANCIAL 

INSTITUTIONS 

Sec. 1201. Short title. 

Sec. 1202. Purpose. 

Sec. 1203. Definitions. 

Sec. 1204. Expanded access to mainstream financial institutions. 


sroberts on DSKD5P82C1PROD with HEARING
11 

Sec. 1205. Low-cost alternatives to payday loans. 

Sec. 1206. Grants to establish loan-loss reserve funds. 

Sec. 1207. Procedural provisions. 

Sec. 1208. Authorization of appropriations. 

Sec. 1209. Regulations. 

Sec. 1210. Evaluation and reports to Congress. 

TITLE XIII—PAY IT BACK ACT 

Sec. 1301. Short title. 

Sec. 1302. Amendment to reduce TARP authorization. 

Sec. 1303. Report. 

Sec. 1304. Amendments to Housing and Economic Recovery Act of 2008. 

Sec. 1305. Federal Housing Finance Agency report. 

Sec. 1306. Repayment of unobligated ARRA funds. 

TITLE XIV—MORTGAGE REFORM AND ANTI-PREDATORY LENDING ACT 

Sec. 1400. Short title; designation as enumerated consumer law. 

Subtitle A—Residential Mortgage Loan Origination Standards 

Sec. 1401. Definitions. 

Sec. 1402. Residential mortgage loan origination. 

Sec. 1403. Prohibition on steering incentives. 

Sec. 1404. Liability. 

Sec. 1405. Regulations. 

Sec. 1406. Study of shared appreciation mortgages. 

Subtitle B—Minimum Standards For Mortgages 

Sec. 1411. Ability to repay. 

Sec. 1412. Safe harbor and rebuttable presumption. 

Sec. 1413. Defense to foreclosure. 

Sec. 1414. Additional standards and requirements. 

Sec. 1415. Rule of construction. 

Sec. 1416. Amendments to civil liability provisions. 

Sec. 1417. Lender rights in the context of borrower deception. 

Sec. 1418. Six-month notice required before reset of hybrid adjustable rate mortgages. 

Sec. 1419. Required disclosures. 

Sec. 1420. Disclosures required in monthly statements for residential mortgage 

loans. 

Sec. 1421. Report by the GAO. 

Sec. 1422. State attorney general enforcement authority. 

Subtitle C—High-Cost Mortgages 

Sec. 1431. Definitions relating to high-cost mortgages. 

Sec. 1432. Amendments to existing requirements for certain mortgages. 

Sec. 1433. Additional requirements for certain mortgages. 

Subtitle D—Office of Housing Counseling 

Sec. 1441. Short title. 

Sec. 1442. Establishment of Office of Housing Counseling. 

Sec. 1443. Counseling procedures. 

Sec. 1444. Grants for housing counseling assistance. 

Sec. 1445. Requirements to use HUD-certified counselors under HUD programs. 

Sec. 1446. Study of defaults and foreclosures. 

Sec. 1447. Default and foreclosure database. 

Sec. 1448. Definitions for counseling-related programs. 

Sec. 1449. Accountability and transparency for grant recipients. 

Sec. 1450. Updating and simplification of mortgage information booklet. 

Sec. 1451. Home inspection counseling. 

Sec. 1452. Warnings to homeowners of foreclosure rescue scams. 

Subtitle E—Mortgage Servicing 

Sec. 1461. Escrow and impound accounts relating to certain consumer credit transactions. 

Sec. 1462. Disclosure notice required for consumers who waive escrow services. 

Sec. 1463. Real Estate Settlement Procedures Act of 1974 amendments. 

Sec. 1464. Truth in Lending Act amendments. 

Sec. 1465. Escrows included in repayment analysis. 


sroberts on DSKD5P82C1PROD with HEARING
12 

Subtitle F—Appraisal Activities 

Sec. 1471. Property appraisal requirements. 

Sec. 1472. Appraisal independence requirements. 

Sec. 1473. Amendments relating to Appraisal Subcommittee of FFIEC, Appraiser 

Independence Monitoring, Approved Appraiser Education, Appraisal 

Management Companies, Appraiser Complaint Hotline, Automated 

Valuation Models, and Broker Price Opinions. 

Sec. 1474. Equal Credit Opportunity Act amendment. 

Sec. 1475. Real Estate Settlement Procedures Act of 1974 amendment relating to 

certain appraisal fees. 

Sec. 1476. GAO study on the effectiveness and impact of various appraisal methods, 

valuation models and distributions channels, and on the Home Valuation Code of conduct and the Appraisal Subcommittee. 

Subtitle G—Mortgage Resolution and Modification 

Sec. 1481. Multifamily mortgage resolution program. 

Sec. 1482. Home Affordable Modification Program guidelines. 

Sec. 1483. Public availability of information of Making Home Affordable Program. 

Sec. 1484. Protecting tenants at foreclosure extension and clarification. 

Subtitle H—Miscellaneous Provisions 

Sec. 1491. Sense of Congress regarding the importance of government-sponsored enterprises reform to enhance the protection, limitation, and regulation of 

the terms of residential mortgage credit. 

Sec. 1492. GAO study report on government efforts to combat mortgage foreclosure 

rescue scams and loan modification fraud. 

Sec. 1493. Reporting of mortgage data by State. 

Sec. 1494. Study of effect of drywall presence on foreclosures. 

Sec. 1495. Definition. 

Sec. 1496. Emergency mortgage relief. 

Sec. 1497. Additional assistance for Neighborhood Stabilization Program. 

Sec. 1498. Legal assistance for foreclosure-related issues. 

TITLE XV—MISCELLANEOUS PROVISIONS 

Sec. 1501. Restrictions on use of United States funds for foreign governments; protection of American taxpayers. 

Sec. 1502. Conflict minerals. 

Sec. 1503. Reporting requirements regarding coal or other mine safety. 

Sec. 1504. Disclosure of payments by resource extraction issuers. 

Sec. 1505. Study by the Comptroller General. 

Sec. 1506. Study on core deposits and brokered deposits. 

TITLE XVI—SECTION 1256 CONTRACTS 

Sec. 1601. Certain swaps, etc., not treated as section 1256 contracts. 

SEC. 2. DEFINITIONS. 

As used in this Act, the following definitions shall apply, except 

as the context otherwise requires or as otherwise specifically provided in this Act: 

(1) AFFILIATE.—The term ‘‘affiliate’’ has the same meaning 

as in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 

1813). 

(2) APPROPRIATE FEDERAL BANKING AGENCY.—On and after 

the transfer date, the term ‘‘appropriate Federal banking agency’’ has the same meaning as in section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. 1813(q)), as amended by title III. 

(3) BOARD OF GOVERNORS.—The term ‘‘Board of Governors’’ 

means the Board of Governors of the Federal Reserve System. 

(4) BUREAU.—The term ‘‘Bureau’’ means the Bureau of Consumer Financial Protection established under title X. 

(5) COMMISSION.—The term ‘‘Commission’’ means the Securities and Exchange Commission, except in the context of the 

Commodity Futures Trading Commission. 


sroberts on DSKD5P82C1PROD with HEARING
13 

(6) COMMODITY FUTURES TERMS.—The terms ‘‘futures commission merchant’’, ‘‘swap’’, ‘‘swap dealer’’, ‘‘swap execution facility’’, ‘‘derivatives clearing organization’’, ‘‘board of trade’’, 

‘‘commodity trading advisor’’, ‘‘commodity pool’’, and ‘‘commodity pool operator’’ have the same meanings as given the 

terms in section 1a of the Commodity Exchange Act (7 U.S.C. 

1 et seq.). 

(7) CORPORATION.—The term ‘‘Corporation’’ means the Federal Deposit Insurance Corporation. 

(8) COUNCIL.—The term ‘‘Council’’ means the Financial 

Stability Oversight Council established under title I. 

(9) CREDIT UNION.—The term ‘‘credit union’’ means a Federal credit union, State credit union, or State-chartered credit 

union, as those terms are defined in section 101 of the Federal 

Credit Union Act (12 U.S.C. 1752). 

(10) FEDERAL BANKING AGENCY.—The term— 

(A) ‘‘Federal banking agency’’ means, individually, the 

Board of Governors, the Office of the Comptroller of the 

Currency, and the Corporation; and 

(B) ‘‘Federal banking agencies’’ means all of the agencies referred to in subparagraph (A), collectively. 

(11) FUNCTIONALLY REGULATED SUBSIDIARY.—The term 

‘‘functionally regulated subsidiary’’ has the same meaning as in 

section 5(c)(5) of the Bank Holding Company Act of 1956 (12 

U.S.C. 1844(c)(5)). 

(12) PRIMARY FINANCIAL REGULATORY AGENCY.—The term 

‘‘primary financial regulatory agency’’ means— 

(A) the appropriate Federal banking agency, with respect to institutions described in section 3(q) of the Federal 

Deposit Insurance Act, except to the extent that an institution is or the activities of an institution are otherwise described in subparagraph (B), (C), (D), or (E); 

(B) the Securities and Exchange Commission, with respect to— 

(i) any broker or dealer that is registered with the 

Commission under the Securities Exchange Act of 

1934, with respect to the activities of the broker or 

dealer that require the broker or dealer to be registered 

under that Act; 

(ii) any investment company that is registered with 

the Commission under the Investment Company Act of 

1940, with respect to the activities of the investment 

company that require the investment company to be 

registered under that Act; 

(iii) any investment adviser that is registered with 

the Commission under the Investment Advisers Act of 

1940, with respect to the investment advisory activities 

of such company and activities that are incidental to 

such advisory activities; 

(iv) any clearing agency registered with the Commission under the Securities Exchange Act of 1934, 

with respect to the activities of the clearing agency that 

require the agency to be registered under such Act; 


sroberts on DSKD5P82C1PROD with HEARING
14 

(v) any nationally recognized statistical rating organization registered with the Commission under the 

Securities Exchange Act of 1934; 

(vi) any transfer agent registered with the Commission under the Securities Exchange Act of 1934; 

(vii) any exchange registered as a national securities exchange with the Commission under the Securities Exchange Act of 1934; 

(viii) any national securities association registered 

with the Commission under the Securities Exchange 

Act of 1934; 

(ix) any securities information processor registered 

with the Commission under the Securities Exchange 

Act of 1934; 

(x) the Municipal Securities Rulemaking Board established under the Securities Exchange Act of 1934; 

(xi) the Public Company Accounting Oversight 

Board established under the Sarbanes-Oxley Act of 

2002 (15 U.S.C. 7211 et seq.); 

(xii) the Securities Investor Protection Corporation 

established under the Securities Investor Protection Act 

of 1970 (15 U.S.C. 78aaa et seq.); and 

(xiii) any security-based swap execution facility, security-based swap data repository, security-based swap 

dealer or major security-based swap participant registered with the Commission under the Securities Exchange Act of 1934, with respect to the security-based 

swap activities of the person that require such person 

to be registered under such Act; 

(C) the Commodity Futures Trading Commission, with 

respect to— 

(i) any futures commission merchant registered 

with the Commodity Futures Trading Commission 

under the Commodity Exchange Act (7 U.S.C. 1 et 

seq.), with respect to the activities of the futures commission merchant that require the futures commission 

merchant to be registered under that Act; 

(ii) any commodity pool operator registered with 

the Commodity Futures Trading Commission under 

the Commodity Exchange Act (7 U.S.C. 1 et seq.), with 

respect to the activities of the commodity pool operator 

that require the commodity pool operator to be registered under that Act, or a commodity pool, as defined 

in that Act; 

(iii) any commodity trading advisor or introducing 

broker registered with the Commodity Futures Trading 

Commission under the Commodity Exchange Act (7 

U.S.C. 1 et seq.), with respect to the activities of the 

commodity trading advisor or introducing broker that 

require the commodity trading adviser or introducing 

broker to be registered under that Act; 

(iv) any derivatives clearing organization registered with the Commodity Futures Trading Commission under the Commodity Exchange Act (7 U.S.C. 1 et 

seq.), with respect to the activities of the derivatives 


sroberts on DSKD5P82C1PROD with HEARING
15 

clearing organization that require the derivatives clearing organization to be registered under that Act; 

(v) any board of trade designated as a contract 

market by the Commodity Futures Trading Commission under the Commodity Exchange Act (7 U.S.C. 1 et 

seq.); 

(vi) any futures association registered with the 

Commodity Futures Trading Commission under the 

Commodity Exchange Act (7 U.S.C. 1 et seq.); 

(vii) any retail foreign exchange dealer registered 

with the Commodity Futures Trading Commission 

under the Commodity Exchange Act (7 U.S.C. 1 et 

seq.), with respect to the activities of the retail foreign 

exchange dealer that require the retail foreign exchange 

dealer to be registered under that Act; 

(viii) any swap execution facility, swap data repository, swap dealer, or major swap participant registered with the Commodity Futures Trading Commission under the Commodity Exchange Act (7 U.S.C. 1 et 

seq.) with respect to the swap activities of the person 

that require such person to be registered under that 

Act; and 

(ix) any registered entity under the Commodity Exchange Act (7 U.S.C. 1 et seq.), with respect to the activities of the registered entity that require the registered entity to be registered under that Act; 

(D) the State insurance authority of the State in which 

an insurance company is domiciled, with respect to the insurance activities and activities that are incidental to such 

insurance activities of an insurance company that is subject 

to supervision by the State insurance authority under State 

insurance law; and 

(E) the Federal Housing Finance Agency, with respect 

to Federal Home Loan Banks or the Federal Home Loan 

Bank System, and with respect to the Federal National 

Mortgage Association or the Federal Home Loan Mortgage 

Corporation. 

(13) PRUDENTIAL STANDARDS.—The term ‘‘prudential standards’’ means enhanced supervision and regulatory standards 

developed by the Board of Governors under section 165. 

(14) SECRETARY.—The term ‘‘Secretary’’ means the Secretary of the Treasury. 

(15) SECURITIES TERMS.—The— 

(A) terms ‘‘broker’’, ‘‘dealer’’, ‘‘issuer’’, ‘‘nationally recognized statistical rating organization’’, ‘‘security’’, and ‘‘securities laws’’ have the same meanings as in section 3 of the 

Securities Exchange Act of 1934 (15 U.S.C. 78c); 

(B) term ‘‘investment adviser’’ has the same meaning as 

in section 202 of the Investment Advisers Act of 1940 (15 

U.S.C. 80b–2); and 

(C) term ‘‘investment company’’ has the same meaning 

as in section 3 of the Investment Company Act of 1940 (15 

U.S.C. 80a–3). 

(16) STATE.—The term ‘‘State’’ means any State, commonwealth, territory, or possession of the United States, the District 


sroberts on DSKD5P82C1PROD with HEARING
16 

of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, American Samoa, 

Guam, or the United States Virgin Islands. 

(17) TRANSFER DATE.—The term ‘‘transfer date’’ means the 

date established under section 311. 

(18) OTHER INCORPORATED DEFINITIONS.— 

(A) FEDERAL DEPOSIT INSURANCE ACT.—The terms 

‘‘bank’’, ‘‘bank holding company’’, ‘‘control’’, ‘‘deposit’’, ‘‘depository institution’’, ‘‘Federal depository institution’’, ‘‘Federal savings association’’, ‘‘foreign bank’’, ‘‘including’’, ‘‘insured branch’’, ‘‘insured depository institution’’, ‘‘national 

member bank’’, ‘‘national nonmember bank’’, ‘‘savings association’’, ‘‘State bank’’, ‘‘State depository institution’’, ‘‘State 

member bank’’, ‘‘State nonmember bank’’, ‘‘State savings association’’, and ‘‘subsidiary’’ have the same meanings as in 

section 3 of the Federal Deposit Insurance Act (12 U.S.C. 

1813). 

(B) HOLDING COMPANIES.—The term— 

(i) ‘‘bank holding company’’ has the same meaning 

as in section 2 of the Bank Holding Company Act of 

1956 (12 U.S.C. 1841); 

(ii) ‘‘financial holding company’’ has the same 

meaning as in section 2(p) of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(p)); and 

(iii) ‘‘savings and loan holding company’’ has the 

same meaning as in section 10 of the Home Owners’ 

Loan Act (12 U.S.C. 1467a(a)). 

SEC. 3. SEVERABILITY. 

If any provision of this Act, an amendment made by this Act, 

or the application of such provision or amendment to any person or 

circumstance is held to be unconstitutional, the remainder of this 

Act, the amendments made by this Act, and the application of the 

provisions of such to any person or circumstance shall not be affected thereby. 

SEC. 4. EFFECTIVE DATE. 

Except as otherwise specifically provided in this Act or the 

amendments made by this Act, this Act and such amendments shall 

take effect 1 day after the date of enactment of this Act. 

SEC. 5. BUDGETARY EFFECTS. 

The budgetary effects of this Act, for the purpose of complying 

with the Statutory Pay-As-You-Go-Act of 2010, shall be determined 

by reference to the latest statement titled ‘‘Budgetary Effects of 

PAYGO Legislation’’ for this Act, jointly submitted for printing in 

the Congressional Record by the Chairmen of the House and Senate 

Budget Committees, provided that such statement has been submitted prior to the vote on passage in the House acting first on this 

conference report or amendment between the Houses. 

SEC. 6. ANTITRUST SAVINGS CLAUSE. 

Nothing in this Act, or any amendment made by this Act, shall 

be construed to modify, impair, or supersede the operation of any of 

the antitrust laws, unless otherwise specified. For purposes of this 

section, the term ‘‘antitrust laws’’ has the same meaning as in subsection (a) of the first section of the Clayton Act, except that such 


sroberts on DSKD5P82C1PROD with HEARING
17 

term includes section 5 of the Federal Trade Commission Act, to the 

extent that such section 5 applies to unfair methods of competition. 

TITLE I—FINANCIAL STABILITY 

SEC. 101. SHORT TITLE. 

This title may be cited as the ‘‘Financial Stability Act of 2010’’. 

SEC. 102. DEFINITIONS. 

(a) IN GENERAL.—For purposes of this title, unless the context 

otherwise requires, the following definitions shall apply: 

(1) BANK HOLDING COMPANY.—The term ‘‘bank holding 

company’’ has the same meaning as in section 2 of the Bank 

Holding Company Act of 1956 (12 U.S.C. 1841). A foreign bank 

or company that is treated as a bank holding company for purposes of the Bank Holding Company Act of 1956, pursuant to 

section 8(a) of the International Banking Act of 1978 (12 U.S.C. 

3106(a)), shall be treated as a bank holding company for purposes of this title. 

(2) CHAIRPERSON.—The term ‘‘Chairperson’’ means the 

Chairperson of the Council. 

(3) MEMBER AGENCY.—The term ‘‘member agency’’ means 

an agency represented by a voting member of the Council. 

(4) NONBANK FINANCIAL COMPANY DEFINITIONS.— 

(A) FOREIGN NONBANK FINANCIAL COMPANY.—The term 

‘‘foreign nonbank financial company’’ means a company 

(other than a company that is, or is treated in the United 

States as, a bank holding company) that is— 

(i) incorporated or organized in a country other 

than the United States; and 

(ii) predominantly engaged in, including through a 

branch in the United States, financial activities, as defined in paragraph (6). 

(B) U.S. NONBANK FINANCIAL COMPANY.—The term 

‘‘U.S. nonbank financial company’’ means a company (other 

than a bank holding company, a Farm Credit System institution chartered and subject to the provisions of the Farm 

Credit Act of 1971 (12 U.S.C. 2001 et seq.), or a national 

securities exchange (or parent thereof), clearing agency (or 

parent thereof, unless the parent is a bank holding company), security-based swap execution facility, or securitybased swap data repository registered with the Commission, or a board of trade designated as a contract market 

(or parent thereof), or a derivatives clearing organization 

(or parent thereof, unless the parent is a bank holding company), swap execution facility or a swap data repository 

registered with the Commodity Futures Trading Commission), that is— 

(i) incorporated or organized under the laws of the 

United States or any State; and 

(ii) predominantly engaged in financial activities, 

as defined in paragraph (6). 

(C) NONBANK FINANCIAL COMPANY.—The term 

‘‘nonbank financial company’’ means a U.S. nonbank financial company and a foreign nonbank financial company. 


sroberts on DSKD5P82C1PROD with HEARING
18 

(D) NONBANK FINANCIAL COMPANY SUPERVISED BY THE

BOARD OF GOVERNORS.—The term ‘‘nonbank financial company supervised by the Board of Governors’’ means a 

nonbank financial company that the Council has determined under section 113 shall be supervised by the Board 

of Governors. 

(5) OFFICE OF FINANCIAL RESEARCH.—The term ‘‘Office of 

Financial Research’’ means the office established under section 

152. 

(6) PREDOMINANTLY ENGAGED.—A company is ‘‘predominantly engaged in financial activities’’ if— 

(A) the annual gross revenues derived by the company 

and all of its subsidiaries from activities that are financial 

in nature (as defined in section 4(k) of the Bank Holding 

Company Act of 1956) and, if applicable, from the ownership or control of one or more insured depository institutions, represents 85 percent or more of the consolidated annual gross revenues of the company; or 

(B) the consolidated assets of the company and all of 

its subsidiaries related to activities that are financial in 

nature (as defined in section 4(k) of the Bank Holding 

Company Act of 1956) and, if applicable, related to the 

ownership or control of one or more insured depository institutions, represents 85 percent or more of the consolidated 

assets of the company. 

(7) SIGNIFICANT INSTITUTIONS.—The terms ‘‘significant 

nonbank financial company’’ and ‘‘significant bank holding 

company’’ have the meanings given those terms by rule of the 

Board of Governors, but in no instance shall the term ‘‘significant nonbank financial company’’ include those entities that are 

excluded under paragraph (4)(B). 

(b) DEFINITIONAL CRITERIA.—The Board of Governors shall establish, by regulation, the requirements for determining if a company is predominantly engaged in financial activities, as defined in 

subsection (a)(6). 

(c) FOREIGN NONBANK FINANCIAL COMPANIES.—For purposes of 

the application of subtitles A and C (other than section 113(b)) with 

respect to a foreign nonbank financial company, references in this 

title to ‘‘company’’ or ‘‘subsidiary’’ include only the United States activities and subsidiaries of such foreign company, except as otherwise provided. 

Subtitle A—Financial Stability Oversight Council 

SEC. 111. FINANCIAL STABILITY OVERSIGHT COUNCIL ESTABLISHED. 

(a) ESTABLISHMENT.—Effective on the date of enactment of this 

Act, there is established the Financial Stability Oversight Council. 

(b) MEMBERSHIP.—The Council shall consist of the following 

members: 

(1) VOTING MEMBERS.—The voting members, who shall 

each have 1 vote on the Council shall be— 

(A) the Secretary of the Treasury, who shall serve as 

Chairperson of the Council; 

(B) the Chairman of the Board of Governors; 

(C) the Comptroller of the Currency; 

(D) the Director of the Bureau; 


sroberts on DSKD5P82C1PROD with HEARING
19 

(E) the Chairman of the Commission; 

(F) the Chairperson of the Corporation; 

(G) the Chairperson of the Commodity Futures Trading 

Commission; 

(H) the Director of the Federal Housing Finance Agency; 

(I) the Chairman of the National Credit Union Administration Board; and 

(J) an independent member appointed by the President, 

by and with the advice and consent of the Senate, having 

insurance expertise. 

(2) NONVOTING MEMBERS.—The nonvoting members, who 

shall serve in an advisory capacity as a nonvoting member of 

the Council, shall be— 

(A) the Director of the Office of Financial Research; 

(B) the Director of the Federal Insurance Office; 

(C) a State insurance commissioner, to be designated 

by a selection process determined by the State insurance 

commissioners; 

(D) a State banking supervisor, to be designated by a 

selection process determined by the State banking supervisors; and 

(E) a State securities commissioner (or an officer performing like functions), to be designated by a selection process determined by such State securities commissioners. 

(3) NONVOTING MEMBER PARTICIPATION.—The nonvoting 

members of the Council shall not be excluded from any of the 

proceedings, meetings, discussions, or deliberations of the Council, except that the Chairperson may, upon an affirmative vote 

of the member agencies, exclude the nonvoting members from 

any of the proceedings, meetings, discussions, or deliberations 

of the Council when necessary to safeguard and promote the 

free exchange of confidential supervisory information. 

(c) TERMS; VACANCY.— 

(1) TERMS.—The independent member of the Council shall 

serve for a term of 6 years, and each nonvoting member described in subparagraphs (C), (D), and (E) of subsection (b)(2) 

shall serve for a term of 2 years. 

(2) VACANCY.—Any vacancy on the Council shall be filled 

in the manner in which the original appointment was made. 

(3) ACTING OFFICIALS MAY SERVE.—In the event of a vacancy in the office of the head of a member agency or department, and pending the appointment of a successor, or during 

the absence or disability of the head of a member agency or department, the acting head of the member agency or department 

shall serve as a member of the Council in the place of that 

agency or department head. 

(d) TECHNICAL AND PROFESSIONAL ADVISORY COMMITTEES.— 

The Council may appoint such special advisory, technical, or professional committees as may be useful in carrying out the functions of 

the Council, including an advisory committee consisting of State 

regulators, and the members of such committees may be members 

of the Council, or other persons, or both. 

(e) MEETINGS.— 


sroberts on DSKD5P82C1PROD with HEARING
20 

(1) TIMING.—The Council shall meet at the call of the 

Chairperson or a majority of the members then serving, but not 

less frequently than quarterly. 

(2) RULES FOR CONDUCTING BUSINESS.—The Council shall 

adopt such rules as may be necessary for the conduct of the 

business of the Council. Such rules shall be rules of agency organization, procedure, or practice for purposes of section 553 of 

title 5, United States Code. 

(f) VOTING.—Unless otherwise specified, the Council shall make 

all decisions that it is authorized or required to make by a majority 

vote of the voting members then serving. 

(g) NONAPPLICABILITY OF FACA.—The Federal Advisory Committee Act (5 U.S.C. App.) shall not apply to the Council, or to any 

special advisory, technical, or professional committee appointed by 

the Council, except that, if an advisory, technical, or professional 

committee has one or more members who are not employees of or affiliated with the United States Government, the Council shall publish a list of the names of the members of such committee. 

(h) ASSISTANCE FROM FEDERAL AGENCIES.—Any department or 

agency of the United States may provide to the Council and any special advisory, technical, or professional committee appointed by the 

Council, such services, funds, facilities, staff, and other support 

services as the Council may determine advisable. 

(i) COMPENSATION OF MEMBERS.— 

(1) FEDERAL EMPLOYEE MEMBERS.—All members of the 

Council who are officers or employees of the United States shall 

serve without compensation in addition to that received for 

their services as officers or employees of the United States. 

(2) COMPENSATION FOR NON-FEDERAL MEMBER.—Section 

5314 of title 5, United States Code, is amended by adding at 

the end the following: 

‘‘Independent Member of the Financial Stability Oversight 

Council (1).’’. 

(j) DETAIL OF GOVERNMENT EMPLOYEES.—Any employee of the 

Federal Government may be detailed to the Council without reimbursement, and such detail shall be without interruption or loss of 

civil service status or privilege. An employee of the Federal Government detailed to the Council shall report to and be subject to oversight by the Council during the assignment to the Council, and 

shall be compensated by the department or agency from which the 

employee was detailed. 

SEC. 112. COUNCIL AUTHORITY. 

(a) PURPOSES AND DUTIES OF THE COUNCIL.— 

(1) IN GENERAL.—The purposes of the Council are— 

(A) to identify risks to the financial stability of the 

United States that could arise from the material financial 

distress or failure, or ongoing activities, of large, interconnected bank holding companies or nonbank financial 

companies, or that could arise outside the financial services 

marketplace; 

(B) to promote market discipline, by eliminating expectations on the part of shareholders, creditors, and counterparties of such companies that the Government will shield 

them from losses in the event of failure; and 


sroberts on DSKD5P82C1PROD with HEARING
21 

(C) to respond to emerging threats to the stability of the 

United States financial system. 

(2) DUTIES.—The Council shall, in accordance with this 

title— 

(A) collect information from member agencies, other 

Federal and State financial regulatory agencies, the Federal Insurance Office and, if necessary to assess risks to the 

United States financial system, direct the Office of Financial Research to collect information from bank holding 

companies and nonbank financial companies; 

(B) provide direction to, and request data and analyses 

from, the Office of Financial Research to support the work 

of the Council; 

(C) monitor the financial services marketplace in order 

to identify potential threats to the financial stability of the 

United States; 

(D) monitor domestic and international financial regulatory proposals and developments, including insurance 

and accounting issues, and to advise Congress and make 

recommendations in such areas that will enhance the integrity, efficiency, competitiveness, and stability of the U.S. financial markets; 

(E) facilitate information sharing and coordination 

among the member agencies and other Federal and State 

agencies regarding domestic financial services policy development, rulemaking, examinations, reporting requirements, 

and enforcement actions; 

(F) recommend to the member agencies general supervisory priorities and principles reflecting the outcome of 

discussions among the member agencies; 

(G) identify gaps in regulation that could pose risks to 

the financial stability of the United States; 

(H) require supervision by the Board of Governors for 

nonbank financial companies that may pose risks to the financial stability of the United States in the event of their 

material financial distress or failure, or because of their activities pursuant to section 113; 

(I) make recommendations to the Board of Governors 

concerning the establishment of heightened prudential 

standards for risk-based capital, leverage, liquidity, contingent capital, resolution plans and credit exposure reports, 

concentration limits, enhanced public disclosures, and overall risk management for nonbank financial companies and 

large, interconnected bank holding companies supervised 

by the Board of Governors; 

(J) identify systemically important financial market 

utilities and payment, clearing, and settlement activities (as 

that term is defined in title VIII); 

(K) make recommendations to primary financial regulatory agencies to apply new or heightened standards and 

safeguards for financial activities or practices that could 

create or increase risks of significant liquidity, credit, or 

other problems spreading among bank holding companies, 

nonbank financial companies, and United States financial 

markets; 


sroberts on DSKD5P82C1PROD with HEARING
22 

(L) review and, as appropriate, may submit comments 

to the Commission and any standard-setting body with respect to an existing or proposed accounting principle, 

standard, or procedure; 

(M) provide a forum for— 

(i) discussion and analysis of emerging market developments and financial regulatory issues; and 

(ii) resolution of jurisdictional disputes among the 

members of the Council; and 

(N) annually report to and testify before Congress on— 

(i) the activities of the Council; 

(ii) significant financial market and regulatory developments, including insurance and accounting regulations and standards, along with an assessment of 

those developments on the stability of the financial system; 

(iii) potential emerging threats to the financial stability of the United States; 

(iv) all determinations made under section 113 or 

title VIII, and the basis for such determinations; 

(v) all recommendations made under section 119 

and the result of such recommendations; and 

(vi) recommendations— 

(I) to enhance the integrity, efficiency, competitiveness, and stability of United States financial 

markets; 

(II) to promote market discipline; and 

(III) to maintain investor confidence. 

(b) STATEMENTS BY VOTING MEMBERS OF THE COUNCIL.—At the 

time at which each report is submitted under subsection (a), each 

voting member of the Council shall— 

(1) if such member believes that the Council, the Government, and the private sector are taking all reasonable steps to 

ensure financial stability and to mitigate systemic risk that 

would negatively affect the economy, submit a signed statement 

to Congress stating such belief; or 

(2) if such member does not believe that all reasonable 

steps described under paragraph (1) are being taken, submit a 

signed statement to Congress stating what actions such member 

believes need to be taken in order to ensure that all reasonable 

steps described under paragraph (1) are taken. 

(c) TESTIMONY BY THE CHAIRPERSON.—The Chairperson shall 

appear before the Committee on Financial Services of the House of 

Representatives and the Committee on Banking, Housing, and 

Urban Affairs of the Senate at an annual hearing, after the report 

is submitted under subsection (a)— 

(1) to discuss the efforts, activities, objectives, and plans of 

the Council; and 

(2) to discuss and answer questions concerning such report. 

(d) AUTHORITY TO OBTAIN INFORMATION.— 

(1) IN GENERAL.—The Council may receive, and may request the submission of, any data or information from the Office of Financial Research, member agencies, and the Federal 

Insurance Office, as necessary— 


sroberts on DSKD5P82C1PROD with HEARING
23 

(A) to monitor the financial services marketplace to 

identify potential risks to the financial stability of the 

United States; or 

(B) to otherwise carry out any of the provisions of this 

title. 

(2) SUBMISSIONS BY THE OFFICE AND MEMBER AGENCIES.— Notwithstanding any other provision of law, the Office of Financial Research, any member agency, and the Federal Insurance Office, are authorized to submit information to the Council. 

(3) FINANCIAL DATA COLLECTION.— (A) IN GENERAL.—The Council, acting through the Office of Financial Research, may require the submission of 

periodic and other reports from any nonbank financial 

company or bank holding company for the purpose of assessing the extent to which a financial activity or financial 

market in which the nonbank financial company or bank 

holding company participates, or the nonbank financial 

company or bank holding company itself, poses a threat to 

the financial stability of the United States. 

(B) MITIGATION OF REPORT BURDEN.—Before requiring 

the submission of reports from any nonbank financial company or bank holding company that is regulated by a member agency or any primary financial regulatory agency, the 

Council, acting through the Office of Financial Research, 

shall coordinate with such agencies and shall, whenever 

possible, rely on information available from the Office of 

Financial Research or such agencies. 

(C) MITIGATION IN CASE OF FOREIGN FINANCIAL COMPA- NIES.—Before requiring the submission of reports from a 

company that is a foreign nonbank financial company or 

foreign-based bank holding company, the Council shall, 

acting through the Office of Financial Research, to the extent appropriate, consult with the appropriate foreign regulator of such company and, whenever possible, rely on information already being collected by such foreign regulator, 

with English translation. 

(4) BACK-UP EXAMINATION BY THE BOARD OF GOVERNORS.— If the Council is unable to determine whether the financial activities of a U.S. nonbank financial company pose a threat to 

the financial stability of the United States, based on information or reports obtained under paragraphs (1) and (3), discussions with management, and publicly available information, 

the Council may request the Board of Governors, and the Board 

of Governors is authorized, to conduct an examination of the 

U.S. nonbank financial company for the sole purpose of determining whether the nonbank financial company should be supervised by the Board of Governors for purposes of this title. 

(5) CONFIDENTIALITY.— (A) IN GENERAL.—The Council, the Office of Financial 

Research, and the other member agencies shall maintain 

the confidentiality of any data, information, and reports 

submitted under this title. 

(B) RETENTION OF PRIVILEGE.—The submission of any 

nonpublicly available data or information under this subVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00027 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
24 

section and subtitle B shall not constitute a waiver of, or 

otherwise affect, any privilege arising under Federal or 

State law (including the rules of any Federal or State 

court) to which the data or information is otherwise subject. 

(C) FREEDOM OF INFORMATION ACT.—Section 552 of 

title 5, United States Code, including the exceptions thereunder, shall apply to any data or information submitted 

under this subsection and subtitle B. 

SEC. 113. AUTHORITY TO REQUIRE SUPERVISION AND REGULATION 

OF CERTAIN NONBANK FINANCIAL COMPANIES. 

(a) U.S. NONBANK FINANCIAL COMPANIES SUPERVISED BY THE

BOARD OF GOVERNORS.— 

(1) DETERMINATION.—The Council, on a nondelegable basis 

and by a vote of not fewer than 2⁄3 of the voting members then 

serving, including an affirmative vote by the Chairperson, may 

determine that a U.S. nonbank financial company shall be supervised by the Board of Governors and shall be subject to prudential standards, in accordance with this title, if the Council 

determines that material financial distress at the U.S. nonbank 

financial company, or the nature, scope, size, scale, concentration, interconnectedness, or mix of the activities of the U.S. 

nonbank financial company, could pose a threat to the financial 

stability of the United States. 

(2) CONSIDERATIONS.—In making a determination under 

paragraph (1), the Council shall consider— 

(A) the extent of the leverage of the company; 

(B) the extent and nature of the off-balance-sheet exposures of the company; 

(C) the extent and nature of the transactions and relationships of the company with other significant nonbank financial companies and significant bank holding companies; 

(D) the importance of the company as a source of credit 

for households, businesses, and State and local governments and as a source of liquidity for the United States financial system; 

(E) the importance of the company as a source of credit 

for low-income, minority, or underserved communities, and 

the impact that the failure of such company would have on 

the availability of credit in such communities; 

(F) the extent to which assets are managed rather than 

owned by the company, and the extent to which ownership 

of assets under management is diffuse; 

(G) the nature, scope, size, scale, concentration, interconnectedness, and mix of the activities of the company; 

(H) the degree to which the company is already regulated by 1 or more primary financial regulatory agencies; 

(I) the amount and nature of the financial assets of the 

company; 

(J) the amount and types of the liabilities of the company, including the degree of reliance on short-term funding; and 

(K) any other risk-related factors that the Council 

deems appropriate. 


sroberts on DSKD5P82C1PROD with HEARING
25 

(b) FOREIGN NONBANK FINANCIAL COMPANIES SUPERVISED BY

THE BOARD OF GOVERNORS.— (1) DETERMINATION.—The Council, on a nondelegable basis 

and by a vote of not fewer than 2⁄3 of the voting members then 

serving, including an affirmative vote by the Chairperson, may 

determine that a foreign nonbank financial company shall be 

supervised by the Board of Governors and shall be subject to 

prudential standards, in accordance with this title, if the Council determines that material financial distress at the foreign 

nonbank financial company, or the nature, scope, size, scale, 

concentration, interconnectedness, or mix of the activities of the 

foreign nonbank financial company, could pose a threat to the 

financial stability of the United States. 

(2) CONSIDERATIONS.—In making a determination under 

paragraph (1), the Council shall consider— 

(A) the extent of the leverage of the company; 

(B) the extent and nature of the United States related 

off-balance-sheet exposures of the company; 

(C) the extent and nature of the transactions and relationships of the company with other significant nonbank financial companies and significant bank holding companies; 

(D) the importance of the company as a source of credit 

for United States households, businesses, and State and 

local governments and as a source of liquidity for the 

United States financial system; 

(E) the importance of the company as a source of credit 

for low-income, minority, or underserved communities in 

the United States, and the impact that the failure of such 

company would have on the availability of credit in such 

communities; 

(F) the extent to which assets are managed rather than 

owned by the company and the extent to which ownership 

of assets under management is diffuse; 

(G) the nature, scope, size, scale, concentration, interconnectedness, and mix of the activities of the company; 

(H) the extent to which the company is subject to prudential standards on a consolidated basis in its home country that are administered and enforced by a comparable 

foreign supervisory authority; 

(I) the amount and nature of the United States financial assets of the company; 

(J) the amount and nature of the liabilities of the company used to fund activities and operations in the United 

States, including the degree of reliance on short-term funding; and 

(K) any other risk-related factors that the Council 

deems appropriate. 

(c) ANTIEVASION.— (1) DETERMINATIONS.—In order to avoid evasion of this 

title, the Council, on its own initiative or at the request of the 

Board of Governors, may determine, on a nondelegable basis 

and by a vote of not fewer than 2⁄3 of the voting members then 

serving, including an affirmative vote by the Chairperson, 

that— 


sroberts on DSKD5P82C1PROD with HEARING
26 

(A) material financial distress related to, or the nature, 

scope, size, scale, concentration, interconnectedness, or mix 

of, the financial activities conducted directly or indirectly 

by a company incorporated or organized under the laws of 

the United States or any State or the financial activities in 

the United States of a company incorporated or organized 

in a country other than the United States would pose a 

threat to the financial stability of the United States, based 

on consideration of the factors in subsection (a)(2) or (b)(2), 

as applicable; 

(B) the company is organized or operates in such a 

manner as to evade the application of this title; and 

(C) such financial activities of the company shall be supervised by the Board of Governors and subject to prudential standards in accordance with this title, consistent with 

paragraph (3). 

(2) REPORT.—Upon making a determination under paragraph (1), the Council shall submit a report to the appropriate 

committees of Congress detailing the reasons for making such 

determination. 

(3) CONSOLIDATED SUPERVISION OF ONLY FINANCIAL ACTIVI- TIES; ESTABLISHMENT OF AN INTERMEDIATE HOLDING COM- PANY.— (A) ESTABLISHMENT OF AN INTERMEDIATE HOLDING

COMPANY.—Upon a determination under paragraph (1), the 

company that is the subject of the determination may establish an intermediate holding company in which the financial activities of such company and its subsidiaries shall be 

conducted (other than the activities described in section 

167(b)(2)) in compliance with any regulations or guidance 

provided by the Board of Governors. Such intermediate 

holding company shall be subject to the supervision of the 

Board of Governors and to prudential standards under this 

title as if the intermediate holding company were a 

nonbank financial company supervised by the Board of 

Governors. 

(B) ACTION OF THE BOARD OF GOVERNORS.—To facilitate the supervision of the financial activities subject to the 

determination in paragraph (1), the Board of Governors 

may require a company to establish an intermediate holding company, as provided for in section 167, which would 

be subject to the supervision of the Board of Governors and 

to prudential standards under this title, as if the intermediate holding company were a nonbank financial company supervised by the Board of Governors. 

(4) NOTICE AND OPPORTUNITY FOR HEARING AND FINAL DETERMINATION; JUDICIAL REVIEW.—Subsections (d) through (h) 

shall apply to determinations made by the Council pursuant to 

paragraph (1) in the same manner as such subsections apply to 

nonbank financial companies. 

(5) COVERED FINANCIAL ACTIVITIES.—For purposes of this 

subsection, the term ‘‘financial activities’’— 

(A) means activities that are financial in nature (as defined in section 4(k) of the Bank Holding Company Act of 

1956); 


sroberts on DSKD5P82C1PROD with HEARING
27 

(B) includes the ownership or control of one or more insured depository institutions; and 

(C) does not include internal financial activities conducted for the company or any affiliate thereof, including 

internal treasury, investment, and employee benefit functions. 

(6) ONLY FINANCIAL ACTIVITIES SUBJECT TO PRUDENTIAL

SUPERVISION.—Nonfinancial activities of the company shall not 

be subject to supervision by the Board of Governors and prudential standards of the Board. For purposes of this Act, the financial activities that are the subject of the determination in 

paragraph (1) shall be subject to the same requirements as a 

nonbank financial company supervised by the Board of Governors. Nothing in this paragraph shall prohibit or limit the 

authority of the Board of Governors to apply prudential standards under this title to the financial activities that are subject 

to the determination in paragraph (1). 

(d) REEVALUATION AND RESCISSION.—The Council shall— 

(1) not less frequently than annually, reevaluate each determination made under subsections (a) and (b) with respect to 

such nonbank financial company supervised by the Board of 

Governors; and 

(2) rescind any such determination, if the Council, by a vote 

of not fewer than 2⁄3 of the voting members then serving, including an affirmative vote by the Chairperson, determines that the 

nonbank financial company no longer meets the standards 

under subsection (a) or (b), as applicable. 

(e) NOTICE AND OPPORTUNITY FOR HEARING AND FINAL DETER- MINATION.— 

(1) IN GENERAL.—The Council shall provide to a nonbank 

financial company written notice of a proposed determination of 

the Council, including an explanation of the basis of the proposed determination of the Council, that a nonbank financial 

company shall be supervised by the Board of Governors and 

shall be subject to prudential standards in accordance with this 

title. 

(2) HEARING.—Not later than 30 days after the date of receipt of any notice of a proposed determination under paragraph (1), the nonbank financial company may request, in writing, an opportunity for a written or oral hearing before the 

Council to contest the proposed determination. Upon receipt of 

a timely request, the Council shall fix a time (not later than 30 

days after the date of receipt of the request) and place at which 

such company may appear, personally or through counsel, to 

submit written materials (or, at the sole discretion of the Council, oral testimony and oral argument). 

(3) FINAL DETERMINATION.—Not later than 60 days after 

the date of a hearing under paragraph (2), the Council shall notify the nonbank financial company of the final determination 

of the Council, which shall contain a statement of the basis for 

the decision of the Council. 

(4) NO HEARING REQUESTED.—If a nonbank financial company does not make a timely request for a hearing, the Council 

shall notify the nonbank financial company, in writing, of the 

final determination of the Council under subsection (a) or (b), 


sroberts on DSKD5P82C1PROD with HEARING
28 

as applicable, not later than 10 days after the date by which 

the company may request a hearing under paragraph (2). 

(f) EMERGENCY EXCEPTION.— (1) IN GENERAL.—The Council may waive or modify the requirements of subsection (e) with respect to a nonbank financial 

company, if the Council determines, by a vote of not fewer than 

2⁄3 of the voting members then serving, including an affirmative 

vote by the Chairperson, that such waiver or modification is 

necessary or appropriate to prevent or mitigate threats posed by 

the nonbank financial company to the financial stability of the 

United States. 

(2) NOTICE.—The Council shall provide notice of a waiver 

or modification under this subsection to the nonbank financial 

company concerned as soon as practicable, but not later than 

24 hours after the waiver or modification is granted. 

(3) INTERNATIONAL COORDINATION.—In making a determination under paragraph (1), the Council shall consult with 

the appropriate home country supervisor, if any, of the foreign 

nonbank financial company that is being considered for such a 

determination. 

(4) OPPORTUNITY FOR HEARING.—The Council shall allow a 

nonbank financial company to request, in writing, an opportunity for a written or oral hearing before the Council to contest 

a waiver or modification under this subsection, not later than 

10 days after the date of receipt of notice of the waiver or modification by the company. Upon receipt of a timely request, the 

Council shall fix a time (not later than 15 days after the date 

of receipt of the request) and place at which the nonbank financial company may appear, personally or through counsel, to 

submit written materials (or, at the sole discretion of the Council, oral testimony and oral argument). 

(5) NOTICE OF FINAL DETERMINATION.—Not later than 30 

days after the date of any hearing under paragraph (4), the 

Council shall notify the subject nonbank financial company of 

the final determination of the Council under this subsection, 

which shall contain a statement of the basis for the decision of 

the Council. 

(g) CONSULTATION.—The Council shall consult with the primary financial regulatory agency, if any, for each nonbank financial 

company or subsidiary of a nonbank financial company that is 

being considered for supervision by the Board of Governors under 

this section before the Council makes any final determination with 

respect to such nonbank financial company under subsection (a), 

(b), or (c). 

(h) JUDICIAL REVIEW.—If the Council makes a final determination under this section with respect to a nonbank financial company, such nonbank financial company may, not later than 30 days 

after the date of receipt of the notice of final determination under 

subsection (d)(2), (e)(3), or (f)(5), bring an action in the United 

States district court for the judicial district in which the home office 

of such nonbank financial company is located, or in the United 

States District Court for the District of Columbia, for an order requiring that the final determination be rescinded, and the court 

shall, upon review, dismiss such action or direct the final determination to be rescinded. Review of such an action shall be limited 


sroberts on DSKD5P82C1PROD with HEARING
29 

to whether the final determination made under this section was arbitrary and capricious. 

(i) INTERNATIONAL COORDINATION.—In exercising its duties 

under this title with respect to foreign nonbank financial companies, 

foreign-based bank holding companies, and cross-border activities 

and markets, the Council shall consult with appropriate foreign regulatory authorities, to the extent appropriate. 

SEC. 114. REGISTRATION OF NONBANK FINANCIAL COMPANIES SUPERVISED BY THE BOARD OF GOVERNORS. 

Not later than 180 days after the date of a final Council determination under section 113 that a nonbank financial company is to 

be supervised by the Board of Governors, such company shall register with the Board of Governors, on forms prescribed by the Board 

of Governors, which shall include such information as the Board of 

Governors, in consultation with the Council, may deem necessary or 

appropriate to carry out this title. 

SEC. 115. ENHANCED SUPERVISION AND PRUDENTIAL STANDARDS 

FOR NONBANK FINANCIAL COMPANIES SUPERVISED BY 

THE BOARD OF GOVERNORS AND CERTAIN BANK HOLDING COMPANIES. 

(a) IN GENERAL.— 

(1) PURPOSE.—In order to prevent or mitigate risks to the 

financial stability of the United States that could arise from the 

material financial distress, failure, or ongoing activities of 

large, interconnected financial institutions, the Council may 

make recommendations to the Board of Governors concerning 

the establishment and refinement of prudential standards and 

reporting and disclosure requirements applicable to nonbank financial companies supervised by the Board of Governors and 

large, interconnected bank holding companies, that— 

(A) are more stringent than those applicable to other 

nonbank financial companies and bank holding companies 

that do not present similar risks to the financial stability 

of the United States; and 

(B) increase in stringency, based on the considerations 

identified in subsection (b)(3). 

(2) RECOMMENDED APPLICATION OF REQUIRED STANDARDS.—In making recommendations under this section, the 

Council may— 

(A) differentiate among companies that are subject to 

heightened standards on an individual basis or by category, taking into consideration their capital structure, 

riskiness, complexity, financial activities (including the financial activities of their subsidiaries), size, and any other 

risk-related factors that the Council deems appropriate; or 

(B) recommend an asset threshold that is higher than 

$50,000,000,000 for the application of any standard described in subsections (c) through (g). 

(b) DEVELOPMENT OF PRUDENTIAL STANDARDS.— 

(1) IN GENERAL.—The recommendations of the Council 

under subsection (a) may include— 

(A) risk-based capital requirements; 

(B) leverage limits; 

(C) liquidity requirements; 


sroberts on DSKD5P82C1PROD with HEARING
30 

(D) resolution plan and credit exposure report requirements; 

(E) concentration limits; 

(F) a contingent capital requirement; 

(G) enhanced public disclosures; 

(H) short-term debt limits; and 

(I) overall risk management requirements. 

(2) PRUDENTIAL STANDARDS FOR FOREIGN FINANCIAL COM- PANIES.—In making recommendations concerning the standards 

set forth in paragraph (1) that would apply to foreign nonbank 

financial companies supervised by the Board of Governors or 

foreign-based bank holding companies, the Council shall— 

(A) give due regard to the principle of national treatment and equality of competitive opportunity; and 

(B) take into account the extent to which the foreign 

nonbank financial company or foreign-based bank holding 

company is subject on a consolidated basis to home country 

standards that are comparable to those applied to financial 

companies in the United States. 

(3) CONSIDERATIONS.—In making recommendations concerning prudential standards under paragraph (1), the Council 

shall— 

(A) take into account differences among nonbank financial companies supervised by the Board of Governors and 

bank holding companies described in subsection (a), based 

on— 

(i) the factors described in subsections (a) and (b) 

of section 113; 

(ii) whether the company owns an insured depository institution; 

(iii) nonfinancial activities and affiliations of the 

company; and 

(iv) any other factors that the Council determines 

appropriate; 

(B) to the extent possible, ensure that small changes in 

the factors listed in subsections (a) and (b) of section 113 

would not result in sharp, discontinuous changes in the 

prudential standards established under section 165; and 

(C) adapt its recommendations as appropriate in light 

of any predominant line of business of such company, including assets under management or other activities for 

which particular standards may not be appropriate. 

(c) CONTINGENT CAPITAL.— 

(1) STUDY REQUIRED.—The Council shall conduct a study 

of the feasibility, benefits, costs, and structure of a contingent 

capital requirement for nonbank financial companies supervised by the Board of Governors and bank holding companies 

described in subsection (a), which study shall include— 

(A) an evaluation of the degree to which such requirement would enhance the safety and soundness of companies 

subject to the requirement, promote the financial stability of 

the United States, and reduce risks to United States taxpayers; 

(B) an evaluation of the characteristics and amounts of 

contingent capital that should be required; 


sroberts on DSKD5P82C1PROD with HEARING
31 

(C) an analysis of potential prudential standards that 

should be used to determine whether the contingent capital 

of a company would be converted to equity in times of financial stress; 

(D) an evaluation of the costs to companies, the effects 

on the structure and operation of credit and other financial 

markets, and other economic effects of requiring contingent 

capital; 

(E) an evaluation of the effects of such requirement on 

the international competitiveness of companies subject to 

the requirement and the prospects for international coordination in establishing such requirement; and 

(F) recommendations for implementing regulations. 

(2) REPORT.—The Council shall submit a report to Congress regarding the study required by paragraph (1) not later 

than 2 years after the date of enactment of this Act. 

(3) RECOMMENDATIONS.— 

(A) IN GENERAL.—Subsequent to submitting a report to 

Congress under paragraph (2), the Council may make recommendations to the Board of Governors to require any 

nonbank financial company supervised by the Board of 

Governors and any bank holding company described in 

subsection (a) to maintain a minimum amount of contingent capital that is convertible to equity in times of financial stress. 

(B) FACTORS TO CONSIDER.—In making recommendations under this subsection, the Council shall consider— 

(i) an appropriate transition period for implementation of a conversion under this subsection; 

(ii) the factors described in subsection (b)(3); 

(iii) capital requirements applicable to a nonbank 

financial company supervised by the Board of Governors or a bank holding company described in subsection (a), and subsidiaries thereof; 

(iv) results of the study required by paragraph (1); 

and 

(v) any other factor that the Council deems appropriate. 

(d) RESOLUTION PLAN AND CREDIT EXPOSURE REPORTS.— 

(1) RESOLUTION PLAN.—The Council may make recommendations to the Board of Governors concerning the requirement that each nonbank financial company supervised by 

the Board of Governors and each bank holding company described in subsection (a) report periodically to the Council, the 

Board of Governors, and the Corporation, the plan of such company for rapid and orderly resolution in the event of material 

financial distress or failure. 

(2) CREDIT EXPOSURE REPORT.—The Council may make recommendations to the Board of Governors concerning the advisability of requiring each nonbank financial company supervised 

by the Board of Governors and bank holding company described in subsection (a) to report periodically to the Council, 

the Board of Governors, and the Corporation on— 


sroberts on DSKD5P82C1PROD with HEARING
32 

(A) the nature and extent to which the company has 

credit exposure to other significant nonbank financial companies and significant bank holding companies; and 

(B) the nature and extent to which other such significant nonbank financial companies and significant bank 

holding companies have credit exposure to that company. 

(e) CONCENTRATION LIMITS.—In order to limit the risks that the 

failure of any individual company could pose to nonbank financial 

companies supervised by the Board of Governors or bank holding 

companies described in subsection (a), the Council may make recommendations to the Board of Governors to prescribe standards to 

limit such risks, as set forth in section 165. 

(f) ENHANCED PUBLIC DISCLOSURES.—The Council may make 

recommendations to the Board of Governors to require periodic public disclosures by bank holding companies described in subsection 

(a) and by nonbank financial companies supervised by the Board of 

Governors, in order to support market evaluation of the risk profile, 

capital adequacy, and risk management capabilities thereof. 

(g) SHORT-TERM DEBT LIMITS.—The Council may make recommendations to the Board of Governors to require short-term debt 

limits to mitigate the risks that an over-accumulation of such debt 

could pose to bank holding companies described in subsection (a), 

nonbank financial companies supervised by the Board of Governors, 

or the financial system. 

SEC. 116. REPORTS. 

(a) IN GENERAL.—Subject to subsection (b), the Council, acting 

through the Office of Financial Research, may require a bank holding company with total consolidated assets of $50,000,000,000 or 

greater or a nonbank financial company supervised by the Board of 

Governors, and any subsidiary thereof, to submit certified reports to 

keep the Council informed as to— 

(1) the financial condition of the company; 

(2) systems for monitoring and controlling financial, operating, and other risks; 

(3) transactions with any subsidiary that is a depository institution; and 

(4) the extent to which the activities and operations of the 

company and any subsidiary thereof, could, under adverse circumstances, have the potential to disrupt financial markets or 

affect the overall financial stability of the United States. 

(b) USE OF EXISTING REPORTS.— 

(1) IN GENERAL.—For purposes of compliance with subsection (a), the Council, acting through the Office of Financial 

Research, shall, to the fullest extent possible, use— 

(A) reports that a bank holding company, nonbank financial company supervised by the Board of Governors, or 

any functionally regulated subsidiary of such company has 

been required to provide to other Federal or State regulatory agencies or to a relevant foreign supervisory authority; 

(B) information that is otherwise required to be reported publicly; and 

(C) externally audited financial statements. 

(2) AVAILABILITY.—Each bank holding company described 

in subsection (a) and nonbank financial company supervised by 


sroberts on DSKD5P82C1PROD with HEARING
33 

the Board of Governors, and any subsidiary thereof, shall provide to the Council, at the request of the Council, copies of all 

reports referred to in paragraph (1). 

(3) CONFIDENTIALITY.—The Council shall maintain the confidentiality of the reports obtained under subsection (a) and 

paragraph (1)(A) of this subsection. 

SEC. 117. TREATMENT OF CERTAIN COMPANIES THAT CEASE TO BE 

BANK HOLDING COMPANIES. 

(a) APPLICABILITY.—This section shall apply to— 

(1) any entity that— 

(A) was a bank holding company having total consoli- dated assets equal to or greater than $50,000,000,000 as of 

January 1, 2010; and 

(B) received financial assistance under or participated 

in the Capital Purchase Program established under the 

Troubled Asset Relief Program authorized by the Emergency Economic Stabilization Act of 2008; and 

(2) any successor entity (as defined by the Board of Governors, in consultation with the Council) to an entity described 

in paragraph (1). 

(b) TREATMENT.—If an entity described in subsection (a) ceases 

to be a bank holding company at any time after January 1, 2010, 

then such entity shall be treated as a nonbank financial company 

supervised by the Board of Governors, as if the Council had made 

a determination under section 113 with respect to that entity. 

(c) APPEAL.— 

(1) REQUEST FOR HEARING.—An entity may request, in writing, an opportunity for a written or oral hearing before the 

Council to appeal its treatment as a nonbank financial company supervised by the Board of Governors in accordance with 

this section. Upon receipt of the request, the Council shall fix 

a time (not later than 30 days after the date of receipt of the 

request) and place at which such entity may appear, personally 

or through counsel, to submit written materials (or, at the sole 

discretion of the Council, oral testimony and oral argument). 

(2) DECISION.— 

(A) PROPOSED DECISION.—A Council decision to grant 

an appeal under this subsection shall be made by a vote of 

not fewer than 2⁄3 of the voting members then serving, including an affirmative vote by the Chairperson. Not later 

than 60 days after the date of a hearing under paragraph 

(1), the Council shall submit a report to, and may testify 

before, the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives on the proposed decision of the Council regarding an appeal under paragraph 

(1), which report shall include a statement of the basis for 

the proposed decision of the Council. 

(B) NOTICE OF FINAL DECISION.—The Council shall notify the subject entity of the final decision of the Council regarding an appeal under paragraph (1), which notice shall 

contain a statement of the basis for the final decision of the 

Council, not later than 60 days after the later of— 

(i) the date of the submission of the report under 

subparagraph (A); or 


sroberts on DSKD5P82C1PROD with HEARING
34 

(ii) if, not later than 1 year after the date of submission of the report under subparagraph (A), the 

Committee on Banking, Housing, and Urban Affairs of 

the Senate or the Committee on Financial Services of 

the House of Representatives holds one or more hearings regarding such report, the date of the last such 

hearing. 

(C) CONSIDERATIONS.—In making a decision regarding 

an appeal under paragraph (1), the Council shall consider 

whether the company meets the standards under section 

113(a) or 113(b), as applicable, and the definition of the 

term ‘‘nonbank financial company’’ under section 102. The 

decision of the Council shall be final, subject to the review 

under paragraph (3). 

(3) REVIEW.—If the Council denies an appeal under this 

subsection, the Council shall, not less frequently than annually, 

review and reevaluate the decision. 

SEC. 118. COUNCIL FUNDING. 

Any expenses of the Council shall be treated as expenses of, and 

paid by, the Office of Financial Research. 

SEC. 119. RESOLUTION OF SUPERVISORY JURISDICTIONAL DISPUTES 

AMONG MEMBER AGENCIES. 

(a) REQUEST FOR COUNCIL RECOMMENDATION.—The Council 

shall seek to resolve a dispute among 2 or more member agencies, 

if— 

(1) a member agency has a dispute with another member 

agency about the respective jurisdiction over a particular bank 

holding company, nonbank financial company, or financial activity or product (excluding matters for which another dispute 

mechanism specifically has been provided under title X); 

(2) the Council determines that the disputing agencies cannot, after a demonstrated good faith effort, resolve the dispute 

without the intervention of the Council; and 

(3) any of the member agencies involved in the dispute— 

(A) provides all other disputants prior notice of the intent to request dispute resolution by the Council; and 

(B) requests in writing, not earlier than 14 days after 

providing the notice described in subparagraph (A), that 

the Council seek to resolve the dispute. 

(b) COUNCIL RECOMMENDATION.—The Council shall seek to resolve each dispute described in subsection (a)— 

(1) within a reasonable time after receiving the dispute resolution request; 

(2) after consideration of relevant information provided by 

each agency party to the dispute; and 

(3) by agreeing with 1 of the disputants regarding the entirety of the matter, or by determining a compromise position. 

(c) FORM OF RECOMMENDATION.—Any Council recommendation 

under this section shall— 

(1) be in writing; 

(2) include an explanation of the reasons therefor; and 

(3) be approved by the affirmative vote of 2⁄3 of the voting 

members of the Council then serving. 


sroberts on DSKD5P82C1PROD with HEARING
35 

(d) NONBINDING EFFECT.—Any recommendation made by the 

Council under subsection (c) shall not be binding on the Federal 

agencies that are parties to the dispute. 

SEC. 120. ADDITIONAL STANDARDS APPLICABLE TO ACTIVITIES OR 

PRACTICES FOR FINANCIAL STABILITY PURPOSES. 

(a) IN GENERAL.—The Council may provide for more stringent 

regulation of a financial activity by issuing recommendations to the 

primary financial regulatory agencies to apply new or heightened 

standards and safeguards, including standards enumerated in section 115, for a financial activity or practice conducted by bank holding companies or nonbank financial companies under their respective jurisdictions, if the Council determines that the conduct, scope, 

nature, size, scale, concentration, or interconnectedness of such activity or practice could create or increase the risk of significant liquidity, credit, or other problems spreading among bank holding 

companies and nonbank financial companies, financial markets of 

the United States, or low-income, minority, or underserved communities. 

(b) PROCEDURE FOR RECOMMENDATIONS TO REGULATORS.— (1) NOTICE AND OPPORTUNITY FOR COMMENT.—The Council 

shall consult with the primary financial regulatory agencies 

and provide notice to the public and opportunity for comment 

for any proposed recommendation that the primary financial 

regulatory agencies apply new or heightened standards and 

safeguards for a financial activity or practice. 

(2) CRITERIA.—The new or heightened standards and safeguards for a financial activity or practice recommended under 

paragraph (1)— 

(A) shall take costs to long-term economic growth into 

account; and 

(B) may include prescribing the conduct of the activity 

or practice in specific ways (such as by limiting its scope, 

or applying particular capital or risk management requirements to the conduct of the activity) or prohibiting the activity or practice. 

(c) IMPLEMENTATION OF RECOMMENDED STANDARDS.— 

(1) ROLE OF PRIMARY FINANCIAL REGULATORY AGENCY.— 

(A) IN GENERAL.—Each primary financial regulatory 

agency may impose, require reports regarding, examine for 

compliance with, and enforce standards in accordance with 

this section with respect to those entities for which it is the 

primary financial regulatory agency. 

(B) RULE OF CONSTRUCTION.—The authority under this 

paragraph is in addition to, and does not limit, any other 

authority of a primary financial regulatory agency. Compliance by an entity with actions taken by a primary financial 

regulatory agency under this section shall be enforceable in 

accordance with the statutes governing the respective jurisdiction of the primary financial regulatory agency over the 

entity, as if the agency action were taken under those statutes. 

(2) IMPOSITION OF STANDARDS.—The primary financial regulatory agency shall impose the standards recommended by the 

Council in accordance with subsection (a), or similar standards 

that the Council deems acceptable, or shall explain in writing 


sroberts on DSKD5P82C1PROD with HEARING
36 

to the Council, not later than 90 days after the date on which 

the Council issues the recommendation, why the agency has determined not to follow the recommendation of the Council. 

(d) REPORT TO CONGRESS.—The Council shall report to Congress on— 

(1) any recommendations issued by the Council under this 

section; 

(2) the implementation of, or failure to implement, such recommendation on the part of a primary financial regulatory 

agency; and 

(3) in any case in which no primary financial regulatory 

agency exists for the nonbank financial company conducting financial activities or practices referred to in subsection (a), recommendations for legislation that would prevent such activities 

or practices from threatening the stability of the financial system of the United States. 

(e) EFFECT OF RESCISSION OF IDENTIFICATION.— (1) NOTICE.—The Council may recommend to the relevant 

primary financial regulatory agency that a financial activity or 

practice no longer requires any standards or safeguards implemented under this section. 

(2) DETERMINATION OF PRIMARY FINANCIAL REGULATORY

AGENCY TO CONTINUE.— (A) IN GENERAL.—Upon receipt of a recommendation 

under paragraph (1), a primary financial regulatory agency 

that has imposed standards under this section shall determine whether such standards should remain in effect. 

(B) APPEAL PROCESS.—Each primary financial regulatory agency that has imposed standards under this section shall promulgate regulations to establish a procedure 

under which entities under its jurisdiction may appeal a 

determination by such agency under this paragraph that 

standards imposed under this section should remain in effect. 

SEC. 121. MITIGATION OF RISKS TO FINANCIAL STABILITY. 

(a) MITIGATORY ACTIONS.—If the Board of Governors determines that a bank holding company with total consolidated assets 

of $50,000,000,000 or more, or a nonbank financial company supervised by the Board of Governors, poses a grave threat to the financial stability of the United States, the Board of Governors, upon an 

affirmative vote of not fewer than 2⁄3 of the voting members of the 

Council then serving, shall— 

(1) limit the ability of the company to merge with, acquire, 

consolidate with, or otherwise become affiliated with another 

company; 

(2) restrict the ability of the company to offer a financial 

product or products; 

(3) require the company to terminate one or more activities; 

(4) impose conditions on the manner in which the company 

conducts 1 or more activities; or 

(5) if the Board of Governors determines that the actions 

described in paragraphs (1) through (4) are inadequate to mitigate a threat to the financial stability of the United States in 

its recommendation, require the company to sell or otherwise 

transfer assets or off-balance-sheet items to unaffiliated entities. 


sroberts on DSKD5P82C1PROD with HEARING
37 

(b) NOTICE AND HEARING.— (1) IN GENERAL.—The Board of Governors, in consultation 

with the Council, shall provide to a company described in subsection (a) written notice that such company is being considered 

for mitigatory action pursuant to this section, including an explanation of the basis for, and description of, the proposed mitigatory action. 

(2) HEARING.—Not later than 30 days after the date of receipt of notice under paragraph (1), the company may request, 

in writing, an opportunity for a written or oral hearing before 

the Board of Governors to contest the proposed mitigatory action. Upon receipt of a timely request, the Board of Governors 

shall fix a time (not later than 30 days after the date of receipt 

of the request) and place at which such company may appear, 

personally or through counsel, to submit written materials (or, 

at the discretion of the Board of Governors, in consultation with 

the Council, oral testimony and oral argument). 

(3) DECISION.—Not later than 60 days after the date of a 

hearing under paragraph (2), or not later than 60 days after 

the provision of a notice under paragraph (1) if no hearing was 

held, the Board of Governors shall notify the company of the 

final decision of the Board of Governors, including the results 

of the vote of the Council, as described in subsection (a). 

(c) FACTORS FOR CONSIDERATION.—The Board of Governors 

and the Council shall take into consideration the factors set forth 

in subsection (a) or (b) of section 113, as applicable, in making any 

determination under subsection (a). 

(d) APPLICATION TO FOREIGN FINANCIAL COMPANIES.—The 

Board of Governors may prescribe regulations regarding the application of this section to foreign nonbank financial companies supervised by the Board of Governors and foreign-based bank holding 

companies— 

(1) giving due regard to the principle of national treatment 

and equality of competitive opportunity; and 

(2) taking into account the extent to which the foreign 

nonbank financial company or foreign-based bank holding company is subject on a consolidated basis to home country standards that are comparable to those applied to financial companies in the United States. 

SEC. 122. GAO AUDIT OF COUNCIL. 

(a) AUTHORITY TO AUDIT.—The Comptroller General of the 

United States may audit the activities of— 

(1) the Council; and 

(2) any person or entity acting on behalf of or under the authority of the Council, to the extent that such activities relate to 

work for the Council by such person or entity. 

(b) ACCESS TO INFORMATION.— 

(1) IN GENERAL.—Notwithstanding any other provision of 

law, the Comptroller General shall, upon request and at such 

reasonable time and in such reasonable form as the Comptroller General may request, have access to— 

(A) any records or other information under the control 

of or used by the Council; 

(B) any records or other information under the control 

of a person or entity acting on behalf of or under the auVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00041 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
38 

thority of the Council, to the extent that such records or 

other information is relevant to an audit under subsection 

(a); and 

(C) the officers, directors, employees, financial advisors, 

staff, working groups, and agents and representatives of the 

Council (as related to the activities on behalf of the Council 

of such agent or representative), at such reasonable times 

as the Comptroller General may request. 

(2) COPIES.—The Comptroller General may make and retain copies of such books, accounts, and other records, access to 

which is granted under this section, as the Comptroller General 

considers appropriate. 

SEC. 123. STUDY OF THE EFFECTS OF SIZE AND COMPLEXITY OF FINANCIAL INSTITUTIONS ON CAPITAL MARKET EFFICIENCY AND ECONOMIC GROWTH. 

(a) STUDY REQUIRED.— 

(1) IN GENERAL.—The Chairperson of the Council shall 

carry out a study of the economic impact of possible financial 

services regulatory limitations intended to reduce systemic risk. 

Such study shall estimate the benefits and costs on the efficiency of capital markets, on the financial sector, and on national economic growth, of— 

(A) explicit or implicit limits on the maximum size of 

banks, bank holding companies, and other large financial 

institutions; 

(B) limits on the organizational complexity and diversification of large financial institutions; 

(C) requirements for operational separation between 

business units of large financial institutions in order to expedite resolution in case of failure; 

(D) limits on risk transfer between business units of 

large financial institutions; 

(E) requirements to carry contingent capital or similar 

mechanisms; 

(F) limits on commingling of commercial and financial 

activities by large financial institutions; 

(G) segregation requirements between traditional financial activities and trading or other high-risk operations in 

large financial institutions; and 

(H) other limitations on the activities or structure of 

large financial institutions that may be useful to limit systemic risk. 

(2) RECOMMENDATIONS.—The study required by this section 

shall include recommendations for the optimal structure of any 

limits considered in subparagraphs (A) through (E), in order to 

maximize their effectiveness and minimize their economic impact. 

(b) REPORT.—Not later than the end of the 180-day period beginning on the date of enactment of this title, and not later than 

every 5 years thereafter, the Chairperson shall issue a report to the 

Congress containing any findings and determinations made in carrying out the study required under subsection (a). 


sroberts on DSKD5P82C1PROD with HEARING
39 

Subtitle B—Office of Financial Research 

SEC. 151. DEFINITIONS. 

For purposes of this subtitle— 

(1) the terms ‘‘Office’’ and ‘‘Director’’ mean the Office of Financial Research established under this subtitle and the Director thereof, respectively; 

(2) the term ‘‘financial company’’ has the same meaning as 

in title II, and includes an insured depository institution and 

an insurance company; 

(3) the term ‘‘Data Center’’ means the data center established under section 154; 

(4) the term ‘‘Research and Analysis Center’’ means the research and analysis center established under section 154; 

(5) the term ‘‘financial transaction data’’ means the structure and legal description of a financial contract, with sufficient 

detail to describe the rights and obligations between counterparties and make possible an independent valuation; 

(6) the term ‘‘position data’’— 

(A) means data on financial assets or liabilities held on 

the balance sheet of a financial company, where positions 

are created or changed by the execution of a financial 

transaction; and 

(B) includes information that identifies counterparties, 

the valuation by the financial company of the position, and 

information that makes possible an independent valuation 

of the position; 

(7) the term ‘‘financial contract’’ means a legally binding 

agreement between 2 or more counterparties, describing rights 

and obligations relating to the future delivery of items of intrinsic or extrinsic value among the counterparties; and 

(8) the term ‘‘financial instrument’’ means a financial contract in which the terms and conditions are publicly available, 

and the roles of one or more of the counterparties are assignable 

without the consent of any of the other counterparties (including 

common stock of a publicly traded company, government bonds, 

or exchange traded futures and options contracts). 

SEC. 152. OFFICE OF FINANCIAL RESEARCH ESTABLISHED. 

(a) ESTABLISHMENT.—There is established within the Department of the Treasury the Office of Financial Research. 

(b) DIRECTOR.— 

(1) IN GENERAL.—The Office shall be headed by a Director, 

who shall be appointed by the President, by and with the advice 

and consent of the Senate. 

(2) TERM OF SERVICE.—The Director shall serve for a term 

of 6 years, except that, in the event that a successor is not nominated and confirmed by the end of the term of service of a Director, the Director may continue to serve until such time as the 

next Director is appointed and confirmed. 

(3) EXECUTIVE LEVEL.—The Director shall be compensated 

at Level III of the Executive Schedule. 

(4) PROHIBITION ON DUAL SERVICE.—The individual serving 

in the position of Director may not, during such service, also 

serve as the head of any financial regulatory agency. 


sroberts on DSKD5P82C1PROD with HEARING
40 

(5) RESPONSIBILITIES, DUTIES, AND AUTHORITY.—The Director shall have sole discretion in the manner in which the Director fulfills the responsibilities and duties and exercises the authorities described in this subtitle. 

(c) BUDGET.—The Director, in consultation with the Chairperson, shall establish the annual budget of the Office. 

(d) OFFICE PERSONNEL.— 

(1) IN GENERAL.—The Director, in consultation with the 

Chairperson, may fix the number of, and appoint and direct, all 

employees of the Office. 

(2) COMPENSATION.—The Director, in consultation with the 

Chairperson, shall fix, adjust, and administer the pay for all 

employees of the Office, without regard to chapter 51 or subchapter III of chapter 53 of title 5, United States Code, relating 

to classification of positions and General Schedule pay rates. 

(3) COMPARABILITY.—Section 1206(a) of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 

U.S.C. 1833b(a)) is amended— 

(A) by striking ‘‘Finance Board,’’ and inserting ‘‘Finance Board, the Office of Financial Research, and the Bureau of Consumer Financial Protection’’; and 

(B) by striking ‘‘and the Office of Thrift Supervision,’’. 

(4) SENIOR EXECUTIVES.—Section 3132(a)(1)(D) of title 5, 

United States Code, is amended by striking ‘‘and the National 

Credit Union Administration;’’ and inserting ‘‘the National 

Credit Union Administration, the Bureau of Consumer Financial Protection, and the Office of Financial Research;’’. 

(e) ASSISTANCE FROM FEDERAL AGENCIES.—Any department or 

agency of the United States may provide to the Office and any special advisory, technical, or professional committees appointed by the 

Office, such services, funds, facilities, staff, and other support services as the Office may determine advisable. Any Federal Government employee may be detailed to the Office without reimbursement, 

and such detail shall be without interruption or loss of civil service 

status or privilege. 

(f) PROCUREMENT OF TEMPORARY AND INTERMITTENT SERVICES.—The Director may procure temporary and intermittent services under section 3109(b) of title 5, United States Code, at rates for 

individuals which do not exceed the daily equivalent of the annual 

rate of basic pay prescribed for Level V of the Executive Schedule 

under section 5316 of such title. 

(g) POST-EMPLOYMENT PROHIBITIONS.—The Secretary, with the 

concurrence of the Director of the Office of Government Ethics, shall 

issue regulations prohibiting the Director and any employee of the 

Office who has had access to the transaction or position data maintained by the Data Center or other business confidential information 

about financial entities required to report to the Office from being 

employed by or providing advice or consulting services to a financial 

company, for a period of 1 year after last having had access in the 

course of official duties to such transaction or position data or business confidential information, regardless of whether that entity is 

required to report to the Office. For employees whose access to business confidential information was limited, the regulations may provide, on a case-by-case basis, for a shorter period of post-employVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00044 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
41 

ment prohibition, provided that the shorter period does not compromise business confidential information. 

(h) TECHNICAL AND PROFESSIONAL ADVISORY COMMITTEES.— The Office, in consultation with the Chairperson, may appoint such 

special advisory, technical, or professional committees as may be 

useful in carrying out the functions of the Office, and the members 

of such committees may be staff of the Office, or other persons, or 

both. 

(i) FELLOWSHIP PROGRAM.—The Office, in consultation with the 

Chairperson, may establish and maintain an academic and professional fellowship program, under which qualified academics and 

professionals shall be invited to spend not longer than 2 years at 

the Office, to perform research and to provide advanced training for 

Office personnel. 

(j) EXECUTIVE SCHEDULE COMPENSATION.—Section 5314 of title 

5, United States Code, is amended by adding at the end the following new item: 

‘‘Director of the Office of Financial Research.’’. 

SEC. 153. PURPOSE AND DUTIES OF THE OFFICE. 

(a) PURPOSE AND DUTIES.—The purpose of the Office is to support the Council in fulfilling the purposes and duties of the Council, 

as set forth in subtitle A, and to support member agencies, by— 

(1) collecting data on behalf of the Council, and providing 

such data to the Council and member agencies; 

(2) standardizing the types and formats of data reported 

and collected; 

(3) performing applied research and essential long-term research; 

(4) developing tools for risk measurement and monitoring; 

(5) performing other related services; 

(6) making the results of the activities of the Office available to financial regulatory agencies; and 

(7) assisting such member agencies in determining the 

types and formats of data authorized by this Act to be collected 

by such member agencies. 

(b) ADMINISTRATIVE AUTHORITY.—The Office may— 

(1) share data and information, including software developed by the Office, with the Council, member agencies, and the 

Bureau of Economic Analysis, which shared data, information, 

and software— 

(A) shall be maintained with at least the same level of 

security as is used by the Office; and 

(B) may not be shared with any individual or entity 

without the permission of the Council; 

(2) sponsor and conduct research projects; and 

(3) assist, on a reimbursable basis, with financial analyses 

undertaken at the request of other Federal agencies that are not 

member agencies. 

(c) RULEMAKING AUTHORITY.— 

(1) SCOPE.—The Office, in consultation with the Chairperson, shall issue rules, regulations, and orders only to the extent necessary to carry out the purposes and duties described in 

paragraphs (1), (2), and (7) of subsection (a). 

(2) STANDARDIZATION.—Member agencies, in consultation 

with the Office, shall implement regulations promulgated by the 


sroberts on DSKD5P82C1PROD with HEARING
42 

Office under paragraph (1) to standardize the types and formats of data reported and collected on behalf of the Council, as 

described in subsection (a)(2). If a member agency fails to implement such regulations prior to the expiration of the 3-year 

period following the date of publication of final regulations, the 

Office, in consultation with the Chairperson, may implement 

such regulations with respect to the financial entities under the 

jurisdiction of the member agency. This paragraph shall not supersede or interfere with the independent authority of a member 

agency under other law to collect data, in such format and 

manner as the member agency requires. 

(d) TESTIMONY.— (1) IN GENERAL.—The Director of the Office shall report to 

and testify before the Committee on Banking, Housing, and 

Urban Affairs of the Senate and the Committee on Financial 

Services of the House of Representatives annually on the activities of the Office, including the work of the Data Center and the 

Research and Analysis Center, and the assessment of the Office 

of significant financial market developments and potential 

emerging threats to the financial stability of the United States. 

(2) NO PRIOR REVIEW.—No officer or agency of the United 

States shall have any authority to require the Director to submit the testimony required under paragraph (1) or other congressional testimony to any officer or agency of the United 

States for approval, comment, or review prior to the submission 

of such testimony. Any such testimony to Congress shall include 

a statement that the views expressed therein are those of the Director and do not necessarily represent the views of the President. 

(e) ADDITIONAL REPORTS.—The Director may provide additional 

reports to Congress concerning the financial stability of the United 

States. The Director shall notify the Council of any such additional 

reports provided to Congress. 

(f) SUBPOENA.— (1) IN GENERAL.—The Director may require from a financial company, by subpoena, the production of the data requested 

under subsection (a)(1) and section 154(b)(1), but only upon a 

written finding by the Director that— 

(A) such data is required to carry out the functions described under this subtitle; and 

(B) the Office has coordinated with the relevant primary financial regulatory agency, as required under section 

154(b)(1)(B)(ii). 

(2) FORMAT.—Subpoenas under paragraph (1) shall bear 

the signature of the Director, and shall be served by any person 

or class of persons designated by the Director for that purpose. 

(3) ENFORCEMENT.—In the case of contumacy or failure to 

obey a subpoena, the subpoena shall be enforceable by order of 

any appropriate district court of the United States. Any failure 

to obey the order of the court may be punished by the court as 

a contempt of court. 

SEC. 154. ORGANIZATIONAL STRUCTURE; RESPONSIBILITIES OF PRIMARY PROGRAMMATIC UNITS. 

(a) IN GENERAL.—There are established within the Office, to 

carry out the programmatic responsibilities of the Office— 


sroberts on DSKD5P82C1PROD with HEARING
43 

(1) the Data Center; and 

(2) the Research and Analysis Center. 

(b) DATA CENTER.— 

(1) GENERAL DUTIES.— 

(A) DATA COLLECTION.—The Data Center, on behalf of 

the Council, shall collect, validate, and maintain all data 

necessary to carry out the duties of the Data Center, as described in this subtitle. The data assembled shall be obtained from member agencies, commercial data providers, 

publicly available data sources, and financial entities 

under subparagraph (B). 

(B) AUTHORITY.— 

(i) IN GENERAL.—The Office may, as determined by 

the Council or by the Director in consultation with the 

Council, require the submission of periodic and other 

reports from any financial company for the purpose of 

assessing the extent to which a financial activity or financial market in which the financial company participates, or the financial company itself, poses a threat to 

the financial stability of the United States. 

(ii) MITIGATION OF REPORT BURDEN.—Before requiring the submission of a report from any financial 

company that is regulated by a member agency, any 

primary financial regulatory agency, a foreign supervisory authority, or the Office shall coordinate with 

such agencies or authority, and shall, whenever possible, rely on information available from such agencies 

or authority. 

(iii) COLLECTION OF FINANCIAL TRANSACTION AND

POSITION DATA.—The Office shall collect, on a schedule 

determined by the Director, in consultation with the 

Council, financial transaction data and position data 

from financial companies. 

(C) RULEMAKING.—The Office shall promulgate regulations pursuant to subsections (a)(1), (a)(2), (a)(7), and (c)(1) 

of section 153 regarding the type and scope of the data to 

be collected by the Data Center under this paragraph. 

(2) RESPONSIBILITIES.— 

(A) PUBLICATION.—The Data Center shall prepare and 

publish, in a manner that is easily accessible to the public— 

(i) a financial company reference database; 

(ii) a financial instrument reference database; and 

(iii) formats and standards for Office data, including standards for reporting financial transaction and 

position data to the Office. 

(B) CONFIDENTIALITY.—The Data Center shall not publish any confidential data under subparagraph (A). 

(3) INFORMATION SECURITY.—The Director shall ensure that 

data collected and maintained by the Data Center are kept secure and protected against unauthorized disclosure. 

(4) CATALOG OF FINANCIAL ENTITIES AND INSTRUMENTS.— 

The Data Center shall maintain a catalog of the financial entities and instruments reported to the Office. 


sroberts on DSKD5P82C1PROD with HEARING
44 

(5) AVAILABILITY TO THE COUNCIL AND MEMBER AGENCIES.—The Data Center shall make data collected and maintained by the Data Center available to the Council and member 

agencies, as necessary to support their regulatory responsibilities. 

(6) OTHER AUTHORITY.—The Office shall, after consultation 

with the member agencies, provide certain data to financial industry participants and to the general public to increase market 

transparency and facilitate research on the financial system, to 

the extent that intellectual property rights are not violated, 

business confidential information is properly protected, and the 

sharing of such information poses no significant threats to the 

financial system of the United States. 

(c) RESEARCH AND ANALYSIS CENTER.— 

(1) GENERAL DUTIES.—The Research and Analysis Center, 

on behalf of the Council, shall develop and maintain independent analytical capabilities and computing resources— 

(A) to develop and maintain metrics and reporting systems for risks to the financial stability of the United States; 

(B) to monitor, investigate, and report on changes in 

systemwide risk levels and patterns to the Council and 

Congress; 

(C) to conduct, coordinate, and sponsor research to support and improve regulation of financial entities and markets; 

(D) to evaluate and report on stress tests or other stability-related evaluations of financial entities overseen by 

the member agencies; 

(E) to maintain expertise in such areas as may be necessary to support specific requests for advice and assistance 

from financial regulators; 

(F) to investigate disruptions and failures in the financial markets, report findings, and make recommendations 

to the Council based on those findings; 

(G) to conduct studies and provide advice on the impact of policies related to systemic risk; and 

(H) to promote best practices for financial risk management. 

(d) REPORTING RESPONSIBILITIES.— 

(1) REQUIRED REPORTS.—Not later than 2 years after the 

date of enactment of this Act, and not later than 120 days after 

the end of each fiscal year thereafter, the Office shall prepare 

and submit a report to Congress. 

(2) CONTENT.—Each report required by this subsection 

shall assess the state of the United States financial system, including— 

(A) an analysis of any threats to the financial stability 

of the United States; 

(B) the status of the efforts of the Office in meeting the 

mission of the Office; and 

(C) key findings from the research and analysis of the 

financial system by the Office. 

SEC. 155. FUNDING. 

(a) FINANCIAL RESEARCH FUND.— 


sroberts on DSKD5P82C1PROD with HEARING
45 

(1) FUND ESTABLISHED.—There is established in the Treasury of the United States a separate fund to be known as the ‘‘Financial Research Fund’’. 

(2) FUND RECEIPTS.—All amounts provided to the Office 

under subsection (c), and all assessments that the Office receives under subsection (d) shall be deposited into the Financial 

Research Fund. 

(3) INVESTMENTS AUTHORIZED.— (A) AMOUNTS IN FUND MAY BE INVESTED.—The Director 

may request the Secretary to invest the portion of the Financial Research Fund that is not, in the judgment of the 

Director, required to meet the needs of the Office. 

(B) ELIGIBLE INVESTMENTS.—Investments shall be 

made by the Secretary in obligations of the United States 

or obligations that are guaranteed as to principal and interest by the United States, with maturities suitable to the 

needs of the Financial Research Fund, as determined by 

the Director. 

(4) INTEREST AND PROCEEDS CREDITED.—The interest on, 

and the proceeds from the sale or redemption of, any obligations 

held in the Financial Research Fund shall be credited to and 

form a part of the Financial Research Fund. 

(b) USE OF FUNDS.— (1) IN GENERAL.—Funds obtained by, transferred to, or 

credited to the Financial Research Fund shall be immediately 

available to the Office, and shall remain available until expended, to pay the expenses of the Office in carrying out the duties and responsibilities of the Office. 

(2) FEES, ASSESSMENTS, AND OTHER FUNDS NOT GOVERN- MENT FUNDS.—Funds obtained by, transferred to, or credited to 

the Financial Research Fund shall not be construed to be Government funds or appropriated moneys. 

(3) AMOUNTS NOT SUBJECT TO APPORTIONMENT.—Notwithstanding any other provision of law, amounts in the Financial 

Research Fund shall not be subject to apportionment for purposes of chapter 15 of title 31, United States Code, or under any 

other authority, or for any other purpose. 

(c) INTERIM FUNDING.—During the 2-year period following the 

date of enactment of this Act, the Board of Governors shall provide 

to the Office an amount sufficient to cover the expenses of the Office. 

(d) PERMANENT SELF-FUNDING.—Beginning 2 years after the 

date of enactment of this Act, the Secretary shall establish, by regulation, and with the approval of the Council, an assessment schedule, including the assessment base and rates, applicable to bank 

holding companies with total consolidated assets of $50,000,000,000 

or greater and nonbank financial companies supervised by the 

Board of Governors, that takes into account differences among such 

companies, based on the considerations for establishing the prudential standards under section 115, to collect assessments equal to the 

total expenses of the Office. 

SEC. 156. TRANSITION OVERSIGHT. 

(a) PURPOSE.—The purpose of this section is to ensure that the 

Office— 

(1) has an orderly and organized startup; 

(2) attracts and retains a qualified workforce; and 


sroberts on DSKD5P82C1PROD with HEARING
46 

(3) establishes comprehensive employee training and benefits programs. 

(b) REPORTING REQUIREMENT.— 

(1) IN GENERAL.—The Office shall submit an annual report 

to the Committee on Banking, Housing, and Urban Affairs of 

the Senate and the Committee on Financial Services of the 

House of Representatives that includes the plans described in 

paragraph (2). 

(2) PLANS.—The plans described in this paragraph are as 

follows: 

(A) TRAINING AND WORKFORCE DEVELOPMENT PLAN.— 

The Office shall submit a training and workforce development plan that includes, to the extent practicable— 

(i) identification of skill and technical expertise 

needs and actions taken to meet those requirements; 

(ii) steps taken to foster innovation and creativity; 

(iii) leadership development and succession planning; and 

(iv) effective use of technology by employees. 

(B) WORKPLACE FLEXIBILITY PLAN.—The Office shall 

submit a workforce flexibility plan that includes, to the extent practicable— 

(i) telework; 

(ii) flexible work schedules; 

(iii) phased retirement; 

(iv) reemployed annuitants; 

(v) part-time work; 

(vi) job sharing; 

(vii) parental leave benefits and childcare assistance; 

(viii) domestic partner benefits; 

(ix) other workplace flexibilities; or 

(x) any combination of the items described in 

clauses (i) through (ix). 

(C) RECRUITMENT AND RETENTION PLAN.—The Office 

shall submit a recruitment and retention plan that includes, to the extent practicable, provisions relating to— 

(i) the steps necessary to target highly qualified applicant pools with diverse backgrounds; 

(ii) streamlined employment application processes; 

(iii) the provision of timely notification of the status of employment applications to applicants; and 

(iv) the collection of information to measure indicators of hiring effectiveness. 

(c) EXPIRATION.—The reporting requirement under subsection 

(b) shall terminate 5 years after the date of enactment of this Act. 

(d) RULE OF CONSTRUCTION.—Nothing in this section may be 

construed to affect— 

(1) a collective bargaining agreement, as that term is defined in section 7103(a)(8) of title 5, United States Code, that 

is in effect on the date of enactment of this Act; or 

(2) the rights of employees under chapter 71 of title 5, 

United States Code. 


sroberts on DSKD5P82C1PROD with HEARING
47 

Subtitle C—Additional Board of Governors Authority for Certain Nonbank Financial Companies and Bank Holding 

Companies 

SEC. 161. REPORTS BY AND EXAMINATIONS OF NONBANK FINANCIAL 

COMPANIES BY THE BOARD OF GOVERNORS. 

(a) REPORTS.— (1) IN GENERAL.—The Board of Governors may require each 

nonbank financial company supervised by the Board of Governors, and any subsidiary thereof, to submit reports under 

oath, to keep the Board of Governors informed as to— 

(A) the financial condition of the company or subsidiary, systems of the company or subsidiary for monitoring and controlling financial, operating, and other risks, 

and the extent to which the activities and operations of the 

company or subsidiary pose a threat to the financial stability of the United States; and 

(B) compliance by the company or subsidiary with the 

requirements of this title. 

(2) USE OF EXISTING REPORTS AND INFORMATION.—In carrying out subsection (a), the Board of Governors shall, to the 

fullest extent possible, use— 

(A) reports and supervisory information that a 

nonbank financial company or subsidiary thereof has been 

required to provide to other Federal or State regulatory 

agencies; 

(B) information otherwise obtainable from Federal or 

State regulatory agencies; 

(C) information that is otherwise required to be reported publicly; and 

(D) externally audited financial statements of such 

company or subsidiary. 

(3) AVAILABILITY.—Upon the request of the Board of Governors, a nonbank financial company supervised by the Board 

of Governors, or a subsidiary thereof, shall promptly provide to 

the Board of Governors any information described in paragraph 

(2). 

(b) EXAMINATIONS.— (1) IN GENERAL.—Subject to paragraph (2), the Board of 

Governors may examine any nonbank financial company supervised by the Board of Governors and any subsidiary of such 

company, to inform the Board of Governors of— 

(A) the nature of the operations and financial condition 

of the company and such subsidiary; 

(B) the financial, operational, and other risks of the 

company or such subsidiary that may pose a threat to the 

safety and soundness of such company or subsidiary or to 

the financial stability of the United States; 

(C) the systems for monitoring and controlling such 

risks; and 

(D) compliance by the company or such subsidiary with 

the requirements of this title. 

(2) USE OF EXAMINATION REPORTS AND INFORMATION.—For 

purposes of this subsection, the Board of Governors shall, to the 

fullest extent possible, rely on reports of examination of any 

subsidiary depository institution or functionally regulated subVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00051 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
48 

sidiary made by the primary financial regulatory agency for 

that subsidiary, and on information described in subsection 

(a)(2). 

(c) COORDINATION WITH PRIMARY FINANCIAL REGULATORY

AGENCY.—The Board of Governors shall— 

(1) provide reasonable notice to, and consult with, the primary financial regulatory agency for any subsidiary before requiring a report or commencing an examination of such subsidiary under this section; and 

(2) avoid duplication of examination activities, reporting requirements, and requests for information, to the fullest extent 

possible. 

SEC. 162. ENFORCEMENT. 

(a) IN GENERAL.—Except as provided in subsection (b), a 

nonbank financial company supervised by the Board of Governors 

and any subsidiaries of such company (other than any depository 

institution subsidiary) shall be subject to the provisions of subsections (b) through (n) of section 8 of the Federal Deposit Insurance 

Act (12 U.S.C. 1818), in the same manner and to the same extent 

as if the company were a bank holding company, as provided in section 8(b)(3) of the Federal Deposit Insurance Act (12 U.S.C. 

1818(b)(3)). 

(b) ENFORCEMENT AUTHORITY FOR FUNCTIONALLY REGULATED

SUBSIDIARIES.— 

(1) REFERRAL.—If the Board of Governors determines that 

a condition, practice, or activity of a depository institution subsidiary or functionally regulated subsidiary of a nonbank financial company supervised by the Board of Governors does not 

comply with the regulations or orders prescribed by the Board 

of Governors under this Act, or otherwise poses a threat to the 

financial stability of the United States, the Board of Governors 

may recommend, in writing, to the primary financial regulatory 

agency for the subsidiary that such agency initiate a supervisory action or enforcement proceeding. The recommendation 

shall be accompanied by a written explanation of the concerns 

giving rise to the recommendation. 

(2) BACK-UP AUTHORITY OF THE BOARD OF GOVERNORS.—If, 

during the 60-day period beginning on the date on which the 

primary financial regulatory agency receives a recommendation 

under paragraph (1), the primary financial regulatory agency 

does not take supervisory or enforcement action against a subsidiary that is acceptable to the Board of Governors, the Board 

of Governors (upon a vote of its members) may take the recommended supervisory or enforcement action, as if the subsidiary were a bank holding company subject to supervision by 

the Board of Governors. 

SEC. 163. ACQUISITIONS. 

(a) ACQUISITIONS OF BANKS; TREATMENT AS A BANK HOLDING

COMPANY.—For purposes of section 3 of the Bank Holding Company 

Act of 1956 (12 U.S.C. 1842), a nonbank financial company supervised by the Board of Governors shall be deemed to be, and shall 

be treated as, a bank holding company. 

(b) ACQUISITION OF NONBANK COMPANIES.— 


sroberts on DSKD5P82C1PROD with HEARING
49 

(1) PRIOR NOTICE FOR LARGE ACQUISITIONS.—Notwithstanding section 4(k)(6)(B) of the Bank Holding Company Act 

of 1956 (12 U.S.C. 1843(k)(6)(B)), a bank holding company with 

total consolidated assets equal to or greater than 

$50,000,000,000 or a nonbank financial company supervised by 

the Board of Governors shall not acquire direct or indirect ownership or control of any voting shares of any company (other 

than an insured depository institution) that is engaged in activities described in section 4(k) of the Bank Holding Company 

Act of 1956 having total consolidated assets of $10,000,000,000 

or more, without providing written notice to the Board of Governors in advance of the transaction. 

(2) EXEMPTIONS.—The prior notice requirement in paragraph (1) shall not apply with regard to the acquisition of 

shares that would qualify for the exemptions in section 4(c) or 

section 4(k)(4)(E) of the Bank Holding Company Act of 1956 (12 

U.S.C. 1843(c) and (k)(4)(E)). 

(3) NOTICE PROCEDURES.—The notice procedures set forth 

in section 4(j)(1) of the Bank Holding Company Act of 1956 (12 

U.S.C. 1843(j)(1)), without regard to section 4(j)(3) of that Act, 

shall apply to an acquisition of any company (other than an insured depository institution) by a bank holding company with 

total consolidated assets equal to or greater than 

$50,000,000,000 or a nonbank financial company supervised by 

the Board of Governors, as described in paragraph (1), including any such company engaged in activities described in section 

4(k) of that Act. 

(4) STANDARDS FOR REVIEW.—In addition to the standards 

provided in section 4(j)(2) of the Bank Holding Company Act of 

1956 (12 U.S.C. 1843(j)(2)), the Board of Governors shall consider the extent to which the proposed acquisition would result 

in greater or more concentrated risks to global or United States 

financial stability or the United States economy. 

(5) HART-SCOTT-RODINO FILING REQUIREMENT.—Solely for 

purposes of section 7A(c)(8) of the Clayton Act (15 U.S.C. 

18a(c)(8)), the transactions subject to the requirements of paragraph (1) shall be treated as if Board of Governors approval is 

not required. 

SEC. 164. PROHIBITION AGAINST MANAGEMENT INTERLOCKS BETWEEN CERTAIN FINANCIAL COMPANIES. 

A nonbank financial company supervised by the Board of Governors shall be treated as a bank holding company for purposes of 

the Depository Institutions Management Interlocks Act (12 U.S.C. 

3201 et seq.), except that the Board of Governors shall not exercise 

the authority provided in section 7 of that Act (12 U.S.C. 3207) to 

permit service by a management official of a nonbank financial 

company supervised by the Board of Governors as a management official of any bank holding company with total consolidated assets 

equal to or greater than $50,000,000,000, or other nonaffiliated 

nonbank financial company supervised by the Board of Governors 

(other than to provide a temporary exemption for interlocks resulting from a merger, acquisition, or consolidation). 


sroberts on DSKD5P82C1PROD with HEARING
50 

SEC. 165. ENHANCED SUPERVISION AND PRUDENTIAL STANDARDS 

FOR NONBANK FINANCIAL COMPANIES SUPERVISED BY 

THE BOARD OF GOVERNORS AND CERTAIN BANK HOLDING COMPANIES. 

(a) IN GENERAL.— (1) PURPOSE.—In order to prevent or mitigate risks to the 

financial stability of the United States that could arise from the 

material financial distress or failure, or ongoing activities, of 

large, interconnected financial institutions, the Board of Governors shall, on its own or pursuant to recommendations by the 

Council under section 115, establish prudential standards for 

nonbank financial companies supervised by the Board of Governors and bank holding companies with total consolidated assets equal to or greater than $50,000,000,000 that— 

(A) are more stringent than the standards and requirements applicable to nonbank financial companies and bank 

holding companies that do not present similar risks to the 

financial stability of the United States; and 

(B) increase in stringency, based on the considerations 

identified in subsection (b)(3). 

(2) TAILORED APPLICATION.— (A) IN GENERAL.—In prescribing more stringent prudential standards under this section, the Board of Governors may, on its own or pursuant to a recommendation 

by the Council in accordance with section 115, differentiate 

among companies on an individual basis or by category, 

taking into consideration their capital structure, riskiness, 

complexity, financial activities (including the financial activities of their subsidiaries), size, and any other risk-related factors that the Board of Governors deems appropriate. 

(B) ADJUSTMENT OF THRESHOLD FOR APPLICATION OF

CERTAIN STANDARDS.—The Board of Governors may, pursuant to a recommendation by the Council in accordance with 

section 115, establish an asset threshold above 

$50,000,000,000 for the application of any standard established under subsections (c) through (g). 

(b) DEVELOPMENT OF PRUDENTIAL STANDARDS.— 

(1) IN GENERAL.— 

(A) REQUIRED STANDARDS.—The Board of Governors 

shall establish prudential standards for nonbank financial 

companies supervised by the Board of Governors and bank 

holding companies described in subsection (a), that shall 

include— 

(i) risk-based capital requirements and leverage 

limits, unless the Board of Governors, in consultation 

with the Council, determines that such requirements 

are not appropriate for a company subject to more 

stringent prudential standards because of the activities 

of such company (such as investment company activities or assets under management) or structure, in 

which case, the Board of Governors shall apply other 

standards that result in similarly stringent risk controls; 

(ii) liquidity requirements; 

(iii) overall risk management requirements; 


sroberts on DSKD5P82C1PROD with HEARING
51 

(iv) resolution plan and credit exposure report requirements; and 

(v) concentration limits. 

(B) ADDITIONAL STANDARDS AUTHORIZED.—The Board 

of Governors may establish additional prudential standards for nonbank financial companies supervised by the 

Board of Governors and bank holding companies described 

in subsection (a), that include— 

(i) a contingent capital requirement; 

(ii) enhanced public disclosures; 

(iii) short-term debt limits; and 

(iv) such other prudential standards as the Board 

or Governors, on its own or pursuant to a recommendation made by the Council in accordance with section 

115, determines are appropriate. 

(2) STANDARDS FOR FOREIGN FINANCIAL COMPANIES.—In 

applying the standards set forth in paragraph (1) to any foreign 

nonbank financial company supervised by the Board of Governors or foreign-based bank holding company, the Board of 

Governors shall— 

(A) give due regard to the principle of national treatment and equality of competitive opportunity; and 

(B) take into account the extent to which the foreign financial company is subject on a consolidated basis to home 

country standards that are comparable to those applied to 

financial companies in the United States. 

(3) CONSIDERATIONS.—In prescribing prudential standards 

under paragraph (1), the Board of Governors shall— 

(A) take into account differences among nonbank financial companies supervised by the Board of Governors and 

bank holding companies described in subsection (a), based 

on— 

(i) the factors described in subsections (a) and (b) 

of section 113; 

(ii) whether the company owns an insured depository institution; 

(iii) nonfinancial activities and affiliations of the 

company; and 

(iv) any other risk-related factors that the Board of 

Governors determines appropriate; 

(B) to the extent possible, ensure that small changes in 

the factors listed in subsections (a) and (b) of section 113 

would not result in sharp, discontinuous changes in the 

prudential standards established under paragraph (1) of 

this subsection; 

(C) take into account any recommendations of the 

Council under section 115; and 

(D) adapt the required standards as appropriate in 

light of any predominant line of business of such company, 

including assets under management or other activities for 

which particular standards may not be appropriate. 

(4) CONSULTATION.—Before imposing prudential standards 

or any other requirements pursuant to this section, including 

notices of deficiencies in resolution plans and more stringent requirements or divestiture orders resulting from such notices, 


sroberts on DSKD5P82C1PROD with HEARING
52 

that are likely to have a significant impact on a functionally 

regulated subsidiary or depository institution subsidiary of a 

nonbank financial company supervised by the Board of Governors or a bank holding company described in subsection (a), 

the Board of Governors shall consult with each Council member 

that primarily supervises any such subsidiary with respect to 

any such standard or requirement. 

(5) REPORT.—The Board of Governors shall submit an annual report to Congress regarding the implementation of the 

prudential standards required pursuant to paragraph (1), including the use of such standards to mitigate risks to the financial stability of the United States. 

(c) CONTINGENT CAPITAL.— 

(1) IN GENERAL.—Subsequent to submission by the Council 

of a report to Congress under section 115(c), the Board of Governors may issue regulations that require each nonbank financial company supervised by the Board of Governors and bank 

holding companies described in subsection (a) to maintain a 

minimum amount of contingent capital that is convertible to equity in times of financial stress. 

(2) FACTORS TO CONSIDER.—In issuing regulations under 

this subsection, the Board of Governors shall consider— 

(A) the results of the study undertaken by the Council, 

and any recommendations of the Council, under section 

115(c); 

(B) an appropriate transition period for implementation of contingent capital under this subsection; 

(C) the factors described in subsection (b)(3)(A); 

(D) capital requirements applicable to the nonbank financial company supervised by the Board of Governors or 

a bank holding company described in subsection (a), and 

subsidiaries thereof; and 

(E) any other factor that the Board of Governors deems 

appropriate. 

(d) RESOLUTION PLAN AND CREDIT EXPOSURE REPORTS.— 

(1) RESOLUTION PLAN.—The Board of Governors shall require each nonbank financial company supervised by the Board 

of Governors and bank holding companies described in subsection (a) to report periodically to the Board of Governors, the 

Council, and the Corporation the plan of such company for 

rapid and orderly resolution in the event of material financial 

distress or failure, which shall include— 

(A) information regarding the manner and extent to 

which any insured depository institution affiliated with the 

company is adequately protected from risks arising from 

the activities of any nonbank subsidiaries of the company; 

(B) full descriptions of the ownership structure, assets, 

liabilities, and contractual obligations of the company; 

(C) identification of the cross-guarantees tied to different securities, identification of major counterparties, and 

a process for determining to whom the collateral of the 

company is pledged; and 

(D) any other information that the Board of Governors 

and the Corporation jointly require by rule or order. 


sroberts on DSKD5P82C1PROD with HEARING
53 

(2) CREDIT EXPOSURE REPORT.—The Board of Governors 

shall require each nonbank financial company supervised by 

the Board of Governors and bank holding companies described 

in subsection (a) to report periodically to the Board of Governors, the Council, and the Corporation on— 

(A) the nature and extent to which the company has 

credit exposure to other significant nonbank financial companies and significant bank holding companies; and 

(B) the nature and extent to which other significant 

nonbank financial companies and significant bank holding 

companies have credit exposure to that company. 

(3) REVIEW.—The Board of Governors and the Corporation 

shall review the information provided in accordance with this 

subsection by each nonbank financial company supervised by 

the Board of Governors and bank holding company described in 

subsection (a). 

(4) NOTICE OF DEFICIENCIES.—If the Board of Governors 

and the Corporation jointly determine, based on their review 

under paragraph (3), that the resolution plan of a nonbank financial company supervised by the Board of Governors or a 

bank holding company described in subsection (a) is not credible or would not facilitate an orderly resolution of the company 

under title 11, United States Code— 

(A) the Board of Governors and the Corporation shall 

notify the company of the deficiencies in the resolution 

plan; and 

(B) the company shall resubmit the resolution plan 

within a timeframe determined by the Board of Governors 

and the Corporation, with revisions demonstrating that the 

plan is credible and would result in an orderly resolution 

under title 11, United States Code, including any proposed 

changes in business operations and corporate structure to 

facilitate implementation of the plan. 

(5) FAILURE TO RESUBMIT CREDIBLE PLAN.— 

(A) IN GENERAL.—If a nonbank financial company supervised by the Board of Governors or a bank holding company described in subsection (a) fails to timely resubmit the 

resolution plan as required under paragraph (4), with such 

revisions as are required under subparagraph (B), the 

Board of Governors and the Corporation may jointly impose more stringent capital, leverage, or liquidity requirements, or restrictions on the growth, activities, or operations of the company, or any subsidiary thereof, until such 

time as the company resubmits a plan that remedies the deficiencies. 

(B) DIVESTITURE.—The Board of Governors and the 

Corporation, in consultation with the Council, may jointly 

direct a nonbank financial company supervised by the 

Board of Governors or a bank holding company described 

in subsection (a), by order, to divest certain assets or operations identified by the Board of Governors and the Corporation, to facilitate an orderly resolution of such company 

under title 11, United States Code, in the event of the failure of such company, in any case in which— 


sroberts on DSKD5P82C1PROD with HEARING
54 

(i) the Board of Governors and the Corporation 

have jointly imposed more stringent requirements on 

the company pursuant to subparagraph (A); and 

(ii) the company has failed, within the 2-year period beginning on the date of the imposition of such requirements under subparagraph (A), to resubmit the 

resolution plan with such revisions as were required 

under paragraph (4)(B). 

(6) NO LIMITING EFFECT.—A resolution plan submitted in 

accordance with this subsection shall not be binding on a bankruptcy court, a receiver appointed under title II, or any other 

authority that is authorized or required to resolve the nonbank 

financial company supervised by the Board, any bank holding 

company, or any subsidiary or affiliate of the foregoing. 

(7) NO PRIVATE RIGHT OF ACTION.—No private right of action may be based on any resolution plan submitted in accordance with this subsection. 

(8) RULES.—Not later than 18 months after the date of enactment of this Act, the Board of Governors and the Corporation shall jointly issue final rules implementing this subsection. 

(e) CONCENTRATION LIMITS.— (1) STANDARDS.—In order to limit the risks that the failure 

of any individual company could pose to a nonbank financial 

company supervised by the Board of Governors or a bank holding company described in subsection (a), the Board of Governors, by regulation, shall prescribe standards that limit such 

risks. 

(2) LIMITATION ON CREDIT EXPOSURE.—The regulations prescribed by the Board of Governors under paragraph (1) shall 

prohibit each nonbank financial company supervised by the 

Board of Governors and bank holding company described in 

subsection (a) from having credit exposure to any unaffiliated 

company that exceeds 25 percent of the capital stock and surplus (or such lower amount as the Board of Governors may determine by regulation to be necessary to mitigate risks to the financial stability of the United States) of the company. 

(3) CREDIT EXPOSURE.—For purposes of paragraph (2), 

‘‘credit exposure’’ to a company means— 

(A) all extensions of credit to the company, including 

loans, deposits, and lines of credit; 

(B) all repurchase agreements and reverse repurchase 

agreements with the company, and all securities borrowing 

and lending transactions with the company, to the extent 

that such transactions create credit exposure for the 

nonbank financial company supervised by the Board of 

Governors or a bank holding company described in subsection (a); 

(C) all guarantees, acceptances, or letters of credit (including endorsement or standby letters of credit) issued on 

behalf of the company; 

(D) all purchases of or investment in securities issued 

by the company; 

(E) counterparty credit exposure to the company in connection with a derivative transaction between the nonbank 

financial company supervised by the Board of Governors or 


sroberts on DSKD5P82C1PROD with HEARING
55 

a bank holding company described in subsection (a) and 

the company; and 

(F) any other similar transactions that the Board of 

Governors, by regulation, determines to be a credit exposure 

for purposes of this section. 

(4) ATTRIBUTION RULE.—For purposes of this subsection, 

any transaction by a nonbank financial company supervised by 

the Board of Governors or a bank holding company described 

in subsection (a) with any person is a transaction with a company, to the extent that the proceeds of the transaction are used 

for the benefit of, or transferred to, that company. 

(5) RULEMAKING.—The Board of Governors may issue such 

regulations and orders, including definitions consistent with 

this section, as may be necessary to administer and carry out 

this subsection. 

(6) EXEMPTIONS.—This subsection shall not apply to any 

Federal home loan bank. The Board of Governors may, by regulation or order, exempt transactions, in whole or in part, from 

the definition of the term ‘‘credit exposure’’ for purposes of this 

subsection, if the Board of Governors finds that the exemption 

is in the public interest and is consistent with the purpose of 

this subsection. 

(7) TRANSITION PERIOD.— (A) IN GENERAL.—This subsection and any regulations 

and orders of the Board of Governors under this subsection 

shall not be effective until 3 years after the date of enactment of this Act. 

(B) EXTENSION AUTHORIZED.—The Board of Governors 

may extend the period specified in subparagraph (A) for not 

longer than an additional 2 years. 

(f) ENHANCED PUBLIC DISCLOSURES.—The Board of Governors 

may prescribe, by regulation, periodic public disclosures by nonbank 

financial companies supervised by the Board of Governors and bank 

holding companies described in subsection (a) in order to support 

market evaluation of the risk profile, capital adequacy, and risk 

management capabilities thereof. 

(g) SHORT-TERM DEBT LIMITS.— (1) IN GENERAL.—In order to mitigate the risks that an 

over-accumulation of short-term debt could pose to financial 

companies and to the stability of the United States financial 

system, the Board of Governors may, by regulation, prescribe a 

limit on the amount of short-term debt, including off-balance 

sheet exposures, that may be accumulated by any bank holding 

company described in subsection (a) and any nonbank financial 

company supervised by the Board of Governors. 

(2) BASIS OF LIMIT.—Any limit prescribed under paragraph 

(1) shall be based on the short-term debt of the company described in paragraph (1) as a percentage of capital stock and 

surplus of the company or on such other measure as the Board 

of Governors considers appropriate. 

(3) SHORT-TERM DEBT DEFINED.—For purposes of this subsection, the term ‘‘short-term debt’’ means such liabilities with 

short-dated maturity that the Board of Governors identifies, by 

regulation, except that such term does not include insured deposits. 


sroberts on DSKD5P82C1PROD with HEARING
56 

(4) RULEMAKING AUTHORITY.—In addition to prescribing 

regulations under paragraphs (1) and (3), the Board of Governors may prescribe such regulations, including definitions 

consistent with this subsection, and issue such orders, as may 

be necessary to carry out this subsection. 

(5) AUTHORITY TO ISSUE EXEMPTIONS AND ADJUSTMENTS.— Notwithstanding the Bank Holding Company Act of 1956 (12 

U.S.C. 1841 et seq.), the Board of Governors may, if it determines such action is necessary to ensure appropriate heightened 

prudential supervision, with respect to a company described in 

paragraph (1) that does not control an insured depository institution, issue to such company an exemption from or adjustment 

to the limit prescribed under paragraph (1). 

(h) RISK COMMITTEE.— (1) NONBANK FINANCIAL COMPANIES SUPERVISED BY THE

BOARD OF GOVERNORS.—The Board of Governors shall require 

each nonbank financial company supervised by the Board of 

Governors that is a publicly traded company to establish a risk 

committee, as set forth in paragraph (3), not later than 1 year 

after the date of receipt of a notice of final determination under 

section 113(e)(3) with respect to such nonbank financial company supervised by the Board of Governors. 

(2) CERTAIN BANK HOLDING COMPANIES.— (A) MANDATORY REGULATIONS.—The Board of Governors shall issue regulations requiring each bank holding 

company that is a publicly traded company and that has 

total consolidated assets of not less than $10,000,000,000 to 

establish a risk committee, as set forth in paragraph (3). 

(B) PERMISSIVE REGULATIONS.—The Board of Governors may require each bank holding company that is a 

publicly traded company and that has total consolidated 

assets of less than $10,000,000,000 to establish a risk committee, as set forth in paragraph (3), as determined necessary or appropriate by the Board of Governors to promote 

sound risk management practices. 

(3) RISK COMMITTEE.—A risk committee required by this 

subsection shall— 

(A) be responsible for the oversight of the enterprisewide risk management practices of the nonbank financial 

company supervised by the Board of Governors or bank 

holding company described in subsection (a), as applicable; 

(B) include such number of independent directors as 

the Board of Governors may determine appropriate, based 

on the nature of operations, size of assets, and other appropriate criteria related to the nonbank financial company 

supervised by the Board of Governors or a bank holding 

company described in subsection (a), as applicable; and 

(C) include at least 1 risk management expert having 

experience in identifying, assessing, and managing risk exposures of large, complex firms. 

(4) RULEMAKING.—The Board of Governors shall issue final 

rules to carry out this subsection, not later than 1 year after the 

transfer date, to take effect not later than 15 months after the 

transfer date. 

(i) STRESS TESTS.— 


sroberts on DSKD5P82C1PROD with HEARING
57 

(1) BY THE BOARD OF GOVERNORS.— (A) ANNUAL TESTS REQUIRED.—The Board of Governors, in coordination with the appropriate primary financial regulatory agencies and the Federal Insurance Office, 

shall conduct annual analyses in which nonbank financial 

companies supervised by the Board of Governors and bank 

holding companies described in subsection (a) are subject to 

evaluation of whether such companies have the capital, on 

a total consolidated basis, necessary to absorb losses as a 

result of adverse economic conditions. 

(B) TEST PARAMETERS AND CONSEQUENCES.—The 

Board of Governors— 

(i) shall provide for at least 3 different sets of conditions under which the evaluation required by this 

subsection shall be conducted, including baseline, adverse, and severely adverse; 

(ii) may require the tests described in subparagraph (A) at bank holding companies and nonbank financial companies, in addition to those for which annual tests are required under subparagraph (A); 

(iii) may develop and apply such other analytic 

techniques as are necessary to identify, measure, and 

monitor risks to the financial stability of the United 

States; 

(iv) shall require the companies described in subparagraph (A) to update their resolution plans required 

under subsection (d)(1), as the Board of Governors determines appropriate, based on the results of the analyses; and 

(v) shall publish a summary of the results of the 

tests required under subparagraph (A) or clause (ii) of 

this subparagraph. 

(2) BY THE COMPANY.— (A) REQUIREMENT.—A nonbank financial company supervised by the Board of Governors and a bank holding 

company described in subsection (a) shall conduct semiannual stress tests. All other financial companies that have 

total consolidated assets of more than $10,000,000,000 and 

are regulated by a primary Federal financial regulatory 

agency shall conduct annual stress tests. The tests required 

under this subparagraph shall be conducted in accordance 

with the regulations prescribed under subparagraph (C). 

(B) REPORT.—A company required to conduct stress 

tests under subparagraph (A) shall submit a report to the 

Board of Governors and to its primary financial regulatory 

agency at such time, in such form, and containing such information as the primary financial regulatory agency shall 

require. 

(C) REGULATIONS.—Each Federal primary financial 

regulatory agency, in coordination with the Board of Governors and the Federal Insurance Office, shall issue consistent and comparable regulations to implement this paragraph that shall— 

(i) define the term ‘‘stress test’’ for purposes of this 

paragraph; 


sroberts on DSKD5P82C1PROD with HEARING
58 

(ii) establish methodologies for the conduct of 

stress tests required by this paragraph that shall provide for at least 3 different sets of conditions, including 

baseline, adverse, and severely adverse; 

(iii) establish the form and content of the report required by subparagraph (B); and 

(iv) require companies subject to this paragraph to 

publish a summary of the results of the required stress 

tests. 

(j) LEVERAGE LIMITATION.— (1) REQUIREMENT.—The Board of Governors shall require a 

bank holding company with total consolidated assets equal to 

or greater than $50,000,000,000 or a nonbank financial company supervised by the Board of Governors to maintain a debt 

to equity ratio of no more than 15 to 1, upon a determination 

by the Council that such company poses a grave threat to the 

financial stability of the United States and that the imposition 

of such requirement is necessary to mitigate the risk that such 

company poses to the financial stability of the United States. 

Nothing in this paragraph shall apply to a Federal home loan 

bank. 

(2) CONSIDERATIONS.—In making a determination under 

this subsection, the Council shall consider the factors described 

in subsections (a) and (b) of section 113 and any other risk-related factors that the Council deems appropriate. 

(3) REGULATIONS.—The Board of Governors shall promulgate regulations to establish procedures and timelines for complying with the requirements of this subsection. 

(k) INCLUSION OF OFF-BALANCE-SHEET ACTIVITIES IN COM- PUTING CAPITAL REQUIREMENTS.— (1) IN GENERAL.—In the case of any bank holding company 

described in subsection (a) or nonbank financial company supervised by the Board of Governors, the computation of capital 

for purposes of meeting capital requirements shall take into account any off-balance-sheet activities of the company. 

(2) EXEMPTIONS.—If the Board of Governors determines 

that an exemption from the requirement under paragraph (1) is 

appropriate, the Board of Governors may exempt a company, or 

any transaction or transactions engaged in by such company, 

from the requirements of paragraph (1). 

(3) OFF-BALANCE-SHEET ACTIVITIES DEFINED.—For purposes 

of this subsection, the term ‘‘off-balance-sheet activities’’ means 

an existing liability of a company that is not currently a balance sheet liability, but may become one upon the happening of 

some future event, including the following transactions, to the 

extent that they may create a liability: 

(A) Direct credit substitutes in which a bank substitutes its own credit for a third party, including standby 

letters of credit. 

(B) Irrevocable letters of credit that guarantee repayment of commercial paper or tax-exempt securities. 

(C) Risk participations in bankers’ acceptances. 

(D) Sale and repurchase agreements. 

(E) Asset sales with recourse against the seller. 

(F) Interest rate swaps. 


sroberts on DSKD5P82C1PROD with HEARING
59 

(G) Credit swaps. 

(H) Commodities contracts. 

(I) Forward contracts. 

(J) Securities contracts. 

(K) Such other activities or transactions as the Board 

of Governors may, by rule, define. 

SEC. 166. EARLY REMEDIATION REQUIREMENTS. 

(a) IN GENERAL.—The Board of Governors, in consultation with 

the Council and the Corporation, shall prescribe regulations establishing requirements to provide for the early remediation of financial distress of a nonbank financial company supervised by the 

Board of Governors or a bank holding company described in section 

165(a), except that nothing in this subsection authorizes the provision of financial assistance from the Federal Government. 

(b) PURPOSE OF THE EARLY REMEDIATION REQUIREMENTS.—The 

purpose of the early remediation requirements under subsection (a) 

shall be to establish a series of specific remedial actions to be taken 

by a nonbank financial company supervised by the Board of Governors or a bank holding company described in section 165(a) that 

is experiencing increasing financial distress, in order to minimize 

the probability that the company will become insolvent and the potential harm of such insolvency to the financial stability of the 

United States. 

(c) REMEDIATION REQUIREMENTS.—The regulations prescribed 

by the Board of Governors under subsection (a) shall— 

(1) define measures of the financial condition of the company, including regulatory capital, liquidity measures, and 

other forward-looking indicators; and 

(2) establish requirements that increase in stringency as the 

financial condition of the company declines, including— 

(A) requirements in the initial stages of financial decline, including limits on capital distributions, acquisitions, and asset growth; and 

(B) requirements at later stages of financial decline, including a capital restoration plan and capital-raising requirements, limits on transactions with affiliates, management changes, and asset sales. 

SEC. 167. AFFILIATIONS. 

(a) AFFILIATIONS.—Nothing in this subtitle shall be construed 

to require a nonbank financial company supervised by the Board of 

Governors, or a company that controls a nonbank financial company supervised by the Board of Governors, to conform the activities 

thereof to the requirements of section 4 of the Bank Holding Company Act of 1956 (12 U.S.C. 1843). 

(b) REQUIREMENT.— 

(1) IN GENERAL.— 

(A) BOARD AUTHORITY.—If a nonbank financial company supervised by the Board of Governors conducts activities other than those that are determined to be financial in 

nature or incidental thereto under section 4(k) of the Bank 

Holding Company Act of 1956, the Board of Governors may 

require such company to establish and conduct all or a portion of such activities that are determined to be financial 

in nature or incidental thereto in or through an interVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00063 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
60 

mediate holding company established pursuant to regulation of the Board of Governors, not later than 90 days (or 

such longer period as the Board of Governors may deem 

appropriate) after the date on which the nonbank financial 

company supervised by the Board of Governors is notified 

of the determination of the Board of Governors under this 

section. 

(B) NECESSARY ACTIONS.—Notwithstanding subparagraph (A), the Board of Governors shall require a nonbank 

financial company supervised by the Board of Governors to 

establish an intermediate holding company if the Board of 

Governors makes a determination that the establishment of 

such intermediate holding company is necessary to— 

(i) appropriately supervise activities that are determined to be financial in nature or incidental thereto; 

or 

(ii) to ensure that supervision by the Board of Governors does not extend to the commercial activities of 

such nonbank financial company. 

(2) INTERNAL FINANCIAL ACTIVITIES.—For purposes of this 

subsection, activities that are determined to be financial in nature or incidental thereto under section 4(k) of the Bank Holding Company Act of 1956, as described in paragraph (1), shall 

not include internal financial activities, including internal 

treasury, investment, and employee benefit functions. With respect to any internal financial activity engaged in for the company or an affiliate and a non-affiliate of such company during 

the year prior to the date of enactment of this Act, such company (or an affiliate that is not an intermediate holding company or subsidiary of an intermediate holding company) may 

continue to engage in such activity, as long as not less than 2/ 

3 of the assets or 2/3 of the revenues generated from the activity 

are from or attributable to such company or an affiliate, subject 

to review by the Board of Governors, to determine whether engaging in such activity presents undue risk to such company or 

to the financial stability of the United States. 

(3) SOURCE OF STRENGTH.—A company that directly or indirectly controls an intermediate holding company established 

under this section shall serve as a source of strength to its subsidiary intermediate holding company. 

(4) PARENT COMPANY REPORTS.—The Board of Governors 

may, from time to time, require reports under oath from a company that controls an intermediate holding company, and from 

the appropriate officers or directors of such company, solely for 

purposes of ensuring compliance with the provisions of this section, including assessing the ability of the company to serve as 

a source of strength to its subsidiary intermediate holding company pursuant to paragraph (3) and enforcing such compliance. 

(5) LIMITED PARENT COMPANY ENFORCEMENT.— (A) IN GENERAL.—In addition to any other authority of 

the Board of Governors, the Board of Governors may enforce compliance with the provisions of this subsection that 

are applicable to any company described in paragraph (1) 

that controls an intermediate holding company under section 8 of the Federal Deposit Insurance Act, and such comVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00064 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
61 

pany shall be subject to such section (solely for such purposes) in the same manner and to the same extent as if 

such company were a bank holding company. 

(B) APPLICATION OF OTHER ACT.—Any violation of this 

subsection by any company that controls an intermediate 

holding company may also be treated as a violation of the 

Federal Deposit Insurance Act for purposes of subparagraph (A). 

(C) NO EFFECT ON OTHER AUTHORITY.—No provision of 

this paragraph shall be construed as limiting any authority 

of the Board of Governors or any other Federal agency 

under any other provision of law. 

(c) REGULATIONS.—The Board of Governors— 

(1) shall promulgate regulations to establish the criteria for 

determining whether to require a nonbank financial company 

supervised by the Board of Governors to establish an intermediate holding company under subsection (b); and 

(2) may promulgate regulations to establish any restrictions 

or limitations on transactions between an intermediate holding 

company or a nonbank financial company supervised by the 

Board of Governors and its affiliates, as necessary to prevent 

unsafe and unsound practices in connection with transactions 

between such company, or any subsidiary thereof, and its parent company or affiliates that are not subsidiaries of such company, except that such regulations shall not restrict or limit any 

transaction in connection with the bona fide acquisition or lease 

by an unaffiliated person of assets, goods, or services. 

SEC. 168. REGULATIONS. 

The Board of Governors shall have authority to issue regulations to implement subtitles A and C and the amendments made 

thereunder. Except as otherwise specified in subtitle A or C, not 

later than 18 months after the effective date of this Act, the Board 

of Governors shall issue final regulations to implement subtitles A 

and C, and the amendments made thereunder. 

SEC. 169. AVOIDING DUPLICATION. 

The Board of Governors shall take any action that the Board 

of Governors deems appropriate to avoid imposing requirements 

under this subtitle that are duplicative of requirements applicable 

to bank holding companies and nonbank financial companies under 

other provisions of law. 

SEC. 170. SAFE HARBOR. 

(a) REGULATIONS.—The Board of Governors shall promulgate 

regulations on behalf of, and in consultation with, the Council setting forth the criteria for exempting certain types or classes of U.S. 

nonbank financial companies or foreign nonbank financial companies from supervision by the Board of Governors. 

(b) CONSIDERATIONS.—In developing the criteria under subsection (a), the Board of Governors shall take into account the factors for consideration described in subsections (a) and (b) of section 

113 in determining whether a U.S. nonbank financial company or 

foreign nonbank financial company shall be supervised by the 

Board of Governors. 

(c) RULE OF CONSTRUCTION.—Nothing in this section shall be 

construed to require supervision by the Board of Governors of a U.S. 


sroberts on DSKD5P82C1PROD with HEARING
62 

nonbank financial company or foreign nonbank financial company, 

if such company does not meet the criteria for exemption established 

under subsection (a). 

(d) REVISIONS.— (1) IN GENERAL.—The Board of Governors shall, in consultation with the Council, review the regulations promulgated 

under subsection (a), not less frequently than every 5 years, and 

based upon the review, the Board of Governors may revise such 

regulations on behalf of, and in consultation with, the Council 

to update as necessary the criteria set forth in such regulations. 

(2) TRANSITION PERIOD.—No revisions under paragraph (1) 

shall take effect before the end of the 2-year period after the 

date of publication of such revisions in final form. 

(e) REPORT.—The Chairman of the Board of Governors and the 

Chairperson of the Council shall submit a joint report to the Committee on Banking, Housing, and Urban Affairs of the Senate and 

the Committee on Financial Services of the House of Representatives 

not later than 30 days after the date of the issuance in final form 

of regulations under subsection (a), or any subsequent revision to 

such regulations under subsection (d), as applicable. Such report 

shall include, at a minimum, the rationale for exemption and empirical evidence to support the criteria for exemption. 

SEC. 171. LEVERAGE AND RISK-BASED CAPITAL REQUIREMENTS. 

(a) DEFINITIONS.—For purposes of this section, the following 

definitions shall apply: 

(1) GENERALLY APPLICABLE LEVERAGE CAPITAL REQUIRE- MENTS.—The term ‘‘generally applicable leverage capital requirements’’ means— 

(A) the minimum ratios of tier 1 capital to average 

total assets, as established by the appropriate Federal 

banking agencies to apply to insured depository institutions 

under the prompt corrective action regulations implementing section 38 of the Federal Deposit Insurance Act, regardless of total consolidated asset size or foreign financial 

exposure; and 

(B) includes the regulatory capital components in the 

numerator of that capital requirement, average total assets 

in the denominator of that capital requirement, and the required ratio of the numerator to the denominator. 

(2) GENERALLY APPLICABLE RISK-BASED CAPITAL REQUIRE- MENTS.—The term ‘‘generally applicable risk-based capital requirements’’ means— 

(A) the risk-based capital requirements, as established 

by the appropriate Federal banking agencies to apply to insured depository institutions under the prompt corrective 

action regulations implementing section 38 of the Federal 

Deposit Insurance Act, regardless of total consolidated asset 

size or foreign financial exposure; and 

(B) includes the regulatory capital components in the 

numerator of those capital requirements, the risk-weighted 

assets in the denominator of those capital requirements, 

and the required ratio of the numerator to the denominator. 

(3) DEFINITION OF DEPOSITORY INSTITUTION HOLDING COMPANY.—The term ‘‘depository institution holding company’’ 

means a bank holding company or a savings and loan holding 


sroberts on DSKD5P82C1PROD with HEARING
63 

company (as those terms are defined in section 3 of the Federal 

Deposit Insurance Act) that is organized in the United States, 

including any bank or savings and loan holding company that 

is owned or controlled by a foreign organization, but does not 

include the foreign organization. 

(b) MINIMUM CAPITAL REQUIREMENTS.— 

(1) MINIMUM LEVERAGE CAPITAL REQUIREMENTS.—The appropriate Federal banking agencies shall establish minimum leverage capital requirements on a consolidated basis for insured 

depository institutions, depository institution holding companies, and nonbank financial companies supervised by the Board 

of Governors. The minimum leverage capital requirements established under this paragraph shall not be less than the generally applicable leverage capital requirements, which shall 

serve as a floor for any capital requirements that the agency 

may require, nor quantitatively lower than the generally applicable leverage capital requirements that were in 

(2) MINIMUM RISK-BASED CAPITAL REQUIREMENTS.—The appropriate Federal banking agencies shall establish minimum 

risk-based capital requirements on a consolidated basis for insured depository institutions, depository institution holding 

companies, and nonbank financial companies supervised by the 

Board of Governors. The minimum risk-based capital requirements established under this paragraph shall not be less than 

the generally applicable risk-based capital requirements, which 

shall serve as a floor for any capital requirements that the 

agency may require, nor quantitatively lower than the generally 

applicable risk-based capital requirements that were in effect 

for insured depository institutions as of the date of enactment 

of this Act. 

(3) INVESTMENTS IN FINANCIAL SUBSIDIARIES.—For purposes of this section, investments in financial subsidiaries that 

insured depository institutions are required to deduct from regulatory capital under section 5136A of the Revised Statutes of 

the United States or section 46(a)(2) of the Federal Deposit Insurance Act need not be deducted from regulatory capital by depository institution holding companies or nonbank financial 

companies supervised by the Board of Governors, unless such 

capital deduction is required by the Board of Governors or the 

primary financial regulatory agency in the case of nonbank financial companies supervised by the Board of Governors. 

(4) EFFECTIVE DATES AND PHASE-IN PERIODS.— 

(A) DEBT OR EQUITY INSTRUMENTS ON OR AFTER MAY

19, 2010.—For debt or equity instruments issued on or after 

May 19, 2010, by depository institution holding companies 

or by nonbank financial companies supervised by the Board 

of Governors, this section shall be deemed to have become 

effective as of May 19, 2010. 

(B) DEBT OR EQUITY INSTRUMENTS ISSUED BEFORE MAY

19, 2010.—For debt or equity instruments issued before May 

19, 2010, by depository institution holding companies or by 

nonbank financial companies supervised by the Board of 

Governors, any regulatory capital deductions required 

under this section shall be phased in incrementally over a 


sroberts on DSKD5P82C1PROD with HEARING
64 

period of 3 years, with the phase-in period to begin on January 1, 2013, except as set forth in subparagraph (C). 

(C) DEBT OR EQUITY INSTRUMENTS OF SMALLER INSTI- TUTIONS.—For debt or equity instruments issued before 

May 19, 2010, by depository institution holding companies 

with total consolidated assets of less than $15,000,000,000 

as of December 31, 2009, and by organizations that were 

mutual holding companies on May 19, 2010, the capital deductions that would be required for other institutions under 

this section are not required as a result of this section. 

(D) DEPOSITORY INSTITUTION HOLDING COMPANIES NOT

PREVIOUSLY SUPERVISED BY THE BOARD OF GOVERNORS.— For any depository institution holding company that was 

not supervised by the Board of Governors as of May 19, 

2010, the requirements of this section, except as set forth in 

subparagraphs (A) and (B), shall be effective 5 years after 

the date of enactment of this Act. 

(E) CERTAIN BANK HOLDING COMPANY SUBSIDIARIES OF

FOREIGN BANKING ORGANIZATIONS.—For bank holding company subsidiaries of foreign banking organizations that 

have relied on Supervision and Regulation Letter SR–01– 

1 issued by the Board of Governors (as in effect on May 19, 

2010), the requirements of this section, except as set forth 

in subparagraph (A), shall be effective 5 years after the 

date of enactment of this Act. 

(5) EXCEPTIONS.—This section shall not apply to— 

(A) debt or equity instruments issued to the United 

States or any agency or instrumentality thereof pursuant to 

the Emergency Economic Stabilization Act of 2008, and 

prior to October 4, 2010; 

(B) any Federal home loan bank; or 

(C) any small bank holding company that is subject to 

the Small Bank Holding Company Policy Statement of the 

Board of Governors, as in effect on May 19, 2010. 

(6) STUDY AND REPORT ON SMALL INSTITUTION ACCESS TO

CAPITAL.— 

(A) STUDY REQUIRED.—The Comptroller General of the 

United States, after consultation with the Federal banking 

agencies, shall conduct a study of access to capital by 

smaller insured depository institutions. 

(B) SCOPE.—For purposes of this study required by 

subparagraph (A), the term ‘‘smaller insured depository institution’’ means an insured depository institution with 

total consolidated assets of $5,000,000,000 or less. 

(C) REPORT TO CONGRESS.—Not later than 18 months 

after the date of enactment of this Act, the Comptroller 

General of the United States shall submit to the Committee 

on Banking, Housing, and Urban Affairs of the Senate and 

the Committee on Financial Services of the House of Representatives a report summarizing the results of the study 

conducted under subparagraph (A), together with any recommendations for legislative or regulatory action that 

would enhance the access to capital of smaller insured depository institutions, in a manner that is consistent with 

safe and sound banking operations. 


sroberts on DSKD5P82C1PROD with HEARING
65 

(7) CAPITAL REQUIREMENTS TO ADDRESS ACTIVITIES THAT

POSE RISKS TO THE FINANCIAL SYSTEM.— (A) IN GENERAL.—Subject to the recommendations of 

the Council, in accordance with section 120, the Federal 

banking agencies shall develop capital requirements applicable to insured depository institutions, depository institution holding companies, and nonbank financial companies 

supervised by the Board of Governors that address the risks 

that the activities of such institutions pose, not only to the 

institution engaging in the activity, but to other public and 

private stakeholders in the event of adverse performance, 

disruption, or failure of the institution or the activity. 

(B) CONTENT.—Such rules shall address, at a minimum, the risks arising from— 

(i) significant volumes of activity in derivatives, 

securitized products purchased and sold, financial 

guarantees purchased and sold, securities borrowing 

and lending, and repurchase agreements and reverse 

repurchase agreements; 

(ii) concentrations in assets for which the values 

presented in financial reports are based on models 

rather than historical cost or prices deriving from deep 

and liquid 2-way markets; and 

(iii) concentrations in market share for any activity 

that would substantially disrupt financial markets if 

the institution is forced to unexpectedly cease the activity. 

SEC. 172. EXAMINATION AND ENFORCEMENT ACTIONS FOR INSURANCE AND ORDERLY LIQUIDATION PURPOSES. 

(a) EXAMINATIONS FOR INSURANCE AND RESOLUTION PUR- POSES.—Section 10(b)(3) of the Federal Deposit Insurance Act (12 

U.S.C. 1820(b)(3)) is amended— 

(1) by striking ‘‘In addition’’ and inserting the following: 

‘‘(A) IN GENERAL.—In addition’’; and 

(2) by striking ‘‘whenever the board of directors determines’’ 

and all that follows through the period and inserting the following: ‘‘or nonbank financial company supervised by the Board 

of Governors or a bank holding company described in section 

165(a) of the Financial Stability Act of 2010, whenever the 

Board of Directors determines that a special examination of any 

such depository institution is necessary to determine the condition of such depository institution for insurance purposes, or of 

such nonbank financial company supervised by the Board of 

Governors or bank holding company described in section 165(a) 

of the Financial Stability Act of 2010, for the purpose of implementing its authority to provide for orderly liquidation of any 

such company under title II of that Act, provided that such authority may not be used with respect to any such company that 

is in a generally sound condition. 

‘‘(B) LIMITATION.—Before conducting a special examination of a nonbank financial company supervised by the 

Board of Governors or a bank holding company described 

in section 165(a) of the Financial Stability Act of 2010, the 

Corporation shall review any available and acceptable resolution plan that the company has submitted in accordance 


sroberts on DSKD5P82C1PROD with HEARING
66 

with section 165(d) of that Act, consistent with the nonbinding effect of such plan, and available reports of examination, and shall coordinate to the maximum extent practicable with the Board of Governors, in order to minimize 

duplicative or conflicting examinations.’’. 

(b) ENFORCEMENT AUTHORITY.—Section 8(t) of the Federal Deposit Insurance Act (12 U.S.C. 1818(t)) is amended— 

(1) in paragraph (1), by inserting ‘‘, any depository institution holding company,’’ before ‘‘or any institution-affiliated 

party’’; 

(2) in paragraph (2)— 

(A) by striking ‘‘or’’ at the end of subparagraph (B); 

(B) at the end of subparagraph (C), by striking the period and inserting ‘‘or’’; and 

(C) by inserting at the end the following new subparagraph: 

‘‘(D) the conduct or threatened conduct (including any 

acts or omissions) of the depository institution holding company poses a risk to the Deposit Insurance Fund, provided 

that such authority may not be used with respect to a depository institution holding company that is in generally 

sound condition and whose conduct does not pose a foreseeable and material risk of loss to the Deposit Insurance 

Fund;’’; and 

(3) by adding at the end the following: 

‘‘(6) POWERS AND DUTIES WITH RESPECT TO DEPOSITORY INSTITUTION HOLDING COMPANIES.—For purposes of exercising the 

backup authority provided in this subsection— 

‘‘(A) the Corporation shall have the same powers with 

respect to a depository institution holding company and its 

affiliates as the appropriate Federal banking agency has 

with respect to the holding company and its affiliates; and 

‘‘(B) the holding company and its affiliates shall have 

the same duties and obligations with respect to the Corporation as the holding company and its affiliates have 

with respect to the appropriate Federal banking agency.’’. 

(c) RULE OF CONSTRUCTION.—Nothing in this Act shall be construed to limit or curtail the Corporation’s current authority to examine or bring enforcement actions with respect to any insured depository institution or institution-affiliated party. 

SEC. 173. ACCESS TO UNITED STATES FINANCIAL MARKET BY FOREIGN 

INSTITUTIONS. 

(a) ESTABLISHMENT OF FOREIGN BANK OFFICES IN THE UNITED

STATES.—Section 7(d)(3) of the International Banking Act of 1978 

(12 U.S.C. 3105(d)(3)) is amended— 

(1) in subparagraph (C), by striking ‘‘and’’ at the end; 

(2) in subparagraph (D), by striking the period at the end 

of and inserting ‘‘; and’’; and 

(3) by adding at the end the following new subparagraph: 

‘‘(E) for a foreign bank that presents a risk to the stability of United States financial system, whether the home 

country of the foreign bank has adopted, or is making demonstrable progress toward adopting, an appropriate system of financial regulation for the financial system of such 

home country to mitigate such risk.’’. 


sroberts on DSKD5P82C1PROD with HEARING
67 

(b) TERMINATION OF FOREIGN BANK OFFICES IN THE UNITED

STATES.—Section 7(e)(1) of the International Banking Act of 1978 

(12 U.S.C. 3105(e)(1)) is amended— 

(1) in subparagraph (A), by striking ‘‘or’’ at the end; 

(2) in subparagraph (B), by striking the period at the end 

of and inserting ‘‘; or’’; and 

(3) by inserting after subparagraph (B), the following new 

subparagraph: 

‘‘(C) for a foreign bank that presents a risk to the stability of the United States financial system, the home country of the foreign bank has not adopted, or made demonstrable progress toward adopting, an appropriate system of 

financial regulation to mitigate such risk.’’. 

(c) REGISTRATION OR SUCCESSION TO A UNITED STATES BROKER

OR DEALER AND TERMINATION OF SUCH REGISTRATION.—Section 15 

of the Securities Exchange Act of 1934 (15 U.S.C. 78o) is amended 

by adding at the end the following new subsections: 

‘‘(k) REGISTRATION OR SUCCESSION TO A UNITED STATES

BROKER OR DEALER.—In determining whether to permit a foreign 

person or an affiliate of a foreign person to register as a United 

States broker or dealer, or succeed to the registration of a United 

States broker or dealer, the Commission may consider whether, for 

a foreign person, or an affiliate of a foreign person that presents a 

risk to the stability of the United States financial system, the home 

country of the foreign person has adopted, or made demonstrable 

progress toward adopting, an appropriate system of financial regulation to mitigate such risk. 

‘‘(l) TERMINATION OF A UNITED STATES BROKER OR DEALER.— 

For a foreign person or an affiliate of a foreign person that presents 

such a risk to the stability of the United States financial system, the 

Commission may determine to terminate the registration of such foreign person or an affiliate of such foreign person as a broker or 

dealer in the United States, if the Commission determines that the 

home country of the foreign person has not adopted, or made demonstrable progress toward adopting, an appropriate system of financial regulation to mitigate such risk.’’. 

SEC. 174. STUDIES AND REPORTS ON HOLDING COMPANY CAPITAL REQUIREMENTS. 

(a) STUDY OF HYBRID CAPITAL INSTRUMENTS.—The Comptroller 

General of the United States, in consultation with the Board of Governors, the Comptroller of the Currency, and the Corporation, shall 

conduct a study of the use of hybrid capital instruments as a component of Tier 1 capital for banking institutions and bank holding 

companies. The study shall consider— 

(1) the current use of hybrid capital instruments, such as 

trust preferred shares, as a component of Tier 1 capital; 

(2) the differences between the components of capital permitted for insured depository institutions and those permitted 

for companies that control insured depository institutions; 

(3) the benefits and risks of allowing such instruments to 

be used to comply with Tier 1 capital requirements; 

(4) the economic impact of prohibiting the use of such capital instruments for Tier 1; 


sroberts on DSKD5P82C1PROD with HEARING
68 

(5) a review of the consequences of disqualifying trust preferred instruments, and whether it could lead to the failure or 

undercapitalization of existing banking organizations; 

(6) the international competitive implications prohibiting 

hybrid capital instruments for Tier 1; 

(7) the impact on the cost and availability of credit in the 

United States from such a prohibition; 

(8) the availability of capital for financial institutions with less than $10,000,000,000 in total assets; and 

(9) any other relevant factors relating to the safety and 

soundness of our financial system and potential economic impact of such a prohibition. 

(b) STUDY OF FOREIGN BANK INTERMEDIATE HOLDING COMPANY

CAPITAL REQUIREMENTS.—The Comptroller General of the United 

States, in consultation with the Secretary, the Board of Governors, 

the Comptroller of the Currency, and the Corporation, shall conduct 

a study of capital requirements applicable to United States intermediate holding companies of foreign banks that are bank holding 

companies or savings and loan holding companies. The study shall 

consider— 

(1) current Board of Governors policy regarding the treatment of intermediate holding companies; 

(2) the principle of national treatment and equality of competitive opportunity for foreign banks operating in the United 

States; 

(3) the extent to which foreign banks are subject on a consolidated basis to home country capital standards comparable 

to United States capital standards; 

(4) potential effects on United States banking organizations 

operating abroad of changes to United States policy regarding 

intermediate holding companies; 

(5) the impact on the cost and availability of credit in the 

United States from a change in United States policy regarding 

intermediate holding companies; and 

(6) any other relevant factors relating to the safety and 

soundness of our financial system and potential economic impact of such a prohibition. 

(c) REPORT.—Not later than 18 months after the date of enactment of this Act, the Comptroller General of the United States shall 

submit reports to the Committee on Banking, Housing, and Urban 

Affairs of the Senate and the Committee on Financial Services of 

the House of Representatives summarizing the results of the studies 

required under subsection (a). The reports shall include specific recommendations for legislative or regulatory action regarding the 

treatment of hybrid capital instruments, including trust preferred 

shares, and shall explain the basis for such recommendations. 

SEC. 175. INTERNATIONAL POLICY COORDINATION. 

(a) BY THE PRESIDENT.—The President, or a designee of the 

President, may coordinate through all available international policy 

channels, similar policies as those found in United States law relating to limiting the scope, nature, size, scale, concentration, and 

interconnectedness of financial companies, in order to protect financial stability and the global economy. 

(b) BY THE COUNCIL.—The Chairperson of the Council, in consultation with the other members of the Council, shall regularly 


sroberts on DSKD5P82C1PROD with HEARING
69 

consult with the financial regulatory entities and other appropriate 

organizations of foreign governments or international organizations 

on matters relating to systemic risk to the international financial 

system. 

(c) BY THE BOARD OF GOVERNORS AND THE SECRETARY.—The 

Board of Governors and the Secretary shall consult with their foreign counterparts and through appropriate multilateral organizations to encourage comprehensive and robust prudential supervision 

and regulation for all highly leveraged and interconnected financial 

companies. 

SEC. 176. RULE OF CONSTRUCTION. 

No regulation or standard imposed under this title may be construed in a manner that would lessen the stringency of the requirements of any applicable primary financial regulatory agency or any 

other Federal or State agency that are otherwise applicable. This 

title, and the rules and regulations or orders prescribed pursuant to 

this title, do not divest any such agency of any authority derived 

from any other applicable law. 

TITLE II—ORDERLY LIQUIDATION AUTHORITY 

SEC. 201. DEFINITIONS. 

(a) IN GENERAL.—In this title, the following definitions shall 

apply: 

(1) ADMINISTRATIVE EXPENSES OF THE RECEIVER.—The 

term ‘‘administrative expenses of the receiver’’ includes— 

(A) the actual, necessary costs and expenses incurred 

by the Corporation as receiver for a covered financial company in liquidating a covered financial company; and 

(B) any obligations that the Corporation as receiver for 

a covered financial company determines are necessary and 

appropriate to facilitate the smooth and orderly liquidation 

of the covered financial company. 

(2) BANKRUPTCY CODE.—The term ‘‘Bankruptcy Code’’ 

means title 11, United States Code. 

(3) BRIDGE FINANCIAL COMPANY.—The term ‘‘bridge financial company’’ means a new financial company organized by the 

Corporation in accordance with section 210(h) for the purpose 

of resolving a covered financial company. 

(4) CLAIM.—The term ‘‘claim’’ means any right to payment, 

whether or not such right is reduced to judgment, liquidated, 

unliquidated, fixed, contingent, matured, unmatured, disputed, 

undisputed, legal, equitable, secured, or unsecured. 

(5) COMPANY.—The term ‘‘company’’ has the same meaning 

as in section 2(b) of the Bank Holding Company Act of 1956 (12 

U.S.C. 1841(b)), except that such term includes any company 

described in paragraph (11), the majority of the securities of 

which are owned by the United States or any State. 

(6) COURT.—The term ‘‘Court’’ means the United States 

District Court for the District of Columbia, unless the context 

otherwise requires. 

(7) COVERED BROKER OR DEALER.—The term ‘‘covered 

broker or dealer’’ means a covered financial company that is a 

broker or dealer that— 


sroberts on DSKD5P82C1PROD with HEARING
70 

(A) is registered with the Commission under section 

15(b) of the Securities Exchange Act of 1934 (15 U.S.C. 

78o(b)); and 

(B) is a member of SIPC. 

(8) COVERED FINANCIAL COMPANY.—The term ‘‘covered financial company’’— 

(A) means a financial company for which a determination has been made under section 203(b); and 

(B) does not include an insured depository institution. 

(9) COVERED SUBSIDIARY.—The term ‘‘covered subsidiary’’ 

means a subsidiary of a covered financial company, other 

than— 

(A) an insured depository institution; 

(B) an insurance company; or 

(C) a covered broker or dealer. 

(10) DEFINITIONS RELATING TO COVERED BROKERS AND

DEALERS.—The terms ‘‘customer’’, ‘‘customer name securities’’, 

‘‘customer property’’, and ‘‘net equity’’ in the context of a covered 

broker or dealer, have the same meanings as in section 16 of 

the Securities Investor Protection Act of 1970 (15 U.S.C. 78lll). 

(11) FINANCIAL COMPANY.—The term ‘‘financial company’’ 

means any company that— 

(A) is incorporated or organized under any provision of 

Federal law or the laws of any State; 

(B) is— 

(i) a bank holding company, as defined in section 

2(a) of the Bank Holding Company Act of 1956 (12 

U.S.C. 1841(a)); 

(ii) a nonbank financial company supervised by 

the Board of Governors; 

(iii) any company that is predominantly engaged 

in activities that the Board of Governors has determined are financial in nature or incidental thereto for 

purposes of section 4(k) of the Bank Holding Company 

Act of 1956 (12 U.S.C. 1843(k)) other than a company 

described in clause (i) or (ii); or 

(iv) any subsidiary of any company described in 

any of clauses (i) through (iii) that is predominantly 

engaged in activities that the Board of Governors has 

determined are financial in nature or incidental thereto for purposes of section 4(k) of the Bank Holding 

Company Act of 1956 (12 U.S.C. 1843(k)) (other than 

a subsidiary that is an insured depository institution 

or an insurance company); and 

(C) is not a Farm Credit System institution chartered 

under and subject to the provisions of the Farm Credit Act 

of 1971, as amended (12 U.S.C. 2001 et seq.), a governmental entity, or a regulated entity, as defined under section 1303(20) of the Federal Housing Enterprises Financial 

Safety and Soundness Act of 1992 (12 U.S.C. 4502(20)). 

(12) FUND.—The term ‘‘Fund’’ means the Orderly Liquidation Fund established under section 210(n). 

(13) INSURANCE COMPANY.—The term ‘‘insurance company’’ 

means any entity that is— 

(A) engaged in the business of insurance; 


sroberts on DSKD5P82C1PROD with HEARING
71 

(B) subject to regulation by a State insurance regulator; and 

(C) covered by a State law that is designed to specifically deal with the rehabilitation, liquidation, or insolvency 

of an insurance company. 

(14) NONBANK FINANCIAL COMPANY.—The term ‘‘nonbank financial company’’ has the same meaning as in section 

102(a)(4)(C). 

(15) NONBANK FINANCIAL COMPANY SUPERVISED BY THE

BOARD OF GOVERNORS.—The term ‘‘nonbank financial company 

supervised by the Board of Governors’’ has the same meaning 

as in section 102(a)(4)(D). 

(16) SIPC.—The term ‘‘SIPC’’ means the Securities Investor 

Protection Corporation. 

(b) DEFINITIONAL CRITERIA.—For purpose of the definition of 

the term ‘‘financial company’’ under subsection (a)(11), no company 

shall be deemed to be predominantly engaged in activities that the 

Board of Governors has determined are financial in nature or incidental thereto for purposes of section 4(k) of the Bank Holding Company Act of 1956 (12 U.S.C. 1843(k)), if the consolidated revenues 

of such company from such activities constitute less than 85 percent 

of the total consolidated revenues of such company, as the Corporation, in consultation with the Secretary, shall establish by regulation. In determining whether a company is a financial company 

under this title, the consolidated revenues derived from the ownership or control of a depository institution shall be included. 

SEC. 202. JUDICIAL REVIEW. 

(a) COMMENCEMENT OF ORDERLY LIQUIDATION.— (1) PETITION TO DISTRICT COURT.— (A) DISTRICT COURT REVIEW.— (i) PETITION TO DISTRICT COURT.—Subsequent to a 

determination by the Secretary under section 203 that 

a financial company satisfies the criteria in section 

203(b), the Secretary shall notify the Corporation and 

the covered financial company. If the board of directors 

(or body performing similar functions) of the covered financial company acquiesces or consents to the appointment of the Corporation as receiver, the Secretary shall 

appoint the Corporation as receiver. If the board of directors (or body performing similar functions) of the 

covered financial company does not acquiesce or consent to the appointment of the Corporation as receiver, 

the Secretary shall petition the United States District 

Court for the District of Columbia for an order authorizing the Secretary to appoint the Corporation as receiver. 

(ii) FORM AND CONTENT OF ORDER.—The Secretary 

shall present all relevant findings and the recommendation made pursuant to section 203(a) to the 

Court. The petition shall be filed under seal. 

(iii) DETERMINATION.—On a strictly confidential 

basis, and without any prior public disclosure, the 

Court, after notice to the covered financial company 

and a hearing in which the covered financial company 

may oppose the petition, shall determine whether the 


sroberts on DSKD5P82C1PROD with HEARING
72 

determination of the Secretary that the covered financial company is in default or in danger of default and 

satisfies the definition of a financial company under 

section 201(a)(11) is arbitrary and capricious. 

(iv) ISSUANCE OF ORDER.—If the Court determines 

that the determination of the Secretary that the covered 

financial company is in default or in danger of default 

and satisfies the definition of a financial company 

under section 201(a)(11)— 

(I) is not arbitrary and capricious, the Court 

shall issue an order immediately authorizing the 

Secretary to appoint the Corporation as receiver of 

the covered financial company; or 

(II) is arbitrary and capricious, the Court 

shall immediately provide to the Secretary a written statement of each reason supporting its determination, and afford the Secretary an immediate 

opportunity to amend and refile the petition under 

clause (i). 

(v) PETITION GRANTED BY OPERATION OF LAW.—If 

the Court does not make a determination within 24 

hours of receipt of the petition— 

(I) the petition shall be granted by operation of 

law; 

(II) the Secretary shall appoint the Corporation as receiver; and 

(III) liquidation under this title shall automatically and without further notice or action be 

commenced and the Corporation may immediately 

take all actions authorized under this title. 

(B) EFFECT OF DETERMINATION.—The determination of 

the Court under subparagraph (A) shall be final, and shall 

be subject to appeal only in accordance with paragraph (2). 

The decision shall not be subject to any stay or injunction 

pending appeal. Upon conclusion of its proceedings under 

subparagraph (A), the Court shall provide immediately for 

the record a written statement of each reason supporting 

the decision of the Court, and shall provide copies thereof 

to the Secretary and the covered financial company. 

(C) CRIMINAL PENALTIES.—A person who recklessly discloses a determination of the Secretary under section 203(b) 

or a petition of the Secretary under subparagraph (A), or 

the pendency of court proceedings as provided for under 

subparagraph (A), shall be fined not more than $250,000, 

or imprisoned for not more than 5 years, or both. 

(2) APPEAL OF DECISIONS OF THE DISTRICT COURT.— 

(A) APPEAL TO COURT OF APPEALS.— 

(i) IN GENERAL.—Subject to clause (ii), the United 

States Court of Appeals for the District of Columbia 

Circuit shall have jurisdiction of an appeal of a final 

decision of the Court filed by the Secretary or a covered 

financial company, through its board of directors, notwithstanding section 210(a)(1)(A)(i), not later than 30 

days after the date on which the decision of the Court 

is rendered or deemed rendered under this subsection. 


sroberts on DSKD5P82C1PROD with HEARING
73 

(ii) CONDITION OF JURISDICTION.—The Court of 

Appeals shall have jurisdiction of an appeal by a covered financial company only if the covered financial 

company did not acquiesce or consent to the appointment of a receiver by the Secretary under paragraph 

(1)(A). 

(iii) EXPEDITION.—The Court of Appeals shall consider any appeal under this subparagraph on an expedited basis. 

(iv) SCOPE OF REVIEW.—For an appeal taken under 

this subparagraph, review shall be limited to whether 

the determination of the Secretary that a covered financial company is in default or in danger of default and 

satisfies the definition of a financial company under 

section 201(a)(11) is arbitrary and capricious. 

(B) APPEAL TO THE SUPREME COURT.— (i) IN GENERAL.—A petition for a writ of certiorari 

to review a decision of the Court of Appeals under subparagraph (A) may be filed by the Secretary or the covered financial company, through its board of directors, 

notwithstanding section 210(a)(1)(A)(i), with the Supreme Court of the United States, not later than 30 

days after the date of the final decision of the Court of 

Appeals, and the Supreme Court shall have discretionary jurisdiction to review such decision. 

(ii) WRITTEN STATEMENT.—In the event of a petition under clause (i), the Court of Appeals shall immediately provide for the record a written statement of 

each reason for its decision. 

(iii) EXPEDITION.—The Supreme Court shall consider any petition under this subparagraph on an expedited basis. 

(iv) SCOPE OF REVIEW.—Review by the Supreme 

Court under this subparagraph shall be limited to 

whether the determination of the Secretary that the 

covered financial company is in default or in danger of 

default and satisfies the definition of a financial company under section 201(a)(11) is arbitrary and capricious. 

(b) ESTABLISHMENT AND TRANSMITTAL OF RULES AND PROCEDURES.— 

(1) IN GENERAL.—Not later than 6 months after the date of 

enactment of this Act, the Court shall establish such rules and 

procedures as may be necessary to ensure the orderly conduct 

of proceedings, including rules and procedures to ensure that 

the 24-hour deadline is met and that the Secretary shall have 

an ongoing opportunity to amend and refile petitions under 

subsection (a)(1). 

(2) PUBLICATION OF RULES.—The rules and procedures established under paragraph (1), and any modifications of such 

rules and procedures, shall be recorded and shall be transmitted to— 

(A) the Committee on the Judiciary of the Senate; 

(B) the Committee on Banking, Housing, and Urban 

Affairs of the Senate; 


sroberts on DSKD5P82C1PROD with HEARING
74 

(C) the Committee on the Judiciary of the House of 

Representatives; and 

(D) the Committee on Financial Services of the House 

of Representatives. 

(c) PROVISIONS APPLICABLE TO FINANCIAL COMPANIES.— (1) BANKRUPTCY CODE.—Except as provided in this subsection, the provisions of the Bankruptcy Code and rules issued 

thereunder or otherwise applicable insolvency law, and not the 

provisions of this title, shall apply to financial companies that 

are not covered financial companies for which the Corporation 

has been appointed as receiver. 

(2) THIS TITLE.—The provisions of this title shall exclusively apply to and govern all matters relating to covered financial companies for which the Corporation is appointed as receiver, and no provisions of the Bankruptcy Code or the rules 

issued thereunder shall apply in such cases, except as expressly 

provided in this title. 

(d) TIME LIMIT ON RECEIVERSHIP AUTHORITY.— (1) BASELINE PERIOD.—Any appointment of the Corporation 

as receiver under this section shall terminate at the end of the 

3-year period beginning on the date on which such appointment 

is made. 

(2) EXTENSION OF TIME LIMIT.—The time limit established 

in paragraph (1) may be extended by the Corporation for up to 

1 additional year, if the Chairperson of the Corporation determines and certifies in writing to the Committee on Banking, 

Housing, and Urban Affairs of the Senate and the Committee 

on Financial Services of the House of Representatives that continuation of the receivership is necessary— 

(A) to— 

(i) maximize the net present value return from the 

sale or other disposition of the assets of the covered financial company; or 

(ii) minimize the amount of loss realized upon the 

sale or other disposition of the assets of the covered financial company; and 

(B) to protect the stability of the financial system of the 

United States. 

(3) SECOND EXTENSION OF TIME LIMIT.— (A) IN GENERAL.—The time limit under this subsection, 

as extended under paragraph (2), may be extended for up 

to 1 additional year, if the Chairperson of the Corporation, 

with the concurrence of the Secretary, submits the certifications described in paragraph (2). 

(B) ADDITIONAL REPORT REQUIRED.—Not later than 30 

days after the date of commencement of the extension under 

subparagraph (A), the Corporation shall submit a report to 

the Committee on Banking, Housing, and Urban Affairs of 

the Senate and the Committee on Financial Services of the 

House of Representatives describing the need for the extension and the specific plan of the Corporation to conclude 

the receivership before the end of the second extension. 

(4) ONGOING LITIGATION.—The time limit under this subsection, as extended under paragraph (3), may be further extended solely for the purpose of completing ongoing litigation in 


sroberts on DSKD5P82C1PROD with HEARING
75 

which the Corporation as receiver is a party, provided that the 

appointment of the Corporation as receiver shall terminate not 

later than 90 days after the date of completion of such litigation, if— 

(A) the Council determines that the Corporation used 

its best efforts to conclude the receivership in accordance 

with its plan before the end of the time limit described in 

paragraph (3); 

(B) the Council determines that the completion of 

longer-term responsibilities in the form of ongoing litigation 

justifies the need for an extension; and 

(C) the Corporation submits a report approved by the 

Council not later than 30 days after the date of the determinations by the Council under subparagraphs (A) and (B) 

to the Committee on Banking, Housing, and Urban Affairs 

of the Senate and the Committee on Financial Services of 

the House of Representatives, describing— 

(i) the ongoing litigation justifying the need for an 

extension; and 

(ii) the specific plan of the Corporation to complete 

the litigation and conclude the receivership. 

(5) REGULATIONS.—The Corporation may issue regulations 

governing the termination of receiverships under this title. 

(6) NO LIABILITY.—The Corporation and the Deposit Insurance Fund shall not be liable for unresolved claims arising 

from the receivership after the termination of the receivership. 

(e) STUDY OF BANKRUPTCY AND ORDERLY LIQUIDATION PROCESS

FOR FINANCIAL COMPANIES.— (1) STUDY.— (A) IN GENERAL.—The Administrative Office of the 

United States Courts and the Comptroller General of the 

United States shall each monitor the activities of the Court, 

and each such Office shall conduct separate studies regarding the bankruptcy and orderly liquidation process for financial companies under the Bankruptcy Code. 

(B) ISSUES TO BE STUDIED.—In conducting the study 

under subparagraph (A), the Administrative Office of the 

United States Courts and the Comptroller General of the 

United States each shall evaluate— 

(i) the effectiveness of chapter 7 or chapter 11 of 

the Bankruptcy Code in facilitating the orderly liquidation or reorganization of financial companies; 

(ii) ways to maximize the efficiency and effectiveness of the Court; and 

(iii) ways to make the orderly liquidation process 

under the Bankruptcy Code for financial companies 

more effective. 

(2) REPORTS.—Not later than 1 year after the date of enactment of this Act, in each successive year until the third year, 

and every fifth year after that date of enactment, the Administrative Office of the United States Courts and the Comptroller 

General of the United States shall submit to the Committee on 

Banking, Housing, and Urban Affairs and the Committee on 

the Judiciary of the Senate and the Committee on Financial 

Services and the Committee on the Judiciary of the House of 


sroberts on DSKD5P82C1PROD with HEARING
76 

Representatives separate reports summarizing the results of the 

studies conducted under paragraph (1). 

(f) STUDY OF INTERNATIONAL COORDINATION RELATING TO

BANKRUPTCY PROCESS FOR FINANCIAL COMPANIES.— (1) STUDY.— (A) IN GENERAL.—The Comptroller General of the 

United States shall conduct a study regarding international coordination relating to the orderly liquidation of 

financial companies under the Bankruptcy Code. 

(B) ISSUES TO BE STUDIED.—In conducting the study 

under subparagraph (A), the Comptroller General of the 

United States shall evaluate, with respect to the bankruptcy 

process for financial companies— 

(i) the extent to which international coordination 

currently exists; 

(ii) current mechanisms and structures for facilitating international cooperation; 

(iii) barriers to effective international coordination; 

and 

(iv) ways to increase and make more effective international coordination. 

(2) REPORT.—Not later than 1 year after the date of enactment of this Act, the Comptroller General of the United States 

shall submit to the Committee on Banking, Housing, and 

Urban Affairs and the Committee on the Judiciary of the Senate and the Committee on Financial Services and the Committee on the Judiciary of the House of Representatives and the 

Secretary a report summarizing the results of the study conducted under paragraph (1). 

(g) STUDY OF PROMPT CORRECTIVE ACTION IMPLEMENTATION BY

THE APPROPRIATE FEDERAL AGENCIES.— (1) STUDY.—The Comptroller General of the United States 

shall conduct a study regarding the implementation of prompt 

corrective action by the appropriate Federal banking agencies. 

(2) ISSUES TO BE STUDIED.—In conducting the study under 

paragraph (1), the Comptroller General shall evaluate— 

(A) the effectiveness of implementation of prompt corrective action by the appropriate Federal banking agencies 

and the resolution of insured depository institutions by the 

Corporation; and 

(B) ways to make prompt corrective action a more effective tool to resolve the insured depository institutions at the 

least possible long-term cost to the Deposit Insurance Fund. 

(3) REPORT TO COUNCIL.—Not later than 1 year after the 

date of enactment of this Act, the Comptroller General shall 

submit a report to the Council on the results of the study conducted under this subsection. 

(4) COUNCIL REPORT OF ACTION.—Not later than 6 months 

after the date of receipt of the report from the Comptroller General under paragraph (3), the Council shall submit a report to 

the Committee on Banking, Housing, and Urban Affairs of the 

Senate and the Committee on Financial Services of the House 

of Representatives on actions taken in response to the report, including any recommendations made to the Federal primary financial regulatory agencies under section 120. 


sroberts on DSKD5P82C1PROD with HEARING
77 

SEC. 203. SYSTEMIC RISK DETERMINATION. 

(a) WRITTEN RECOMMENDATION AND DETERMINATION.— 

(1) VOTE REQUIRED.— 

(A) IN GENERAL.—On their own initiative, or at the request of the Secretary, the Corporation and the Board of 

Governors shall consider whether to make a written recommendation described in paragraph (2) with respect to 

whether the Secretary should appoint the Corporation as 

receiver for a financial company. Such recommendation 

shall be made upon a vote of not fewer than 2⁄3 of the members of the Board of Governors then serving and 2⁄3 of the 

members of the board of directors of the Corporation then 

serving. 

(B) CASES INVOLVING BROKERS OR DEALERS.—In the 

case of a broker or dealer, or in which the largest United 

States subsidiary (as measured by total assets as of the end 

of the previous calendar quarter) of a financial company is 

a broker or dealer, the Commission and the Board of Governors, at the request of the Secretary, or on their own initiative, shall consider whether to make the written recommendation described in paragraph (2) with respect to 

the financial company. Subject to the requirements in paragraph (2), such recommendation shall be made upon a vote 

of not fewer than 2⁄3 of the members of the Board of Governors then serving and 2⁄3 of the members of the Commission then serving, and in consultation with the Corporation. 

(C) CASES INVOLVING INSURANCE COMPANIES.—In the 

case of an insurance company, or in which the largest 

United States subsidiary (as measured by total assets as of 

the end of the previous calendar quarter) of a financial 

company is an insurance company, the Director of the Federal Insurance Office and the Board of Governors, at the request of the Secretary or on their own initiative, shall consider whether to make the written recommendation described in paragraph (2) with respect to the financial company. Subject to the requirements in paragraph (2), such 

recommendation shall be made upon a vote of not fewer 

than 2⁄3 of the Board of Governors then serving and the affirmative approval of the Director of the Federal Insurance 

Office, and in consultation with the Corporation. 

(2) RECOMMENDATION REQUIRED.—Any written recommendation pursuant to paragraph (1) shall contain— 

(A) an evaluation of whether the financial company is 

in default or in danger of default; 

(B) a description of the effect that the default of the financial company would have on financial stability in the 

United States; 

(C) a description of the effect that the default of the financial company would have on economic conditions or financial stability for low income, minority, or underserved 

communities; 

(D) a recommendation regarding the nature and the extent of actions to be taken under this title regarding the financial company; 


sroberts on DSKD5P82C1PROD with HEARING
78 

(E) an evaluation of the likelihood of a private sector 

alternative to prevent the default of the financial company; 

(F) an evaluation of why a case under the Bankruptcy 

Code is not appropriate for the financial company; 

(G) an evaluation of the effects on creditors, counterparties, and shareholders of the financial company and 

other market participants; and 

(H) an evaluation of whether the company satisfies the 

definition of a financial company under section 201. 

(b) DETERMINATION BY THE SECRETARY.—Notwithstanding any 

other provision of Federal or State law, the Secretary shall take action in accordance with section 202(a)(1)(A), if, upon the written recommendation under subsection (a), the Secretary (in consultation 

with the President) determines that— 

(1) the financial company is in default or in danger of default; 

(2) the failure of the financial company and its resolution 

under otherwise applicable Federal or State law would have serious adverse effects on financial stability in the United States; 

(3) no viable private sector alternative is available to prevent the default of the financial company; 

(4) any effect on the claims or interests of creditors, counterparties, and shareholders of the financial company and other 

market participants as a result of actions to be taken under this 

title is appropriate, given the impact that any action taken 

under this title would have on financial stability in the United 

States; 

(5) any action under section 204 would avoid or mitigate 

such adverse effects, taking into consideration the effectiveness 

of the action in mitigating potential adverse effects on the financial system, the cost to the general fund of the Treasury, 

and the potential to increase excessive risk taking on the part 

of creditors, counterparties, and shareholders in the financial 

company; 

(6) a Federal regulatory agency has ordered the financial 

company to convert all of its convertible debt instruments that 

are subject to the regulatory order; and 

(7) the company satisfies the definition of a financial company under section 201. 

(c) DOCUMENTATION AND REVIEW.— 

(1) IN GENERAL.—The Secretary shall— 

(A) document any determination under subsection (b); 

(B) retain the documentation for review under paragraph (2); and 

(C) notify the covered financial company and the Corporation of such determination. 

(2) REPORT TO CONGRESS.—Not later than 24 hours after 

the date of appointment of the Corporation as receiver for a covered financial company, the Secretary shall provide written notice of the recommendations and determinations reached in accordance with subsections (a) and (b) to the Majority Leader 

and the Minority Leader of the Senate and the Speaker and the 

Minority Leader of the House of Representatives, the Committee 

on Banking, Housing, and Urban Affairs of the Senate, and the 

Committee on Financial Services of the House of RepresentaVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00082 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
79 

tives, which shall consist of a summary of the basis for the determination, including, to the extent available at the time of the 

determination— 

(A) the size and financial condition of the covered financial company; 

(B) the sources of capital and credit support that were 

available to the covered financial company; 

(C) the operations of the covered financial company 

that could have had a significant impact on financial stability, markets, or both; 

(D) identification of the banks and financial companies 

which may be able to provide the services offered by the 

covered financial company; 

(E) any potential international ramifications of resolution of the covered financial company under other applicable insolvency law; 

(F) an estimate of the potential effect of the resolution 

of the covered financial company under other applicable insolvency law on the financial stability of the United States; 

(G) the potential effect of the appointment of a receiver 

by the Secretary on consumers; 

(H) the potential effect of the appointment of a receiver 

by the Secretary on the financial system, financial markets, 

and banks and other financial companies; and 

(I) whether resolution of the covered financial company 

under other applicable insolvency law would cause banks 

or other financial companies to experience severe liquidity 

distress. 

(3) REPORTS TO CONGRESS AND THE PUBLIC.— (A) IN GENERAL.—Not later than 60 days after the date 

of appointment of the Corporation as receiver for a covered 

financial company, the Corporation shall file a report with 

the Committee on Banking, Housing, and Urban Affairs of 

the Senate and the Committee on Financial Services of the 

House of Representatives— 

(i) setting forth information on the financial condition of the covered financial company as of the date of 

the appointment, including a description of its assets 

and liabilities; 

(ii) describing the plan of, and actions taken by, 

the Corporation to wind down the covered financial 

company; 

(iii) explaining each instance in which the Corporation waived any applicable requirements of part 

366 of title 12, Code of Federal Regulations (or any 

successor thereto) with respect to conflicts of interest by 

any person in the private sector who was retained to 

provide services to the Corporation in connection with 

such receivership; 

(iv) describing the reasons for the provision of any 

funding to the receivership out of the Fund; 

(v) setting forth the expected costs of the orderly 

liquidation of the covered financial company; 

(vi) setting forth the identity of any claimant that 

is treated in a manner different from other similarly 


sroberts on DSKD5P82C1PROD with HEARING
80 

situated claimants under subsection (b)(4), (d)(4), or 

(h)(5)(E), the amount of any additional payment to 

such claimant under subsection (d)(4), and the reason 

for any such action; and 

(vii) which report the Corporation shall publish on 

an online website maintained by the Corporation, subject to maintaining appropriate confidentiality. 

(B) AMENDMENTS.—The Corporation shall, on a timely 

basis, not less frequently than quarterly, amend or revise 

and resubmit the reports prepared under this paragraph, 

as necessary. 

(C) CONGRESSIONAL TESTIMONY.—The Corporation and 

the primary financial regulatory agency, if any, of the financial company for which the Corporation was appointed 

receiver under this title shall appear before Congress, if requested, not later than 30 days after the date on which the 

Corporation first files the reports required under subparagraph (A). 

(4) DEFAULT OR IN DANGER OF DEFAULT.—For purposes of 

this title, a financial company shall be considered to be in default or in danger of default if, as determined in accordance 

with subsection (b)— 

(A) a case has been, or likely will promptly be, commenced with respect to the financial company under the 

Bankruptcy Code; 

(B) the financial company has incurred, or is likely to 

incur, losses that will deplete all or substantially all of its 

capital, and there is no reasonable prospect for the company to avoid such depletion; 

(C) the assets of the financial company are, or are likely to be, less than its obligations to creditors and others; or 

(D) the financial company is, or is likely to be, unable 

to pay its obligations (other than those subject to a bona 

fide dispute) in the normal course of business. 

(5) GAO REVIEW.—The Comptroller General of the United 

States shall review and report to Congress on any determination under subsection (b), that results in the appointment of the 

Corporation as receiver, including— 

(A) the basis for the determination; 

(B) the purpose for which any action was taken pursuant thereto; 

(C) the likely effect of the determination and such action on the incentives and conduct of financial companies 

and their creditors, counterparties, and shareholders; and 

(D) the likely disruptive effect of the determination and 

such action on the reasonable expectations of creditors, 

counterparties, and shareholders, taking into account the 

impact any action under this title would have on financial 

stability in the United States, including whether the rights 

of such parties will be disrupted. 

(d) CORPORATION POLICIES AND PROCEDURES.—As soon as is 

practicable after the date of enactment of this Act, the Corporation 

shall establish policies and procedures that are acceptable to the 

Secretary governing the use of funds available to the Corporation to 

carry out this title, including the terms and conditions for the proviVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00084 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
81 

sion and use of funds under sections 204(d), 210(h)(2)(G)(iv), and 

210(h)(9). 

(e) TREATMENT OF INSURANCE COMPANIES AND INSURANCE

COMPANY SUBSIDIARIES.— 

(1) IN GENERAL.—Notwithstanding subsection (b), if an insurance company is a covered financial company or a subsidiary or affiliate of a covered financial company, the liquidation or rehabilitation of such insurance company, and any subsidiary or affiliate of such company that is not excepted under 

paragraph (2), shall be conducted as provided under applicable 

State law. 

(2) EXCEPTION FOR SUBSIDIARIES AND AFFILIATES.—The requirement of paragraph (1) shall not apply with respect to any 

subsidiary or affiliate of an insurance company that is not itself 

an insurance company. 

(3) BACKUP AUTHORITY.—Notwithstanding paragraph (1), 

with respect to a covered financial company described in paragraph (1), if, after the end of the 60-day period beginning on the 

date on which a determination is made under section 202(a) 

with respect to such company, the appropriate regulatory agency has not filed the appropriate judicial action in the appropriate State court to place such company into orderly liquidation under the laws and requirements of the State, the Corporation shall have the authority to stand in the place of the appropriate regulatory agency and file the appropriate judicial action 

in the appropriate State court to place such company into orderly liquidation under the laws and requirements of the State. 

SEC. 204. ORDERLY LIQUIDATION OF COVERED FINANCIAL COMPANIES. 

(a) PURPOSE OF ORDERLY LIQUIDATION AUTHORITY.—It is the 

purpose of this title to provide the necessary authority to liquidate 

failing financial companies that pose a significant risk to the financial stability of the United States in a manner that mitigates such 

risk and minimizes moral hazard. The authority provided in this 

title shall be exercised in the manner that best fulfills such purpose, 

so that— 

(1) creditors and shareholders will bear the losses of the financial company; 

(2) management responsible for the condition of the financial company will not be retained; and 

(3) the Corporation and other appropriate agencies will 

take all steps necessary and appropriate to assure that all parties, including management, directors, and third parties, having responsibility for the condition of the financial company 

bear losses consistent with their responsibility, including actions for damages, restitution, and recoupment of compensation 

and other gains not compatible with such responsibility. 

(b) CORPORATION AS RECEIVER.—Upon the appointment of the 

Corporation under section 202, the Corporation shall act as the receiver for the covered financial company, with all of the rights and 

obligations set forth in this title. 

(c) CONSULTATION.—The Corporation, as receiver— 

(1) shall consult with the primary financial regulatory 

agency or agencies of the covered financial company and its covVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00085 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
82 

ered subsidiaries for purposes of ensuring an orderly liquidation of the covered financial company; 

(2) may consult with, or under subsection (a)(1)(B)(v) or 

(a)(1)(L) of section 210, acquire the services of, any outside experts, as appropriate to inform and aid the Corporation in the 

orderly liquidation process; 

(3) shall consult with the primary financial regulatory 

agency or agencies of any subsidiaries of the covered financial 

company that are not covered subsidiaries, and coordinate with 

such regulators regarding the treatment of such solvent subsidiaries and the separate resolution of any such insolvent subsidiaries under other governmental authority, as appropriate; and 

(4) shall consult with the Commission and the Securities 

Investor Protection Corporation in the case of any covered financial company for which the Corporation has been appointed 

as receiver that is a broker or dealer registered with the Commission under section 15(b) of the Securities Exchange Act of 

1934 (15 U.S.C. 78o(b)) and is a member of the Securities Investor Protection Corporation, for the purpose of determining 

whether to transfer to a bridge financial company organized by 

the Corporation as receiver, without consent of any customer, 

customer accounts of the covered financial company. 

(d) FUNDING FOR ORDERLY LIQUIDATION.—Upon its appointment as receiver for a covered financial company, and thereafter as 

the Corporation may, in its discretion, determine to be necessary or 

appropriate, the Corporation may make available to the receivership, subject to the conditions set forth in section 206 and subject 

to the plan described in section 210(n)(9), funds for the orderly liquidation of the covered financial company. All funds provided by 

the Corporation under this subsection shall have a priority of 

claims under subparagraph (A) or (B) of section 210(b)(1), as applicable, including funds used for— 

(1) making loans to, or purchasing any debt obligation of, 

the covered financial company or any covered subsidiary; 

(2) purchasing or guaranteeing against loss the assets of 

the covered financial company or any covered subsidiary, directly or through an entity established by the Corporation for 

such purpose; 

(3) assuming or guaranteeing the obligations of the covered 

financial company or any covered subsidiary to 1 or more third 

parties; 

(4) taking a lien on any or all assets of the covered financial company or any covered subsidiary, including a first priority lien on all unencumbered assets of the covered financial 

company or any covered subsidiary to secure repayment of any 

transactions conducted under this subsection; 

(5) selling or transferring all, or any part, of such acquired 

assets, liabilities, or obligations of the covered financial company or any covered subsidiary; and 

(6) making payments pursuant to subsections (b)(4), (d)(4), 

and (h)(5)(E) of section 210. 

SEC. 205. ORDERLY LIQUIDATION OF COVERED BROKERS AND DEALERS. 

(a) APPOINTMENT OF SIPC AS TRUSTEE.— 


sroberts on DSKD5P82C1PROD with HEARING
83 

(1) APPOINTMENT.—Upon the appointment of the Corporation as receiver for any covered broker or dealer, the Corporation shall appoint, without any need for court approval, the Securities Investor Protection Corporation to act as trustee for the 

liquidation under the Securities Investor Protection Act of 1970 

(15 U.S.C. 78aaa et seq.) of the covered broker or dealer. 

(2) ACTIONS BY SIPC.— (A) FILING.—Upon appointment of SIPC under paragraph (1), SIPC shall promptly file with any Federal district court of competent jurisdiction specified in section 21 

or 27 of the Securities Exchange Act of 1934 (15 U.S.C. 

78u, 78aa), an application for a protective decree under the 

Securities Investor Protection Act of 1970 (15 U.S.C. 78aaa 

et seq.) as to the covered broker or dealer. The Federal district court shall accept and approve the filing, including 

outside of normal business hours, and shall immediately 

issue the protective decree as to the covered broker or dealer. 

(B) ADMINISTRATION BY SIPC.—Following entry of the 

protective decree, and except as otherwise provided in this 

section, the determination of claims and the liquidation of 

assets retained in the receivership of the covered broker or 

dealer and not transferred to the bridge financial company 

shall be administered under the Securities Investor Protection Act of 1970 (15 U.S.C. 78aaa et seq.) by SIPC, as 

trustee for the covered broker or dealer. 

(C) DEFINITION OF FILING DATE.—For purposes of the 

liquidation proceeding, the term ‘‘filing date’’ means the 

date on which the Corporation is appointed as receiver of 

the covered broker or dealer. 

(D) DETERMINATION OF CLAIMS.—As trustee for the covered broker or dealer, SIPC shall determine and satisfy, 

consistent with this title and with the Securities Investor 

Protection Act of 1970 (15 U.S.C. 78aaa et seq.), all claims 

against the covered broker or dealer arising on or before the 

filing date. 

(b) POWERS AND DUTIES OF SIPC.— 

(1) IN GENERAL.—Except as provided in this section, upon 

its appointment as trustee for the liquidation of a covered 

broker or dealer, SIPC shall have all of the powers and duties 

provided by the Securities Investor Protection Act of 1970 (15 

U.S.C. 78aaa et seq.), including, without limitation, all rights 

of action against third parties, and shall conduct such liquidation in accordance with the terms of the Securities Investor Protection Act of 1970 (15 U.S.C. 78aaa et seq.), except that SIPC 

shall have no powers or duties with respect to assets and liabilities transferred by the Corporation from the covered broker or 

dealer to any bridge financial company established in accordance with this title. 

(2) LIMITATION OF POWERS.—The exercise by SIPC of powers and functions as trustee under subsection (a) shall not impair or impede the exercise of the powers and duties of the Corporation with regard to— 

(A) any action, except as otherwise provided in this 

title— 


sroberts on DSKD5P82C1PROD with HEARING
84 

(i) to make funds available under section 204(d); 

(ii) to organize, establish, operate, or terminate any 

bridge financial company; 

(iii) to transfer assets and liabilities; 

(iv) to enforce or repudiate contracts; or 

(v) to take any other action relating to such bridge 

financial company under section 210; or 

(B) determining claims under subsection (e). 

(3) PROTECTIVE DECREE.—SIPC and the Corporation, in 

consultation with the Commission, shall jointly determine the 

terms of the protective decree to be filed by SIPC with any court 

of competent jurisdiction under section 21 or 27 of the Securities Exchange Act of 1934 (15 U.S.C. 78u, 78aa), as required by 

subsection (a). 

(4) QUALIFIED FINANCIAL CONTRACTS.—Notwithstanding 

any provision of the Securities Investor Protection Act of 1970 

(15 U.S.C. 78aaa et seq.) to the contrary (including section 

5(b)(2)(C) of that Act (15 U.S.C. 78eee(b)(2)(C))), the rights and 

obligations of any party to a qualified financial contract (as 

that term is defined in section 210(c)(8)) to which a covered 

broker or dealer for which the Corporation has been appointed 

receiver is a party shall be governed exclusively by section 210, 

including the limitations and restrictions contained in section 

210(c)(10)(B). 

(c) LIMITATION ON COURT ACTION.—Except as otherwise provided in this title, no court may take any action, including any action pursuant to the Securities Investor Protection Act of 1970 (15 

U.S.C. 78aaa et seq.) or the Bankruptcy Code, to restrain or affect 

the exercise of powers or functions of the Corporation as receiver for 

a covered broker or dealer and any claims against the Corporation 

as such receiver shall be determined in accordance with subsection 

(e) and such claims shall be limited to money damages. 

(d) ACTIONS BY CORPORATION AS RECEIVER.— 

(1) IN GENERAL.—Notwithstanding any other provision of 

this title, no action taken by the Corporation as receiver with 

respect to a covered broker or dealer shall— 

(A) adversely affect the rights of a customer to customer 

property or customer name securities; 

(B) diminish the amount or timely payment of net equity claims of customers; or 

(C) otherwise impair the recoveries provided to a customer under the Securities Investor Protection Act of 1970 

(15 U.S.C. 78aaa et seq.). 

(2) NET PROCEEDS.—The net proceeds from any transfer, 

sale, or disposition of assets of the covered broker or dealer, or 

proceeds thereof by the Corporation as receiver for the covered 

broker or dealer shall be for the benefit of the estate of the covered broker or dealer, as provided in this title. 

(e) CLAIMS AGAINST THE CORPORATION AS RECEIVER.—Any 

claim against the Corporation as receiver for a covered broker or 

dealer for assets transferred to a bridge financial company established with respect to such covered broker or dealer— 

(1) shall be determined in accordance with section 

210(a)(2); and 


sroberts on DSKD5P82C1PROD with HEARING
85 

(2) may be reviewed by the appropriate district or territorial court of the United States in accordance with section 

210(a)(5). 

(f) SATISFACTION OF CUSTOMER CLAIMS.— (1) OBLIGATIONS TO CUSTOMERS.—Notwithstanding any 

other provision of this title, all obligations of a covered broker 

or dealer or of any bridge financial company established with 

respect to such covered broker or dealer to a customer relating 

to, or net equity claims based upon, customer property or customer name securities shall be promptly discharged by SIPC, 

the Corporation, or the bridge financial company, as applicable, 

by the delivery of securities or the making of payments to or for 

the account of such customer, in a manner and in an amount 

at least as beneficial to the customer as would have been the 

case had the actual proceeds realized from the liquidation of 

the covered broker or dealer under this title been distributed in 

a proceeding under the Securities Investor Protection Act of 

1970 (15 U.S.C. 78aaa et seq.) without the appointment of the 

Corporation as receiver and without any transfer of assets or liabilities to a bridge financial company, and with a filing date 

as of the date on which the Corporation is appointed as receiver. 

(2) SATISFACTION OF CLAIMS BY SIPC.—SIPC, as trustee for 

a covered broker or dealer, shall satisfy customer claims in the 

manner and amount provided under the Securities Investor 

Protection Act of 1970 (15 U.S.C. 78aaa et seq.), as if the appointment of the Corporation as receiver had not occurred, and 

with a filing date as of the date on which the Corporation is 

appointed as receiver. The Corporation shall satisfy customer 

claims, to the extent that a customer would have received more 

securities or cash with respect to the allocation of customer 

property had the covered financial company been subject to a 

proceeding under the Securities Investor Protection Act (15 

U.S.C. 78aaa et seq.) without the appointment of the Corporation as receiver, and with a filing date as of the date on which 

the Corporation is appointed as receiver. 

(g) PRIORITIES.— (1) CUSTOMER PROPERTY.—As trustee for a covered broker 

or dealer, SIPC shall allocate customer property and deliver 

customer name securities in accordance with section 8(c) of the 

Securities Investor Protection Act of 1970 (15 U.S.C. 78fff–2(c)). 

(2) OTHER CLAIMS.—All claims other than those described 

in paragraph (1) (including any unpaid claim by a customer for 

the allowed net equity claim of such customer from customer 

property) shall be paid in accordance with the priorities in section 210(b). 

(h) RULEMAKING.—The Commission and the Corporation, after 

consultation with SIPC, shall jointly issue rules to implement this 

section. 

SEC. 206. MANDATORY TERMS AND CONDITIONS FOR ALL ORDERLY 

LIQUIDATION ACTIONS. 

In taking action under this title, the Corporation shall— 

(1) determine that such action is necessary for purposes of 

the financial stability of the United States, and not for the purpose of preserving the covered financial company; 


sroberts on DSKD5P82C1PROD with HEARING
86 

(2) ensure that the shareholders of a covered financial company do not receive payment until after all other claims and the 

Fund are fully paid; 

(3) ensure that unsecured creditors bear losses in accordance with the priority of claim provisions in section 210; 

(4) ensure that management responsible for the failed condition of the covered financial company is removed (if such 

management has not already been removed at the time at which 

the Corporation is appointed receiver); 

(5) ensure that the members of the board of directors (or 

body performing similar functions) responsible for the failed 

condition of the covered financial company are removed, if such 

members have not already been removed at the time the Corporation is appointed as receiver; and 

(6) not take an equity interest in or become a shareholder 

of any covered financial company or any covered subsidiary. 

SEC. 207. DIRECTORS NOT LIABLE FOR ACQUIESCING IN APPOINTMENT OF RECEIVER. 

The members of the board of directors (or body performing 

similar functions) of a covered financial company shall not be liable 

to the shareholders or creditors thereof for acquiescing in or consenting in good faith to the appointment of the Corporation as receiver for the covered financial company under section 203. 

SEC. 208. DISMISSAL AND EXCLUSION OF OTHER ACTIONS. 

(a) IN GENERAL.—Effective as of the date of the appointment of 

the Corporation as receiver for the covered financial company under 

section 202 or the appointment of SIPC as trustee for a covered 

broker or dealer under section 205, as applicable, any case or proceeding commenced with respect to the covered financial company 

under the Bankruptcy Code or the Securities Investor Protection Act 

of 1970 (15 U.S.C. 78aaa et seq.) shall be dismissed, upon notice to 

the bankruptcy court (with respect to a case commenced under the 

Bankruptcy Code), and upon notice to SIPC (with respect to a covered broker or dealer) and no such case or proceeding may be commenced with respect to a covered financial company at any time 

while the orderly liquidation is pending. 

(b) REVESTING OF ASSETS.—Effective as of the date of appointment of the Corporation as receiver, the assets of a covered financial 

company shall, to the extent they have vested in any entity other 

than the covered financial company as a result of any case or proceeding commenced with respect to the covered financial company 

under the Bankruptcy Code, the Securities Investor Protection Act 

of 1970 (15 U.S.C. 78aaa et seq.), or any similar provision of State 

liquidation or insolvency law applicable to the covered financial 

company, revest in the covered financial company. 

(c) LIMITATION.—Notwithstanding subsections (a) and (b), any 

order entered or other relief granted by a bankruptcy court prior to 

the date of appointment of the Corporation as receiver shall continue with the same validity as if an orderly liquidation had not 

been commenced. 

SEC. 209. RULEMAKING; NON-CONFLICTING LAW. 

The Corporation shall, in consultation with the Council, prescribe such rules or regulations as the Corporation considers necessary or appropriate to implement this title, including rules and 


sroberts on DSKD5P82C1PROD with HEARING
87 

regulations with respect to the rights, interests, and priorities of 

creditors, counterparties, security entitlement holders, or other persons with respect to any covered financial company or any assets or 

other property of or held by such covered financial company, and 

address the potential for conflicts of interest between or among individual receiverships established under this title or under the Federal Deposit Insurance Act. To the extent possible, the Corporation 

shall seek to harmonize applicable rules and regulations promulgated under this section with the insolvency laws that would otherwise apply to a covered financial company. 

SEC. 210. POWERS AND DUTIES OF THE CORPORATION. 

(a) POWERS AND AUTHORITIES.— (1) GENERAL POWERS.— (A) SUCCESSOR TO COVERED FINANCIAL COMPANY.—The 

Corporation shall, upon appointment as receiver for a covered financial company under this title, succeed to— 

(i) all rights, titles, powers, and privileges of the 

covered financial company and its assets, and of any 

stockholder, member, officer, or director of such company; and 

(ii) title to the books, records, and assets of any 

previous receiver or other legal custodian of such covered financial company. 

(B) OPERATION OF THE COVERED FINANCIAL COMPANY

DURING THE PERIOD OF ORDERLY LIQUIDATION.—The Corporation, as receiver for a covered financial company, 

may— 

(i) take over the assets of and operate the covered 

financial company with all of the powers of the members or shareholders, the directors, and the officers of 

the covered financial company, and conduct all business of the covered financial company; 

(ii) collect all obligations and money owed to the 

covered financial company; 

(iii) perform all functions of the covered financial 

company, in the name of the covered financial company; 

(iv) manage the assets and property of the covered 

financial company, consistent with maximization of the 

value of the assets in the context of the orderly liquidation; and 

(v) provide by contract for assistance in fulfilling 

any function, activity, action, or duty of the Corporation as receiver. 

(C) FUNCTIONS OF COVERED FINANCIAL COMPANY OFFICERS, DIRECTORS, AND SHAREHOLDERS.—The Corporation 

may provide for the exercise of any function by any member 

or stockholder, director, or officer of any covered financial 

company for which the Corporation has been appointed as 

receiver under this title. 

(D) ADDITIONAL POWERS AS RECEIVER.—The Corporation shall, as receiver for a covered financial company, and 

subject to all legally enforceable and perfected security interests and all legally enforceable security entitlements in 

respect of assets held by the covered financial company, liqVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00091 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
88 

uidate, and wind-up the affairs of a covered financial company, including taking steps to realize upon the assets of 

the covered financial company, in such manner as the Corporation deems appropriate, including through the sale of 

assets, the transfer of assets to a bridge financial company 

established under subsection (h), or the exercise of any 

other rights or privileges granted to the receiver under this 

section. 

(E) ADDITIONAL POWERS WITH RESPECT TO FAILING

SUBSIDIARIES OF A COVERED FINANCIAL COMPANY.— 

(i) IN GENERAL.—In any case in which a receiver 

is appointed for a covered financial company under 

section 202, the Corporation may appoint itself as receiver of any covered subsidiary of the covered financial company that is organized under Federal law or 

the laws of any State, if the Corporation and the Secretary jointly determine that— 

(I) the covered subsidiary is in default or in 

danger of default; 

(II) such action would avoid or mitigate serious adverse effects on the financial stability or economic conditions of the United States; and 

(III) such action would facilitate the orderly 

liquidation of the covered financial company. 

(ii) TREATMENT AS COVERED FINANCIAL COMPANY.—If the Corporation is appointed as receiver of a 

covered subsidiary of a covered financial company 

under clause (i), the covered subsidiary shall thereafter 

be considered a covered financial company under this 

title, and the Corporation shall thereafter have all the 

powers and rights with respect to that covered subsidiary as it has with respect to a covered financial 

company under this title. 

(F) ORGANIZATION OF BRIDGE COMPANIES.—The Corporation, as receiver for a covered financial company, may 

organize a bridge financial company under subsection (h). 

(G) MERGER; TRANSFER OF ASSETS AND LIABILITIES.— 

(i) IN GENERAL.—Subject to clauses (ii) and (iii), 

the Corporation, as receiver for a covered financial 

company, may— 

(I) merge the covered financial company with 

another company; or 

(II) transfer any asset or liability of the covered financial company (including any assets and 

liabilities held by the covered financial company 

for security entitlement holders, any customer 

property, or any assets and liabilities associated 

with any trust or custody business) without obtaining any approval, assignment, or consent with respect to such transfer. 

(ii) FEDERAL AGENCY APPROVAL; ANTITRUST REVIEW.—With respect to a transaction described in 

clause (i)(I) that requires approval by a Federal agency— 


sroberts on DSKD5P82C1PROD with HEARING
89 

(I) the transaction may not be consummated 

before the 5th calendar day after the date of approval by the Federal agency responsible for such 

approval; 

(II) if, in connection with any such approval, 

a report on competitive factors is required, the Federal agency responsible for such approval shall 

promptly notify the Attorney General of the United 

States of the proposed transaction, and the Attorney General shall provide the required report not 

later than 10 days after the date of the request; 

and 

(III) if notification under section 7A of the 

Clayton Act is required with respect to such transaction, then the required waiting period shall end 

on the 15th day after the date on which the Attorney General and the Federal Trade Commission 

receive such notification, unless the waiting period 

is terminated earlier under subsection (b)(2) of 

such section 7A, or is extended pursuant to subsection (e)(2) of such section 7A. 

(iii) SETOFF.—Subject to the other provisions of 

this title, any transferee of assets from a receiver, including a bridge financial company, shall be subject to 

such claims or rights as would prevail over the rights 

of such transferee in such assets under applicable noninsolvency law. 

(H) PAYMENT OF VALID OBLIGATIONS.—The Corporation, as receiver for a covered financial company, shall, to 

the extent that funds are available, pay all valid obligations of the covered financial company that are due and 

payable at the time of the appointment of the Corporation 

as receiver, in accordance with the prescriptions and limitations of this title. 

(I) APPLICABLE NONINSOLVENCY LAW.—Except as may 

otherwise be provided in this title, the applicable noninsolvency law shall be determined by the noninsolvency choice 

of law rules otherwise applicable to the claims, rights, titles, persons, or entities at issue. 

(J) SUBPOENA AUTHORITY.— 

(i) IN GENERAL.—The Corporation, as receiver for 

a covered financial company, may, for purposes of carrying out any power, authority, or duty with respect to 

the covered financial company (including determining 

any claim against the covered financial company and 

determining and realizing upon any asset of any person in the course of collecting money due the covered 

financial company), exercise any power established 

under section 8(n) of the Federal Deposit Insurance 

Act, as if the Corporation were the appropriate Federal 

banking agency for the covered financial company, and 

the covered financial company were an insured depository institution. 

(ii) RULE OF CONSTRUCTION.—This subparagraph 

may not be construed as limiting any rights that the 


sroberts on DSKD5P82C1PROD with HEARING
90 

Corporation, in any capacity, might otherwise have to 

exercise any powers described in clause (i) or under 

any other provision of law. 

(K) INCIDENTAL POWERS.—The Corporation, as receiver 

for a covered financial company, may exercise all powers 

and authorities specifically granted to receivers under this 

title, and such incidental powers as shall be necessary to 

carry out such powers under this title. 

(L) UTILIZATION OF PRIVATE SECTOR.—In carrying out 

its responsibilities in the management and disposition of 

assets from the covered financial company, the Corporation, 

as receiver for a covered financial company, may utilize the 

services of private persons, including real estate and loan 

portfolio asset management, property management, auction 

marketing, legal, and brokerage services, if such services 

are available in the private sector, and the Corporation determines that utilization of such services is practicable, efficient, and cost effective. 

(M) SHAREHOLDERS AND CREDITORS OF COVERED FI- NANCIAL COMPANY.—Notwithstanding any other provision 

of law, the Corporation, as receiver for a covered financial 

company, shall succeed by operation of law to the rights, titles, powers, and privileges described in subparagraph (A), 

and shall terminate all rights and claims that the stockholders and creditors of the covered financial company may 

have against the assets of the covered financial company or 

the Corporation arising out of their status as stockholders 

or creditors, except for their right to payment, resolution, or 

other satisfaction of their claims, as permitted under this 

section. The Corporation shall ensure that shareholders 

and unsecured creditors bear losses, consistent with the priority of claims provisions under this section. 

(N) COORDINATION WITH FOREIGN FINANCIAL AUTHORI- TIES.—The Corporation, as receiver for a covered financial 

company, shall coordinate, to the maximum extent possible, 

with the appropriate foreign financial authorities regarding 

the orderly liquidation of any covered financial company 

that has assets or operations in a country other than the 

United States. 

(O) RESTRICTION ON TRANSFERS.— 

(i) SELECTION OF ACCOUNTS FOR TRANSFER.—If the 

Corporation establishes one or more bridge financial 

companies with respect to a covered broker or dealer, 

the Corporation shall transfer to one of such bridge financial companies, all customer accounts of the covered broker or dealer, and all associated customer 

name securities and customer property, unless the Corporation, after consulting with the Commission and 

SIPC, determines that— 

(I) the customer accounts, customer name securities, and customer property are likely to be 

promptly transferred to another broker or dealer 

that is registered with the Commission under section 15(b) of the Securities Exchange Act of 1934 

(15 U.S.C. 73o(b)) and is a member of SIPC; or 


sroberts on DSKD5P82C1PROD with HEARING
91 

(II) the transfer of the accounts to a bridge financial company would materially interfere with 

the ability of the Corporation to avoid or mitigate 

serious adverse effects on financial stability or economic conditions in the United States. 

(ii) TRANSFER OF PROPERTY.—SIPC, as trustee for 

the liquidation of the covered broker or dealer, and the 

Commission shall provide any and all reasonable assistance necessary to complete such transfers by the 

Corporation. 

(iii) CUSTOMER CONSENT AND COURT APPROVAL

NOT REQUIRED.—Neither customer consent nor court 

approval shall be required to transfer any customer accounts or associated customer name securities or customer property to a bridge financial company in accordance with this section. 

(iv) NOTIFICATION OF SIPC AND SHARING OF INFOR- MATION.—The Corporation shall identify to SIPC the 

customer accounts and associated customer name securities and customer property transferred to the bridge 

financial company. The Corporation and SIPC shall 

cooperate in the sharing of any information necessary 

for each entity to discharge its obligations under this 

title and under the Securities Investor Protection Act of 

1970 (15 U.S.C. 78aaa et seq.) including by providing 

access to the books and records of the covered financial 

company and any bridge financial company established in accordance with this title. 

(2) DETERMINATION OF CLAIMS.— (A) IN GENERAL.—The Corporation, as receiver for a 

covered financial company, shall report on claims, as set 

forth in section 203(c)(3). Subject to paragraph (4) of this 

subsection, the Corporation, as receiver for a covered financial company, shall determine claims in accordance with 

the requirements of this subsection and regulations prescribed under section 209. 

(B) NOTICE REQUIREMENTS.—The Corporation, as receiver for a covered financial company, in any case involving the liquidation or winding up of the affairs of a covered 

financial company, shall— 

(i) promptly publish a notice to the creditors of the 

covered financial company to present their claims, together with proof, to the receiver by a date specified in 

the notice, which shall be not earlier than 90 days after 

the date of publication of such notice; and 

(ii) republish such notice 1 month and 2 months, 

respectively, after the date of publication under clause 

(i). 

(C) MAILING REQUIRED.—The Corporation as receiver 

shall mail a notice similar to the notice published under 

clause (i) or (ii) of subparagraph (B), at the time of such 

publication, to any creditor shown on the books and records 

of the covered financial company— 

(i) at the last address of the creditor appearing in 

such books; 


sroberts on DSKD5P82C1PROD with HEARING
92 

(ii) in any claim filed by the claimant; or 

(iii) upon discovery of the name and address of a 

claimant not appearing on the books and records of the 

covered financial company, not later than 30 days after 

the date of the discovery of such name and address. 

(3) PROCEDURES FOR RESOLUTION OF CLAIMS.— 

(A) DECISION PERIOD.— 

(i) IN GENERAL.—Prior to the 180th day after the 

date on which a claim against a covered financial company is filed with the Corporation as receiver, or such 

later date as may be agreed as provided in clause (ii), 

the Corporation shall notify the claimant whether it allows or disallows the claim, in accordance with subparagraphs (B), (C), and (D). 

(ii) EXTENSION OF TIME.—By written agreement executed not later than 180 days after the date on which 

a claim against a covered financial company is filed 

with the Corporation, the period described in clause (i) 

may be extended by written agreement between the 

claimant and the Corporation. Failure to notify the 

claimant of any disallowance within the time period 

set forth in clause (i), as it may be extended by agreement under this clause, shall be deemed to be a disallowance of such claim, and the claimant may file or 

continue an action in court, as provided in paragraph 

(4). 

(iii) MAILING OF NOTICE SUFFICIENT.—The requirements of clause (i) shall be deemed to be satisfied if the 

notice of any decision with respect to any claim is 

mailed to the last address of the claimant which appears— 

(I) on the books, records, or both of the covered 

financial company; 

(II) in the claim filed by the claimant; or 

(III) in documents submitted in proof of the 

claim. 

(iv) CONTENTS OF NOTICE OF DISALLOWANCE.—If 

the Corporation as receiver disallows any claim filed 

under clause (i), the notice to the claimant shall contain— 

(I) a statement of each reason for the disallowance; and 

(II) the procedures required to file or continue 

an action in court, as provided in paragraph (4). 

(B) ALLOWANCE OF PROVEN CLAIM.—The receiver shall 

allow any claim received by the receiver on or before the 

date specified in the notice under paragraph (2)(B)(i), 

which is proved to the satisfaction of the receiver. 

(C) DISALLOWANCE OF CLAIMS FILED AFTER END OF FILING PERIOD.— 

(i) IN GENERAL.—Except as provided in clause (ii), 

claims filed after the date specified in the notice published under paragraph (2)(B)(i) shall be disallowed, 

and such disallowance shall be final. 


sroberts on DSKD5P82C1PROD with HEARING
93 

(ii) CERTAIN EXCEPTIONS.—Clause (i) shall not 

apply with respect to any claim filed by a claimant 

after the date specified in the notice published under 

paragraph (2)(B)(i), and such claim may be considered 

by the receiver under subparagraph (B), if— 

(I) the claimant did not receive notice of the 

appointment of the receiver in time to file such 

claim before such date; and 

(II) such claim is filed in time to permit payment of such claim. 

(D) AUTHORITY TO DISALLOW CLAIMS.— 

(i) IN GENERAL.—The Corporation may disallow 

any portion of any claim by a creditor or claim of a security, preference, setoff, or priority which is not proved 

to the satisfaction of the Corporation. 

(ii) PAYMENTS TO UNDERSECURED CREDITORS.—In 

the case of a claim against a covered financial company that is secured by any property or other asset of 

such covered financial company, the receiver— 

(I) may treat the portion of such claim which 

exceeds an amount equal to the fair market value 

of such property or other asset as an unsecured 

claim; and 

(II) may not make any payment with respect to 

such unsecured portion of the claim, other than in 

connection with the disposition of all claims of unsecured creditors of the covered financial company. 

(iii) EXCEPTIONS.—No provision of this paragraph 

shall apply with respect to— 

(I) any extension of credit from any Federal reserve bank, or the Corporation, to any covered financial company; or 

(II) subject to clause (ii), any legally enforceable and perfected security interest in the assets of 

the covered financial company securing any such 

extension of credit. 

(E) LEGAL EFFECT OF FILING.— 

(i) STATUTE OF LIMITATIONS TOLLED.—For purposes of any applicable statute of limitations, the filing 

of a claim with the receiver shall constitute a commencement of an action. 

(ii) NO PREJUDICE TO OTHER ACTIONS.—Subject to 

paragraph (8), the filing of a claim with the receiver 

shall not prejudice any right of the claimant to continue any action which was filed before the date of appointment of the receiver for the covered financial company. 

(4) JUDICIAL DETERMINATION OF CLAIMS.— 

(A) IN GENERAL.—Subject to subparagraph (B), a 

claimant may file suit on a claim (or continue an action 

commenced before the date of appointment of the Corporation as receiver) in the district or territorial court of the 

United States for the district within which the principal 

place of business of the covered financial company is loVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00097 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
94 

cated (and such court shall have jurisdiction to hear such 

claim). 

(B) TIMING.—A claim under subparagraph (A) may be 

filed before the end of the 60-day period beginning on the 

earlier of— 

(i) the end of the period described in paragraph 

(3)(A)(i) (or, if extended by agreement of the Corporation and the claimant, the period described in paragraph (3)(A)(ii)) with respect to any claim against a 

covered financial company for which the Corporation is 

receiver; or 

(ii) the date of any notice of disallowance of such 

claim pursuant to paragraph (3)(A)(i). 

(C) STATUTE OF LIMITATIONS.—If any claimant fails to 

file suit on such claim (or to continue an action on such 

claim commenced before the date of appointment of the 

Corporation as receiver) prior to the end of the 60-day period described in subparagraph (B), the claim shall be 

deemed to be disallowed (other than any portion of such 

claim which was allowed by the receiver) as of the end of 

such period, such disallowance shall be final, and the 

claimant shall have no further rights or remedies with respect to such claim. 

(5) EXPEDITED DETERMINATION OF CLAIMS.— (A) PROCEDURE REQUIRED.—The Corporation shall establish a procedure for expedited relief outside of the claims 

process established under paragraph (3), for any claimant 

that alleges— 

(i) having a legally valid and enforceable or perfected security interest in property of a covered financial company or control of any legally valid and enforceable security entitlement in respect of any asset 

held by the covered financial company for which the 

Corporation has been appointed receiver; and 

(ii) that irreparable injury will occur if the claims 

procedure established under paragraph (3) is followed. 

(B) DETERMINATION PERIOD.—Prior to the end of the 

90-day period beginning on the date on which a claim is 

filed in accordance with the procedures established pursuant to subparagraph (A), the Corporation shall— 

(i) determine— 

(I) whether to allow or disallow such claim, or 

any portion thereof; or 

(II) whether such claim should be determined 

pursuant to the procedures established pursuant to 

paragraph (3); 

(ii) notify the claimant of the determination; and 

(iii) if the claim is disallowed, provide a statement 

of each reason for the disallowance and the procedure 

for obtaining a judicial determination. 

(C) PERIOD FOR FILING OR RENEWING SUIT.—Any 

claimant who files a request for expedited relief shall be 

permitted to file suit (or continue a suit filed before the date 

of appointment of the Corporation as receiver seeking a determination of the rights of the claimant with respect to 


sroberts on DSKD5P82C1PROD with HEARING
95 

such security interest (or such security entitlement) after the 

earlier of— 

(i) the end of the 90-day period beginning on the 

date of the filing of a request for expedited relief; or 

(ii) the date on which the Corporation denies the 

claim or a portion thereof. 

(D) STATUTE OF LIMITATIONS.—If an action described 

in subparagraph (C) is not filed, or the motion to renew a 

previously filed suit is not made, before the end of the 30- 

day period beginning on the date on which such action or 

motion may be filed in accordance with subparagraph (C), 

the claim shall be deemed to be disallowed as of the end 

of such period (other than any portion of such claim which 

was allowed by the receiver), such disallowance shall be 

final, and the claimant shall have no further rights or remedies with respect to such claim. 

(E) LEGAL EFFECT OF FILING.— 

(i) STATUTE OF LIMITATIONS TOLLED.—For purposes of any applicable statute of limitations, the filing 

of a claim with the receiver shall constitute a commencement of an action. 

(ii) NO PREJUDICE TO OTHER ACTIONS.—Subject to 

paragraph (8), the filing of a claim with the receiver 

shall not prejudice any right of the claimant to continue any action which was filed before the appointment of the Corporation as receiver for the covered financial company. 

(6) AGREEMENTS AGAINST INTEREST OF THE RECEIVER.—No 

agreement that tends to diminish or defeat the interest of the 

Corporation as receiver in any asset acquired by the receiver 

under this section shall be valid against the receiver, unless 

such agreement— 

(A) is in writing; 

(B) was executed by an authorized officer or representative of the covered financial company, or confirmed in the 

ordinary course of business by the covered financial company; and 

(C) has been, since the time of its execution, an official 

record of the company or the party claiming under the 

agreement provides documentation, acceptable to the receiver, of such agreement and its authorized execution or 

confirmation by the covered financial company. 

(7) PAYMENT OF CLAIMS.— 

(A) IN GENERAL.—Subject to subparagraph (B), the 

Corporation as receiver may, in its discretion and to the extent that funds are available, pay creditor claims, in such 

manner and amounts as are authorized under this section, 

which are— 

(i) allowed by the receiver; 

(ii) approved by the receiver pursuant to a final determination pursuant to paragraph (3) or (5), as applicable; or 

(iii) determined by the final judgment of a court of 

competent jurisdiction. 


sroberts on DSKD5P82C1PROD with HEARING
96 

(B) LIMITATION.—A creditor shall, in no event, receive 

less than the amount that the creditor is entitled to receive 

under paragraphs (2) and (3) of subsection (d), as applicable. 

(C) PAYMENT OF DIVIDENDS ON CLAIMS.—The Corporation as receiver may, in its sole discretion, and to the extent 

otherwise permitted by this section, pay dividends on proven claims at any time, and no liability shall attach to the 

Corporation as receiver, by reason of any such payment or 

for failure to pay dividends to a claimant whose claim is 

not proved at the time of any such payment. 

(D) RULEMAKING BY THE CORPORATION.—The Corporation may prescribe such rules, including definitions of 

terms, as the Corporation deems appropriate to establish 

an interest rate for or to make payments of post-insolvency 

interest to creditors holding proven claims against the receivership estate of a covered financial company, except 

that no such interest shall be paid until the Corporation as 

receiver has satisfied the principal amount of all creditor 

claims. 

(8) SUSPENSION OF LEGAL ACTIONS.— (A) IN GENERAL.—After the appointment of the Corporation as receiver for a covered financial company, the 

Corporation may request a stay in any judicial action or 

proceeding in which such covered financial company is or 

becomes a party, for a period of not to exceed 90 days. 

(B) GRANT OF STAY BY ALL COURTS REQUIRED.—Upon 

receipt of a request by the Corporation pursuant to subparagraph (A), the court shall grant such stay as to all parties. 

(9) ADDITIONAL RIGHTS AND DUTIES.— (A) PRIOR FINAL ADJUDICATION.—The Corporation 

shall abide by any final, non-appealable judgment of any 

court of competent jurisdiction that was rendered before the 

appointment of the Corporation as receiver. 

(B) RIGHTS AND REMEDIES OF RECEIVER.—In the event 

of any appealable judgment, the Corporation as receiver 

shall— 

(i) have all the rights and remedies available to 

the covered financial company (before the date of appointment of the Corporation as receiver under section 

202) and the Corporation, including removal to Federal court and all appellate rights; and 

(ii) not be required to post any bond in order to 

pursue such remedies. 

(C) NO ATTACHMENT OR EXECUTION.—No attachment 

or execution may be issued by any court upon assets in the 

possession of the Corporation as receiver for a covered financial company. 

(D) LIMITATION ON JUDICIAL REVIEW.—Except as otherwise provided in this title, no court shall have jurisdiction 

over— 

(i) any claim or action for payment from, or any 

action seeking a determination of rights with respect to, 

the assets of any covered financial company for which 


sroberts on DSKD5P82C1PROD with HEARING
97 

the Corporation has been appointed receiver, including 

any assets which the Corporation may acquire from 

itself as such receiver; or 

(ii) any claim relating to any act or omission of 

such covered financial company or the Corporation as 

receiver. 

(E) DISPOSITION OF ASSETS.—In exercising any right, 

power, privilege, or authority as receiver in connection with 

any covered financial company for which the Corporation is 

acting as receiver under this section, the Corporation shall, 

to the greatest extent practicable, conduct its operations in 

a manner that— 

(i) maximizes the net present value return from the 

sale or disposition of such assets; 

(ii) minimizes the amount of any loss realized in 

the resolution of cases; 

(iii) mitigates the potential for serious adverse effects to the financial system; 

(iv) ensures timely and adequate competition and 

fair and consistent treatment of offerors; and 

(v) prohibits discrimination on the basis of race, 

sex, or ethnic group in the solicitation and consideration of offers. 

(10) STATUTE OF LIMITATIONS FOR ACTIONS BROUGHT BY

RECEIVER.— 

(A) IN GENERAL.—Notwithstanding any provision of 

any contract, the applicable statute of limitations with regard to any action brought by the Corporation as receiver 

for a covered financial company shall be— 

(i) in the case of any contract claim, the longer of— 

(I) the 6-year period beginning on the date on 

which the claim accrues; or 

(II) the period applicable under State law; and 

(ii) in the case of any tort claim, the longer of— 

(I) the 3-year period beginning on the date on 

which the claim accrues; or 

(II) the period applicable under State law. 

(B) DATE ON WHICH A CLAIM ACCRUES.—For purposes 

of subparagraph (A), the date on which the statute of limitations begins to run on any claim described in subparagraph (A) shall be the later of— 

(i) the date of the appointment of the Corporation 

as receiver under this title; or 

(ii) the date on which the cause of action accrues. 

(C) REVIVAL OF EXPIRED STATE CAUSES OF ACTION.— 

(i) IN GENERAL.—In the case of any tort claim described in clause (ii) for which the applicable statute of 

limitations under State law has expired not more than 

5 years before the date of appointment of the Corporation as receiver for a covered financial company, the 

Corporation may bring an action as receiver on such 

claim without regard to the expiration of the statute of 

limitations. 

(ii) CLAIMS DESCRIBED.—A tort claim referred to in 

clause (i) is a claim arising from fraud, intentional 


sroberts on DSKD5P82C1PROD with HEARING
98 

misconduct resulting in unjust enrichment, or intentional misconduct resulting in substantial loss to the 

covered financial company. 

(11) AVOIDABLE TRANSFERS.— 

(A) FRAUDULENT TRANSFERS.—The Corporation, as receiver for any covered financial company, may avoid a 

transfer of any interest of the covered financial company in 

property, or any obligation incurred by the covered financial company, that was made or incurred at or within 2 

years before the date on which the Corporation was appointed receiver, if— 

(i) the covered financial company voluntarily or involuntarily— 

(I) made such transfer or incurred such obligation with actual intent to hinder, delay, or defraud any entity to which the covered financial 

company was or became, on or after the date on 

which such transfer was made or such obligation 

was incurred, indebted; or 

(II) received less than a reasonably equivalent 

value in exchange for such transferor obligation; 

and 

(ii) the covered financial company voluntarily or 

involuntarily— 

(I) was insolvent on the date that such transfer 

was made or such obligation was incurred, or became insolvent as a result of such transfer or obligation; 

(II) was engaged in business or a transaction, 

or was about to engage in business or a transaction, for which any property remaining with the 

covered financial company was an unreasonably 

small capital; 

(III) intended to incur, or believed that the 

covered financial company would incur, debts that 

would be beyond the ability of the covered financial company to pay as such debts matured; or 

(IV) made such transfer to or for the benefit of 

an insider, or incurred such obligation to or for the 

benefit of an insider, under an employment contract and not in the ordinary course of business. 

(B) PREFERENTIAL TRANSFERS.—The Corporation as receiver for any covered financial company may avoid a 

transfer of an interest of the covered financial company in 

property— 

(i) to or for the benefit of a creditor; 

(ii) for or on account of an antecedent debt that 

was owed by the covered financial company before the 

transfer was made; 

(iii) that was made while the covered financial 

company was insolvent; 

(iv) that was made— 

(I) 90 days or less before the date on which the 

Corporation was appointed receiver; or 


sroberts on DSKD5P82C1PROD with HEARING
99 

(II) more than 90 days, but less than 1 year 

before the date on which the Corporation was appointed receiver, if such creditor at the time of the 

transfer was an insider; and 

(v) that enables the creditor to receive more than 

the creditor would receive if— 

(I) the covered financial company had been 

liquidated under chapter 7 of the Bankruptcy 

Code; 

(II) the transfer had not been made; and 

(III) the creditor received payment of such debt 

to the extent provided by the provisions of chapter 

7 of the Bankruptcy Code. 

(C) POST-RECEIVERSHIP TRANSACTIONS.—The Corporation as receiver for any covered financial company may 

avoid a transfer of property of the receivership that occurred after the Corporation was appointed receiver that 

was not authorized under this title by the Corporation as 

receiver. 

(D) RIGHT OF RECOVERY.—To the extent that a transfer 

is avoided under subparagraph (A), (B), or (C), the Corporation may recover, for the benefit of the covered financial company, the property transferred or, if a court so orders, the value of such property (at the time of such transfer) from— 

(i) the initial transferee of such transfer or the person for whose benefit such transfer was made; or 

(ii) any immediate or mediate transferee of any 

such initial transferee. 

(E) RIGHTS OF TRANSFEREE OR OBLIGEE.—The Corporation may not recover under subparagraph (D)(ii) 

from— 

(i) any transferee that takes for value, including in 

satisfaction of or to secure a present or antecedent debt, 

in good faith, and without knowledge of the voidability 

of the transfer avoided; or 

(ii) any immediate or mediate good faith transferee 

of such transferee. 

(F) DEFENSES.—Subject to the other provisions of this 

title— 

(i) a transferee or obligee from which the Corporation seeks to recover a transfer or to avoid an obligation under subparagraph (A), (B), (C), or (D) shall 

have the same defenses available to a transferee or obligee from which a trustee seeks to recover a transfer or 

avoid an obligation under sections 547, 548, and 549 

of the Bankruptcy Code; and 

(ii) the authority of the Corporation to recover a 

transfer or avoid an obligation shall be subject to subsections (b) and (c) of section 546, section 547(c), and 

section 548(c) of the Bankruptcy Code. 

(G) RIGHTS UNDER THIS SECTION.—The rights of the 

Corporation as receiver under this section shall be superior 

to any rights of a trustee or any other party (other than a 

Federal agency) under the Bankruptcy Code. 


sroberts on DSKD5P82C1PROD with HEARING
100 

(H) RULES OF CONSTRUCTION; DEFINITIONS.—For purposes of— 

(i) subparagraphs (A) and (B)— 

(I) the term ‘‘insider’’ has the same meaning as 

in section 101(31) of the Bankruptcy Code; 

(II) a transfer is made when such transfer is 

so perfected that a bona fide purchaser from the 

covered financial company against whom applicable law permits such transfer to be perfected cannot acquire an interest in the property transferred 

that is superior to the interest in such property of 

the transferee, but if such transfer is not so perfected before the date on which the Corporation is 

appointed as receiver for the covered financial 

company, such transfer is made immediately before the date of such appointment; and 

(III) the term ‘‘value’’ means property, or satisfaction or securing of a present or antecedent debt 

of the covered financial company, but does not include an unperformed promise to furnish support 

to the covered financial company; and 

(ii) subparagraph (B)— 

(I) the covered financial company is presumed 

to have been insolvent on and during the 90-day 

period immediately preceding the date of appointment of the Corporation as receiver; and 

(II) the term ‘‘insolvent’’ has the same meaning 

as in section 101(32) of the Bankruptcy Code. 

(12) SETOFF.— (A) GENERALLY.—Except as otherwise provided in this 

title, any right of a creditor to offset a mutual debt owed 

by the creditor to any covered financial company that arose 

before the Corporation was appointed as receiver for the 

covered financial company against a claim of such creditor 

may be asserted if enforceable under applicable noninsolvency law, except to the extent that— 

(i) the claim of the creditor against the covered financial company is disallowed; 

(ii) the claim was transferred, by an entity other 

than the covered financial company, to the creditor— 

(I) after the Corporation was appointed as receiver of the covered financial company; or 

(II)(aa) after the 90-day period preceding the 

date on which the Corporation was appointed as 

receiver for the covered financial company; and 

(bb) while the covered financial company was 

insolvent (except for a setoff in connection with a 

qualified financial contract); or 

(iii) the debt owed to the covered financial company was incurred by the covered financial company— 

(I) after the 90-day period preceding the date 

on which the Corporation was appointed as receiver for the covered financial company; 

(II) while the covered financial company was 

insolvent; and 


sroberts on DSKD5P82C1PROD with HEARING
101 

(III) for the purpose of obtaining a right of 

setoff against the covered financial company (except for a setoff in connection with a qualified financial contract). 

(B) INSUFFICIENCY.— (i) IN GENERAL.—Except with respect to a setoff in 

connection with a qualified financial contract, if a 

creditor offsets a mutual debt owed to the covered financial company against a claim of the covered financial company on or within the 90-day period preceding 

the date on which the Corporation is appointed as receiver for the covered financial company, the Corporation may recover from the creditor the amount so offset, 

to the extent that any insufficiency on the date of such 

setoff is less than the insufficiency on the later of— 

(I) the date that is 90 days before the date on 

which the Corporation is appointed as receiver for 

the covered financial company; or 

(II) the first day on which there is an insufficiency during the 90-day period preceding the date 

on which the Corporation is appointed as receiver 

for the covered financial company. 

(ii) DEFINITION OF INSUFFICIENCY.—In this subparagraph, the term ‘‘insufficiency’’ means the amount, 

if any, by which a claim against the covered financial 

company exceeds a mutual debt owed to the covered financial company by the holder of such claim. 

(C) INSOLVENCY.—The term ‘‘insolvent’’ has the same 

meaning as in section 101(32) of the Bankruptcy Code. 

(D) PRESUMPTION OF INSOLVENCY.—For purposes of 

this paragraph, the covered financial company is presumed 

to have been insolvent on and during the 90-day period preceding the date of appointment of the Corporation as receiver. 

(E) LIMITATION.—Nothing in this paragraph (12) shall 

be the basis for any right of setoff where no such right exists under applicable noninsolvency law. 

(F) PRIORITY CLAIM.—Except as otherwise provided in 

this title, the Corporation as receiver for the covered financial company may sell or transfer any assets free and clear 

of the setoff rights of any party, except that such party shall 

be entitled to a claim, subordinate to the claims payable 

under subparagraphs (A), (B), (C), and (D) of subsection 

(b)(1), but senior to all other unsecured liabilities defined 

in subsection (b)(1)(E), in an amount equal to the value of 

such setoff rights. 

(13) ATTACHMENT OF ASSETS AND OTHER INJUNCTIVE RE- LIEF.—Subject to paragraph (14), any court of competent jurisdiction may, at the request of the Corporation as receiver for a 

covered financial company, issue an order in accordance with 

Rule 65 of the Federal Rules of Civil Procedure, including an 

order placing the assets of any person designated by the Corporation under the control of the court and appointing a trustee 

to hold such assets. 

(14) STANDARDS.— 


sroberts on DSKD5P82C1PROD with HEARING
102 

(A) SHOWING.—Rule 65 of the Federal Rules of Civil 

Procedure shall apply with respect to any proceeding under 

paragraph (13), without regard to the requirement that the 

applicant show that the injury, loss, or damage is irreparable and immediate. 

(B) STATE PROCEEDING.—If, in the case of any proceeding in a State court, the court determines that rules of 

civil procedure available under the laws of the State provide substantially similar protections of the right of the 

parties to due process as provided under Rule 65 (as modified with respect to such proceeding by subparagraph (A)), 

the relief sought by the Corporation pursuant to paragraph 

(14) may be requested under the laws of such State. 

(15) TREATMENT OF CLAIMS ARISING FROM BREACH OF CON- TRACTS EXECUTED BY THE CORPORATION AS RECEIVER.—Notwithstanding any other provision of this title, any final and 

non-appealable judgment for monetary damages entered 

against the Corporation as receiver for a covered financial company for the breach of an agreement executed or approved by 

the Corporation after the date of its appointment shall be paid 

as an administrative expense of the receiver. Nothing in this 

paragraph shall be construed to limit the power of a receiver to 

exercise any rights under contract or law, including to terminate, breach, cancel, or otherwise discontinue such agreement. 

(16) ACCOUNTING AND RECORDKEEPING REQUIREMENTS.— (A) IN GENERAL.—The Corporation as receiver for a 

covered financial company shall, consistent with the accounting and reporting practices and procedures established by the Corporation, maintain a full accounting of 

each receivership or other disposition of any covered financial company. 

(B) ANNUAL ACCOUNTING OR REPORT.—With respect to 

each receivership to which the Corporation is appointed, 

the Corporation shall make an annual accounting or report, as appropriate, available to the Secretary and the 

Comptroller General of the United States. 

(C) AVAILABILITY OF REPORTS.—Any report prepared 

pursuant to subparagraph (B) and section 203(c)(3) shall 

be made available to the public by the Corporation. 

(D) RECORDKEEPING REQUIREMENT.— 

(i) IN GENERAL.—The Corporation shall prescribe 

such regulations and establish such retention schedules 

as are necessary to maintain the documents and 

records of the Corporation generated in exercising the 

authorities of this title and the records of a covered financial company for which the Corporation is appointed receiver, with due regard for— 

(I) the avoidance of duplicative record retention; and 

(II) the expected evidentiary needs of the Corporation as receiver for a covered financial company and the public regarding the records of covered financial companies. 

(ii) RETENTION OF RECORDS.—Unless otherwise required by applicable Federal law or court order, the 


sroberts on DSKD5P82C1PROD with HEARING
103 

Corporation may not, at any time, destroy any records 

that are subject to clause (i). 

(iii) RECORDS DEFINED.—As used in this subparagraph, the terms ‘‘records’’ and ‘‘records of a covered financial company’’ mean any document, book, paper, 

map, photograph, microfiche, microfilm, computer or 

electronically-created record generated or maintained 

by the covered financial company in the course of and 

necessary to its transaction of business. 

(b) PRIORITY OF EXPENSES AND UNSECURED CLAIMS.— 

(1) IN GENERAL.—Unsecured claims against a covered financial company, or the Corporation as receiver for such covered financial company under this section, that are proven to 

the satisfaction of the receiver shall have priority in the following order: 

(A) Administrative expenses of the receiver. 

(B) Any amounts owed to the United States, unless the 

United States agrees or consents otherwise. 

(C) Wages, salaries, or commissions, including vacation, severance, and sick leave pay earned by an individual 

(other than an individual described in subparagraph (G)), 

but only to the extent of $11,725 for each individual (as indexed for inflation, by regulation of the Corporation) 

earned not later than 180 days before the date of appointment of the Corporation as receiver. 

(D) Contributions owed to employee benefit plans arising from services rendered not later than 180 days before 

the date of appointment of the Corporation as receiver, to 

the extent of the number of employees covered by each such 

plan, multiplied by $11,725 (as indexed for inflation, by 

regulation of the Corporation), less the aggregate amount 

paid to such employees under subparagraph (C), plus the 

aggregate amount paid by the receivership on behalf of 

such employees to any other employee benefit plan. 

(E) Any other general or senior liability of the covered 

financial company (which is not a liability described under 

subparagraph (F), (G), or (H)). 

(F) Any obligation subordinated to general creditors 

(which is not an obligation described under subparagraph 

(G) or (H)). 

(G) Any wages, salaries, or commissions, including vacation, severance, and sick leave pay earned, owed to senior 

executives and directors of the covered financial company. 

(H) Any obligation to shareholders, members, general 

partners, limited partners, or other persons, with interests 

in the equity of the covered financial company arising as a 

result of their status as shareholders, members, general 

partners, limited partners, or other persons with interests 

in the equity of the covered financial company. 

(2) POST-RECEIVERSHIP FINANCING PRIORITY.—In the event 

that the Corporation, as receiver for a covered financial company, is unable to obtain unsecured credit for the covered financial company from commercial sources, the Corporation as receiver may obtain credit or incur debt on the part of the covered 


sroberts on DSKD5P82C1PROD with HEARING
104 

financial company, which shall have priority over any or all 

administrative expenses of the receiver under paragraph (1)(A). 

(3) CLAIMS OF THE UNITED STATES.—Unsecured claims of 

the United States shall, at a minimum, have a higher priority 

than liabilities of the covered financial company that count as 

regulatory capital. 

(4) CREDITORS SIMILARLY SITUATED.—All claimants of a 

covered financial company that are similarly situated under 

paragraph (1) shall be treated in a similar manner, except that 

the Corporation may take any action (including making payments, subject to subsection (o)(1)(D)(i)) that does not comply 

with this subsection, if— 

(A) the Corporation determines that such action is necessary— 

(i) to maximize the value of the assets of the covered financial company; 

(ii) to initiate and continue operations essential to 

implementation of the receivership or any bridge financial company; 

(iii) to maximize the present value return from the 

sale or other disposition of the assets of the covered financial company; or 

(iv) to minimize the amount of any loss realized 

upon the sale or other disposition of the assets of the 

covered financial company; and 

(B) all claimants that are similarly situated under 

paragraph (1) receive not less than the amount provided in 

paragraphs (2) and (3) of subsection (d). 

(5) SECURED CLAIMS UNAFFECTED.—This section shall not 

affect secured claims or security entitlements in respect of assets 

or property held by the covered financial company, except to the 

extent that the security is insufficient to satisfy the claim, and 

then only with regard to the difference between the claim and 

the amount realized from the security. 

(6) PRIORITY OF EXPENSES AND UNSECURED CLAIMS IN THE

ORDERLY LIQUIDATION OF SIPC MEMBER.—Where the Corporation is appointed as receiver for a covered broker or dealer, unsecured claims against such covered broker or dealer, or the 

Corporation as receiver for such covered broker or dealer under 

this section, that are proven to the satisfaction of the receiver 

under section 205(e), shall have the priority prescribed in paragraph (1), except that— 

(A) SIPC shall be entitled to recover administrative expenses incurred in performing its responsibilities under section 205 on an equal basis with the Corporation, in accordance with paragraph (1)(A); 

(B) the Corporation shall be entitled to recover any 

amounts paid to customers or to SIPC pursuant to section 

205(f), in accordance with paragraph (1)(B); 

(C) SIPC shall be entitled to recover any amounts paid 

out of the SIPC Fund to meet its obligations under section 

205 and under the Securities Investor Protection Act of 

1970 (15 U.S.C. 78aaa et seq.), which claim shall be subordinate to the claims payable under subparagraphs (A) and 

(B) of paragraph (1), but senior to all other claims; and 


sroberts on DSKD5P82C1PROD with HEARING
105 

(D) the Corporation may, after paying any proven 

claims to customers under section 205 and the Securities 

Investor Protection Act of 1970 (15 U.S.C. 78aaa et seq.), 

and as provided above, pay dividends on other proven 

claims, in its discretion, and to the extent that funds are 

available, in accordance with the priorities set forth in 

paragraph (1). 

(c) PROVISIONS RELATING TO CONTRACTS ENTERED INTO BE- FORE APPOINTMENT OF RECEIVER.— (1) AUTHORITY TO REPUDIATE CONTRACTS.—In addition to 

any other rights that a receiver may have, the Corporation as 

receiver for any covered financial company may disaffirm or repudiate any contract or lease— 

(A) to which the covered financial company is a party; 

(B) the performance of which the Corporation as receiver, in the discretion of the Corporation, determines to be 

burdensome; and 

(C) the disaffirmance or repudiation of which the Corporation as receiver determines, in the discretion of the Corporation, will promote the orderly administration of the affairs of the covered financial company. 

(2) TIMING OF REPUDIATION.—The Corporation, as receiver 

for any covered financial company, shall determine whether or 

not to exercise the rights of repudiation under this section within a reasonable period of time. 

(3) CLAIMS FOR DAMAGES FOR REPUDIATION.— (A) IN GENERAL.—Except as provided in paragraphs 

(4), (5), and (6) and in subparagraphs (C), (D), and (E) of 

this paragraph, the liability of the Corporation as receiver 

for a covered financial company for the disaffirmance or repudiation of any contract pursuant to paragraph (1) shall 

be— 

(i) limited to actual direct compensatory damages; 

and 

(ii) determined as of— 

(I) the date of the appointment of the Corporation as receiver; or 

(II) in the case of any contract or agreement 

referred to in paragraph (8), the date of the 

disaffirmance or repudiation of such contract or 

agreement. 

(B) NO LIABILITY FOR OTHER DAMAGES.—For purposes 

of subparagraph (A), the term ‘‘actual direct compensatory 

damages’’ does not include— 

(i) punitive or exemplary damages; 

(ii) damages for lost profits or opportunity; or 

(iii) damages for pain and suffering. 

(C) MEASURE OF DAMAGES FOR REPUDIATION OF QUALIFIED FINANCIAL CONTRACTS.—In the case of any qualified 

financial contract or agreement to which paragraph (8) applies, compensatory damages shall be— 

(i) deemed to include normal and reasonable costs 

of cover or other reasonable measures of damages utilized in the industries for such contract and agreement 

claims; and 


sroberts on DSKD5P82C1PROD with HEARING
106 

(ii) paid in accordance with this paragraph and 

subsection (d), except as otherwise specifically provided 

in this subsection. 

(D) MEASURE OF DAMAGES FOR REPUDIATION OR

DISAFFIRMANCE OF DEBT OBLIGATION.—In the case of any 

debt for borrowed money or evidenced by a security, actual 

direct compensatory damages shall be no less than the 

amount lent plus accrued interest plus any accreted original issue discount as of the date the Corporation was appointed receiver of the covered financial company and, to 

the extent that an allowed secured claim is secured by property the value of which is greater than the amount of such 

claim and any accrued interest through the date of repudiation or disaffirmance, such accrued interest pursuant to 

paragraph (1). 

(E) MEASURE OF DAMAGES FOR REPUDIATION OR

DISAFFIRMANCE OF CONTINGENT OBLIGATION.—In the case 

of any contingent obligation of a covered financial company 

consisting of any obligation under a guarantee, letter of 

credit, loan commitment, or similar credit obligation, the 

Corporation may, by rule or regulation, prescribe that actual direct compensatory damages shall be no less than the 

estimated value of the claim as of the date the Corporation 

was appointed receiver of the covered financial company, as 

such value is measured based on the likelihood that such 

contingent claim would become fixed and the probable 

magnitude thereof. 

(4) LEASES UNDER WHICH THE COVERED FINANCIAL COM- PANY IS THE LESSEE.— (A) IN GENERAL.—If the Corporation as receiver disaffirms or repudiates a lease under which the covered financial company is the lessee, the receiver shall not be liable for any damages (other than damages determined pursuant to subparagraph (B)) for the disaffirmance or repudiation of such lease. 

(B) PAYMENTS OF RENT.—Notwithstanding subparagraph (A), the lessor under a lease to which subparagraph 

(A) would otherwise apply shall— 

(i) be entitled to the contractual rent accruing before the later of the date on which— 

(I) the notice of disaffirmance or repudiation is 

mailed; or 

(II) the disaffirmance or repudiation becomes 

effective, unless the lessor is in default or breach of 

the terms of the lease; 

(ii) have no claim for damages under any acceleration clause or other penalty provision in the lease; and 

(iii) have a claim for any unpaid rent, subject to 

all appropriate offsets and defenses, due as of the date 

of the appointment which shall be paid in accordance 

with this paragraph and subsection (d). 

(5) LEASES UNDER WHICH THE COVERED FINANCIAL COM- PANY IS THE LESSOR.— 

(A) IN GENERAL.—If the Corporation as receiver for a 

covered financial company repudiates an unexpired written 


sroberts on DSKD5P82C1PROD with HEARING
107 

lease of real property of the covered financial company 

under which the covered financial company is the lessor 

and the lessee is not, as of the date of such repudiation, in 

default, the lessee under such lease may either— 

(i) treat the lease as terminated by such repudiation; or 

(ii) remain in possession of the leasehold interest 

for the balance of the term of the lease, unless the lessee defaults under the terms of the lease after the date 

of such repudiation. 

(B) PROVISIONS APPLICABLE TO LESSEE REMAINING IN

POSSESSION.—If any lessee under a lease described in subparagraph (A) remains in possession of a leasehold interest 

pursuant to clause (ii) of subparagraph (A)— 

(i) the lessee— 

(I) shall continue to pay the contractual rent 

pursuant to the terms of the lease after the date of 

the repudiation of such lease; and 

(II) may offset against any rent payment 

which accrues after the date of the repudiation of 

the lease, any damages which accrue after such 

date due to the nonperformance of any obligation 

of the covered financial company under the lease 

after such date; and 

(ii) the Corporation as receiver shall not be liable 

to the lessee for any damages arising after such date 

as a result of the repudiation, other than the amount 

of any offset allowed under clause (i)(II). 

(6) CONTRACTS FOR THE SALE OF REAL PROPERTY.— (A) IN GENERAL.—If the receiver repudiates any contract (which meets the requirements of subsection (a)(6)) for 

the sale of real property, and the purchaser of such real 

property under such contract is in possession and is not, as 

of the date of such repudiation, in default, such purchaser 

may either— 

(i) treat the contract as terminated by such repudiation; or 

(ii) remain in possession of such real property. 

(B) PROVISIONS APPLICABLE TO PURCHASER REMAINING

IN POSSESSION.—If any purchaser of real property under 

any contract described in subparagraph (A) remains in possession of such property pursuant to clause (ii) of subparagraph (A)— 

(i) the purchaser— 

(I) shall continue to make all payments due 

under the contract after the date of the repudiation 

of the contract; and 

(II) may offset against any such payments any 

damages which accrue after such date due to the 

nonperformance (after such date) of any obligation 

of the covered financial company under the contract; and 

(ii) the Corporation as receiver shall— 

(I) not be liable to the purchaser for any damages arising after such date as a result of the repuVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00111 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
108 

diation, other than the amount of any offset allowed under clause (i)(II); 

(II) deliver title to the purchaser in accordance 

with the provisions of the contract; and 

(III) have no obligation under the contract 

other than the performance required under subclause (II). 

(C) ASSIGNMENT AND SALE ALLOWED.— 

(i) IN GENERAL.—No provision of this paragraph 

shall be construed as limiting the right of the Corporation as receiver to assign the contract described in subparagraph (A) and sell the property, subject to the contract and the provisions of this paragraph. 

(ii) NO LIABILITY AFTER ASSIGNMENT AND SALE.— 

If an assignment and sale described in clause (i) is 

consummated, the Corporation as receiver shall have 

no further liability under the contract described in subparagraph (A) or with respect to the real property 

which was the subject of such contract. 

(7) PROVISIONS APPLICABLE TO SERVICE CONTRACTS.— 

(A) SERVICES PERFORMED BEFORE APPOINTMENT.—In 

the case of any contract for services between any person and 

any covered financial company for which the Corporation 

has been appointed receiver, any claim of such person for 

services performed before the date of appointment shall 

be— 

(i) a claim to be paid in accordance with subsections (a), (b), and (d); and 

(ii) deemed to have arisen as of the date on which 

the receiver was appointed. 

(B) SERVICES PERFORMED AFTER APPOINTMENT AND

PRIOR TO REPUDIATION.—If, in the case of any contract for 

services described in subparagraph (A), the Corporation as 

receiver accepts performance by the other person before 

making any determination to exercise the right of repudiation of such contract under this section— 

(i) the other party shall be paid under the terms of 

the contract for the services performed; and 

(ii) the amount of such payment shall be treated as 

an administrative expense of the receivership. 

(C) ACCEPTANCE OF PERFORMANCE NO BAR TO SUBSEQUENT REPUDIATION.—The acceptance by the Corporation 

as receiver for services referred to in subparagraph (B) in 

connection with a contract described in subparagraph (B) 

shall not affect the right of the Corporation as receiver to 

repudiate such contract under this section at any time after 

such performance. 

(8) CERTAIN QUALIFIED FINANCIAL CONTRACTS.— 

(A) RIGHTS OF PARTIES TO CONTRACTS.—Subject to subsection (a)(8) and paragraphs (9) and (10) of this subsection, and notwithstanding any other provision of this 

section, any other provision of Federal law, or the law of 

any State, no person shall be stayed or prohibited from exercising— 


sroberts on DSKD5P82C1PROD with HEARING
109 

(i) any right that such person has to cause the termination, liquidation, or acceleration of any qualified 

financial contract with a covered financial company 

which arises upon the date of appointment of the Corporation as receiver for such covered financial company 

or at any time after such appointment; 

(ii) any right under any security agreement or arrangement or other credit enhancement related to one 

or more qualified financial contracts described in 

clause (i); or 

(iii) any right to offset or net out any termination 

value, payment amount, or other transfer obligation 

arising under or in connection with 1 or more contracts 

or agreements described in clause (i), including any 

master agreement for such contracts or agreements. 

(B) APPLICABILITY OF OTHER PROVISIONS.—Subsection 

(a)(8) shall apply in the case of any judicial action or proceeding brought against the Corporation as receiver referred to in subparagraph (A), or the subject covered financial company, by any party to a contract or agreement described in subparagraph (A)(i) with such covered financial 

company. 

(C) CERTAIN TRANSFERS NOT AVOIDABLE.— (i) IN GENERAL.—Notwithstanding subsection 

(a)(11), (a)(12), or (c)(12), section 5242 of the Revised 

Statutes of the United States, or any other provision of 

Federal or State law relating to the avoidance of preferential or fraudulent transfers, the Corporation, 

whether acting as the Corporation or as receiver for a 

covered financial company, may not avoid any transfer 

of money or other property in connection with any 

qualified financial contract with a covered financial 

company. 

(ii) EXCEPTION FOR CERTAIN TRANSFERS.—Clause 

(i) shall not apply to any transfer of money or other 

property in connection with any qualified financial 

contract with a covered financial company if the transferee had actual intent to hinder, delay, or defraud 

such company, the creditors of such company, or the 

Corporation as receiver appointed for such company. 

(D) CERTAIN CONTRACTS AND AGREEMENTS DEFINED.— 

For purposes of this subsection, the following definitions 

shall apply: 

(i) QUALIFIED FINANCIAL CONTRACT.—The term 

‘‘qualified financial contract’’ means any securities contract, commodity contract, forward contract, repurchase agreement, swap agreement, and any similar 

agreement that the Corporation determines by regulation, resolution, or order to be a qualified financial 

contract for purposes of this paragraph. 

(ii) SECURITIES CONTRACT.—The term ‘‘securities 

contract’’— 

(I) means a contract for the purchase, sale, or 

loan of a security, a certificate of deposit, a mortgage loan, any interest in a mortgage loan, a group 


sroberts on DSKD5P82C1PROD with HEARING
110 

or index of securities, certificates of deposit, or 

mortgage loans or interests therein (including any 

interest therein or based on the value thereof), or 

any option on any of the foregoing, including any 

option to purchase or sell any such security, certificate of deposit, mortgage loan, interest, group or 

index, or option, and including any repurchase or 

reverse repurchase transaction on any such security, certificate of deposit, mortgage loan, interest, 

group or index, or option (whether or not such repurchase or reverse repurchase transaction is a 

‘‘repurchase agreement’’, as defined in clause (v)); 

(II) does not include any purchase, sale, or repurchase obligation under a participation in a 

commercial mortgage loan unless the Corporation 

determines by regulation, resolution, or order to include any such agreement within the meaning of 

such term; 

(III) means any option entered into on a national securities exchange relating to foreign currencies; 

(IV) means the guarantee (including by novation) by or to any securities clearing agency of any 

settlement of cash, securities, certificates of deposit, 

mortgage loans or interests therein, group or index 

of securities, certificates of deposit or mortgage 

loans or interests therein (including any interest 

therein or based on the value thereof) or an option 

on any of the foregoing, including any option to 

purchase or sell any such security, certificate of deposit, mortgage loan, interest, group or index, or 

option (whether or not such settlement is in connection with any agreement or transaction referred 

to in subclauses (I) through (XII) (other than subclause (II))); 

(V) means any margin loan; 

(VI) means any extension of credit for the 

clearance or settlement of securities transactions; 

(VII) means any loan transaction coupled with 

a securities collar transaction, any prepaid securities forward transaction, or any total return swap 

transaction coupled with a securities sale transaction; 

(VIII) means any other agreement or transaction that is similar to any agreement or transaction referred to in this clause; 

(IX) means any combination of the agreements 

or transactions referred to in this clause; 

(X) means any option to enter into any agreement or transaction referred to in this clause; 

(XI) means a master agreement that provides 

for an agreement or transaction referred to in any 

of subclauses (I) through (X), other than subclause 

(II), together with all supplements to any such 

master agreement, without regard to whether the 


sroberts on DSKD5P82C1PROD with HEARING
111 

master agreement provides for an agreement or 

transaction that is not a securities contract under 

this clause, except that the master agreement shall 

be considered to be a securities contract under this 

clause only with respect to each agreement or 

transaction under the master agreement that is referred to in any of subclauses (I) through (X), other 

than subclause (II); and 

(XII) means any security agreement or arrangement or other credit enhancement related to 

any agreement or transaction referred to in this 

clause, including any guarantee or reimbursement 

obligation in connection with any agreement or 

transaction referred to in this clause. 

(iii) COMMODITY CONTRACT.—The term ‘‘commodity 

contract’’ means— 

(I) with respect to a futures commission merchant, a contract for the purchase or sale of a commodity for future delivery on, or subject to the 

rules of, a contract market or board of trade; 

(II) with respect to a foreign futures commission merchant, a foreign future; 

(III) with respect to a leverage transaction 

merchant, a leverage transaction; 

(IV) with respect to a clearing organization, a 

contract for the purchase or sale of a commodity 

for future delivery on, or subject to the rules of, a 

contract market or board of trade that is cleared 

by such clearing organization, or commodity option traded on, or subject to the rules of, a contract 

market or board of trade that is cleared by such 

clearing organization; 

(V) with respect to a commodity options dealer, 

a commodity option; 

(VI) any other agreement or transaction that is 

similar to any agreement or transaction referred to 

in this clause; 

(VII) any combination of the agreements or 

transactions referred to in this clause; 

(VIII) any option to enter into any agreement 

or transaction referred to in this clause; 

(IX) a master agreement that provides for an 

agreement or transaction referred to in any of subclauses (I) through (VIII), together with all supplements to any such master agreement, without regard to whether the master agreement provides for 

an agreement or transaction that is not a commodity contract under this clause, except that the 

master agreement shall be considered to be a commodity contract under this clause only with respect 

to each agreement or transaction under the master 

agreement that is referred to in any of subclauses 

(I) through (VIII); or 

(X) any security agreement or arrangement or 

other credit enhancement related to any agreement 


sroberts on DSKD5P82C1PROD with HEARING
112 

or transaction referred to in this clause, including 

any guarantee or reimbursement obligation in connection with any agreement or transaction referred 

to in this clause. 

(iv) FORWARD CONTRACT.—The term ‘‘forward contract’’ means— 

(I) a contract (other than a commodity contract) for the purchase, sale, or transfer of a commodity or any similar good, article, service, right, 

or interest which is presently or in the future becomes the subject of dealing in the forward contract trade, or product or byproduct thereof, with 

a maturity date that is more than 2 days after the 

date on which the contract is entered into, including a repurchase or reverse repurchase transaction 

(whether or not such repurchase or reverse repurchase transaction is a ‘‘repurchase agreement’’, as 

defined in clause (v)), consignment, lease, swap, 

hedge transaction, deposit, loan, option, allocated 

transaction, unallocated transaction, or any other 

similar agreement; 

(II) any combination of agreements or transactions referred to in subclauses (I) and (III); 

(III) any option to enter into any agreement or 

transaction referred to in subclause (I) or (II); 

(IV) a master agreement that provides for an 

agreement or transaction referred to in subclause 

(I), (II), or (III), together with all supplements to 

any such master agreement, without regard to 

whether the master agreement provides for an 

agreement or transaction that is not a forward 

contract under this clause, except that the master 

agreement shall be considered to be a forward contract under this clause only with respect to each 

agreement or transaction under the master agreement that is referred to in subclause (I), (II), or 

(III); or 

(V) any security agreement or arrangement or 

other credit enhancement related to any agreement 

or transaction referred to in subclause (I), (II), 

(III), or (IV), including any guarantee or reimbursement obligation in connection with any agreement or transaction referred to in any such subclause. 

(v) REPURCHASE AGREEMENT.—The term ‘‘repurchase agreement’’ (which definition also applies to a reverse repurchase agreement)— 

(I) means an agreement, including related 

terms, which provides for the transfer of one or 

more certificates of deposit, mortgage related securities (as such term is defined in section 3 of the 

Securities Exchange Act of 1934), mortgage loans, 

interests in mortgage-related securities or mortgage 

loans, eligible bankers’ acceptances, qualified foreign government securities (which, for purposes of 


sroberts on DSKD5P82C1PROD with HEARING
113 

this clause, means a security that is a direct obligation of, or that is fully guaranteed by, the central government of a member of the Organization 

for Economic Cooperation and Development, as determined by regulation or order adopted by the 

Board of Governors), or securities that are direct 

obligations of, or that are fully guaranteed by, the 

United States or any agency of the United States 

against the transfer of funds by the transferee of 

such certificates of deposit, eligible bankers’ acceptances, securities, mortgage loans, or interests with 

a simultaneous agreement by such transferee to 

transfer to the transferor thereof certificates of deposit, eligible bankers’ acceptances, securities, 

mortgage loans, or interests as described above, at 

a date certain not later than 1 year after such 

transfers or on demand, against the transfer of 

funds, or any other similar agreement; 

(II) does not include any repurchase obligation 

under a participation in a commercial mortgage 

loan, unless the Corporation determines, by regulation, resolution, or order to include any such participation within the meaning of such term; 

(III) means any combination of agreements or 

transactions referred to in subclauses (I) and (IV); 

(IV) means any option to enter into any agreement or transaction referred to in subclause (I) or 

(III); 

(V) means a master agreement that provides 

for an agreement or transaction referred to in subclause (I), (III), or (IV), together with all supplements to any such master agreement, without regard to whether the master agreement provides for 

an agreement or transaction that is not a repurchase agreement under this clause, except that the 

master agreement shall be considered to be a repurchase agreement under this subclause only 

with respect to each agreement or transaction 

under the master agreement that is referred to in 

subclause (I), (III), or (IV); and 

(VI) means any security agreement or arrangement or other credit enhancement related to any 

agreement or transaction referred to in subclause 

(I), (III), (IV), or (V), including any guarantee or 

reimbursement obligation in connection with any 

agreement or transaction referred to in any such 

subclause. 

(vi) SWAP AGREEMENT.—The term ‘‘swap agreement’’ means— 

(I) any agreement, including the terms and 

conditions incorporated by reference in any such 

agreement, which is an interest rate swap, option, 

future, or forward agreement, including a rate 

floor, rate cap, rate collar, cross-currency rate 

swap, and basis swap; a spot, same day-tomorrow, 


sroberts on DSKD5P82C1PROD with HEARING
114 

tomorrow-next, forward, or other foreign exchange, 

precious metals, or other commodity agreement; a 

currency swap, option, future, or forward agreement; an equity index or equity swap, option, future, or forward agreement; a debt index or debt 

swap, option, future, or forward agreement; a total 

return, credit spread or credit swap, option, future, 

or forward agreement; a commodity index or commodity swap, option, future, or forward agreement; 

weather swap, option, future, or forward agreement; an emissions swap, option, future, or forward agreement; or an inflation swap, option, future, or forward agreement; 

(II) any agreement or transaction that is similar to any other agreement or transaction referred 

to in this clause and that is of a type that has 

been, is presently, or in the future becomes, the 

subject of recurrent dealings in the swap or other 

derivatives markets (including terms and conditions incorporated by reference in such agreement) 

and that is a forward, swap, future, option, or spot 

transaction on one or more rates, currencies, commodities, equity securities or other equity instruments, debt securities or other debt instruments, 

quantitative measures associated with an occurrence, extent of an occurrence, or contingency associated with a financial, commercial, or economic 

consequence, or economic or financial indices or 

measures of economic or financial risk or value; 

(III) any combination of agreements or transactions referred to in this clause; 

(IV) any option to enter into any agreement or 

transaction referred to in this clause; 

(V) a master agreement that provides for an 

agreement or transaction referred to in subclause 

(I), (II), (III), or (IV), together with all supplements 

to any such master agreement, without regard to 

whether the master agreement contains an agreement or transaction that is not a swap agreement 

under this clause, except that the master agreement shall be considered to be a swap agreement 

under this clause only with respect to each agreement or transaction under the master agreement 

that is referred to in subclause (I), (II), (III), or 

(IV); and 

(VI) any security agreement or arrangement or 

other credit enhancement related to any agreement 

or transaction referred to in any of subclauses (I) 

through (V), including any guarantee or reimbursement obligation in connection with any agreement or transaction referred to in any such clause. 

(vii) DEFINITIONS RELATING TO DEFAULT.—When 

used in this paragraph and paragraphs (9) and (10)— 

(I) the term ‘‘default’’ means, with respect to a 

covered financial company, any adjudication or 


sroberts on DSKD5P82C1PROD with HEARING
115 

other official decision by any court of competent jurisdiction, or other public authority pursuant to 

which the Corporation has been appointed receiver; 

and 

(II) the term ‘‘in danger of default’’ means a 

covered financial company with respect to which 

the Corporation or appropriate State authority has 

determined that— 

(aa) in the opinion of the Corporation or 

such authority— 

(AA) the covered financial company is 

not likely to be able to pay its obligations 

in the normal course of business; and 

(BB) there is no reasonable prospect 

that the covered financial company will be 

able to pay such obligations without Federal assistance; or 

(bb) in the opinion of the Corporation or 

such authority— 

(AA) the covered financial company 

has incurred or is likely to incur losses 

that will deplete all or substantially all of 

its capital; and 

(BB) there is no reasonable prospect 

that the capital will be replenished without Federal assistance. 

(viii) TREATMENT OF MASTER AGREEMENT AS ONE

AGREEMENT.—Any master agreement for any contract 

or agreement described in any of clauses (i) through 

(vi) (or any master agreement for such master agreement or agreements), together with all supplements to 

such master agreement, shall be treated as a single 

agreement and a single qualified financial contact. If 

a master agreement contains provisions relating to 

agreements or transactions that are not themselves 

qualified financial contracts, the master agreement 

shall be deemed to be a qualified financial contract 

only with respect to those transactions that are themselves qualified financial contracts. 

(ix) TRANSFER.—The term ‘‘transfer’’ means every 

mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with 

property or with an interest in property, including retention of title as a security interest and foreclosure of 

the equity of redemption of the covered financial company. 

(x) PERSON.—The term ‘‘person’’ includes any governmental entity in addition to any entity included in 

the definition of such term in section 1, title 1, United 

States Code. 

(E) CLARIFICATION.—No provision of law shall be construed as limiting the right or power of the Corporation, or 

authorizing any court or agency to limit or delay, in any 

manner, the right or power of the Corporation to transfer 


sroberts on DSKD5P82C1PROD with HEARING
116 

any qualified financial contract or to disaffirm or repudiate 

any such contract in accordance with this subsection. 

(F) WALKAWAY CLAUSES NOT EFFECTIVE.— (i) IN GENERAL.—Notwithstanding the provisions 

of subparagraph (A) of this paragraph and sections 

403 and 404 of the Federal Deposit Insurance Corporation Improvement Act of 1991, no walkaway clause 

shall be enforceable in a qualified financial contract of 

a covered financial company in default. 

(ii) LIMITED SUSPENSION OF CERTAIN OBLIGA- TIONS.—In the case of a qualified financial contract referred to in clause (i), any payment or delivery obligations otherwise due from a party pursuant to the qualified financial contract shall be suspended from the 

time at which the Corporation is appointed as receiver 

until the earlier of— 

(I) the time at which such party receives notice 

that such contract has been transferred pursuant 

to paragraph (10)(A); or 

(II) 5:00 p.m. (eastern time) on the business 

day following the date of the appointment of the 

Corporation as receiver. 

(iii) WALKAWAY CLAUSE DEFINED.—For purposes of 

this subparagraph, the term ‘‘walkaway clause’’ means 

any provision in a qualified financial contract that 

suspends, conditions, or extinguishes a payment obligation of a party, in whole or in part, or does not create 

a payment obligation of a party that would otherwise 

exist, solely because of the status of such party as a 

nondefaulting party in connection with the insolvency 

of a covered financial company that is a party to the 

contract or the appointment of or the exercise of rights 

or powers by the Corporation as receiver for such covered financial company, and not as a result of the exercise by a party of any right to offset, setoff, or net obligations that exist under the contract, any other contract between those parties, or applicable law. 

(G) CERTAIN OBLIGATIONS TO CLEARING ORGANIZA- TIONS.—In the event that the Corporation has been appointed as receiver for a covered financial company which 

is a party to any qualified financial contract cleared by or 

subject to the rules of a clearing organization (as defined 

in paragraph (9)(D)), the receiver shall use its best efforts 

to meet all margin, collateral, and settlement obligations of 

the covered financial company that arise under qualified financial contracts (other than any margin, collateral, or settlement obligation that is not enforceable against the receiver under paragraph (8)(F)(i) or paragraph (10)(B)), as 

required by the rules of the clearing organization when due. 

Notwithstanding any other provision of this title, if the receiver fails to satisfy any such margin, collateral, or settlement obligations under the rules of the clearing organization, the clearing organization shall have the immediate 

right to exercise, and shall not be stayed from exercising, 

all of its rights and remedies under its rules and applicable 


sroberts on DSKD5P82C1PROD with HEARING
117 

law with respect to any qualified financial contract of the 

covered financial company, including, without limitation, 

the right to liquidate all positions and collateral of such 

covered financial company under the company’s qualified 

financial contracts, and suspend or cease to act for such 

covered financial company, all in accordance with the rules 

of the clearing organization. 

(H) RECORDKEEPING.— (i) JOINT RULEMAKING.—The Federal primary financial regulatory agencies shall jointly prescribe regulations requiring that financial companies maintain 

such records with respect to qualified financial contracts (including market valuations) that the Federal 

primary financial regulatory agencies determine to be 

necessary or appropriate in order to assist the Corporation as receiver for a covered financial company in 

being able to exercise its rights and fulfill its obligations under this paragraph or paragraph (9) or (10). 

(ii) TIME FRAME.—The Federal primary financial 

regulatory agencies shall prescribe joint final or interim final regulations not later than 24 months after 

the date of enactment of this Act. 

(iii) BACK-UP RULEMAKING AUTHORITY.—If the Federal primary financial regulatory agencies do not prescribe joint final or interim final regulations within the 

time frame in clause (ii), the Chairperson of the Council shall prescribe, in consultation with the Corporation, the regulations required by clause (i). 

(iv) CATEGORIZATION AND TIERING.—The joint regulations prescribed under clause (i) shall, as appropriate, differentiate among financial companies by taking into consideration their size, risk, complexity, leverage, frequency and dollar amount of qualified financial 

contracts, interconnectedness to the financial system, 

and any other factors deemed appropriate. 

(9) TRANSFER OF QUALIFIED FINANCIAL CONTRACTS.— (A) IN GENERAL.—In making any transfer of assets or 

liabilities of a covered financial company in default, which 

includes any qualified financial contract, the Corporation 

as receiver for such covered financial company shall either— 

(i) transfer to one financial institution, other than 

a financial institution for which a conservator, receiver, trustee in bankruptcy, or other legal custodian 

has been appointed or which is otherwise the subject of 

a bankruptcy or insolvency proceeding— 

(I) all qualified financial contracts between 

any person or any affiliate of such person and the 

covered financial company in default; 

(II) all claims of such person or any affiliate 

of such person against such covered financial company under any such contract (other than any 

claim which, under the terms of any such contract, 

is subordinated to the claims of general unsecured 

creditors of such company); 


sroberts on DSKD5P82C1PROD with HEARING
118 

(III) all claims of such covered financial company against such person or any affiliate of such 

person under any such contract; and 

(IV) all property securing or any other credit 

enhancement for any contract described in subclause (I) or any claim described in subclause (II) 

or (III) under any such contract; or 

(ii) transfer none of the qualified financial contracts, claims, property or other credit enhancement referred to in clause (i) (with respect to such person and 

any affiliate of such person). 

(B) TRANSFER TO FOREIGN BANK, FINANCIAL INSTITUTION, OR BRANCH OR AGENCY THEREOF.—In transferring 

any qualified financial contracts and related claims and 

property under subparagraph (A)(i), the Corporation as receiver for the covered financial company shall not make 

such transfer to a foreign bank, financial institution organized under the laws of a foreign country, or a branch or 

agency of a foreign bank or financial institution unless, 

under the law applicable to such bank, financial institution, branch or agency, to the qualified financial contracts, 

and to any netting contract, any security agreement or arrangement or other credit enhancement related to one or 

more qualified financial contracts, the contractual rights of 

the parties to such qualified financial contracts, netting 

contracts, security agreements or arrangements, or other 

credit enhancements are enforceable substantially to the 

same extent as permitted under this section. 

(C) TRANSFER OF CONTRACTS SUBJECT TO THE RULES

OF A CLEARING ORGANIZATION.—In the event that the Corporation as receiver for a financial institution transfers any 

qualified financial contract and related claims, property, or 

credit enhancement pursuant to subparagraph (A)(i) and 

such contract is cleared by or subject to the rules of a clearing organization, the clearing organization shall not be required to accept the transferee as a member by virtue of the 

transfer. 

(D) DEFINITIONS.—For purposes of this paragraph— 

(i) the term ‘‘financial institution’’ means a broker 

or dealer, a depository institution, a futures commission merchant, a bridge financial company, or any 

other institution determined by the Corporation, by regulation, to be a financial institution; and 

(ii) the term ‘‘clearing organization’’ has the same 

meaning as in section 402 of the Federal Deposit Insurance Corporation Improvement Act of 1991. 

(10) NOTIFICATION OF TRANSFER.— 

(A) IN GENERAL.— 

(i) NOTICE.—The Corporation shall provide notice 

in accordance with clause (ii), if— 

(I) the Corporation as receiver for a covered financial company in default or in danger of default 

transfers any assets or liabilities of the covered financial company; and 


sroberts on DSKD5P82C1PROD with HEARING
119 

(II) the transfer includes any qualified financial contract. 

(ii) TIMING.—The Corporation as receiver for a covered financial company shall notify any person who is 

a party to any contract described in clause (i) of such 

transfer not later than 5:00 p.m. (eastern time) on the 

business day following the date of the appointment of 

the Corporation as receiver. 

(B) CERTAIN RIGHTS NOT ENFORCEABLE.— 

(i) RECEIVERSHIP.—A person who is a party to a 

qualified financial contract with a covered financial 

company may not exercise any right that such person 

has to terminate, liquidate, or net such contract under 

paragraph (8)(A) solely by reason of or incidental to the 

appointment under this section of the Corporation as 

receiver for the covered financial company (or the insolvency or financial condition of the covered financial 

company for which the Corporation has been appointed 

as receiver)— 

(I) until 5:00 p.m. (eastern time) on the business day following the date of the appointment; or 

(II) after the person has received notice that 

the contract has been transferred pursuant to 

paragraph (9)(A). 

(ii) NOTICE.—For purposes of this paragraph, the 

Corporation as receiver for a covered financial company shall be deemed to have notified a person who is 

a party to a qualified financial contract with such covered financial company, if the Corporation has taken 

steps reasonably calculated to provide notice to such 

person by the time specified in subparagraph (A). 

(C) TREATMENT OF BRIDGE FINANCIAL COMPANY.—For 

purposes of paragraph (9), a bridge financial company 

shall not be considered to be a financial institution for 

which a conservator, receiver, trustee in bankruptcy, or 

other legal custodian has been appointed, or which is otherwise the subject of a bankruptcy or insolvency proceeding. 

(D) BUSINESS DAY DEFINED.—For purposes of this 

paragraph, the term ‘‘business day’’ means any day other 

than any Saturday, Sunday, or any day on which either 

the New York Stock Exchange or the Federal Reserve Bank 

of New York is closed. 

(11) DISAFFIRMANCE OR REPUDIATION OF QUALIFIED FINANCIAL CONTRACTS.—In exercising the rights of disaffirmance or 

repudiation of the Corporation as receiver with respect to any 

qualified financial contract to which a covered financial company is a party, the Corporation shall either— 

(A) disaffirm or repudiate all qualified financial contracts between— 

(i) any person or any affiliate of such person; and 

(ii) the covered financial company in default; or 

(B) disaffirm or repudiate none of the qualified financial contracts referred to in subparagraph (A) (with respect 

to such person or any affiliate of such person). 


sroberts on DSKD5P82C1PROD with HEARING
120 

(12) CERTAIN SECURITY AND CUSTOMER INTERESTS NOT

AVOIDABLE.—No provision of this subsection shall be construed 

as permitting the avoidance of any— 

(A) legally enforceable or perfected security interest in 

any of the assets of any covered financial company, except 

in accordance with subsection (a)(11); or 

(B) legally enforceable interest in customer property, security entitlements in respect of assets or property held by 

the covered financial company for any security entitlement 

holder. 

(13) AUTHORITY TO ENFORCE CONTRACTS.— 

(A) IN GENERAL.—The Corporation, as receiver for a 

covered financial company, may enforce any contract, other 

than a liability insurance contract of a director or officer, 

a financial institution bond entered into by the covered financial company, notwithstanding any provision of the 

contract providing for termination, default, acceleration, or 

exercise of rights upon, or solely by reason of, insolvency, 

the appointment of or the exercise of rights or powers by the 

Corporation as receiver, the filing of the petition pursuant 

to section 202(a)(1), or the issuance of the recommendations 

or determination, or any actions or events occurring in connection therewith or as a result thereof, pursuant to section 

203. 

(B) CERTAIN RIGHTS NOT AFFECTED.—No provision of 

this paragraph may be construed as impairing or affecting 

any right of the Corporation as receiver to enforce or recover under a liability insurance contract of a director or 

officer or financial institution bond under other applicable 

law. 

(C) CONSENT REQUIREMENT AND IPSO FACTO

CLAUSES.— 

(i) IN GENERAL.—Except as otherwise provided by 

this section, no person may exercise any right or power 

to terminate, accelerate, or declare a default under any 

contract to which the covered financial company is a 

party (and no provision in any such contract providing 

for such default, termination, or acceleration shall be 

enforceable), or to obtain possession of or exercise control over any property of the covered financial company 

or affect any contractual rights of the covered financial 

company, without the consent of the Corporation as receiver for the covered financial company during the 90 

day period beginning from the appointment of the Corporation as receiver. 

(ii) EXCEPTIONS.—No provision of this subparagraph shall apply to a director or officer liability insurance contract or a financial institution bond, to the 

rights of parties to certain qualified financial contracts 

pursuant to paragraph (8), or to the rights of parties 

to netting contracts pursuant to subtitle A of title IV of 

the Federal Deposit Insurance Corporation Improvement Act of 1991 (12 U.S.C. 4401 et seq.), or shall be 

construed as permitting the Corporation as receiver to 


sroberts on DSKD5P82C1PROD with HEARING
121 

fail to comply with otherwise enforceable provisions of 

such contract. 

(D) CONTRACTS TO EXTEND CREDIT.—Notwithstanding 

any other provision in this title, if the Corporation as receiver enforces any contract to extend credit to the covered 

financial company or bridge financial company, any valid 

and enforceable obligation to repay such debt shall be paid 

by the Corporation as receiver, as an administrative expense of the receivership. 

(14) EXCEPTION FOR FEDERAL RESERVE BANKS AND COR- PORATION SECURITY INTEREST.—No provision of this subsection 

shall apply with respect to— 

(A) any extension of credit from any Federal reserve 

bank or the Corporation to any covered financial company; 

or 

(B) any security interest in the assets of the covered financial company securing any such extension of credit. 

(15) SAVINGS CLAUSE.—The meanings of terms used in this 

subsection are applicable for purposes of this subsection only, 

and shall not be construed or applied so as to challenge or affect the characterization, definition, or treatment of any similar 

terms under any other statute, regulation, or rule, including the 

Gramm-Leach-Bliley Act, the Legal Certainty for Bank Products Act of 2000, the securities laws (as that term is defined in 

section 3(a)(47) of the Securities Exchange Act of 1934), and the 

Commodity Exchange Act. 

(16) ENFORCEMENT OF CONTRACTS GUARANTEED BY THE

COVERED FINANCIAL COMPANY.— (A) IN GENERAL.—The Corporation, as receiver for a 

covered financial company or as receiver for a subsidiary of 

a covered financial company (including an insured depository institution) shall have the power to enforce contracts of 

subsidiaries or affiliates of the covered financial company, 

the obligations under which are guaranteed or otherwise 

supported by or linked to the covered financial company, 

notwithstanding any contractual right to cause the termination, liquidation, or acceleration of such contracts based 

solely on the insolvency, financial condition, or receivership 

of the covered financial company, if— 

(i) such guaranty or other support and all related 

assets and liabilities are transferred to and assumed 

by a bridge financial company or a third party (other 

than a third party for which a conservator, receiver, 

trustee in bankruptcy, or other legal custodian has 

been appointed, or which is otherwise the subject of a 

bankruptcy or insolvency proceeding) within the same 

period of time as the Corporation is entitled to transfer 

the qualified financial contracts of such covered financial company; or 

(ii) the Corporation, as receiver, otherwise provides 

adequate protection with respect to such obligations. 

(B) RULE OF CONSTRUCTION.—For purposes of this 

paragraph, a bridge financial company shall not be considered to be a third party for which a conservator, receiver, 

trustee in bankruptcy, or other legal custodian has been apVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00125 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
122 

pointed, or which is otherwise the subject of a bankruptcy 

or insolvency proceeding. 

(d) VALUATION OF CLAIMS IN DEFAULT.— (1) IN GENERAL.—Notwithstanding any other provision of 

Federal law or the law of any State, and regardless of the method utilized by the Corporation for a covered financial company, 

including transactions authorized under subsection (h), this 

subsection shall govern the rights of the creditors of any such 

covered financial company. 

(2) MAXIMUM LIABILITY.—The maximum liability of the 

Corporation, acting as receiver for a covered financial company 

or in any other capacity, to any person having a claim against 

the Corporation as receiver or the covered financial company for 

which the Corporation is appointed shall equal the amount that 

such claimant would have received if— 

(A) the Corporation had not been appointed receiver 

with respect to the covered financial company; and 

(B) the covered financial company had been liquidated 

under chapter 7 of the Bankruptcy Code, or any similar 

provision of State insolvency law applicable to the covered 

financial company. 

(3) SPECIAL PROVISION FOR ORDERLY LIQUIDATION BY

SIPC.—The maximum liability of the Corporation, acting as receiver or in its corporate capacity for any covered broker or 

dealer to any customer of such covered broker or dealer, with 

respect to customer property of such customer, shall be— 

(A) equal to the amount that such customer would have 

received with respect to such customer property in a case 

initiated by SIPC under the Securities Investor Protection 

Act of 1970 (15 U.S.C. 78aaa et seq.); and 

(B) determined as of the close of business on the date 

on which the Corporation is appointed as receiver. 

(4) ADDITIONAL PAYMENTS AUTHORIZED.— (A) IN GENERAL.—Subject to subsection (o)(1)(D)(i), the 

Corporation, with the approval of the Secretary, may make 

additional payments or credit additional amounts to or 

with respect to or for the account of any claimant or category of claimants of the covered financial company, if the 

Corporation determines that such payments or credits are 

necessary or appropriate to minimize losses to the Corporation as receiver from the orderly liquidation of the covered 

financial company under this section. 

(B) LIMITATIONS.— 

(i) PROHIBITION.—The Corporation shall not make 

any payments or credit amounts to any claimant or 

category of claimants that would result in any claimant receiving more than the face value amount of any 

claim that is proven to the satisfaction of the Corporation. 

(ii) NO OBLIGATION.—Notwithstanding any other 

provision of Federal or State law, or the Constitution 

of any State, the Corporation shall not be obligated, as 

a result of having made any payment under subparagraph (A) or credited any amount described in subparagraph (A) to or with respect to, or for the account, 


sroberts on DSKD5P82C1PROD with HEARING
123 

of any claimant or category of claimants, to make payments to any other claimant or category of claimants. 

(C) MANNER OF PAYMENT.—The Corporation may make 

payments or credit amounts under subparagraph (A) directly to the claimants or may make such payments or credit such amounts to a company other than a covered financial company or a bridge financial company established 

with respect thereto in order to induce such other company 

to accept liability for such claims. 

(e) LIMITATION ON COURT ACTION.—Except as provided in this 

title, no court may take any action to restrain or affect the exercise 

of powers or functions of the receiver hereunder, and any remedy 

against the Corporation or receiver shall be limited to money damages determined in accordance with this title. 

(f) LIABILITY OF DIRECTORS AND OFFICERS.— (1) IN GENERAL.—A director or officer of a covered financial 

company may be held personally liable for monetary damages 

in any civil action described in paragraph (2) by, on behalf of, 

or at the request or direction of the Corporation, which action 

is prosecuted wholly or partially for the benefit of the Corporation— 

(A) acting as receiver for such covered financial company; 

(B) acting based upon a suit, claim, or cause of action 

purchased from, assigned by, or otherwise conveyed by the 

Corporation as receiver; or 

(C) acting based upon a suit, claim, or cause of action 

purchased from, assigned by, or otherwise conveyed in 

whole or in part by a covered financial company or its affiliate in connection with assistance provided under this title. 

(2) ACTIONS COVERED.—Paragraph (1) shall apply with respect to actions for gross negligence, including any similar conduct or conduct that demonstrates a greater disregard of a duty 

of care (than gross negligence) including intentional tortious 

conduct, as such terms are defined and determined under applicable State law. 

(3) SAVINGS CLAUSE.—Nothing in this subsection shall impair or affect any right of the Corporation under other applicable law. 

(g) DAMAGES.—In any proceeding related to any claim against 

a director, officer, employee, agent, attorney, accountant, or appraiser of a covered financial company, or any other party employed 

by or providing services to a covered financial company, recoverable 

damages determined to result from the improvident or otherwise improper use or investment of any assets of the covered financial company shall include principal losses and appropriate interest. 

(h) BRIDGE FINANCIAL COMPANIES.— 

(1) ORGANIZATION.— 

(A) PURPOSE.—The Corporation, as receiver for one or 

more covered financial companies or in anticipation of 

being appointed receiver for one or more covered financial 

companies, may organize one or more bridge financial companies in accordance with this subsection. 

(B) AUTHORITIES.—Upon the creation of a bridge financial company under subparagraph (A) with respect to a 


sroberts on DSKD5P82C1PROD with HEARING
124 

covered financial company, such bridge financial company 

may— 

(i) assume such liabilities (including liabilities associated with any trust or custody business, but excluding any liabilities that count as regulatory capital) of 

such covered financial company as the Corporation 

may, in its discretion, determine to be appropriate; 

(ii) purchase such assets (including assets associated with any trust or custody business) of such covered financial company as the Corporation may, in its 

discretion, determine to be appropriate; and 

(iii) perform any other temporary function which 

the Corporation may, in its discretion, prescribe in accordance with this section. 

(2) CHARTER AND ESTABLISHMENT.— (A) ESTABLISHMENT.—Except as provided in subparagraph (H), where the covered financial company is a covered broker or dealer, the Corporation, as receiver for a covered financial company, may grant a Federal charter to 

and approve articles of association for one or more bridge 

financial company or companies, with respect to such covered financial company which shall, by operation of law 

and immediately upon issuance of its charter and approval 

of its articles of association, be established and operate in 

accordance with, and subject to, such charter, articles, and 

this section. 

(B) MANAGEMENT.—Upon its establishment, a bridge 

financial company shall be under the management of a 

board of directors appointed by the Corporation. 

(C) ARTICLES OF ASSOCIATION.—The articles of association and organization certificate of a bridge financial company shall have such terms as the Corporation may provide, and shall be executed by such representatives as the 

Corporation may designate. 

(D) TERMS OF CHARTER; RIGHTS AND PRIVILEGES.— Subject to and in accordance with the provisions of this 

subsection, the Corporation shall— 

(i) establish the terms of the charter of a bridge financial company and the rights, powers, authorities, 

and privileges of a bridge financial company granted 

by the charter or as an incident thereto; and 

(ii) provide for, and establish the terms and conditions governing, the management (including the bylaws 

and the number of directors of the board of directors) 

and operations of the bridge financial company. 

(E) TRANSFER OF RIGHTS AND PRIVILEGES OF COVERED

FINANCIAL COMPANY.— 

(i) IN GENERAL.—Notwithstanding any other provision of Federal or State law, the Corporation may provide for a bridge financial company to succeed to and 

assume any rights, powers, authorities, or privileges of 

the covered financial company with respect to which 

the bridge financial company was established and, 

upon such determination by the Corporation, the 

bridge financial company shall immediately and by opVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00128 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
125 

eration of law succeed to and assume such rights, powers, authorities, and privileges. 

(ii) EFFECTIVE WITHOUT APPROVAL.—Any succession to or assumption by a bridge financial company of 

rights, powers, authorities, or privileges of a covered financial company under clause (i) or otherwise shall be 

effective without any further approval under Federal or 

State law, assignment, or consent with respect thereto. 

(F) CORPORATE GOVERNANCE AND ELECTION AND DES- IGNATION OF BODY OF LAW.—To the extent permitted by the 

Corporation and consistent with this section and any rules, 

regulations, or directives issued by the Corporation under 

this section, a bridge financial company may elect to follow 

the corporate governance practices and procedures that are 

applicable to a corporation incorporated under the general 

corporation law of the State of Delaware, or the State of incorporation or organization of the covered financial company with respect to which the bridge financial company 

was established, as such law may be amended from time 

to time. 

(G) CAPITAL.— (i) CAPITAL NOT REQUIRED.—Notwithstanding any 

other provision of Federal or State law, a bridge financial company may, if permitted by the Corporation, operate without any capital or surplus, or with such capital or surplus as the Corporation may in its discretion 

determine to be appropriate. 

(ii) NO CONTRIBUTION BY THE CORPORATION RE- QUIRED.—The Corporation is not required to pay capital into a bridge financial company or to issue any 

capital stock on behalf of a bridge financial company 

established under this subsection. 

(iii) AUTHORITY.—If the Corporation determines 

that such action is advisable, the Corporation may 

cause capital stock or other securities of a bridge financial company established with respect to a covered financial company to be issued and offered for sale in 

such amounts and on such terms and conditions as the 

Corporation may, in its discretion, determine. 

(iv) OPERATING FUNDS IN LIEU OF CAPITAL AND IMPLEMENTATION PLAN.—Upon the organization of a 

bridge financial company, and thereafter as the Corporation may, in its discretion, determine to be necessary or advisable, the Corporation may make available to the bridge financial company, subject to the 

plan described in subsection (n)(9), funds for the operation of the bridge financial company in lieu of capital. 

(H) BRIDGE BROKERS OR DEALERS.— 

(i) IN GENERAL.—The Corporation, as receiver for 

a covered broker or dealer, may approve articles of association for one or more bridge financial companies 

with respect to such covered broker or dealer, which 

bridge financial company or companies shall, by operation of law and immediately upon approval of its articles of association— 


sroberts on DSKD5P82C1PROD with HEARING
126 

(I) be established and deemed registered with 

the Commission under the Securities Exchange Act 

of 1934 and a member of SIPC; 

(II) operate in accordance with such articles 

and this section; and 

(III) succeed to any and all registrations and 

memberships of the covered financial company 

with or in any self-regulatory organizations. 

(ii) OTHER REQUIREMENTS.—Except as provided in 

clause (i), and notwithstanding any other provision of 

this section, the bridge financial company shall be subject to the Federal securities laws and all requirements 

with respect to being a member of a self-regulatory organization, unless exempted from any such requirements by the Commission, as is necessary or appropriate in the public interest or for the protection of investors. 

(iii) TREATMENT OF CUSTOMERS.—Except as otherwise provided by this title, any customer of the covered 

broker or dealer whose account is transferred to a 

bridge financial company shall have all the rights, 

privileges, and protections under section 205(f) and 

under the Securities Investor Protection Act of 1970 (15 

U.S.C. 78aaa et seq.), that such customer would have 

had if the account were not transferred from the covered financial company under this subparagraph. 

(iv) OPERATION OF BRIDGE BROKERS OR DEALERS.— Notwithstanding any other provision of this title, the 

Corporation shall not operate any bridge financial 

company created by the Corporation under this title 

with respect to a covered broker or dealer in such a 

manner as to adversely affect the ability of customers 

to promptly access their customer property in accordance with applicable law. 

(3) INTERESTS IN AND ASSETS AND OBLIGATIONS OF COV- ERED FINANCIAL COMPANY.—Notwithstanding paragraph (1) or 

(2) or any other provision of law— 

(A) a bridge financial company shall assume, acquire, 

or succeed to the assets or liabilities of a covered financial 

company (including the assets or liabilities associated with 

any trust or custody business) only to the extent that such 

assets or liabilities are transferred by the Corporation to 

the bridge financial company in accordance with, and subject to the restrictions set forth in, paragraph (1)(B); and 

(B) a bridge financial company shall not assume, acquire, or succeed to any obligation that a covered financial 

company for which the Corporation has been appointed receiver may have to any shareholder, member, general partner, limited partner, or other person with an interest in the 

equity of the covered financial company that arises as a result of the status of that person having an equity claim in 

the covered financial company. 

(4) BRIDGE FINANCIAL COMPANY TREATED AS BEING IN DE- FAULT FOR CERTAIN PURPOSES.—A bridge financial company 

shall be treated as a covered financial company in default at 


sroberts on DSKD5P82C1PROD with HEARING
127 

such times and for such purposes as the Corporation may, in 

its discretion, determine. 

(5) TRANSFER OF ASSETS AND LIABILITIES.— (A) AUTHORITY OF CORPORATION.—The Corporation, as 

receiver for a covered financial company, may transfer any 

assets and liabilities of a covered financial company (including any assets or liabilities associated with any trust 

or custody business) to one or more bridge financial companies, in accordance with and subject to the restrictions of 

paragraph (1). 

(B) SUBSEQUENT TRANSFERS.—At any time after the establishment of a bridge financial company with respect to 

a covered financial company, the Corporation, as receiver, 

may transfer any assets and liabilities of such covered financial company as the Corporation may, in its discretion, 

determine to be appropriate in accordance with and subject 

to the restrictions of paragraph (1). 

(C) TREATMENT OF TRUST OR CUSTODY BUSINESS.—For 

purposes of this paragraph, the trust or custody business, 

including fiduciary appointments, held by any covered financial company is included among its assets and liabilities. 

(D) EFFECTIVE WITHOUT APPROVAL.—The transfer of 

any assets or liabilities, including those associated with 

any trust or custody business of a covered financial company, to a bridge financial company shall be effective without any further approval under Federal or State law, assignment, or consent with respect thereto. 

(E) EQUITABLE TREATMENT OF SIMILARLY SITUATED

CREDITORS.—The Corporation shall treat all creditors of a 

covered financial company that are similarly situated 

under subsection (b)(1), in a similar manner in exercising 

the authority of the Corporation under this subsection to 

transfer any assets or liabilities of the covered financial 

company to one or more bridge financial companies established with respect to such covered financial company, except that the Corporation may take any action (including 

making payments, subject to subsection (o)(1)(D)(i)) that 

does not comply with this subparagraph, if— 

(i) the Corporation determines that such action is 

necessary— 

(I) to maximize the value of the assets of the 

covered financial company; 

(II) to maximize the present value return from 

the sale or other disposition of the assets of the 

covered financial company; or 

(III) to minimize the amount of any loss realized upon the sale or other disposition of the assets 

of the covered financial company; and 

(ii) all creditors that are similarly situated under 

subsection (b)(1) receive not less than the amount provided under paragraphs (2) and (3) of subsection (d). 

(F) LIMITATION ON TRANSFER OF LIABILITIES.—Notwithstanding any other provision of law, the aggregate 

amount of liabilities of a covered financial company that 


sroberts on DSKD5P82C1PROD with HEARING
128 

are transferred to, or assumed by, a bridge financial company from a covered financial company may not exceed the 

aggregate amount of the assets of the covered financial 

company that are transferred to, or purchased by, the 

bridge financial company from the covered financial company. 

(6) STAY OF JUDICIAL ACTION.—Any judicial action to 

which a bridge financial company becomes a party by virtue of 

its acquisition of any assets or assumption of any liabilities of 

a covered financial company shall be stayed from further proceedings for a period of not longer than 45 days (or such longer 

period as may be agreed to upon the consent of all parties) at 

the request of the bridge financial company. 

(7) AGREEMENTS AGAINST INTEREST OF THE BRIDGE FINAN- CIAL COMPANY.—No agreement that tends to diminish or defeat 

the interest of the bridge financial company in any asset of a 

covered financial company acquired by the bridge financial 

company shall be valid against the bridge financial company, 

unless such agreement— 

(A) is in writing; 

(B) was executed by an authorized officer or representative of the covered financial company or confirmed in the 

ordinary course of business by the covered financial company; and 

(C) has been on the official record of the company, 

since the time of its execution, or with which, the party 

claiming under the agreement provides documentation of 

such agreement and its authorized execution or confirmation by the covered financial company that is acceptable to 

the receiver. 

(8) NO FEDERAL STATUS.— (A) AGENCY STATUS.—A bridge financial company is 

not an agency, establishment, or instrumentality of the 

United States. 

(B) EMPLOYEE STATUS.—Representatives for purposes 

of paragraph (1)(B), directors, officers, employees, or agents 

of a bridge financial company are not, solely by virtue of 

service in any such capacity, officers or employees of the 

United States. Any employee of the Corporation or of any 

Federal instrumentality who serves at the request of the 

Corporation as a representative for purposes of paragraph 

(1)(B), director, officer, employee, or agent of a bridge financial company shall not— 

(i) solely by virtue of service in any such capacity 

lose any existing status as an officer or employee of the 

United States for purposes of title 5, United States 

Code, or any other provision of law; or 

(ii) receive any salary or benefits for service in any 

such capacity with respect to a bridge financial company in addition to such salary or benefits as are obtained through employment with the Corporation or 

such Federal instrumentality. 

(9) FUNDING AUTHORIZED.—The Corporation may, subject 

to the plan described in subsection (n)(9), provide funding to facilitate any transaction described in subparagraph (A), (B), (C), 


sroberts on DSKD5P82C1PROD with HEARING
129 

or (D) of paragraph (13) with respect to any bridge financial 

company, or facilitate the acquisition by a bridge financial company of any assets, or the assumption of any liabilities, of a covered financial company for which the Corporation has been appointed receiver. 

(10) EXEMPT TAX STATUS.—Notwithstanding any other provision of Federal or State law, a bridge financial company, its 

franchise, property, and income shall be exempt from all taxation now or hereafter imposed by the United States, by any territory, dependency, or possession thereof, or by any State, county, municipality, or local taxing authority. 

(11) FEDERAL AGENCY APPROVAL; ANTITRUST REVIEW.—If a 

transaction involving the merger or sale of a bridge financial 

company requires approval by a Federal agency, the transaction 

may not be consummated before the 5th calendar day after the 

date of approval by the Federal agency responsible for such approval with respect thereto. If, in connection with any such approval a report on competitive factors from the Attorney General 

is required, the Federal agency responsible for such approval 

shall promptly notify the Attorney General of the proposed 

transaction and the Attorney General shall provide the required 

report within 10 days of the request. If a notification is required 

under section 7A of the Clayton Act with respect to such transaction, the required waiting period shall end on the 15th day 

after the date on which the Attorney General and the Federal 

Trade Commission receive such notification, unless the waiting 

period is terminated earlier under section 7A(b)(2) of the Clayton Act, or extended under section 7A(e)(2) of that Act. 

(12) DURATION OF BRIDGE FINANCIAL COMPANY.—Subject to 

paragraphs (13) and (14), the status of a bridge financial company as such shall terminate at the end of the 2-year period following the date on which it was granted a charter. The Corporation may, in its discretion, extend the status of the bridge 

financial company as such for no more than 3 additional 1-year 

periods. 

(13) TERMINATION OF BRIDGE FINANCIAL COMPANY STATUS.—The status of any bridge financial company as such shall 

terminate upon the earliest of— 

(A) the date of the merger or consolidation of the bridge 

financial company with a company that is not a bridge financial company; 

(B) at the election of the Corporation, the sale of a majority of the capital stock of the bridge financial company 

to a company other than the Corporation and other than 

another bridge financial company; 

(C) the sale of 80 percent, or more, of the capital stock 

of the bridge financial company to a person other than the 

Corporation and other than another bridge financial company; 

(D) at the election of the Corporation, either the assumption of all or substantially all of the liabilities of the 

bridge financial company by a company that is not a 

bridge financial company, or the acquisition of all or substantially all of the assets of the bridge financial company 


sroberts on DSKD5P82C1PROD with HEARING
130 

by a company that is not a bridge financial company, or 

other entity as permitted under applicable law; and 

(E) the expiration of the period provided in paragraph 

(12), or the earlier dissolution of the bridge financial company, as provided in paragraph (15). 

(14) EFFECT OF TERMINATION EVENTS.— (A) MERGER OR CONSOLIDATION.—A merger or consolidation, described in paragraph (13)(A) shall be conducted 

in accordance with, and shall have the effect provided in, 

the provisions of applicable law. For the purpose of effecting such a merger or consolidation, the bridge financial 

company shall be treated as a corporation organized under 

the laws of the State of Delaware (unless the law of another 

State has been selected by the bridge financial company in 

accordance with paragraph (2)(F)), and the Corporation 

shall be treated as the sole shareholder thereof, notwithstanding any other provision of State or Federal law. 

(B) CHARTER CONVERSION.—Following the sale of a 

majority of the capital stock of the bridge financial company, as provided in paragraph (13)(B), the Corporation 

may amend the charter of the bridge financial company to 

reflect the termination of the status of the bridge financial 

company as such, whereupon the company shall have all of 

the rights, powers, and privileges under its constituent documents and applicable Federal or State law. In connection 

therewith, the Corporation may take such steps as may be 

necessary or convenient to reincorporate the bridge financial company under the laws of a State and, notwithstanding any provisions of Federal or State law, such 

State-chartered corporation shall be deemed to succeed by 

operation of law to such rights, titles, powers, and interests 

of the bridge financial company as the Corporation may 

provide, with the same effect as if the bridge financial company had merged with the State-chartered corporation 

under provisions of the corporate laws of such State. 

(C) SALE OF STOCK.—Following the sale of 80 percent 

or more of the capital stock of a bridge financial company, 

as provided in paragraph (13)(C), the company shall have 

all of the rights, powers, and privileges under its constituent documents and applicable Federal or State law. In 

connection therewith, the Corporation may take such steps 

as may be necessary or convenient to reincorporate the 

bridge financial company under the laws of a State and, 

notwithstanding any provisions of Federal or State law, the 

State-chartered corporation shall be deemed to succeed by 

operation of law to such rights, titles, powers and interests 

of the bridge financial company as the Corporation may 

provide, with the same effect as if the bridge financial company had merged with the State-chartered corporation 

under provisions of the corporate laws of such State. 

(D) ASSUMPTION OF LIABILITIES AND SALE OF ASSETS.— 

Following the assumption of all or substantially all of the 

liabilities of the bridge financial company, or the sale of all 

or substantially all of the assets of the bridge financial 

company, as provided in paragraph (13)(D), at the election 


sroberts on DSKD5P82C1PROD with HEARING
131 

of the Corporation, the bridge financial company may retain its status as such for the period provided in paragraph 

(12) or may be dissolved at the election of the Corporation. 

(E) AMENDMENTS TO CHARTER.—Following the consummation of a transaction described in subparagraph (A), 

(B), (C), or (D) of paragraph (13), the charter of the resulting company shall be amended to reflect the termination of 

bridge financial company status, if appropriate. 

(15) DISSOLUTION OF BRIDGE FINANCIAL COMPANY.— (A) IN GENERAL.—Notwithstanding any other provision 

of Federal or State law, if the status of a bridge financial 

company as such has not previously been terminated by the 

occurrence of an event specified in subparagraph (A), (B), 

(C), or (D) of paragraph (13)— 

(i) the Corporation may, in its discretion, dissolve 

the bridge financial company in accordance with this 

paragraph at any time; and 

(ii) the Corporation shall promptly commence dissolution proceedings in accordance with this paragraph upon the expiration of the 2-year period following the date on which the bridge financial company 

was chartered, or any extension thereof, as provided in 

paragraph (12). 

(B) PROCEDURES.—The Corporation shall remain the 

receiver for a bridge financial company for the purpose of 

dissolving the bridge financial company. The Corporation 

as receiver for a bridge financial company shall wind up 

the affairs of the bridge financial company in conformity 

with the provisions of law relating to the liquidation of covered financial companies under this title. With respect to 

any such bridge financial company, the Corporation as receiver shall have all the rights, powers, and privileges and 

shall perform the duties related to the exercise of such 

rights, powers, or privileges granted by law to the Corporation as receiver for a covered financial company under this 

title and, notwithstanding any other provision of law, in 

the exercise of such rights, powers, and privileges, the Corporation shall not be subject to the direction or supervision 

of any State agency or other Federal agency. 

(16) AUTHORITY TO OBTAIN CREDIT.— 

(A) IN GENERAL.—A bridge financial company may obtain unsecured credit and issue unsecured debt. 

(B) INABILITY TO OBTAIN CREDIT.—If a bridge financial 

company is unable to obtain unsecured credit or issue unsecured debt, the Corporation may authorize the obtaining of 

credit or the issuance of debt by the bridge financial company— 

(i) with priority over any or all of the obligations 

of the bridge financial company; 

(ii) secured by a lien on property of the bridge financial company that is not otherwise subject to a lien; 

or 

(iii) secured by a junior lien on property of the 

bridge financial company that is subject to a lien. 

(C) LIMITATIONS.— 


sroberts on DSKD5P82C1PROD with HEARING
132 

(i) IN GENERAL.—The Corporation, after notice and 

a hearing, may authorize the obtaining of credit or the 

issuance of debt by a bridge financial company that is 

secured by a senior or equal lien on property of the 

bridge financial company that is subject to a lien, only 

if— 

(I) the bridge financial company is unable to 

otherwise obtain such credit or issue such debt; 

and 

(II) there is adequate protection of the interest 

of the holder of the lien on the property with respect to which such senior or equal lien is proposed 

to be granted. 

(ii) HEARING.—The hearing required pursuant to 

this subparagraph shall be before a court of the United 

States, which shall have jurisdiction to conduct such 

hearing and to authorize a bridge financial company to 

obtain secured credit under clause (i). 

(D) BURDEN OF PROOF.—In any hearing under this 

paragraph, the Corporation has the burden of proof on the 

issue of adequate protection. 

(E) QUALIFIED FINANCIAL CONTRACTS.—No credit or 

debt obtained or issued by a bridge financial company may 

contain terms that impair the rights of a counterparty to a 

qualified financial contract upon a default by the bridge financial company, other than the priority of such counterparty’s unsecured claim (after the exercise of rights) relative 

to the priority of the bridge financial company’s obligations 

in respect of such credit or debt, unless such counterparty 

consents in writing to any such impairment. 

(17) EFFECT ON DEBTS AND LIENS.—The reversal or modification on appeal of an authorization under this subsection to 

obtain credit or issue debt, or of a grant under this section of 

a priority or a lien, does not affect the validity of any debt so 

issued, or any priority or lien so granted, to an entity that extended such credit in good faith, whether or not such entity 

knew of the pendency of the appeal, unless such authorization 

and the issuance of such debt, or the granting of such priority 

or lien, were stayed pending appeal. 

(i) SHARING RECORDS.—If the Corporation has been appointed 

as receiver for a covered financial company, other Federal regulators shall make all records relating to the covered financial company available to the Corporation, which may be used by the Corporation in any manner that the Corporation determines to be appropriate. 

(j) EXPEDITED PROCEDURES FOR CERTAIN CLAIMS.— 

(1) TIME FOR FILING NOTICE OF APPEAL.—The notice of appeal of any order, whether interlocutory or final, entered in any 

case brought by the Corporation against a director, officer, employee, agent, attorney, accountant, or appraiser of the covered 

financial company, or any other person employed by or providing services to a covered financial company, shall be filed 

not later than 30 days after the date of entry of the order. The 

hearing of the appeal shall be held not later than 120 days 

after the date of the notice of appeal. The appeal shall be deVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00136 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
133 

cided not later than 180 days after the date of the notice of appeal. 

(2) SCHEDULING.—The court shall expedite the consideration of any case brought by the Corporation against a director, 

officer, employee, agent, attorney, accountant, or appraiser of a 

covered financial company or any other person employed by or 

providing services to a covered financial company. As far as 

practicable, the court shall give such case priority on its docket. 

(3) JUDICIAL DISCRETION.—The court may modify the 

schedule and limitations stated in paragraphs (1) and (2) in a 

particular case, based on a specific finding that the ends of justice that would be served by making such a modification would 

outweigh the best interest of the public in having the case resolved expeditiously. 

(k) FOREIGN INVESTIGATIONS.—The Corporation, as receiver for 

any covered financial company, and for purposes of carrying out 

any power, authority, or duty with respect to a covered financial 

company— 

(1) may request the assistance of any foreign financial authority and provide assistance to any foreign financial authority 

in accordance with section 8(v) of the Federal Deposit Insurance 

Act, as if the covered financial company were an insured depository institution, the Corporation were the appropriate Federal 

banking agency for the company, and any foreign financial authority were the foreign banking authority; and 

(2) may maintain an office to coordinate foreign investigations or investigations on behalf of foreign financial authorities. 

(l) PROHIBITION ON ENTERING SECRECY AGREEMENTS AND PROTECTIVE ORDERS.—The Corporation may not enter into any agreement or approve any protective order which prohibits the Corporation from disclosing the terms of any settlement of an administrative or other action for damages or restitution brought by the Corporation in its capacity as receiver for a covered financial company. 

(m) LIQUIDATION OF CERTAIN COVERED FINANCIAL COMPANIES

OR BRIDGE FINANCIAL COMPANIES.— 

(1) IN GENERAL.—Except as specifically provided in this 

section, and notwithstanding any other provision of law, the 

Corporation, in connection with the liquidation of any covered 

financial company or bridge financial company with respect to 

which the Corporation has been appointed as receiver, shall— 

(A) in the case of any covered financial company or 

bridge financial company that is a stockbroker, but is not 

a member of the Securities Investor Protection Corporation, 

apply the provisions of subchapter III of chapter 7 of the 

Bankruptcy Code, in respect of the distribution to any customer of all customer name security and customer property 

and member property, as if such covered financial company 

or bridge financial company were a debtor for purposes of 

such subchapter; or 

(B) in the case of any covered financial company or 

bridge financial company that is a commodity broker, 

apply the provisions of subchapter IV of chapter 7 the 

Bankruptcy Code, in respect of the distribution to any customer of all customer property and member property, as if 


sroberts on DSKD5P82C1PROD with HEARING
134 

such covered financial company or bridge financial company were a debtor for purposes of such subchapter. 

(2) DEFINITIONS.—For purposes of this subsection— 

(A) the terms ‘‘customer’’, ‘‘customer name security’’, 

and ‘‘customer property and member property’’ have the 

same meanings as in sections 741 and 761 of title 11, 

United States Code; and 

(B) the terms ‘‘commodity broker’’ and ‘‘stockbroker’’ 

have the same meanings as in section 101 of the Bankruptcy Code. 

(n) ORDERLY LIQUIDATION FUND.— (1) ESTABLISHMENT.—There is established in the Treasury 

of the United States a separate fund to be known as the ‘‘Orderly Liquidation Fund’’, which shall be available to the Corporation to carry out the authorities contained in this title, for 

the cost of actions authorized by this title, including the orderly 

liquidation of covered financial companies, payment of administrative expenses, the payment of principal and interest by the 

Corporation on obligations issued under paragraph (5), and the 

exercise of the authorities of the Corporation under this title. 

(2) PROCEEDS.—Amounts received by the Corporation, including assessments received under subsection (o), proceeds of 

obligations issued under paragraph (5), interest and other earnings from investments, and repayments to the Corporation by 

covered financial companies, shall be deposited into the Fund. 

(3) MANAGEMENT.—The Corporation shall manage the 

Fund in accordance with this subsection and the policies and 

procedures established under section 203(d). 

(4) INVESTMENTS.—At the request of the Corporation, the 

Secretary may invest such portion of amounts held in the Fund 

that are not, in the judgment of the Corporation, required to 

meet the current needs of the Corporation, in obligations of the 

United States having suitable maturities, as determined by the 

Corporation. The interest on and the proceeds from the sale or 

redemption of such obligations shall be credited to the Fund. 

(5) AUTHORITY TO ISSUE OBLIGATIONS.— (A) CORPORATION AUTHORIZED TO ISSUE OBLIGA- TIONS.—Upon appointment by the Secretary of the Corporation as receiver for a covered financial company, the Corporation is authorized to issue obligations to the Secretary. 

(B) SECRETARY AUTHORIZED TO PURCHASE OBLIGATIONS.—The Secretary may, under such terms and conditions as the Secretary may require, purchase or agree to 

purchase any obligations issued under subparagraph (A), 

and for such purpose, the Secretary is authorized to use as 

a public debt transaction the proceeds of the sale of any securities issued under chapter 31 of title 31, United States 

Code, and the purposes for which securities may be issued 

under chapter 31 of title 31, United States Code, are extended to include such purchases. 

(C) INTEREST RATE.—Each purchase of obligations by 

the Secretary under this paragraph shall be upon such 

terms and conditions as to yield a return at a rate determined by the Secretary, taking into consideration the current average yield on outstanding marketable obligations of 


sroberts on DSKD5P82C1PROD with HEARING
135 

the United States of comparable maturity, plus an interest 

rate surcharge to be determined by the Secretary, which 

shall be greater than the difference between— 

(i) the current average rate on an index of corporate obligations of comparable maturity; and 

(ii) the current average rate on outstanding marketable obligations of the United States of comparable 

maturity. 

(D) SECRETARY AUTHORIZED TO SELL OBLIGATIONS.— The Secretary may sell, upon such terms and conditions as 

the Secretary shall determine, any of the obligations acquired under this paragraph. 

(E) PUBLIC DEBT TRANSACTIONS.—All purchases and 

sales by the Secretary of such obligations under this paragraph shall be treated as public debt transactions of the 

United States, and the proceeds from the sale of any obligations acquired by the Secretary under this paragraph shall 

be deposited into the Treasury of the United States as miscellaneous receipts. 

(6) MAXIMUM OBLIGATION LIMITATION.—The Corporation 

may not, in connection with the orderly liquidation of a covered 

financial company, issue or incur any obligation, if, after 

issuing or incurring the obligation, the aggregate amount of 

such obligations outstanding under this subsection for each covered financial company would exceed— 

(A) an amount that is equal to 10 percent of the total 

consolidated assets of the covered financial company, based 

on the most recent financial statement available, during the 

30-day period immediately following the date of appointment of the Corporation as receiver (or a shorter time period if the Corporation has calculated the amount described 

under subparagraph (B)); and 

(B) the amount that is equal to 90 percent of the fair 

value of the total consolidated assets of each covered financial company that are available for repayment, after the 

time period described in subparagraph (A). 

(7) RULEMAKING.—The Corporation and the Secretary shall 

jointly, in consultation with the Council, prescribe regulations 

governing the calculation of the maximum obligation limitation 

defined in this paragraph. 

(8) RULE OF CONSTRUCTION.— 

(A) IN GENERAL.—Nothing in this section shall be construed to affect the authority of the Corporation under subsection (a) or (b) of section 14 or section 15(c)(5) of the Federal Deposit Insurance Act (12 U.S.C. 1824, 1825(c)(5)), the 

management of the Deposit Insurance Fund by the Corporation, or the resolution of insured depository institutions, provided that— 

(i) the authorities of the Corporation contained in 

this title shall not be used to assist the Deposit Insurance Fund or to assist any financial company under 

applicable law other than this Act; 

(ii) the authorities of the Corporation relating to 

the Deposit Insurance Fund, or any other responsibilities of the Corporation under applicable law other 


sroberts on DSKD5P82C1PROD with HEARING
136 

than this title, shall not be used to assist a covered financial company pursuant to this title; and 

(iii) the Deposit Insurance Fund may not be used 

in any manner to otherwise circumvent the purposes of 

this title. 

(B) VALUATION.—For purposes of determining the 

amount of obligations under this subsection— 

(i) the Corporation shall include as an obligation 

any contingent liability of the Corporation pursuant to 

this title; and 

(ii) the Corporation shall value any contingent liability at its expected cost to the Corporation. 

(9) ORDERLY LIQUIDATION AND REPAYMENT PLANS.— (A) ORDERLY LIQUIDATION PLAN.—Amounts in the 

Fund shall be available to the Corporation with regard to 

a covered financial company for which the Corporation is 

appointed receiver after the Corporation has developed an 

orderly liquidation plan that is acceptable to the Secretary 

with regard to such covered financial company, including 

the provision and use of funds, including taking any actions specified under section 204(d) and subsection 

(h)(2)(G)(iv) and (h)(9) of this section, and payments to 

third parties. The orderly liquidation plan shall take into 

account actions to avoid or mitigate potential adverse effects on low income, minority, or underserved communities 

affected by the failure of the covered financial company, 

and shall provide for coordination with the primary financial regulatory agencies, as appropriate, to ensure that such 

actions are taken. The Corporation may, at any time, 

amend any orderly liquidation plan approved by the Secretary with the concurrence of the Secretary. 

(B) MANDATORY REPAYMENT PLAN.— 

(i) IN GENERAL.—No amount authorized under 

paragraph (6)(B) may be provided by the Secretary to 

the Corporation under paragraph (5), unless an agreement is in effect between the Secretary and the Corporation that— 

(I) provides a specific plan and schedule to 

achieve the repayment of the outstanding amount 

of any borrowing under paragraph (5); and 

(II) demonstrates that income to the Corporation from the liquidated assets of the covered financial company and assessments under subsection (o) will be sufficient to amortize the outstanding balance within the period established in 

the repayment schedule and pay the interest accruing on such balance within the time provided in 

subsection (o)(1)(B). 

(ii) CONSULTATION WITH AND REPORT TO CON- GRESS.—The Secretary and the Corporation shall— 

(I) consult with the Committee on Banking, 

Housing, and Urban Affairs of the Senate and the 

Committee on Financial Services of the House of 

Representatives on the terms of any repayment 

schedule agreement; and 


sroberts on DSKD5P82C1PROD with HEARING
137 

(II) submit a copy of the repayment schedule 

agreement to the Committees described in subclause (I) before the end of the 30-day period beginning on the date on which any amount is provided 

by the Secretary to the Corporation under paragraph (5). 

(10) IMPLEMENTATION EXPENSES.— 

(A) IN GENERAL.—Reasonable implementation expenses 

of the Corporation incurred after the date of enactment of 

this Act shall be treated as expenses of the Council. 

(B) REQUESTS FOR REIMBURSEMENT.—The Corporation 

shall periodically submit a request for reimbursement for 

implementation expenses to the Chairperson of the Council, 

who shall arrange for prompt reimbursement to the Corporation of reasonable implementation expenses. 

(C) DEFINITION.—As used in this paragraph, the term 

‘‘implementation expenses’’— 

(i) means costs incurred by the Corporation beginning on the date of enactment of this Act, as part of its 

efforts to implement this title that do not relate to a 

particular covered financial company; and 

(ii) includes the costs incurred in connection with 

the development of policies, procedures, rules, and regulations and other planning activities of the Corporation consistent with carrying out this title. 

(o) ASSESSMENTS.— 

(1) RISK-BASED ASSESSMENTS.— 

(A) ELIGIBLE FINANCIAL COMPANIES DEFINED.—For 

purposes of this subsection, the term ‘‘eligible financial 

company’’ means any bank holding company with total consolidated assets equal to or greater than $50,000,000,000 

and any nonbank financial company supervised by the 

Board of Governors. 

(B) ASSESSMENTS.—The Corporation shall charge one 

or more risk-based assessments in accordance with the provisions of subparagraph (D), if such assessments are necessary to pay in full the obligations issued by the Corporation to the Secretary under this title within 60 months of 

the date of issuance of such obligations. 

(C) EXTENSIONS AUTHORIZED.—The Corporation may, 

with the approval of the Secretary, extend the time period 

under subparagraph (B), if the Corporation determines that 

an extension is necessary to avoid a serious adverse effect 

on the financial system of the United States. 

(D) APPLICATION OF ASSESSMENTS.—To meet the requirements of subparagraph (B), the Corporation shall— 

(i) impose assessments, as soon as practicable, on 

any claimant that received additional payments or 

amounts from the Corporation pursuant to subsection 

(b)(4), (d)(4), or (h)(5)(E), except for payments or 

amounts necessary to initiate and continue operations 

essential to implementation of the receivership or any 

bridge financial company, to recover on a cumulative 

basis, the entire difference between— 


sroberts on DSKD5P82C1PROD with HEARING
138 

(I) the aggregate value the claimant received 

from the Corporation on a claim pursuant to this 

title (including pursuant to subsection (b)(4), 

(d)(4), and (h)(5)(E)), as of the date on which such 

value was received; and 

(II) the value the claimant was entitled to receive from the Corporation on such claim solely 

from the proceeds of the liquidation of the covered 

financial company under this title; and 

(ii) if the amounts to be recovered on a cumulative 

basis under clause (i) are insufficient to meet the requirements of subparagraph (B), after taking into account the considerations set forth in paragraph (4), impose assessments on— 

(I) eligible financial companies; and 

(II) financial companies with total consolidated assets equal to or greater than 

$50,000,000,000 that are not eligible financial 

companies. 

(E) PROVISION OF FINANCING.—Payments or amounts 

necessary to initiate and continue operations essential to 

implementation of the receivership or any bridge financial 

company described in subparagraph (D)(i) shall not include 

the provision of financing, as defined by rule of the Corporation, to third parties. 

(2) GRADUATED ASSESSMENT RATE.—The Corporation shall 

impose assessments on a graduated basis, with financial companies having greater assets and risk being assessed at a higher 

rate. 

(3) NOTIFICATION AND PAYMENT.—The Corporation shall 

notify each financial company of that company’s assessment 

under this subsection. Any financial company subject to assessment under this subsection shall pay such assessment in accordance with the regulations prescribed pursuant to paragraph 

(6). 

(4) RISK-BASED ASSESSMENT CONSIDERATIONS.—In imposing assessments under paragraph (1)(D)(ii), the Corporation 

shall use a risk matrix. The Council shall make a recommendation to the Corporation on the risk matrix to be used in imposing such assessments, and the Corporation shall take into account any such recommendation in the establishment of the risk 

matrix to be used to impose such assessments. In recommending 

or establishing such risk matrix, the Council and the Corporation, respectively, shall take into account— 

(A) economic conditions generally affecting financial 

companies so as to allow assessments to increase during 

more favorable economic conditions and to decrease during 

less favorable economic conditions; 

(B) any assessments imposed on a financial company 

or an affiliate of a financial company that— 

(i) is an insured depository institution, assessed 

pursuant to section 7 or 13(c)(4)(G) of the Federal Deposit Insurance Act; 

(ii) is a member of the Securities Investor Protection Corporation, assessed pursuant to section 4 of the 


sroberts on DSKD5P82C1PROD with HEARING
139 

Securities Investor Protection Act of 1970 (15 U.S.C. 

78ddd); 

(iii) is an insured credit union, assessed pursuant 

to section 202(c)(1)(A)(i) of the Federal Credit Union 

Act (12 U.S.C. 1782(c)(1)(A)(i)); or 

(iv) is an insurance company, assessed pursuant to 

applicable State law to cover (or reimburse payments 

made to cover) the costs of the rehabilitation, liquidation, or other State insolvency proceeding with respect 

to 1 or more insurance companies; 

(C) the risks presented by the financial company to the 

financial system and the extent to which the financial company has benefitted, or likely would benefit, from the orderly liquidation of a financial company under this title, 

including— 

(i) the amount, different categories, and concentrations of assets of the financial company and its affiliates, including both on-balance sheet and off-balance 

sheet assets; 

(ii) the activities of the financial company and its 

affiliates; 

(iii) the relevant market share of the financial company and its affiliates; 

(iv) the extent to which the financial company is leveraged; 

(v) the potential exposure to sudden calls on liquidity precipitated by economic distress; 

(vi) the amount, maturity, volatility, and stability 

of the company’s financial obligations to, and relationship with, other financial companies; 

(vii) the amount, maturity, volatility, and stability 

of the liabilities of the company, including the degree 

of reliance on short-term funding, taking into consideration existing systems for measuring a company’s riskbased capital; 

(viii) the stability and variety of the company’s 

sources of funding; 

(ix) the company’s importance as a source of credit 

for households, businesses, and State and local governments and as a source of liquidity for the financial system; 

(x) the extent to which assets are simply managed 

and not owned by the financial company and the extent 

to which ownership of assets under management is diffuse; and 

(xi) the amount, different categories, and concentrations of liabilities, both insured and uninsured, 

contingent and noncontingent, including both on-balance sheet and off-balance sheet liabilities, of the financial company and its affiliates; 

(D) any risks presented by the financial company during the 10-year period immediately prior to the appointment of the Corporation as receiver for the covered financial company that contributed to the failure of the covered 

financial company; and 


sroberts on DSKD5P82C1PROD with HEARING
140 

(E) such other risk-related factors as the Corporation, 

or the Council, as applicable, may determine to be appropriate. 

(5) COLLECTION OF INFORMATION.—The Corporation may 

impose on covered financial companies such collection of information requirements as the Corporation deems necessary to 

carry out this subsection after the appointment of the Corporation as receiver under this title. 

(6) RULEMAKING.— 

(A) IN GENERAL.—The Corporation shall prescribe regulations to carry out this subsection. The Corporation shall 

consult with the Secretary in the development and finalization of such regulations. 

(B) EQUITABLE TREATMENT.—The regulations prescribed under subparagraph (A) shall take into account the 

differences in risks posed to the financial stability of the 

United States by financial companies, the differences in the 

liability structures of financial companies, and the different 

bases for other assessments that such financial companies 

may be required to pay, to ensure that assessed financial 

companies are treated equitably and that assessments 

under this subsection reflect such differences. 

(p) UNENFORCEABILITY OF CERTAIN AGREEMENTS.— 

(1) IN GENERAL.—No provision described in paragraph (2) 

shall be enforceable against or impose any liability on any person, as such enforcement or liability shall be contrary to public 

policy. 

(2) PROHIBITED PROVISIONS.—A provision described in this 

paragraph is any term contained in any existing or future 

standstill, confidentiality, or other agreement that, directly or 

indirectly— 

(A) affects, restricts, or limits the ability of any person 

to offer to acquire or acquire; 

(B) prohibits any person from offering to acquire or acquiring; or 

(C) prohibits any person from using any previously disclosed information in connection with any such offer to acquire or acquisition of, 

all or part of any covered financial company, including any liabilities, assets, or interest therein, in connection with any 

transaction in which the Corporation exercises its authority 

under this title. 

(q) OTHER EXEMPTIONS.— 

(1) IN GENERAL.—When acting as a receiver under this 

title— 

(A) the Corporation, including its franchise, its capital, 

reserves and surplus, and its income, shall be exempt from 

all taxation imposed by any State, county, municipality, or 

local taxing authority, except that any real property of the 

Corporation shall be subject to State, territorial, county, 

municipal, or local taxation to the same extent according to 

its value as other real property is taxed, except that, notwithstanding the failure of any person to challenge an assessment under State law of the value of such property, 


sroberts on DSKD5P82C1PROD with HEARING
141 

such value, and the tax thereon, shall be determined as of 

the period for which such tax is imposed; 

(B) no property of the Corporation shall be subject to 

levy, attachment, garnishment, foreclosure, or sale without 

the consent of the Corporation, nor shall any involuntary 

lien attach to the property of the Corporation; and 

(C) the Corporation shall not be liable for any amounts 

in the nature of penalties or fines, including those arising 

from the failure of any person to pay any real property, personal property, probate, or recording tax or any recording 

or filing fees when due; and 

(D) the Corporation shall be exempt from all prosecution by the United States or any State, county, municipality, or local authority for any criminal offense arising 

under Federal, State, county, municipal, or local law, 

which was allegedly committed by the covered financial 

company, or persons acting on behalf of the covered financial company, prior to the appointment of the Corporation 

as receiver. 

(2) LIMITATION.—Paragraph (1) shall not apply with respect to any tax imposed (or other amount arising) under the 

Internal Revenue Code of 1986. 

(r) CERTAIN SALES OF ASSETS PROHIBITED.— (1) PERSONS WHO ENGAGED IN IMPROPER CONDUCT WITH, OR CAUSED LOSSES TO, COVERED FINANCIAL COMPANIES.—The 

Corporation shall prescribe regulations which, at a minimum, 

shall prohibit the sale of assets of a covered financial company 

by the Corporation to— 

(A) any person who— 

(i) has defaulted, or was a member of a partnership or an officer or director of a corporation that has 

defaulted, on 1 or more obligations, the aggregate 

amount of which exceeds $1,000,000, to such covered financial company; 

(ii) has been found to have engaged in fraudulent 

activity in connection with any obligation referred to in 

clause (i); and 

(iii) proposes to purchase any such asset in whole 

or in part through the use of the proceeds of a loan or 

advance of credit from the Corporation or from any 

covered financial company; 

(B) any person who participated, as an officer or director of such covered financial company or of any affiliate of 

such company, in a material way in any transaction that 

resulted in a substantial loss to such covered financial company; or 

(C) any person who has demonstrated a pattern or 

practice of defalcation regarding obligations to such covered financial company. 

(2) CONVICTED DEBTORS.—Except as provided in paragraph 

(3), a person may not purchase any asset of such institution 

from the receiver, if that person— 

(A) has been convicted of an offense under section 215, 

656, 657, 1005, 1006, 1007, 1008, 1014, 1032, 1341, 1343, 

or 1344 of title 18, United States Code, or of conspiring to 


sroberts on DSKD5P82C1PROD with HEARING
142 

commit such an offense, affecting any covered financial 

company; and 

(B) is in default on any loan or other extension of credit 

from such covered financial company which, if not paid, 

will cause substantial loss to the Fund or the Corporation. 

(3) SETTLEMENT OF CLAIMS.—Paragraphs (1) and (2) shall 

not apply to the sale or transfer by the Corporation of any asset 

of any covered financial company to any person, if the sale or 

transfer of the asset resolves or settles, or is part of the resolution or settlement, of 1 or more claims that have been, or could 

have been, asserted by the Corporation against the person. 

(4) DEFINITION OF DEFAULT.—For purposes of this subsection, the term ‘‘default’’ means a failure to comply with the 

terms of a loan or other obligation to such an extent that the 

property securing the obligation is foreclosed upon. 

(s) RECOUPMENT OF COMPENSATION FROM SENIOR EXECUTIVES

AND DIRECTORS.— (1) IN GENERAL.—The Corporation, as receiver of a covered 

financial company, may recover from any current or former senior executive or director substantially responsible for the failed 

condition of the covered financial company any compensation 

received during the 2-year period preceding the date on which 

the Corporation was appointed as the receiver of the covered financial company, except that, in the case of fraud, no time limit 

shall apply. 

(2) COST CONSIDERATIONS.—In seeking to recover any such 

compensation, the Corporation shall weigh the financial and 

deterrent benefits of such recovery against the cost of executing 

the recovery. 

(3) RULEMAKING.—The Corporation shall promulgate regulations to implement the requirements of this subsection, including defining the term ‘‘compensation’’ to mean any financial remuneration, including salary, bonuses, incentives, benefits, severance, deferred compensation, or golden parachute benefits, 

and any profits realized from the sale of the securities of the 

covered financial company. 

SEC. 211. MISCELLANEOUS PROVISIONS. 

(a) CLARIFICATION OF PROHIBITION REGARDING CONCEALMENT

OF ASSETS FROM RECEIVER OR LIQUIDATING AGENT.—Section 

1032(1) of title 18, United States Code, is amended by inserting ‘‘the 

Federal Deposit Insurance Corporation acting as receiver for a covered financial company, in accordance with title II of the DoddFrank Wall Street Reform and Consumer Protection Act,’’ before ‘‘or 

the National Credit’’. 

(b) CONFORMING AMENDMENT.—Section 1032 of title 18, United 

States Code, is amended in the section heading, by striking ‘‘of financial institution’’. 

(c) FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT

ACT OF 1991.—Section 403(a) of the Federal Deposit Insurance Corporation Improvement Act of 1991 (12 U.S.C. 4403(a)) is amended 

by inserting ‘‘section 210(c) of the Dodd-Frank Wall Street Reform 

and Consumer Protection Act, section 1367 of the Federal Housing 

Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 

4617(d)),’’ after ‘‘section 11(e) of the Federal Deposit Insurance Act,’’. 

(d) FDIC INSPECTOR GENERAL REVIEWS.— 


sroberts on DSKD5P82C1PROD with HEARING
143 

(1) SCOPE.—The Inspector General of the Corporation shall 

conduct, supervise, and coordinate audits and investigations of 

the liquidation of any covered financial company by the Corporation as receiver under this title, including collecting and 

summarizing— 

(A) a description of actions taken by the Corporation as 

receiver; 

(B) a description of any material sales, transfers, mergers, obligations, purchases, and other material transactions 

entered into by the Corporation; 

(C) an evaluation of the adequacy of the policies and 

procedures of the Corporation under section 203(d) and orderly liquidation plan under section 210(n)(14); 

(D) an evaluation of the utilization by the Corporation 

of the private sector in carrying out its functions, including 

the adequacy of any conflict-of-interest reviews; and 

(E) an evaluation of the overall performance of the Corporation in liquidating the covered financial company, including administrative costs, timeliness of liquidation process, and impact on the financial system. 

(2) FREQUENCY.—Not later than 6 months after the date of 

appointment of the Corporation as receiver under this title and 

every 6 months thereafter, the Inspector General of the Corporation shall conduct the audit and investigation described in 

paragraph (1). 

(3) REPORTS AND TESTIMONY.—The Inspector General of the 

Corporation shall include in the semiannual reports required by 

section 5(a) of the Inspector General Act of 1978 (5 U.S.C. 

App.), a summary of the findings and evaluations under paragraph (1), and shall appear before the appropriate committees 

of Congress, if requested, to present each such report. 

(4) FUNDING.— 

(A) INITIAL FUNDING.—The expenses of the Inspector 

General of the Corporation in carrying out this subsection 

shall be considered administrative expenses of the receivership. 

(B) ADDITIONAL FUNDING.—If the maximum amount 

available to the Corporation as receiver under this title is 

insufficient to enable the Inspector General of the Corporation to carry out the duties under this subsection, the Corporation shall pay such additional amounts from assessments imposed under section 210. 

(5) TERMINATION OF RESPONSIBILITIES.—The duties and responsibilities of the Inspector General of the Corporation under 

this subsection shall terminate 1 year after the date of termination of the receivership under this title. 

(e) TREASURY INSPECTOR GENERAL REVIEWS.— 

(1) SCOPE.—The Inspector General of the Department of the 

Treasury shall conduct, supervise, and coordinate audits and 

investigations of actions taken by the Secretary related to the 

liquidation of any covered financial company under this title, 

including collecting and summarizing— 

(A) a description of actions taken by the Secretary 

under this title; 


sroberts on DSKD5P82C1PROD with HEARING
144 

(B) an analysis of the approval by the Secretary of the 

policies and procedures of the Corporation under section 

203 and acceptance of the orderly liquidation plan of the 

Corporation under section 210; and 

(C) an assessment of the terms and conditions underlying the purchase by the Secretary of obligations of the 

Corporation under section 210. 

(2) FREQUENCY.—Not later than 6 months after the date of 

appointment of the Corporation as receiver under this title and 

every 6 months thereafter, the Inspector General of the Department of the Treasury shall conduct the audit and investigation 

described in paragraph (1). 

(3) REPORTS AND TESTIMONY.—The Inspector General of the 

Department of the Treasury shall include in the semiannual reports required by section 5(a) of the Inspector General Act of 

1978 (5 U.S.C. App.), a summary of the findings and assessments under paragraph (1), and shall appear before the appropriate committees of Congress, if requested, to present each such 

report. 

(4) TERMINATION OF RESPONSIBILITIES.—The duties and responsibilities of the Inspector General of the Department of the 

Treasury under this subsection shall terminate 1 year after the 

date on which the obligations purchased by the Secretary from 

the Corporation under section 210 are fully redeemed. 

(f) PRIMARY FINANCIAL REGULATORY AGENCY INSPECTOR GEN- ERAL REVIEWS.— (1) SCOPE.—Upon the appointment of the Corporation as 

receiver for a covered financial company supervised by a Federal primary financial regulatory agency or the Board of Governors under section 165, the Inspector General of the agency or 

the Board of Governors shall make a written report reviewing 

the supervision by the agency or the Board of Governors of the 

covered financial company, which shall— 

(A) evaluate the effectiveness of the agency or the Board 

of Governors in carrying out its supervisory responsibilities 

with respect to the covered financial company; 

(B) identify any acts or omissions on the part of agency 

or Board of Governors officials that contributed to the covered financial company being in default or in danger of default; 

(C) identify any actions that could have been taken by 

the agency or the Board of Governors that would have prevented the company from being in default or in danger of 

default; and 

(D) recommend appropriate administrative or legislative action. 

(2) REPORTS AND TESTIMONY.—Not later than 1 year after 

the date of appointment of the Corporation as receiver under 

this title, the Inspector General of the Federal primary financial 

regulatory agency or the Board of Governors shall provide the 

report required by paragraph (1) to such agency or the Board 

of Governors, and along with such agency or the Board of Governors, as applicable, shall appear before the appropriate committees of Congress, if requested, to present the report required 

by paragraph (1). Not later than 90 days after the date of reVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00148 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
145 

ceipt of the report required by paragraph (1), such agency or the 

Board of Governors, as applicable, shall provide a written report to Congress describing any actions taken in response to the 

recommendations in the report, and if no such actions were 

taken, describing the reasons why no actions were taken. 

SEC. 212. PROHIBITION OF CIRCUMVENTION AND PREVENTION OF 

CONFLICTS OF INTEREST. 

(a) NO OTHER FUNDING.—Funds for the orderly liquidation of 

any covered financial company under this title shall only be provided as specified under this title. 

(b) LIMIT ON GOVERNMENTAL ACTIONS.—No governmental entity may take any action to circumvent the purposes of this title. 

(c) CONFLICT OF INTEREST.—In the event that the Corporation 

is appointed receiver for more than 1 covered financial company or 

is appointed receiver for a covered financial company and receiver 

for any insured depository institution that is an affiliate of such 

covered financial company, the Corporation shall take appropriate 

action, as necessary to avoid any conflicts of interest that may arise 

in connection with multiple receiverships. 

SEC. 213. BAN ON CERTAIN ACTIVITIES BY SENIOR EXECUTIVES AND 

DIRECTORS. 

(a) PROHIBITION AUTHORITY.—The Board of Governors or, if the 

covered financial company was not supervised by the Board of Governors, the Corporation, may exercise the authority provided by this 

section. 

(b) AUTHORITY TO ISSUE ORDER.—The appropriate agency described in subsection (a) may take any action authorized by subsection (c), if the agency determines that— 

(1) a senior executive or a director of the covered financial 

company, prior to the appointment of the Corporation as receiver, has, directly or indirectly— 

(A) violated— 

(i) any law or regulation; 

(ii) any cease-and-desist order which has become 

final; 

(iii) any condition imposed in writing by a Federal 

agency in connection with any action on any application, notice, or request by such company or senior executive; or 

(iv) any written agreement between such company 

and such agency; 

(B) engaged or participated in any unsafe or unsound 

practice in connection with any financial company; or 

(C) committed or engaged in any act, omission, or practice which constitutes a breach of the fiduciary duty of such 

senior executive or director; 

(2) by reason of the violation, practice, or breach described 

in any subparagraph of paragraph (1), such senior executive or 

director has received financial gain or other benefit by reason 

of such violation, practice, or breach and such violation, practice, or breach contributed to the failure of the company; and 

(3) such violation, practice, or breach— 

(A) involves personal dishonesty on the part of such 

senior executive or director; or 


sroberts on DSKD5P82C1PROD with HEARING
146 

(B) demonstrates willful or continuing disregard by 

such senior executive or director for the safety or soundness 

of such company. 

(c) AUTHORIZED ACTIONS.— 

(1) IN GENERAL.—The appropriate agency for a financial 

company, as described in subsection (a), may serve upon a senior executive or director described in subsection (b) a written notice of the intention of the agency to prohibit any further participation by such person, in any manner, in the conduct of the affairs of any financial company for a period of time determined 

by the appropriate agency to be commensurate with such violation, practice, or breach, provided such period shall be not less 

than 2 years. 

(2) PROCEDURES.—The due process requirements and other 

procedures under section 8(e) of the Federal Deposit Insurance 

Act (12 U.S.C. 1818(e)) shall apply to actions under this section 

as if the covered financial company were an insured depository 

institution and the senior executive or director were an institution-affiliated party, as those terms are defined in that Act. 

(d) REGULATIONS.—The Corporation and the Board of Governors, in consultation with the Council, shall jointly prescribe rules 

or regulations to administer and carry out this section, including 

rules, regulations, or guidelines to further define the term senior executive for the purposes of this section. 

SEC. 214. PROHIBITION ON TAXPAYER FUNDING. 

(a) LIQUIDATION REQUIRED.—All financial companies put into 

receivership under this title shall be liquidated. No taxpayer funds 

shall be used to prevent the liquidation of any financial company 

under this title. 

(b) RECOVERY OF FUNDS.—All funds expended in the liquidation of a financial company under this title shall be recovered from 

the disposition of assets of such financial company, or shall be the 

responsibility of the financial sector, through assessments. 

(c) NO LOSSES TO TAXPAYERS.—Taxpayers shall bear no losses 

from the exercise of any authority under this title. 

SEC. 215. STUDY ON SECURED CREDITOR HAIRCUTS. 

(a) STUDY REQUIRED.—The Council shall conduct a study evaluating the importance of maximizing United States taxpayer protections and promoting market discipline with respect to the treatment 

of fully secured creditors in the utilization of the orderly liquidation 

authority authorized by this Act. In carrying out such study, the 

Council shall— 

(1) not be prejudicial to current or past laws or regulations 

with respect to secured creditor treatment in a resolution process; 

(2) study the similarities and differences between the resolution mechanisms authorized by the Bankruptcy Code, the 

Federal Deposit Insurance Corporation Improvement Act of 

1991, and the orderly liquidation authority authorized by this 

Act; 

(3) determine how various secured creditors are treated in 

such resolution mechanisms and examine how a haircut (of various degrees) on secured creditors could improve market discipline and protect taxpayers; 


sroberts on DSKD5P82C1PROD with HEARING
147 

(4) compare the benefits and dynamics of prudent lending 

practices by depository institutions in secured loans for consumers and small businesses to the lending practices of secured 

creditors to large, interconnected financial firms; 

(5) consider whether credit differs according to different 

types of collateral and different terms and timing of the extension of credit; and 

(6) include an examination of stakeholders who were unsecured or under-collateralized and seek collateral when a firm is 

failing, and the impact that such behavior has on financial stability and an orderly resolution that protects taxpayers if the 

firm fails. 

(b) REPORT.—Not later than the end of the 1-year period beginning on the date of enactment of this Act, the Council shall issue 

a report to the Congress containing all findings and conclusions 

made by the Council in carrying out the study required under subsection (a). 

SEC. 216. STUDY ON BANKRUPTCY PROCESS FOR FINANCIAL AND 

NONBANK FINANCIAL INSTITUTIONS. 

(a) STUDY.— 

(1) IN GENERAL.—Upon enactment of this Act, the Board of 

Governors, in consultation with the Administrative Office of the 

United States Courts, shall conduct a study regarding the resolution of financial companies under the Bankruptcy Code, 

under chapter 7 or 11 thereof. 

(2) ISSUES TO BE STUDIED.—Issues to be studied under this 

section include— 

(A) the effectiveness of chapter 7 and chapter 11 of the 

Bankruptcy Code in facilitating the orderly resolution or reorganization of systemic financial companies; 

(B) whether a special financial resolution court or 

panel of special masters or judges should be established to 

oversee cases involving financial companies to provide for 

the resolution of such companies under the Bankruptcy 

Code, in a manner that minimizes adverse impacts on financial markets without creating moral hazard; 

(C) whether amendments to the Bankruptcy Code 

should be adopted to enhance the ability of the Code to resolve financial companies in a manner that minimizes adverse impacts on financial markets without creating moral 

hazard; 

(D) whether amendments should be made to the Bankruptcy Code, the Federal Deposit Insurance Act, and other 

insolvency laws to address the manner in which qualified 

financial contracts of financial companies are treated; and 

(E) the implications, challenges, and benefits to creating a new chapter or subchapter of the Bankruptcy Code 

to deal with financial companies. 

(b) REPORTS TO CONGRESS.—Not later than 1 year after the 

date of enactment of this Act, and in each successive year until the 

fifth year after the date of enactment of this Act, the Administrative 

Office of the United States courts shall submit to the Committees on 

Banking, Housing, and Urban Affairs and the Judiciary of the Senate and the Committees on Financial Services and the Judiciary of 


sroberts on DSKD5P82C1PROD with HEARING
148 

the House of Representatives a report summarizing the results of the 

study conducted under subsection (a). 

SEC. 217. STUDY ON INTERNATIONAL COORDINATION RELATING TO 

BANKRUPTCY PROCESS FOR NONBANK FINANCIAL INSTITUTIONS. 

(a) STUDY.— 

(1) IN GENERAL.—The Board of Governors, in consultation 

with the Administrative Office of the United States Courts, 

shall conduct a study regarding international coordination relating to the resolution of systemic financial companies under 

the United States Bankruptcy Code and applicable foreign law. 

(2) ISSUES TO BE STUDIED.—With respect to the bankruptcy 

process for financial companies, issues to be studied under this 

section include— 

(A) the extent to which international coordination currently exists; 

(B) current mechanisms and structures for facilitating 

international cooperation; 

(C) barriers to effective international coordination; and 

(D) ways to increase and make more effective international coordination of the resolution of financial companies, so as to minimize the impact on the financial system 

without creating moral hazard. 

(b) REPORT TO CONGRESS.—Not later than 1 year after the date 

of enactment of this Act, the Administrative office of the United 

States Courts shall submit to the Committees on Banking, Housing, 

and Urban Affairs and the Judiciary of the Senate and the Committees on Financial Services and the Judiciary of the House of Representatives a report summarizing the results of the study conducted 

under subsection (a). 

TITLE III—TRANSFER OF POWERS TO THE COMPTROLLER OF THE CURRENCY, THE CORPORATION, 

AND THE BOARD OF GOVERNORS 

SEC. 300. SHORT TITLE. 

This title may be cited as the ‘‘Enhancing Financial Institution 

Safety and Soundness Act of 2010’’. 

SEC. 301. PURPOSES. 

The purposes of this title are— 

(1) to provide for the safe and sound operation of the banking system of the United States; 

(2) to preserve and protect the dual system of Federal and 

State-chartered depository institutions; 

(3) to ensure the fair and appropriate supervision of each 

depository institution, regardless of the size or type of charter 

of the depository institution; and 

(4) to streamline and rationalize the supervision of depository institutions and the holding companies of depository institutions. 

SEC. 302. DEFINITION. 

In this title, the term ‘‘transferred employee’’ means, as the context requires, an employee transferred to the Office of the Comptroller of the Currency or the Corporation under section 322. 


sroberts on DSKD5P82C1PROD with HEARING
149 

Subtitle A—Transfer of Powers and Duties 

SEC. 311. TRANSFER DATE. 

(a) TRANSFER DATE.—Except as provided in subsection (b), the 

term ‘‘transfer date’’ means the date that is 1 year after the date of 

enactment of this Act. 

(b) EXTENSION PERMITTED.— (1) NOTICE REQUIRED.—The Secretary, in consultation with 

the Comptroller of the Currency, the Director of the Office of 

Thrift Supervision, the Chairman of the Board of Governors, 

and the Chairperson of the Corporation, may extend the period 

under subsection (a) and designate a transfer date that is not 

later than 18 months after the date of enactment of this Act, if 

the Secretary transmits to the Committee on Banking, Housing, 

and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives— 

(A) a written determination that commencement of the 

orderly process to implement this title is not feasible by the 

date that is 1 year after the date of enactment of this Act; 

(B) an explanation of why an extension is necessary to 

commence the process of orderly implementation of this 

title; 

(C) the transfer date designated under this subsection; 

and 

(D) a description of the steps that will be taken to initiate the process of an orderly and timely implementation 

of this title within the extended time period. 

(2) PUBLICATION OF NOTICE.—Not later than 270 days after 

the date of enactment of this Act, the Secretary shall publish in 

the Federal Register notice of any transfer date designated 

under paragraph (1). 

SEC. 312. POWERS AND DUTIES TRANSFERRED. 

(a) EFFECTIVE DATE.—This section, and the amendments made 

by this section, shall take effect on the transfer date. 

(b) FUNCTIONS OF THE OFFICE OF THRIFT SUPERVISION.— 

(1) SAVINGS AND LOAN HOLDING COMPANY FUNCTIONS

TRANSFERRED.— 

(A) TRANSFER OF FUNCTIONS.—There are transferred to 

the Board of Governors all functions of the Office of Thrift 

Supervision and the Director of the Office of Thrift Supervision (including the authority to issue orders) relating to— 

(i) the supervision of— 

(I) any savings and loan holding company; 

and 

(II) any subsidiary (other than a depository institution) of a savings and loan holding company; 

and 

(ii) all rulemaking authority of the Office of Thrift 

Supervision and the Director of the Office of Thrift Supervision relating to savings and loan holding companies. 

(B) POWERS, AUTHORITIES, RIGHTS, AND DUTIES.—The 

Board of Governors shall succeed to all powers, authorities, 

rights, and duties that were vested in the Office of Thrift 

Supervision and the Director of the Office of Thrift SuperVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00153 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
150 

vision on the day before the transfer date relating to the 

functions and authority transferred under subparagraph 

(A). 

(2) ALL OTHER FUNCTIONS TRANSFERRED.— 

(A) BOARD OF GOVERNORS.—All rulemaking authority 

of the Office of Thrift Supervision and the Director of the 

Office of Thrift Supervision under section 11 of the Home 

Owners’ Loan Act (12 U.S.C. 1468) relating to transactions 

with affiliates and extensions of credit to executive officers, 

directors, and principal shareholders and under section 

5(q) of such Act relating to tying arrangements is transferred to the Board of Governors. 

(B) COMPTROLLER OF THE CURRENCY.—Except as provided in paragraph (1) and subparagraph (A)— 

(i) there are transferred to the Office of the Comptroller of the Currency and the Comptroller of the Currency— 

(I) all functions of the Office of Thrift Supervision and the Director of the Office of Thrift Supervision, respectively, relating to Federal savings 

associations; and 

(II) all rulemaking authority of the Office of 

Thrift Supervision and the Director of the Office of 

Thrift Supervision, respectively, relating to savings 

associations; and 

(ii) the Office of the Comptroller of the Currency 

and the Comptroller of the Currency shall succeed to 

all powers, authorities, rights, and duties that were 

vested in the Office of Thrift Supervision and the Director of the Office of Thrift Supervision, respectively, 

on the day before the transfer date relating to the functions and authority transferred under clause (i). 

(C) CORPORATION.—Except as provided in paragraph 

(1) and subparagraphs (A) and (B)— 

(i) all functions of the Office of Thrift Supervision 

and the Director of the Office of Thrift Supervision relating to State savings associations are transferred to 

the Corporation; and 

(ii) the Corporation shall succeed to all powers, authorities, rights, and duties that were vested in the Office of Thrift Supervision and the Director of the Office 

of Thrift Supervision on the day before the transfer 

date relating to the functions transferred under clause 

(i). 

(c) CONFORMING AMENDMENTS.—Section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813) is amended— 

(1) in subsection (q), by striking paragraphs (1) through (4) 

and inserting the following: 

‘‘(1) the Office of the Comptroller of the Currency, in the 

case of— 

‘‘(A) any national banking association; 

‘‘(B) any Federal branch or agency of a foreign bank; 

and 

‘‘(C) any Federal savings association; 


sroberts on DSKD5P82C1PROD with HEARING
151 

‘‘(2) the Federal Deposit Insurance Corporation, in the case 

of— 

‘‘(A) any State nonmember insured bank; 

‘‘(B) any foreign bank having an insured branch; and 

‘‘(C) any State savings association; 

‘‘(3) the Board of Governors of the Federal Reserve System, 

in the case of— 

‘‘(A) any State member bank; 

‘‘(B) any branch or agency of a foreign bank with respect to any provision of the Federal Reserve Act which is 

made applicable under the International Banking Act of 

1978; 

‘‘(C) any foreign bank which does not operate an insured branch; 

‘‘(D) any agency or commercial lending company other 

than a Federal agency; 

‘‘(E) supervisory or regulatory proceedings arising from 

the authority given to the Board of Governors under section 

7(c)(1) of the International Banking Act of 1978, including 

such proceedings under the Financial Institutions Supervisory Act of 1966; 

‘‘(F) any bank holding company and any subsidiary 

(other than a depository institution) of a bank holding company; and 

‘‘(G) any savings and loan holding company and any 

subsidiary (other than a depository institution) of a savings 

and loan holding company.’’; and 

(2) in paragraphs (1) and (3) of subsection (u), by striking 

‘‘(other than a bank holding company’’ and inserting ‘‘(other 

than a bank holding company or savings and loan holding 

company’’. 

(d) CONSUMER PROTECTION.—Nothing in this section may be 

construed to limit or otherwise affect the transfer of powers under 

title X. 

SEC. 313. ABOLISHMENT. 

Effective 90 days after the transfer date, the Office of Thrift Supervision and the position of Director of the Office of Thrift Supervision are abolished. 

SEC. 314. AMENDMENTS TO THE REVISED STATUTES. 

(a) AMENDMENT TO SECTION 324.—Section 324 of the Revised 

Statutes of the United States (12 U.S.C. 1) is amended to read as 

follows: 

‘‘SEC. 324. COMPTROLLER OF THE CURRENCY. 

‘‘(a) OFFICE OF THE COMPTROLLER OF THE CURRENCY ESTABLISHED.—There is established in the Department of the Treasury a 

bureau to be known as the ‘Office of the Comptroller of the Currency’ which is charged with assuring the safety and soundness of, 

and compliance with laws and regulations, fair access to financial 

services, and fair treatment of customers by, the institutions and 

other persons subject to its jurisdiction. 

‘‘(b) COMPTROLLER OF THE CURRENCY.— 

‘‘(1) IN GENERAL.—The chief officer of the Office of the 

Comptroller of the Currency shall be known as the Comptroller 

of the Currency. The Comptroller of the Currency shall perform 


sroberts on DSKD5P82C1PROD with HEARING
152 

the duties of the Comptroller of the Currency under the general 

direction of the Secretary of the Treasury. The Secretary of the 

Treasury may not delay or prevent the issuance of any rule or 

the promulgation of any regulation by the Comptroller of the 

Currency, and may not intervene in any matter or proceeding 

before the Comptroller of the Currency (including agency enforcement actions), unless otherwise specifically provided by 

law. 

‘‘(2) ADDITIONAL AUTHORITY.—The Comptroller of the Currency shall have the same authority with respect to functions 

transferred to the Comptroller of the Currency under the Enhancing Financial Institution Safety and Soundness Act of 

2010 as was vested in the Director of the Office of Thrift Supervision on the transfer date, as defined in section 311 of that 

Act.’’. 

(b) SUPERVISION OF FEDERAL SAVINGS ASSOCIATIONS.—Chapter 

9 of title VII of the Revised Statutes of the United States (12 U.S.C. 

1 et seq.) is amended by inserting after section 327A (12 U.S.C. 4a) 

the following: 

‘‘SEC. 327B. DEPUTY COMPTROLLER FOR THE SUPERVISION AND EXAMINATION OF FEDERAL SAVINGS ASSOCIATIONS. 

‘‘The Comptroller of the Currency shall designate a Deputy 

Comptroller, who shall be responsible for the supervision and examination of Federal savings associations.’’. 

(c) AMENDMENT TO SECTION 329.—Section 329 of the Revised 

Statutes of the United States (12 U.S.C. 11) is amended by inserting 

before the period at the end the following: ‘‘or any Federal savings 

association’’. 

(d) EFFECTIVE DATE.—This section, and the amendments made 

by this section, shall take effect on the transfer date. 

SEC. 315. FEDERAL INFORMATION POLICY. 

Section 3502(5) of title 44, United States Code, is amended by 

inserting ‘‘Office of the Comptroller of the Currency,’’ after ‘‘the Securities and Exchange Commission,’’. 

SEC. 316. SAVINGS PROVISIONS. 

(a) OFFICE OF THRIFT SUPERVISION.— 

(1) EXISTING RIGHTS, DUTIES, AND OBLIGATIONS NOT AFFECTED.—Sections 312(b) and 313 shall not affect the validity 

of any right, duty, or obligation of the United States, the Director of the Office of Thrift Supervision, the Office of Thrift Supervision, or any other person, that existed on the day before the 

transfer date. 

(2) CONTINUATION OF SUITS.—This title shall not abate any 

action or proceeding commenced by or against the Director of 

the Office of Thrift Supervision or the Office of Thrift Supervision before the transfer date, except that— 

(A) for any action or proceeding arising out of a function of the Office of Thrift Supervision or the Director of the 

Office of Thrift Supervision transferred to the Board of 

Governors by this title, the Board of Governors shall be 

substituted for the Office of Thrift Supervision or the Director of the Office of Thrift Supervision as a party to the action or proceeding on and after the transfer date; 


sroberts on DSKD5P82C1PROD with HEARING
153 

(B) for any action or proceeding arising out of a function of the Office of Thrift Supervision or the Director of the 

Office of Thrift Supervision transferred to the Office of the 

Comptroller of the Currency or the Comptroller of the Currency by this title, the Office of the Comptroller of the Currency or the Comptroller of the Currency shall be substituted for the Office of Thrift Supervision or the Director 

of the Office of Thrift Supervision, as the case may be, as 

a party to the action or proceeding on and after the transfer 

date; and 

(C) for any action or proceeding arising out of a function of the Office of Thrift Supervision or the Director of the 

Office of Thrift Supervision transferred to the Corporation 

by this title, the Corporation shall be substituted for the Office of Thrift Supervision or the Director of the Office of 

Thrift Supervision as a party to the action or proceeding on 

and after the transfer date. 

(b) CONTINUATION OF EXISTING OTS ORDERS, RESOLUTIONS, 

DETERMINATIONS, AGREEMENTS, REGULATIONS, ETC.—All orders, 

resolutions, determinations, agreements, and regulations, interpretative rules, other interpretations, guidelines, procedures, and other 

advisory materials, that have been issued, made, prescribed, or allowed to become effective by the Office of Thrift Supervision or the 

Director of the Office of Thrift Supervision, or by a court of competent jurisdiction, in the performance of functions that are transferred by this title and that are in effect on the day before the transfer date, shall continue in effect according to the terms of such orders, resolutions, determinations, agreements, and regulations, interpretative rules, other interpretations, guidelines, procedures, and 

other advisory materials, and shall be enforceable by or against— 

(1) the Board of Governors, in the case of a function of the 

Office of Thrift Supervision or the Director of the Office of 

Thrift Supervision transferred to the Board of Governors, until 

modified, terminated, set aside, or superseded in accordance 

with applicable law by the Board of Governors, by any court of 

competent jurisdiction, or by operation of law; 

(2) the Office of the Comptroller of the Currency or the 

Comptroller of the Currency, in the case of a function of the Office of Thrift Supervision or the Director of the Office of Thrift 

Supervision transferred to the Office of the Comptroller of the 

Currency or the Comptroller of the Currency, respectively, until 

modified, terminated, set aside, or superseded in accordance 

with applicable law by the Office of the Comptroller of the Currency or the Comptroller of the Currency, by any court of competent jurisdiction, or by operation of law; and 

(3) the Corporation, in the case of a function of the Office 

of Thrift Supervision or the Director of the Office of Thrift Supervision transferred to the Corporation, until modified, terminated, set aside, or superseded in accordance with applicable 

law by the Corporation, by any court of competent jurisdiction, 

or by operation of law. 

(c) IDENTIFICATION OF REGULATIONS CONTINUED.— 

(1) BY THE BOARD OF GOVERNORS.—Not later than the 

transfer date, the Board of Governors shall— 


sroberts on DSKD5P82C1PROD with HEARING
154 

(A) identify the regulations continued under subsection 

(b) that will be enforced by the Board of Governors; and 

(B) publish a list of the regulations identified under 

subparagraph (A) in the Federal Register. 

(2) BY OFFICE OF THE COMPTROLLER OF THE CURRENCY.— 

Not later than the transfer date, the Office of the Comptroller 

of the Currency shall— 

(A) after consultation with the Corporation, identify the 

regulations continued under subsection (b) that will be enforced by the Office of the Comptroller of the Currency; and 

(B) publish a list of the regulations identified under 

subparagraph (A) in the Federal Register. 

(3) BY THE CORPORATION.—Not later than the transfer date, 

the Corporation shall— 

(A) after consultation with the Office of the Comptroller 

of the Currency, identify the regulations continued under 

subsection (b) that will be enforced by the Corporation; and 

(B) publish a list of the regulations identified under 

subparagraph (A) in the Federal Register. 

(d) STATUS OF REGULATIONS PROPOSED OR NOT YET EFFECTIVE.— 

(1) PROPOSED REGULATIONS.—Any proposed regulation of 

the Office of Thrift Supervision, which the Office of Thrift Supervision in performing functions transferred by this title, has 

proposed before the transfer date but has not published as a 

final regulation before such date, shall be deemed to be a proposed regulation of the Office of the Comptroller of the Currency 

or the Board of Governors, as appropriate, according to the 

terms of the proposed regulation. 

(2) REGULATIONS NOT YET EFFECTIVE.—Any interim or 

final regulation of the Office of Thrift Supervision, which the 

Office of Thrift Supervision, in performing functions transferred 

by this title, has published before the transfer date but which 

has not become effective before that date, shall become effective 

as a regulation of the Office of the Comptroller of the Currency 

or the Board of Governors, as appropriate, according to the 

terms of the interim or final regulation, unless modified, terminated, set aside, or superseded in accordance with applicable 

law by the Office of the Comptroller of the Currency or the 

Board of Governors, as appropriate, by any court of competent 

jurisdiction, or by operation of law. 

SEC. 317. REFERENCES IN FEDERAL LAW TO FEDERAL BANKING AGENCIES. 

On and after the transfer date, any reference in Federal law to 

the Director of the Office of Thrift Supervision or the Office of Thrift 

Supervision, in connection with any function of the Director of the 

Office of Thrift Supervision or the Office of Thrift Supervision 

transferred under section 312(b) or any other provision of this subtitle, shall be deemed to be a reference to the Comptroller of the Currency, the Office of the Comptroller of the Currency, the Chairperson 

of the Corporation, the Corporation, the Chairman of the Board of 

Governors, or the Board of Governors, as appropriate and consistent 

with the amendments made in subtitle E. 


sroberts on DSKD5P82C1PROD with HEARING
155 

SEC. 318. FUNDING. 

(a) COMPENSATION OF EXAMINERS.—Section 5240 of the Revised 

Statutes of the United States (12 U.S.C. 481 et seq.) is amended— 

(1) in the second undesignated paragraph (12 U.S.C. 481), 

in the fourth sentence, by striking ‘‘without regard to the provisions of other laws applicable to officers or employees of the 

United States’’ and inserting the following: ‘‘set and adjusted 

subject to chapter 71 of title 5, United States Code, and without 

regard to the provisions of other laws applicable to officers or 

employees of the United States’’; and 

(2) in the third undesignated paragraph (12 U.S.C. 482), in 

the first sentence, by striking ‘‘shall fix’’ and inserting ‘‘shall, 

subject to chapter 71 of title 5, United States Code, fix’’. 

(b) FUNDING OF OFFICE OF THE COMPTROLLER OF THE CURRENCY.—Chapter 4 of title LXII of the Revised Statutes is amended 

by inserting after section 5240 (12 U.S.C. 481, 482) the following: 

‘‘SEC. 5240A. The Comptroller of the Currency may collect an 

assessment, fee, or other charge from any entity described in section 

3(q)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1813(q)(1)), 

as the Comptroller determines is necessary or appropriate to carry 

out the responsibilities of the Office of the Comptroller of the Currency. In establishing the amount of an assessment, fee, or charge 

collected from an entity under this section, the Comptroller of the 

Currency may take into account the nature and scope of the activities of the entity, the amount and type of assets that the entity holds, 

the financial and managerial condition of the entity, and any other 

factor, as the Comptroller of the Currency determines is appropriate. 

Funds derived from any assessment, fee, or charge collected or payment made pursuant to this section may be deposited by the Comptroller of the Currency in accordance with the provisions of section 

5234. Such funds shall not be construed to be Government funds or 

appropriated monies, and shall not be subject to apportionment for 

purposes of chapter 15 of title 31, United States Code, or any other 

provision of law. The authority of the Comptroller of the Currency 

under this section shall be in addition to the authority under section 

5240. 

‘‘The Comptroller of the Currency shall have sole authority to 

determine the manner in which the obligations of the Office of the 

Comptroller of the Currency shall be incurred and its disbursements 

and expenses allowed and paid, in accordance with this section, except as provided in chapter 71 of title 5, United States Code (with 

respect to compensation).’’. 

(c) FUNDING OF BOARD OF GOVERNORS.—Section 11 of the Federal Reserve Act (12 U.S.C. 248) is amended by adding at the end 

the following: 

‘‘(s) ASSESSMENTS, FEES, AND OTHER CHARGES FOR CERTAIN

COMPANIES.— 

‘‘(1) IN GENERAL.—The Board shall collect a total amount 

of assessments, fees, or other charges from the companies described in paragraph (2) that is equal to the total expenses the 

Board estimates are necessary or appropriate to carry out the 

supervisory and regulatory responsibilities of the Board with respect to such companies. 

‘‘(2) COMPANIES.—The companies described in this paragraph are— 


sroberts on DSKD5P82C1PROD with HEARING
156 

‘‘(A) all bank holding companies having total consolidated assets of $50,000,000,000 or more; 

‘‘(B) all savings and loan holding companies having 

total consolidated assets of $50,000,000,000 or more; and 

‘‘(C) all nonbank financial companies supervised by the 

Board under section 113 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.’’. 

(d) CORPORATION EXAMINATION FEES.—Section 10(e) of the Federal Deposit Insurance Act (12 U.S.C. 1820(e)) is amended by striking paragraph (1) and inserting the following: 

‘‘(1) REGULAR AND SPECIAL EXAMINATIONS OF DEPOSITORY

INSTITUTIONS.—The cost of conducting any regular examination 

or special examination of any depository institution under subsection (b)(2), (b)(3), or (d) or of any entity described in section 

3(q)(2) may be assessed by the Corporation against the institution or entity to meet the expenses of the Corporation in carrying out such examinations.’’. 

(e) EFFECTIVE DATE.—This section, and the amendments made 

by this section, shall take effect on the transfer date. 

SEC. 319. CONTRACTING AND LEASING AUTHORITY. 

Notwithstanding the Federal Property and Administrative Services Act of 1949 (41 U.S.C. 251 et seq.) or any other provision of law 

(except the full and open competition requirements of the Competition in Contracting Act), the Office of the Comptroller of the Currency may— 

(1) enter into and perform contracts, execute instruments, 

and acquire real property (or property interest) as the Comptroller deems necessary to carry out the duties and responsibilities of the Office of the Comptroller of the Currency; and 

(2) hold, maintain, sell, lease, or otherwise dispose of the 

property (or property interest) acquired under paragraph (1). 

Subtitle B—Transitional Provisions 

SEC. 321. INTERIM USE OF FUNDS, PERSONNEL, AND PROPERTY OF 

THE OFFICE OF THRIFT SUPERVISION. 

(a) IN GENERAL.—Before the transfer date, the Office of the 

Comptroller of the Currency, the Corporation, and the Board of 

Governors shall— 

(1) consult and cooperate with the Office of Thrift Supervision to facilitate the orderly transfer of functions to the Office 

of the Comptroller of the Currency, the Corporation, and the 

Board of Governors in accordance with this title; 

(2) determine jointly, from time to time— 

(A) the amount of funds necessary to pay any expenses 

associated with the transfer of functions (including expenses for personnel, property, and administrative services) 

during the period beginning on the date of enactment of 

this Act and ending on the transfer date; 

(B) which personnel are appropriate to facilitate the orderly transfer of functions by this title; and 

(C) what property and administrative services are necessary to support the Office of the Comptroller of the Currency, the Corporation, and the Board of Governors during 


sroberts on DSKD5P82C1PROD with HEARING
157 

the period beginning on the date of enactment of this Act 

and ending on the transfer date; and 

(3) take such actions as may be necessary to provide for the 

orderly implementation of this title. 

(b) AGENCY CONSULTATION.—When requested jointly by the Office of the Comptroller of the Currency, the Corporation, and the 

Board of Governors to do so before the transfer date, the Office of 

Thrift Supervision shall— 

(1) pay to the Office of the Comptroller of the Currency, the 

Corporation, or the Board of Governors, as applicable, from 

funds obtained by the Office of Thrift Supervision through assessments, fees, or other charges that the Office of Thrift Supervision is authorized by law to impose, such amounts as the Office of the Comptroller of the Currency, the Corporation, and 

the Board of Governors jointly determine to be necessary under 

subsection (a); 

(2) detail to the Office of the Comptroller of the Currency, 

the Corporation, or the Board of Governors, as applicable, such 

personnel as the Office of the Comptroller of the Currency, the 

Corporation, and the Board of Governors jointly determine to be 

appropriate under subsection (a); and 

(3) make available to the Office of the Comptroller of the 

Currency, the Corporation, or the Board of Governors, as applicable, such property and provide to the Office of the Comptroller 

of the Currency, the Corporation, or the Board of Governors, as 

applicable, such administrative services as the Office of the 

Comptroller of the Currency, the Corporation, and the Board of 

Governors jointly determine to be necessary under subsection 

(a). 

(c) NOTICE REQUIRED.—The Office of the Comptroller of the 

Currency, the Corporation, and the Board of Governors shall jointly 

give the Office of Thrift Supervision reasonable prior notice of any 

request that the Office of the Comptroller of the Currency, the Corporation, and the Board of Governors jointly intend to make under 

subsection (b). 

SEC. 322. TRANSFER OF EMPLOYEES. 

(a) IN GENERAL.— 

(1) OFFICE OF THRIFT SUPERVISION EMPLOYEES.— 

(A) IN GENERAL.—Except as provided in section 1064, 

all employees of the Office of Thrift Supervision shall be 

transferred to the Office of the Comptroller of the Currency 

or the Corporation for employment in accordance with this 

section. 

(B) ALLOCATING EMPLOYEES FOR TRANSFER TO RECEIVING AGENCIES.—The Director of the Office of Thrift Supervision, the Comptroller of the Currency, and the Chairperson of the Corporation shall— 

(i) jointly determine the number of employees of the 

Office of Thrift Supervision necessary to perform or 

support the functions that are transferred to the Office 

of the Comptroller of the Currency or the Corporation 

by this title; and 

(ii) consistent with the determination under clause 

(i), jointly identify employees of the Office of Thrift SuVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00161 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
158 

pervision for transfer to the Office of the Comptroller of 

the Currency or the Corporation. 

(2) EMPLOYEES TRANSFERRED; SERVICE PERIODS CRED- ITED.—For purposes of this section, periods of service with a 

Federal home loan bank, a joint office of Federal home loan 

banks, or a Federal reserve bank shall be credited as periods 

of service with a Federal agency. 

(3) APPOINTMENT AUTHORITY FOR EXCEPTED SERVICE

TRANSFERRED.— (A) IN GENERAL.—Except as provided in subparagraph 

(B), any appointment authority of the Office of Thrift Supervision under Federal law that relates to the functions 

transferred under section 312, including the regulations of 

the Office of Personnel Management, for filling the positions of employees in the excepted service shall be transferred to the Comptroller of the Currency or the Chairperson of the Corporation, as appropriate. 

(B) DECLINING TRANSFERS ALLOWED.—The Comptroller 

of the Currency or the Chairperson of the Corporation may 

decline to accept a transfer of authority under subparagraph (A) (and the employees appointed under that authority) to the extent that such authority relates to positions excepted from the competitive service because of their confidential, policy-making, policy-determining, or policy-advocating character. 

(4) ADDITIONAL APPOINTMENT AUTHORITY.—Notwithstanding any other provision of law, the Office of the Comptroller of the Currency and the Corporation may appoint transferred employees to positions in the Office of the Comptroller of 

the Currency or the Corporation, respectively. 

(b) TIMING OF TRANSFERS AND POSITION ASSIGNMENTS.—Each 

employee to be transferred under subsection (a)(1) shall— 

(1) be transferred not later than 90 days after the transfer 

date; and 

(2) receive notice of the position assignment of the employee 

not later than 120 days after the effective date of the transfer 

of the employee. 

(c) TRANSFER OF FUNCTIONS.— (1) IN GENERAL.—Notwithstanding any other provision of 

law, the transfer of employees under this subtitle shall be 

deemed a transfer of functions for the purpose of section 3503 

of title 5, United States Code. 

(2) PRIORITY.—If any provision of this subtitle conflicts 

with any protection provided to a transferred employee under 

section 3503 of title 5, United States Code, the provisions of this 

subtitle shall control. 

(d) EMPLOYEE STATUS AND ELIGIBILITY.—The transfer of functions and employees under this subtitle, and the abolishment of the 

Office of Thrift Supervision under section 313, shall not affect the 

status of the transferred employees as employees of an agency of the 

United States under any provision of law. 

(e) EQUAL STATUS AND TENURE POSITIONS.— (1) STATUS AND TENURE.—Each transferred employee from 

the Office of Thrift Supervision shall be placed in a position at 

the Office of the Comptroller of the Currency or the Corporation 


sroberts on DSKD5P82C1PROD with HEARING
159 

with the same status and tenure as the transferred employee 

held on the day before the date on which the employee was 

transferred. 

(2) FUNCTIONS.—To the extent practicable, each transferred 

employee shall be placed in a position at the Office of the Comptroller of the Currency or the Corporation, as applicable, responsible for the same functions and duties as the transferred 

employee had on the day before the date on which the employee 

was transferred, in accordance with the expertise and preferences of the transferred employee. 

(f) NO ADDITIONAL CERTIFICATION REQUIREMENTS.—An examiner who is a transferred employee shall not be subject to any additional certification requirements before being placed in a comparable position at the Office of the Comptroller of the Currency or 

the Corporation, if the examiner carries out examinations of the 

same type of institutions as an employee of the Office of the Comptroller of the Currency or the Corporation as the employee was responsible for carrying out before the date on which the employee 

was transferred. 

(g) PERSONNEL ACTIONS LIMITED.— (1) PROTECTION.— (A) IN GENERAL.—Except as provided in paragraph (2), 

each affected employee shall not, during the 30-month period beginning on the transfer date, be involuntarily separated, or involuntarily reassigned outside his or her locality 

pay area. 

(B) AFFECTED EMPLOYEES.—For purposes of this paragraph, the term ‘‘affected employee’’ means— 

(i) an employee transferred from the Office of 

Thrift Supervision holding a permanent position on the 

day before the transfer date; and 

(ii) an employee of the Office of the Comptroller of 

the Currency or the Corporation holding a permanent 

position on the day before the transfer date. 

(2) EXCEPTIONS.—Paragraph (1) does not limit the right of 

the Office of the Comptroller of the Currency or the Corporation 

to— 

(A) separate an employee for cause or for unacceptable 

performance; 

(B) terminate an appointment to a position excepted 

from the competitive service because of its confidential policy-making, policy-determining, or policy-advocating character; or 

(C) reassign an employee outside such employee’s locality pay area when the Office of the Comptroller of the Currency or the Corporation determines that the reassignment 

is necessary for the efficient operation of the agency. 

(h) PAY.— 

(1) 30-MONTH PROTECTION.—Except as provided in paragraph (2), during the 30-month period beginning on the date on 

which the employee was transferred under this subtitle, a transferred employee shall be paid at a rate that is not less than the 

basic rate of pay, including any geographic differential, that the 

transferred employee received during the pay period immediately preceding the date on which the employee was transVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00163 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
160 

ferred. Notwithstanding the preceding sentence, if the employee 

was receiving a higher rate of basic pay on a temporary basis 

(because of a temporary assignment, temporary promotion, or 

other temporary action) immediately before the transfer, the 

Agency may reduce the rate of basic pay on the date the rate 

would have been reduced but for the transfer, and the protected 

rate for the remainder of the 30-month period will be the reduced rate that would have applied but for the transfer. 

(2) EXCEPTIONS.—The Comptroller of the Currency or the 

Corporation may reduce the rate of basic pay of a transferred 

employee— 

(A) for cause, including for unacceptable performance; 

or 

(B) with the consent of the transferred employee. 

(3) PROTECTION ONLY WHILE EMPLOYED.—This subsection 

shall apply to a transferred employee only during the period 

that the transferred employee remains employed by Office of the 

Comptroller of the Currency or the Corporation. 

(4) PAY INCREASES PERMITTED.—Nothing in this subsection 

shall limit the authority of the Comptroller of the Currency or 

the Chairperson of the Corporation to increase the pay of a 

transferred employee. 

(i) BENEFITS.— 

(1) RETIREMENT BENEFITS FOR TRANSFERRED EMPLOYEES.— 

(A) IN GENERAL.— 

(i) CONTINUATION OF EXISTING RETIREMENT

PLAN.—Each transferred employee shall remain enrolled in the retirement plan of the transferred employee, for as long as the transferred employee is employed by the Office of the Comptroller of the Currency 

or the Corporation. 

(ii) EMPLOYER’S CONTRIBUTION.—The Comptroller 

of the Currency or the Chairperson of the Corporation, 

as appropriate, shall pay any employer contributions to 

the existing retirement plan of each transferred employee, as required under each such existing retirement 

plan. 

(B) DEFINITION.—In this paragraph, the term ‘‘existing 

retirement plan’’ means, with respect to a transferred employee, the retirement plan (including the Financial Institutions Retirement Fund), and any associated thrift savings 

plan, of the agency from which the employee was transferred in which the employee was enrolled on the day before 

the date on which the employee was transferred. 

(2) BENEFITS OTHER THAN RETIREMENT BENEFITS.— 

(A) DURING FIRST YEAR.— 

(i) EXISTING PLANS CONTINUE.—During the 1-year 

period following the transfer date, each transferred employee may retain membership in any employee benefit 

program (other than a retirement benefit program) of 

the agency from which the employee was transferred 

under this title, including any dental, vision, long term 

care, or life insurance program to which the employee 

belonged on the day before the transfer date. 


sroberts on DSKD5P82C1PROD with HEARING
161 

(ii) EMPLOYER’S CONTRIBUTION.—The Office of the 

Comptroller of the Currency or the Corporation, as appropriate, shall pay any employer cost required to extend coverage in the benefit program to the transferred 

employee as required under that program or negotiated 

agreements. 

(B) DENTAL, VISION, OR LIFE INSURANCE AFTER FIRST

YEAR.—If, after the 1-year period beginning on the transfer 

date, the Office of the Comptroller of the Currency or the 

Corporation determines that the Office of the Comptroller of 

the Currency or the Corporation, as the case may be, will 

not continue to participate in any dental, vision, or life insurance program of an agency from which an employee was 

transferred, a transferred employee who is a member of the 

program may, before the decision takes effect and without 

regard to any regularly scheduled open season, elect to enroll in— 

(i) the enhanced dental benefits program established under chapter 89A of title 5, United States Code; 

(ii) the enhanced vision benefits established under 

chapter 89B of title 5, United States Code; and 

(iii) the Federal Employees’ Group Life Insurance 

Program established under chapter 87 of title 5, United 

States Code, without regard to any requirement of insurability. 

(C) LONG TERM CARE INSURANCE AFTER 1ST YEAR.—If, 

after the 1-year period beginning on the transfer date, the 

Office of the Comptroller of the Currency or the Corporation 

determines that the Office of the Comptroller of the Currency or the Corporation, as appropriate, will not continue 

to participate in any long term care insurance program of 

an agency from which an employee transferred, a transferred employee who is a member of such a program may, 

before the decision takes effect, elect to apply for coverage 

under the Federal Long Term Care Insurance Program established under chapter 90 of title 5, United States Code, 

under the underwriting requirements applicable to a new 

active workforce member, as described in part 875 of title 

5, Code of Federal Regulations (or any successor thereto). 

(D) CONTRIBUTION OF TRANSFERRED EMPLOYEE.— 

(i) IN GENERAL.—Subject to clause (ii), a transferred employee who is enrolled in a plan under the 

Federal Employees Health Benefits Program shall pay 

any employee contribution required under the plan. 

(ii) COST DIFFERENTIAL.—The Office of the Comptroller of the Currency or the Corporation, as applicable, shall pay any difference in cost between the employee contribution required under the plan provided to 

transferred employees by the agency from which the 

employee transferred on the date of enactment of this 

Act and the plan provided by the Office of the Comptroller of the Currency or the Corporation, as the case 

may be, under this section. 

(iii) FUNDS TRANSFER.—The Office of the Comptroller of the Currency or the Corporation, as the case 


sroberts on DSKD5P82C1PROD with HEARING
162 

may be, shall transfer to the Employees Health Benefits 

Fund established under section 8909 of title 5, United 

States Code, an amount determined by the Director of 

the Office of Personnel Management, after consultation 

with the Comptroller of the Currency or the Chairperson of the Corporation, as the case may be, and the 

Office of Management and Budget, to be necessary to 

reimburse the Fund for the cost to the Fund of providing any benefits under this subparagraph that are 

not otherwise paid for by a transferred employee under 

clause (i). 

(E) SPECIAL PROVISIONS TO ENSURE CONTINUATION OF

LIFE INSURANCE BENEFITS.— (i) IN GENERAL.—An annuitant, as defined in section 8901 of title 5, United States Code, who is enrolled 

in a life insurance plan administered by an agency 

from which employees are transferred under this title 

on the day before the transfer date shall be eligible for 

coverage by a life insurance plan under sections 

8706(b), 8714a, 8714b, or 8714c of title 5, United 

States Code, or by a life insurance plan established by 

the Office of the Comptroller of the Currency or the 

Corporation, as applicable, without regard to any regularly scheduled open season or any requirement of insurability. 

(ii) CONTRIBUTION OF TRANSFERRED EMPLOYEE.— (I) IN GENERAL.—Subject to subclause (II), a 

transferred employee enrolled in a life insurance 

plan under this subparagraph shall pay any employee contribution required by the plan. 

(II) COST DIFFERENTIAL.—The Office of the 

Comptroller of the Currency or the Corporation, as 

the case may be, shall pay any difference in cost 

between the benefits provided by the agency from 

which the employee transferred on the date of enactment of this Act and the benefits provided 

under this section. 

(III) FUNDS TRANSFER.—The Office of the 

Comptroller of the Currency or the Corporation, as 

the case may be, shall transfer to the Federal Employees’ Group Life Insurance Fund established 

under section 8714 of title 5, United States Code, 

an amount determined by the Director of the Office 

of Personnel Management, after consultation with 

the Comptroller of the Currency or the Chairperson 

of the Corporation, as the case may be, and the Office of Management and Budget, to be necessary to 

reimburse the Federal Employees’ Group Life Insurance Fund for the cost to the Federal Employees’ Group Life Insurance Fund of providing benefits under this subparagraph not otherwise paid 

for by a transferred employee under subclause (I). 

(IV) CREDIT FOR TIME ENROLLED IN OTHER

PLANS.—For any transferred employee, enrollment 

in a life insurance plan administered by the agenVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00166 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
163 

cy from which the employee transferred, immediately before enrollment in a life insurance plan 

under chapter 87 of title 5, United States Code, 

shall be considered as enrollment in a life insurance plan under that chapter for purposes of section 8706(b)(1)(A) of title 5, United States Code. 

(j) INCORPORATION INTO AGENCY PAY SYSTEM.—Not later than 

30 months after the transfer date, the Comptroller of the Currency 

and the Chairperson of the Corporation shall place each transferred 

employee into the established pay system and structure of the appropriate employing agency. 

(k) EQUITABLE TREATMENT.—In administering the provisions of 

this section, the Comptroller of the Currency and the Chairperson 

of the Corporation— 

(1) may not take any action that would unfairly disadvantage a transferred employee relative to any other employee of the 

Office of the Comptroller of the Currency or the Corporation on 

the basis of prior employment by the Office of Thrift Supervision; 

(2) may take such action as is appropriate in an individual 

case to ensure that a transferred employee receives equitable 

treatment, with respect to the status, tenure, pay, benefits (other 

than benefits under programs administered by the Office of Personnel Management), and accrued leave or vacation time for 

prior periods of service with any Federal agency of the transferred employee; 

(3) shall, jointly with the Director of the Office of Thrift Supervision, develop and adopt procedures and safeguards designed to ensure that the requirements of this subsection are 

met; and 

(4) shall conduct a study detailing the position assignments 

of all employees transferred pursuant to subsection (a), describing the procedures and safeguards adopted pursuant to paragraph (3), and demonstrating that the requirements of this subsection have been met; and shall, not later than 365 days after 

the transfer date, submit a copy of such study to Congress. 

(l) REORGANIZATION.— 

(1) IN GENERAL.—If the Comptroller of the Currency or the 

Chairperson of the Corporation determines, during the 2-year 

period beginning 1 year after the transfer date, that a reorganization of the staff of the Office of the Comptroller of the Currency or the Corporation, respectively, is required, the reorganization shall be deemed a ‘‘major reorganization’’ for purposes 

of affording affected employees retirement under section 

8336(d)(2) or 8414(b)(1)(B) of title 5, United States Code. 

(2) SERVICE CREDIT.—For purposes of this subsection, periods of service with a Federal home loan bank or a joint office 

of Federal home loan banks shall be credited as periods of service with a Federal agency. 

SEC. 323. PROPERTY TRANSFERRED. 

(a) PROPERTY DEFINED.—For purposes of this section, the term 

‘‘property’’ includes all real property (including leaseholds) and all 

personal property, including computers, furniture, fixtures, equipment, books, accounts, records, reports, files, memoranda, paper, reVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00167 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
164 

ports of examination, work papers, and correspondence related to 

such reports, and any other information or materials. 

(b) PROPERTY OF THE OFFICE OF THRIFT SUPERVISION.— 

(1) IN GENERAL.—No later than 90 days after the transfer 

date, all property of the Office of Thrift Supervision (other than 

property described under paragraph (b)(2)) that the Comptroller 

of the Currency and the Chairperson of the Corporation jointly 

determine is used, on the day before the transfer date, to perform or support the functions of the Office of Thrift Supervision 

transferred to the Office of the Comptroller of the Currency or 

the Corporation under this title, shall be transferred to the Office of the Comptroller of the Currency or the Corporation in a 

manner consistent with the transfer of employees under this 

subtitle. 

(2) PERSONAL PROPERTY.—All books, accounts, records, reports, files, memoranda, papers, documents, reports of examination, work papers, and correspondence of the Office of Thrift 

Supervision that the Comptroller of the Currency, the Chairperson of the Corporation, and the Chairman of the Board of 

Governors jointly determine is used, on the day before the transfer date, to perform or support the functions of the Office of 

Thrift Supervision transferred to the Board of Governors under 

this title shall be transferred to the Board of Governors in a 

manner consistent with the purposes of this title. 

(c) CONTRACTS RELATED TO PROPERTY TRANSFERRED.—Each 

contract, agreement, lease, license, permit, and similar arrangement 

relating to property transferred to the Office of the Comptroller of 

the Currency or the Corporation by this section shall be transferred 

to the Office of the Comptroller of the Currency or the Corporation, 

as appropriate, together with the property to which it relates. 

(d) PRESERVATION OF PROPERTY.—Property identified for transfer under this section shall not be altered, destroyed, or deleted before transfer under this section. 

SEC. 324. FUNDS TRANSFERRED. 

The funds that, on the day before the transfer date, the Director 

of the Office of Thrift Supervision (in consultation with the Comptroller of the Currency, the Chairperson of the Corporation, and the 

Chairman of the Board of Governors) determines are not necessary 

to dispose of the affairs of the Office of Thrift Supervision under section 325 and are available to the Office of Thrift Supervision to pay 

the expenses of the Office of Thrift Supervision— 

(1) relating to the functions of the Office of Thrift Supervision transferred under section 312(b)(2)(B), shall be transferred to the Office of the Comptroller of the Currency on the 

transfer date; 

(2) relating to the functions of the Office of Thrift Supervision transferred under section 312(b)(2)(C), shall be transferred to the Corporation on the transfer date; and 

(3) relating to the functions of the Office of Thrift Supervision transferred under section 312(b)(1)(A), shall be transferred to the Board of Governors on the transfer date. 


sroberts on DSKD5P82C1PROD with HEARING
165 

SEC. 325. DISPOSITION OF AFFAIRS. 

(a) AUTHORITY OF DIRECTOR.—During the 90-day period beginning on the transfer date, the Director of the Office of Thrift Supervision— 

(1) shall, solely for the purpose of winding up the affairs 

of the Office of Thrift Supervision relating to any function 

transferred to the Office of the Comptroller of the Currency, the 

Corporation, or the Board of Governors under this title— 

(A) manage the employees of the Office of Thrift Supervision who have not yet been transferred and provide for 

the payment of the compensation and benefits of the employees that accrue before the date on which the employees 

are transferred under this title; and 

(B) manage any property of the Office of Thrift Supervision, until the date on which the property is transferred 

under section 323; and 

(2) may take any other action necessary to wind up the affairs of the Office of Thrift Supervision. 

(b) STATUS OF DIRECTOR.— 

(1) IN GENERAL.—Notwithstanding the transfer of functions 

under this subtitle, during the 90-day period beginning on the 

transfer date, the Director of the Office of Thrift Supervision 

shall retain and may exercise any authority vested in the Director of the Office of Thrift Supervision on the day before the 

transfer date, only to the extent necessary— 

(A) to wind up the Office of Thrift Supervision; and 

(B) to carry out the transfer under this subtitle during 

such 90-day period. 

(2) OTHER PROVISIONS.—For purposes of paragraph (1), the 

Director of the Office of Thrift Supervision shall, during the 90- 

day period beginning on the transfer date, continue to be— 

(A) treated as an officer of the United States; and 

(B) entitled to receive compensation at the same annual 

rate of basic pay that the Director of the Office of Thrift Supervision received on the day before the transfer date. 

SEC. 326. CONTINUATION OF SERVICES. 

Any agency, department, or other instrumentality of the United 

States, and any successor to any such agency, department, or instrumentality, that was, before the transfer date, providing support services to the Office of Thrift Supervision in connection with functions 

transferred to the Office of the Comptroller of the Currency, the Corporation or the Board of Governors under this title, shall— 

(1) continue to provide such services, subject to reimbursement by the Office of the Comptroller of the Currency, the Corporation, or the Board of Governors, until the transfer of functions under this title is complete; and 

(2) consult with the Comptroller of the Currency, the Chairperson of the Corporation, or the Chairman of the Board of 

Governors, as appropriate, to coordinate and facilitate a prompt 

and orderly transition. 

SEC. 327. IMPLEMENTATION PLAN AND REPORTS. 

(a) PLAN SUBMISSION.—Within 180 days of the enactment of the 

Dodd-Frank Wall Street Reform and Consumer Protection Act, the 

Board of Governors, the Corporation, the Office of the Comptroller 


sroberts on DSKD5P82C1PROD with HEARING
166 

of the Currency, and the Office of Thrift Supervision, shall jointly 

submit a plan to the Committee on Banking, Housing, and Urban 

Affairs of the Senate, the Committee on Financial Services of the 

House of Representatives, and the Inspectors General of the Department of the Treasury, the Corporation, and the Board of Governors 

detailing the steps the Board of Governors, the Corporation, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision will take to implement the provisions of sections 301 

through 326, and the provisions of the amendments made by such 

sections. 

(b) INSPECTORS GENERAL REVIEW OF THE PLAN.—Within 60 

days of receiving the plan required under subsection (a), the Inspectors General of the Department of the Treasury, the Corporation, 

and the Board of Governors shall jointly provide a written report 

to the Board of Governors, the Corporation, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision and 

shall submit a copy to the Committee on Banking, Housing, and 

Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives detailing whether the plan conforms with the provisions of sections 301 through 326, and the provisions of the amendments made by such sections, including— 

(1) whether the plan sufficiently takes into consideration 

the orderly transfer of personnel; 

(2) whether the plan describes procedures and safeguards 

to ensure that the Office of Thrift Supervision employees are not 

unfairly disadvantaged relative to employees of the Office of the 

Comptroller of the Currency and the Corporation; 

(3) whether the plan sufficiently takes into consideration 

the orderly transfer of authority and responsibilities; 

(4) whether the plan sufficiently takes into consideration 

the effective transfer of funds; 

(5) whether the plan sufficiently takes in consideration the 

orderly transfer of property; and 

(6) any additional recommendations for an orderly and effective process. 

(c) IMPLEMENTATION REPORTS.—Not later than 6 months after 

the date on which the Committee on Banking, Housing, and Urban 

Affairs of the Senate and the Committee on Financial Services of 

the House of Representatives receives the report required under subsection (b), and every 6 months thereafter until all aspects of the 

plan have been implemented, the Inspectors General of the Department of the Treasury, the Corporation, and the Board of Governors 

shall jointly provide a written report on the status of the implementation of the plan to the Board of Governors, the Corporation, the 

Office of the Comptroller of the Currency, and the Office of Thrift 

Supervision and shall submit a copy to the Committee on Banking, 

Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives. 

Subtitle C—Federal Deposit Insurance Corporation 

SEC. 331. DEPOSIT INSURANCE REFORMS. 

(a) SIZE DISTINCTIONS.—Section 7(b)(2) of the Federal Deposit 

Insurance Act (12 U.S.C. 1817(b)(2)) is amended— 

(1) by striking subparagraph (D); and 


sroberts on DSKD5P82C1PROD with HEARING
167 

(2) by redesignating subparagraph (C) as subparagraph 

(D). 

(b) ASSESSMENT BASE.—The Corporation shall amend the regulations issued by the Corporation under section 7(b)(2) of the Federal Deposit Insurance Act (12 U.S.C. 1817(b)(2)) to define the term 

‘‘assessment base’’ with respect to an insured depository institution 

for purposes of that section 7(b)(2), as an amount equal to— 

(1) the average consolidated total assets of the insured depository institution during the assessment period; minus 

(2) the sum of— 

(A) the average tangible equity of the insured depository institution during the assessment period; and 

(B) in the case of an insured depository institution that 

is a custodial bank (as defined by the Corporation, based 

on factors including the percentage of total revenues generated by custodial businesses and the level of assets under 

custody) or a banker’s bank (as that term is used in section 

5136 of the Revised Statutes (12 U.S.C. 24)), an amount 

that the Corporation determines is necessary to establish 

assessments consistent with the definition under section 

7(b)(1) of the Federal Deposit Insurance Act (12 U.S.C. 

1817(b)(1)) for a custodial bank or a banker’s bank. 

SEC. 332. ELIMINATION OF PROCYCLICAL ASSESSMENTS. 

Section 7(e) of the Federal Deposit Insurance Act is amended— 

(1) in paragraph (2)— 

(A) by amending subparagraph (B) to read as follows: 

‘‘(B) LIMITATION.—The Board of Directors may, in its 

sole discretion, suspend or limit the declaration of payment 

of dividends under subparagraph (A).’’; 

(B) by amending subparagraph (C) to read as follows: 

‘‘(C) NOTICE AND OPPORTUNITY FOR COMMENT.—The 

Corporation shall prescribe, by regulation, after notice and 

opportunity for comment, the method for the declaration, 

calculation, distribution, and payment of dividends under 

this paragraph’’; and 

(C) by striking subparagraphs (D) through (G); and 

(2) in paragraph (4)(A) by striking ‘‘paragraphs (2)(D) and’’ 

and inserting ‘‘paragraphs (2) and’’. 

SEC. 333. ENHANCED ACCESS TO INFORMATION FOR DEPOSIT INSURANCE PURPOSES. 

(a) Section 7(a)(2)(B) of the Federal Deposit Insurance Act is 

amended by striking ‘‘agreement’’ and inserting ‘‘consultation’’. 

(b) Section 7(b)(1)(E) of the Federal Deposit Insurance Act is 

amended— 

(1) in clause (i), by striking ‘‘such as’’ and inserting ‘‘including’’; and 

(2) in clause (iii), by striking ‘‘Corporation’’ and inserting 

‘‘Corporation, except as provided in section 7(a)(2)(B)’’. 

SEC. 334. TRANSITION RESERVE RATIO REQUIREMENTS TO REFLECT 

NEW ASSESSMENT BASE. 

(a) Section 7(b)(3)(B) of the Federal Deposit Insurance Act is 

amended to read as follows: 

‘‘(B) MINIMUM RESERVE RATIO.—The reserve ratio designated by the Board of Directors for any year may not be 


sroberts on DSKD5P82C1PROD with HEARING
168 

less than 1.35 percent of estimated insured deposits, or the 

comparable percentage of the assessment base set forth in 

paragraph (2)(C).’’. 

(b) Section 3(y)(3) of the Federal Deposit Insurance Act is 

amended by inserting ‘‘, or such comparable percentage of the assessment base set forth in section 7(b)(2)(C)’’ before the period. 

(c) For a period of not less than 5 years after the date of the 

enactment of this title, the Federal Deposit Insurance Corporation 

shall make available to the public the reserve ratio and the designated reserve ratio using both estimated insured deposits and the 

assessment base under section 7(b)(2)(C) of the Federal Deposit Insurance Act. 

(d) RESERVE RATIO.—Notwithstanding the timing requirements 

of section 7(b)(3)(E)(ii) of the Federal Deposit Insurance Act, the 

Corporation shall take such steps as may be necessary for the reserve ratio of the Deposit Insurance Fund to reach 1.35 percent of 

estimated insured deposits by September 30, 2020. 

(e) OFFSET.—In setting the assessments necessary to meet the 

requirements of subsection (d), the Corporation shall offset the effect 

of subsection (d) on insured depository institutions with total consolidated assets of less than $10,000,000,000. 

SEC. 335. PERMANENT INCREASE IN DEPOSIT AND SHARE INSURANCE. 

(a) PERMANENT INCREASE IN DEPOSIT INSURANCE.—Section 

11(a)(1)(E) of the Federal Deposit Insurance Act (12 U.S.C. 

1821(a)(1)(E)) is amended— 

(1) by striking ‘‘$100,000’’ and inserting ‘‘$250,000’’; and 

(2) by adding at the end the following new sentences: ‘‘Notwithstanding any other provision of law, the increase in the 

standard maximum deposit insurance amount to $250,000 

shall apply to depositors in any institution for which the Corporation was appointed as receiver or conservator on or after 

January 1, 2008, and before October 3, 2008. The Corporation 

shall take such actions as are necessary to carry out the requirements of this section with respect to such depositors, without regard to any time limitations under this Act. In implementing 

this and the preceding 2 sentences, any payment on a deposit 

claim made by the Corporation as receiver or conservator to a 

depositor above the standard maximum deposit insurance 

amount in effect at the time of the appointment of the Corporation as receiver or conservator shall be deemed to be part of the 

net amount due to the depositor under subparagraph (B).’’ 

(b) PERMANENT INCREASE IN SHARE INSURANCE.—Section 

207(k)(5) of the Federal Credit Union Act (12 U.S.C. 1787(k)(5)) is 

amended by striking ‘‘$100,000’’ and inserting ‘‘$250,000’’. 

SEC. 336. MANAGEMENT OF THE FEDERAL DEPOSIT INSURANCE CORPORATION. 

(a) IN GENERAL.—Section 2 of the Federal Deposit Insurance 

Act (12 U.S.C. 1812) is amended— 

(1) in subsection (a)(1)(B), by striking ‘‘Director of the Office 

of Thrift Supervision’’ and inserting ‘‘Director of the Consumer 

Financial Protection Bureau’’; 

(2) by amending subsection (d)(2) to read as follows: 

‘‘(2) ACTING OFFICIALS MAY SERVE.—In the event of a vacancy in the office of the Comptroller of the Currency or the ofVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00172 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
169 

fice of Director of the Consumer Financial Protection Bureau 

and pending the appointment of a successor, or during the absence or disability of the Comptroller of the Currency or the Director of the Consumer Financial Protection Bureau, the acting 

Comptroller of the Currency or the acting Director of the Consumer Financial Protection Bureau, as the case may be, shall 

be a member of the Board of Directors in the place of the Comptroller or Director.’’; and 

(3) in subsection (f)(2), by striking ‘‘Office of Thrift Supervision’’ and inserting ‘‘Consumer Financial Protection Bureau’’. 

(b) EFFECTIVE DATE.—This section, and the amendments made 

by this section, shall take effect on the transfer date. 

Subtitle D—Other Matters 

SEC. 341. BRANCHING. 

Notwithstanding the Federal Deposit Insurance Act (12 U.S.C. 

1811 et seq.), the Bank Holding Company Act of 1956 (12 U.S.C. 

1841 et seq.), or any other provision of Federal or State law, a savings association that becomes a bank may— 

(1) continue to operate any branch or agency that the savings association operated immediately before the savings association became a bank; and 

(2) establish, acquire, and operate additional branches and 

agencies at any location within any State in which the savings 

association operated a branch immediately before the savings 

association became a bank, if the law of the State in which the 

branch is located, or is to be located, would permit establishment of the branch if the bank were a State bank chartered by 

such State. 

SEC. 342. OFFICE OF MINORITY AND WOMEN INCLUSION. 

(a) OFFICE OF MINORITY AND WOMEN INCLUSION.— 

(1) ESTABLISHMENT.— 

(A) IN GENERAL.—Except as provided in subparagraph 

(B), not later than 6 months after the date of enactment of 

this Act, each agency shall establish an Office of Minority 

and Women Inclusion that shall be responsible for all matters of the agency relating to diversity in management, employment, and business activities. 

(B) BUREAU.—The Bureau shall establish an Office of 

Minority and Women Inclusion not later than 6 months 

after the designated transfer date established under section 

1062. 

(2) TRANSFER OF RESPONSIBILITIES.—Each agency that, on 

the day before the date of enactment of this Act, assigned the 

responsibilities described in paragraph (1) (or comparable responsibilities) to another office of the agency shall ensure that 

such responsibilities are transferred to the Office. 

(3) DUTIES WITH RESPECT TO CIVIL RIGHTS LAWS.—The responsibilities described in paragraph (1) do not include enforcement of statutes, regulations, or executive orders pertaining to 

civil rights, except each Director shall coordinate with the agency administrator, or the designee of the agency administrator, 

regarding the design and implementation of any remedies reVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00173 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
170 

sulting from violations of such statutes, regulations, or executive orders. 

(b) DIRECTOR.— (1) IN GENERAL.—The Director of each Office shall be appointed by, and shall report to, the agency administrator. The 

position of Director shall be a career reserved position in the 

Senior Executive Service, as that position is defined in section 

3132 of title 5, United States Code, or an equivalent designation. 

(2) DUTIES.—Each Director shall develop standards for— 

(A) equal employment opportunity and the racial, ethnic, and gender diversity of the workforce and senior management of the agency; 

(B) increased participation of minority-owned and 

women-owned businesses in the programs and contracts of 

the agency, including standards for coordinating technical 

assistance to such businesses; and 

(C) assessing the diversity policies and practices of entities regulated by the agency. 

(3) OTHER DUTIES.—Each Director shall advise the agency 

administrator on the impact of the policies and regulations of 

the agency on minority-owned and women-owned businesses. 

(4) RULE OF CONSTRUCTION.—Nothing in paragraph (2)(C) 

may be construed to mandate any requirement on or otherwise 

affect the lending policies and practices of any regulated entity, 

or to require any specific action based on the findings of the assessment. 

(c) INCLUSION IN ALL LEVELS OF BUSINESS ACTIVITIES.— (1) IN GENERAL.—The Director of each Office shall develop 

and implement standards and procedures to ensure, to the maximum extent possible, the fair inclusion and utilization of minorities, women, and minority-owned and women-owned businesses in all business and activities of the agency at all levels, 

including in procurement, insurance, and all types of contracts. 

(2) CONTRACTS.—The procedures established by each agency for review and evaluation of contract proposals and for hiring service providers shall include, to the extent consistent with 

applicable law, a component that gives consideration to the diversity of the applicant. Such procedure shall include a written 

statement, in a form and with such content as the Director 

shall prescribe, that a contractor shall ensure, to the maximum 

extent possible, the fair inclusion of women and minorities in 

the workforce of the contractor and, as applicable, subcontractors. 

(3) TERMINATION.— 

(A) DETERMINATION.—The standards and procedures 

developed and implemented under this subsection shall include a procedure for the Director to make a determination 

whether an agency contractor, and, as applicable, a subcontractor has failed to make a good faith effort to include minorities and women in their workforce. 

(B) EFFECT OF DETERMINATION.— (i) RECOMMENDATION TO AGENCY ADMINIS- TRATOR.—Upon a determination described in subparagraph (A), the Director shall make a recommendation 


sroberts on DSKD5P82C1PROD with HEARING
171 

to the agency administrator that the contract be terminated. 

(ii) ACTION BY AGENCY ADMINISTRATOR.—Upon receipt of a recommendation under clause (i), the agency 

administrator may— 

(I) terminate the contract; 

(II) make a referral to the Office of Federal 

Contract Compliance Programs of the Department 

of Labor; or 

(III) take other appropriate action. 

(d) APPLICABILITY.—This section shall apply to all contracts of 

an agency for services of any kind, including the services of financial institutions, investment banking firms, mortgage banking 

firms, asset management firms, brokers, dealers, financial services 

entities, underwriters, accountants, investment consultants, and providers of legal services. The contracts referred to in this subsection 

include all contracts for all business and activities of an agency, at 

all levels, including contracts for the issuance or guarantee of any 

debt, equity, or security, the sale of assets, the management of the 

assets of the agency, the making of equity investments by the agency, 

and the implementation by the agency of programs to address economic recovery. 

(e) REPORTS.—Each Office shall submit to Congress an annual 

report regarding the actions taken by the agency and the Office pursuant to this section, which shall include— 

(1) a statement of the total amounts paid by the agency to 

contractors since the previous report; 

(2) the percentage of the amounts described in paragraph 

(1) that were paid to contractors described in subsection (c)(1); 

(3) the successes achieved and challenges faced by the agency in operating minority and women outreach programs; 

(4) the challenges the agency may face in hiring qualified 

minority and women employees and contracting with qualified 

minority-owned and women-owned businesses; and 

(5) any other information, findings, conclusions, and recommendations for legislative or agency action, as the Director 

determines appropriate. 

(f) DIVERSITY IN AGENCY WORKFORCE.—Each agency shall take 

affirmative steps to seek diversity in the workforce of the agency at 

all levels of the agency in a manner consistent with applicable law. 

Such steps shall include— 

(1) recruiting at historically black colleges and universities, 

Hispanic-serving institutions, women’s colleges, and colleges 

that typically serve majority minority populations; 

(2) sponsoring and recruiting at job fairs in urban communities; 

(3) placing employment advertisements in newspapers and 

magazines oriented toward minorities and women; 

(4) partnering with organizations that are focused on developing opportunities for minorities and women to place talented 

young minorities and women in industry internships, summer 

employment, and full-time positions; 

(5) where feasible, partnering with inner-city high schools, 

girls’ high schools, and high schools with majority minority 


sroberts on DSKD5P82C1PROD with HEARING
172 

populations to establish or enhance financial literacy programs 

and provide mentoring; and 

(6) any other mass media communications that the Office 

determines necessary. 

(g) DEFINITIONS.—For purposes of this section, the following 

definitions shall apply: 

(1) AGENCY.—The term ‘‘agency’’ means— 

(A) the Departmental Offices of the Department of the 

Treasury; 

(B) the Corporation; 

(C) the Federal Housing Finance Agency; 

(D) each of the Federal reserve banks; 

(E) the Board; 

(F) the National Credit Union Administration; 

(G) the Office of the Comptroller of the Currency; 

(H) the Commission; and 

(I) the Bureau. 

(2) AGENCY ADMINISTRATOR.—The term ‘‘agency administrator’’ means the head of an agency. 

(3) MINORITY.—The term ‘‘minority’’ has the same meaning 

as in section 1204(c) of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 1811 note). 

(4) MINORITY-OWNED BUSINESS.—The term ‘‘minorityowned business’’ has the same meaning as in section 

21A(r)(4)(A) of the Federal Home Loan Bank Act (12 U.S.C. 

1441a(r)(4)(A)), as in effect on the day before the transfer date. 

(5) OFFICE.—The term ‘‘Office’’ means the Office of Minority 

and Women Inclusion established by an agency under subsection (a). 

(6) WOMEN-OWNED BUSINESS.—The term ‘‘women-owned 

business’’ has the meaning given the term ‘‘women’s business’’ 

in section 21A(r)(4)(B) of the Federal Home Loan Bank Act (12 

U.S.C. 1441a(r)(4)(B)), as in effect on the day before the transfer 

date. 

SEC. 343. INSURANCE OF TRANSACTION ACCOUNTS. 

(a) BANKS AND SAVINGS ASSOCIATIONS.— (1) AMENDMENTS.—Section 11(a)(1) of the Federal Deposit 

Insurance Act (12 U.S.C. 1821(a)(1)) is amended— 

(A) in subparagraph (B)— 

(i) by striking ‘‘The net amount’’ and inserting the 

following: 

‘‘(i) IN GENERAL.—Subject to clause (ii), the net 

amount’’; and 

(ii) by adding at the end the following new clauses: 

‘‘(ii) INSURANCE FOR NONINTEREST-BEARING TRANSACTION ACCOUNTS.—Notwithstanding clause (i), the 

Corporation shall fully insure the net amount that any 

depositor at an insured depository institution maintains in a noninterest-bearing transaction account. 

Such amount shall not be taken into account when 

computing the net amount due to such depositor under 

clause (i). 

‘‘(iii) NONINTEREST-BEARING TRANSACTION ACCOUNT DEFINED.—For purposes of this subparagraph, 

the term ‘noninterest-bearing transaction account’ 


sroberts on DSKD5P82C1PROD with HEARING
173 

means a deposit or account maintained at an insured 

depository institution— 

‘‘(I) with respect to which interest is neither accrued nor paid; 

‘‘(II) on which the depositor or account holder 

is permitted to make withdrawals by negotiable or 

transferable instrument, payment orders of withdrawal, telephone or other electronic media transfers, or other similar items for the purpose of making payments or transfers to third parties or others; and 

‘‘(III) on which the insured depository institution does not reserve the right to require advance 

notice of an intended withdrawal.’’; and 

(B) in subparagraph (C), by striking ‘‘subparagraph 

(B)’’ and inserting ‘‘subparagraph (B)(i)’’. 

(2) EFFECTIVE DATE.—The amendments made by paragraph (1) shall take effect on December 31, 2010. 

(3) PROSPECTIVE REPEAL.—Effective January 1, 2013, section 11(a)(1) of the Federal Deposit Insurance Act (12 U.S.C. 

1821(a)(1)), as amended by paragraph (1), is amended— 

(A) in subparagraph (B)— 

(i) by striking ‘‘DEPOSIT.—’’ and all that follows 

through ‘‘clause (ii), the net amount’’ and insert ‘‘DE- POSIT.—The net amount’’; and 

(ii) by striking clauses (ii) and (iii); and 

(B) in subparagraph (C), by striking ‘‘subparagraph 

(B)(i)’’ and inserting ‘‘subparagraph (B)’’. 

(b) CREDIT UNIONS.— (1) AMENDMENTS.—Section 207(k)(1) of the Federal Credit 

Union Act (12 U.S.C. 1787(k)(1)) is amended— 

(A) in subparagraph (A)— 

(i) by striking ‘‘Subject to the provisions of paragraph (2), the net amount’’ and inserting the following: 

‘‘(i) NET AMOUNT OF INSURANCE PAYABLE.—Subject 

to clause (ii) and the provisions of paragraph (2), the 

net amount’’; and 

(ii) by adding at the end the following new clauses: 

‘‘(ii) INSURANCE FOR NONINTEREST-BEARING TRANS- ACTION ACCOUNTS.—Notwithstanding clause (i), the 

Board shall fully insure the net amount that any member or depositor at an insured credit union maintains 

in a noninterest-bearing transaction account. Such 

amount shall not be taken into account when computing the net amount due to such member or depositor 

under clause (i). 

‘‘(iii) NONINTEREST-BEARING TRANSACTION AC- COUNT DEFINED.—For purposes of this subparagraph, 

the term ‘noninterest-bearing transaction account’ 

means an account or deposit maintained at an insured 

credit union— 

‘‘(I) with respect to which interest is neither accrued nor paid; 

‘‘(II) on which the account holder or depositor 

is permitted to make withdrawals by negotiable or 


sroberts on DSKD5P82C1PROD with HEARING
174 

transferable instrument, payment orders of withdrawal, telephone or other electronic media transfers, or other similar items for the purpose of making payments or transfers to third parties or others; and 

‘‘(III) on which the insured credit union does 

not reserve the right to require advance notice of 

an intended withdrawal.’’; and 

(B) in subparagraph (B), by striking ‘‘subparagraph 

(A)’’ and inserting ‘‘subparagraph (A)(i)’’. 

(2) EFFECTIVE DATE.—The amendments made by paragraph (1) shall take effect upon the date of the enactment of this 

Act. 

(3) PROSPECTIVE REPEAL.—Effective January 1, 2013, section 207(k)(1) of the Federal Credit Union Act (12 U.S.C. 

1787(k)(1)), as amended by paragraph (1), is amended— 

(A) in subparagraph (A)— 

(i) by striking ‘‘(i) NET AMOUNT OF INSURANCE PAYABLE.—’’ and all that follows through ‘‘paragraph (2), 

the net amount’’ and inserting ‘‘Subject to the provisions of paragraph (2), the net amount’’; and 

(ii) by striking clauses (ii) and (iii); and 

(B) in subparagraph (B), by striking ‘‘subparagraph 

(A)(i)’’ and inserting ‘‘subparagraph (A)’’. 

Subtitle E—Technical and Conforming Amendments 

SEC. 351. EFFECTIVE DATE. 

Except as provided in section 364(a), the amendments made by 

this subtitle shall take effect on the transfer date. 

SEC. 352. BALANCED BUDGET AND EMERGENCY DEFICIT CONTROL 

ACT OF 1985. 

Section 256(h) of the Balanced Budget and Emergency Deficit 

Control Act of 1985 (2 U.S.C. 906(h)) is amended— 

(1) in paragraph (4), by striking subparagraphs (C) and 

(G); and 

(2) by redesignating subparagraphs (D), (E), (F), and (H) as 

subparagraphs (C), (D), (E), and (F), respectively. 

SEC. 353. BANK ENTERPRISE ACT OF 1991. 

Section 232(a) of the Bank Enterprise Act of 1991 (12 U.S.C. 

1834(a)) is amended— 

(1) in the subsection heading, by striking ‘‘BY FEDERAL RESERVE BOARD’’; 

(2) in paragraph (1)— 

(A) by striking ‘‘The Board of Governors of the Federal 

Reserve System,’’ and inserting ‘‘The Comptroller of the 

Currency’’; and 

(B) by striking ‘‘section 7(b)(2)(H)’’ and inserting ‘‘section 7(b)(2)(E)’’; 

(3) in paragraph (2)(A), by striking ‘‘Board’’ and inserting 

‘‘Comptroller’’; and 

(4) in paragraph (3)— 

(A) by redesignating subparagraphs (A) through (C) as 

subparagraphs (B) through (D), respectively; and 

(B) by inserting before subparagraph (B) the following: 


sroberts on DSKD5P82C1PROD with HEARING
175 

‘‘(A) COMPTROLLER.—The term ‘Comptroller’ means the 

Comptroller of the Currency.’’. 

SEC. 354. BANK HOLDING COMPANY ACT OF 1956. 

The Bank Holding Company Act of 1956 (12 U.S.C. 1841 et 

seq.) is amended— 

(1) in section 2(j)(3) (12 U.S.C. 1841(j)(3)), strike ‘‘Director 

of the Office of Thrift Supervision’’ and inserting ‘‘appropriate 

Federal banking agency’’; 

(2) in section 4 (12 U.S.C. 1843)— 

(A) in subsection (i)— 

(i) in paragraph (4)— 

(I) in subparagraph (A)— 

(aa) in the subparagraph heading, by 

striking ‘‘TO DIRECTOR’’; and 

(bb) by striking ‘‘Board’’ and all that follows through the end of the subparagraph and 

inserting ‘‘Board shall solicit comments and 

recommendations from— 

‘‘(i) the Comptroller of the Currency, with respect to 

the acquisition of a Federal savings association; and 

‘‘(ii) the Federal Deposit Insurance Corporation, 

with respect to the acquisition of a State savings association.’’. 

(II) in subparagraph (B), by striking ‘‘Director’’ each place that term appears and inserting 

‘‘Comptroller of the Currency or the Federal Deposit Insurance Corporation, as applicable,’’; 

(ii) in paragraph (5)— 

(I) in subparagraph (B), by striking ‘‘Director 

with’’ and inserting ‘‘Comptroller of the Currency 

or the Federal Deposit Insurance Corporation, as 

applicable, with’’; and 

(II) by striking ‘‘Director’’ each place that term 

appears and inserting ‘‘Comptroller of the Currency or the Federal Deposit Insurance Corporation’’; 

(iii) in paragraph (6), by striking ‘‘Director’’ and 

inserting ‘‘Comptroller of the Currency or the Federal 

Deposit Insurance Corporation, as applicable,’’; and 

(iv) by striking paragraph (7); and 

(3) in section 5(f) (12 U.S.C. 1844(f))— 

(A) by striking ‘‘subpena’’ each place that term appears 

and inserting ‘‘subpoena’’; 

(B) by striking ‘‘subpenas’’ each place that term appears and inserting ‘‘subpoenas’’; and 

(C) by striking ‘‘subpenaed’’ and inserting ‘‘subpoenaed’’. 

SEC. 355. BANK HOLDING COMPANY ACT AMENDMENTS OF 1970. 

Section 106(b)(1) of the Bank Holding Company Act Amendments of 1970 (12 U.S.C. 1972(1)) is amended in the undesignated 

matter following subparagraph (E) by inserting ‘‘issue such regulations as are necessary to carry out this section, and, in consultation 

with the Comptroller of the Currency and the Federal Deposit Insurance Company, may’’ after ‘‘The Board may’’. 


sroberts on DSKD5P82C1PROD with HEARING
176 

SEC. 356. BANK PROTECTION ACT OF 1968. 

The Bank Protection Act of 1968 (12 U.S.C. 1881 et seq.) is 

amended— 

(1) in section 2 (12 U.S.C. 1881), by striking ‘‘the term’’ and 

all that follows through the end of the section and inserting ‘‘the 

term ‘Federal supervisory agency’ means the appropriate Federal banking agency, as defined in section 3(q) of the Federal 

Deposit Insurance Act (12 U.S.C. 1813(q)).’’; 

(2) in section 3 (12 U.S.C. 1882), by striking ‘‘and loan’’ 

each place that term appears; and 

(3) in section 5 (12 U.S.C. 1884), by striking ‘‘and loan’’. 

SEC. 357. BANK SERVICE COMPANY ACT. 

The Bank Service Company Act (12 U.S.C. 1861 et seq.) is 

amended— 

(1) in section 1(b)(4) (12 U.S.C. 1861(b)(4))— 

(A) by inserting after ‘‘an insured bank,’’ the following: 

‘‘a savings association,’’; 

(B) by striking ‘‘Director of the Office of Thrift Supervision’’ and inserting ‘‘appropriate Federal banking agency’’; and 

(C) by striking ‘‘, the Federal Savings and Loan Insurance Corporation,’’; 

(2) in section 1(b)(5), by striking ‘‘term ‘insured depository 

institution’ has the same meaning as in section 3(c)’’ and inserting ‘‘terms ‘depository institution’ and ‘savings association’ have 

the same meanings as in section 3’’; and 

(3) in section 7(c)(2) (12 U.S.C. 1867(c)(2)), by inserting 

‘‘each’’ after ‘‘notify’’. 

SEC. 358. COMMUNITY REINVESTMENT ACT OF 1977. 

The Community Reinvestment Act of 1977 (12 U.S.C. 2901 et 

seq.) is amended— 

(1) in section 803 (12 U.S.C. 2902)— 

(A) in paragraph (1)— 

(i) in subparagraph (A), by inserting ‘‘and Federal 

savings associations (the deposits of which are insured 

by the Federal Deposit Insurance Corporation)’’ after 

‘‘banks’’; 

(ii) in subparagraph (B), by striking ‘‘and bank 

holding companies’’ and inserting ‘‘, bank holding companies, and savings and loan holding companies’’; and 

(iii) in subparagraph (C), by striking ‘‘; and’’ and 

inserting ‘‘, and State savings associations (the deposits 

of which are insured by the Federal Deposit Insurance 

Corporation).’’; and 

(B) by striking paragraph (2) (relating to the Office of 

Thrift Supervision), as added by section 744(q) of the Financial Institutions Reform, Recovery, and Enforcement 

Act of 1989 (Public Law 101–73; 103 Stat. 440); and 

(2) in section 806 (12 U.S.C. 2905), by inserting ‘‘, except 

that the Comptroller of the Currency shall prescribe regulations 

applicable to savings associations and the Board of Governors 

shall prescribe regulations applicable to insured State member 

banks, bank holding companies and savings and loan holding 

companies,’’ after ‘‘supervisory agency’’. 


sroberts on DSKD5P82C1PROD with HEARING
177 

SEC. 359. CRIME CONTROL ACT OF 1990. 

The Crime Control Act of 1990 is amended— 

(1) in section 2539(c)(2) (28 U.S.C. 509 note)— 

(A) by striking subparagraphs (C) and (D); and 

(B) by redesignating subparagraphs (E) through (H) as 

subparagraphs (C) through (G), respectively; and 

(2) in section 2554(b)(2) (Public Law 101–647; 104 Stat. 

4890)— 

(A) in subparagraph (A), by striking ‘‘, the Director of 

the Office of Thrift Supervision,’’ and inserting ‘‘the Comptroller of the Currency’’; and 

(B) in subparagraph (B), by striking ‘‘, the Director’’ 

and all that follows through ‘‘Trust Corporation’’ and inserting ‘‘or the Federal Deposit Insurance Corporation’’. 

SEC. 360. DEPOSITORY INSTITUTION MANAGEMENT INTERLOCKS ACT. 

The Depository Institution Management Interlocks Act (12 

U.S.C. 3201 et seq.) is amended— 

(1) in section 207 (12 U.S.C. 3206)— 

(A) in paragraph (1), by inserting before the comma at 

the end the following: ‘‘and Federal savings associations 

(the deposits of which are insured by the Federal Deposit 

Insurance Corporation)’’; 

(B) in paragraph (2), by striking ‘‘, and bank holding 

companies’’ and inserting ‘‘, bank holding companies, and 

savings and loan holding companies’’; 

(C) in paragraph (3), by striking ‘‘Corporation,’’ and inserting ‘‘Corporation and State savings associations (the deposits of which are insured by the Federal Deposit Insurance Corporation),’’; 

(D) by striking paragraph (4); 

(E) by redesignating paragraphs (5) and (6) as paragraphs (4) and (5), respectively; and 

(F) in paragraph (5), as so redesignated, by striking 

‘‘through (5)’’ and inserting ‘‘through (4)’’; 

(2) in section 209 (12 U.S.C. 3207)— 

(A) in paragraph (1), by inserting before the comma at 

the end the following: ‘‘and Federal savings associations 

(the deposits of which are insured by the Federal Deposit 

Insurance Corporation)’’; 

(B) in paragraph (2), by striking ‘‘, and bank holding 

companies’’ and inserting ‘‘, bank holding companies, and 

savings and loan holding companies’’; 

(C) in paragraph (3), by striking ‘‘Corporation,’’ and inserting ‘‘Corporation and State savings associations (the deposits of which are insured by the Federal Deposit Insurance Corporation),’’; 

(D) by striking paragraph (4); and 

(E) by redesignating paragraph (5) as paragraph (4); 

and 

(3) in section 210(a) (12 U.S.C. 3208(a))— 

(A) by striking ‘‘his’’ and inserting ‘‘the’’; and 

(B) by inserting ‘‘of the Attorney General’’ after ‘‘enforcement functions’’. 


sroberts on DSKD5P82C1PROD with HEARING
178 

SEC. 361. EMERGENCY HOMEOWNERS’ RELIEF ACT. 

Section 110 of the Emergency Homeowners’ Relief Act (12 

U.S.C. 2709) is amended in the second sentence, by striking ‘‘Home 

Loan Bank Board, the Federal Savings and Loan Insurance Corporation’’ and inserting ‘‘Housing Finance Agency’’. 

SEC. 362. FEDERAL CREDIT UNION ACT. 

The Federal Credit Union Act (12 U.S.C. 1751 et seq.) is 

amended— 

(1) in section 107(8) (12 U.S.C. 1757(8)), by striking ‘‘or the 

Federal Savings and Loan Insurance Corporation’’; 

(2) in section 205 (12 U.S.C. 1785)— 

(A) in subsection (b)(2)(G)(i), by striking ‘‘the Office of 

Thrift Supervision and’’; and 

(B) in subsection (i)(1), by striking ‘‘or the Federal Savings and Loan Insurance Corporation’’; and 

(3) in section 206(g)(7) (12 U.S.C. 1786(g)(7))— 

(A) in subparagraph (A)— 

(i) in clause (ii), by striking ‘‘(b)(8)’’ and inserting 

‘‘(b)(9)’’; 

(ii) in clause (v)— 

(I) by striking ‘‘depository’’ and inserting ‘‘financial’’; and 

(II) by adding ‘‘and’’ at the end; 

(iii) in clause (vi)— 

(I) by striking ‘‘Board’’ and inserting ‘‘Agency’’; 

and 

(II) by striking ‘‘; and’’ and inserting a period; 

and 

(iv) by striking clause (vii); and 

(B) in subparagraph (D)— 

(i) in clause (iii), by adding ‘‘and’’ at the end; 

(ii) in clause (iv)— 

(I) by striking ‘‘Board’’ and inserting ‘‘Agency’’; 

and 

(II) by striking ‘‘and’’ at the end; and 

(iii) by striking clause (v). 

SEC. 363. FEDERAL DEPOSIT INSURANCE ACT. 

The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.) is 

amended— 

(1) in section 3 (12 U.S.C. 1813)— 

(A) in subsection (b)(1)(C), by striking ‘‘Director of the 

Office of Thrift Supervision’’ and inserting ‘‘Comptroller of 

the Currency’’; 

(B) in subsection (l)(5), in the matter preceding subparagraph (A), by striking ‘‘Director of the Office of Thrift 

Supervision,’’; and 

(C) in subsection (z), by striking ‘‘the Director of the Office of Thrift Supervision,’’; 

(2) in section 7 (12 U.S.C. 1817)— 

(A) in subsection (a)— 

(i) in paragraph (2)— 

(I) in subparagraph (A)— 

(aa) in the first sentence, by striking ‘‘the 

Director of the Office of Thrift Supervision,’’; 


sroberts on DSKD5P82C1PROD with HEARING
179 

(bb) in the second sentence— 

(AA) by striking ‘‘the Director of the Office 

of Thrift Supervision,’’ and inserting ‘‘to’’; and 

(BB) by inserting ‘‘to’’ before ‘‘any Federal 

home’’; and 

(cc) by striking ‘‘Finance Board’’ each 

place that term appears and inserting ‘‘Finance Agency’’; and 

(II) in subparagraph (B), by striking ‘‘the 

Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the Director of the Office of Thrift Supervision,’’ and inserting ‘‘the Comptroller of the Currency and the 

Board of Governors of the Federal Reserve System,’’; 

(ii) in paragraph (3), in the first sentence, by striking ‘‘Comptroller of the Currency, the Chairman of the 

Board of Governors of the Federal Reserve System, and 

the Director of the Office of Thrift Supervision.’’ and 

inserting ‘‘Comptroller of the Currency, and the Chairman of the Board of Governors of the Federal Reserve 

System.’’; 

(iii) in paragraph (6), by striking ‘‘section 

232(a)(3)(C)’’ and inserting ‘‘section 232(a)(3)(D)’’; and 

(iv) in paragraph (7), by striking ‘‘, the Director of 

the Office of Thrift Supervision,’’; and 

(B) in subsection (n)— 

(i) in the heading, by striking ‘‘DIRECTOR OF THE

OFFICE OF THRIFT SUPERVISION’’ and inserting ‘‘COMP- TROLLER OF THE CURRENCY’’; 

(ii) in the first sentence— 

(I) by striking ‘‘the Director of the Office of 

Thrift Supervision’’ and inserting ‘‘the Comptroller 

of the Currency’’; and 

(II) by inserting ‘‘Federal’’ before ‘‘savings associations’’; 

(iii) in the third sentence, by striking ‘‘, the Financing Corporation, and the Resolution Funding Corporation’’; and 

(iv) by striking ‘‘the Director’’ each place that term 

appears and inserting ‘‘the Comptroller’’; 

(3) in section 8 (12 U.S.C. 1818)— 

(A) in subsection (a)(8)(B)(ii), in the last sentence, by 

striking ‘‘Director of the Office of Thrift Supervision’’ each 

place that term appears and inserting ‘‘Comptroller of the 

Currency’’; 

(B) in subsection (b)(3)— 

(i) by inserting ‘‘any savings and loan holding 

company and any subsidiary (other than a depository 

institution) of a savings and loan holding company (as 

such terms are defined in section 10 of Home Owners’ 

Loan Act), any noninsured State member bank’’ after 

‘‘Bank Holding Company Act of 1956,’’; and 

(ii) by inserting ‘‘or against a savings and loan 

holding company or any subsidiary thereof (other than 


sroberts on DSKD5P82C1PROD with HEARING
180 

a depository institution or a subsidiary of such depository institution)’’ before the period at the end; 

(C) by striking paragraph (9) of subsection (b) and inserting the following new paragraph: 

‘‘(9) [Repealed]’’. 

(D) in subsection (e)(7)— 

(i) in subparagraph (A)— 

(I) in clause (v), by inserting ‘‘and’’ after the 

semicolon; 

(II) in clause (vi)— 

(aa) by striking ‘‘Board’’ and inserting 

‘‘Agency’’; and 

(bb) by striking ‘‘; and’’ and inserting a 

period; and 

(III) by striking clause (vii); and 

(ii) in subparagraph (D)— 

(I) in clause (iii), by inserting ‘‘and’’ after the 

semicolon; 

(II) in clause (iv)— 

(aa) by striking ‘‘Board’’ and inserting 

‘‘Agency’’; and 

(bb) by striking ‘‘; and’’ and inserting a 

period; and 

(III) by striking clause (v); 

(E) in subsection (j)— 

(i) in paragraph (2), by striking ‘‘, or as a savings 

association under subsection (b)(9) of this section’’; 

(ii) in paragraph (3), by inserting ‘‘or’’ after the 

semicolon; 

(iii) in paragraph (4), by striking ‘‘; or’’ and inserting a comma; and 

(iv) by striking paragraph (5); 

(F) in subsection (o), by striking ‘‘Director of the Office 

of Thrift Supervision’’ and inserting ‘‘Comptroller of the 

Currency’’; and 

(G) in subsection (w)(3)(A), by striking ‘‘and the Office 

of Thrift Supervision’’; 

(4) in section 10 (12 U.S.C. 1820)— 

(A) in subsection (d)(5), by striking ‘‘or the Resolution 

Trust Corporation’’ each place that term appears; and 

(B) in subsection (k)(5)(B)— 

(i) in clause (ii), by inserting ‘‘and’’ after the semicolon; 

(ii) in clause (iii), by striking ‘‘; and’’ and inserting 

a period; and 

(iii) by striking clause (iv); 

(5) in section 11 (12 U.S.C. 1821)— 

(A) in subsection (c)— 

(i) in paragraph (2)(A)(ii), by striking ‘‘(other than 

section 21A of the Federal Home Loan Bank Act)’’; 

(ii) in paragraph (4), by striking ‘‘Except as otherwise provided in section 21A of the Federal Home Loan 

Bank Act and notwithstanding’’ and inserting ‘‘Notwithstanding’’; 

(iii) in paragraph (6)— 


sroberts on DSKD5P82C1PROD with HEARING
181 

(I) in the heading, by striking ‘‘DIRECTOR OF

THE OFFICE OF THRIFT SUPERVISION’’ and inserting 

‘‘COMPTROLLER OF THE CURRENCY’’; 

(II) in subparagraph (A)— 

(aa) by striking ‘‘or the Resolution Trust 

Corporation’’; and 

(bb) by striking ‘‘Director of the Office of 

Thrift Supervision’’ and inserting ‘‘Comptroller of the Currency’’; and 

(III) by amending subparagraph (B) to read as 

follows: 

‘‘(B) RECEIVER.—The Corporation may, at the discretion of the Comptroller of the Currency, be appointed receiver and the Corporation may accept any such appointment.’’; 

(iv) in paragraph (12)(A), by striking ‘‘or the Resolution Trust Corporation’’; 

(B) in subsection (d)— 

(i) in paragraph (17)(A), by striking ‘‘or the Director of the Office of Thrift Supervision’’; and 

(ii) in paragraph (18)(B), by striking ‘‘or the Director of the Office of Thrift Supervision’’; 

(C) in subsection (m)— 

(i) in paragraph (9), by striking ‘‘or the Director of 

the Office of Thrift Supervision, as appropriate’’; 

(ii) in paragraph (16), by striking ‘‘or the Director 

of the Office of Thrift Supervision, as appropriate’’ each 

place that term appears; and 

(iii) in paragraph (18), by striking ‘‘or the Director 

of the Office of Thrift Supervision, as appropriate’’ each 

place that term appears; 

(D) in subsection (n)— 

(i) in paragraph (1)(A)— 

(I) by striking ‘‘, or the Director of the Office 

of Thrift Supervision, with respect to’’ and inserting ‘‘or’’; and 

(II) by striking ‘‘applicable,,’’ and inserting 

‘‘applicable,’’; 

(ii) in paragraph (2)(A), by striking ‘‘or the Director of the Office of Thrift Supervision’’; 

(iii) in paragraph (4)(D), by striking ‘‘and the Director of the Office of Thrift Supervision, as appropriate,’’; 

(iv) in paragraph (4)(G), by striking ‘‘and the Director of the Office of Thrift Supervision, as appropriate,’’; and 

(v) in paragraph (12)(B)— 

(I) by inserting ‘‘as’’ after ‘‘shall appoint the 

Corporation’’; 

(II) by striking ‘‘or the Director of the Office of 

Thrift Supervision, as appropriate,’’ each place 

such term appears; 

(E) in subsection (p)— 

(i) in paragraph (2)(B), by striking ‘‘the Corporation, the FSLIC Resolution Fund, or the Resolution 


sroberts on DSKD5P82C1PROD with HEARING
182 

Trust Corporation,’’ and inserting ‘‘or the Corporation,’’; and 

(ii) in paragraph (3)(B), by striking ‘‘, the FSLIC 

Resolution Fund, the Resolution Trust Corporation,’’; 

and 

(F) in subsection (r), by striking ‘‘and the Resolution 

Trust Corporation’’; 

(6) in section 13(k)(1)(A)(iv) (12 U.S.C. 1823(k)(1)(A)(iv)), by 

striking ‘‘Director of the Office of Thrift Supervision’’ and inserting ‘‘Comptroller of the Currency’’; 

(7) in section 18 (12 U.S.C. 1828)— 

(A) in subsection (c)(2)— 

(i) in subparagraph (A), by inserting ‘‘or a Federal 

savings association’’ before the semicolon; 

(ii) in subparagraph (B), by adding ‘‘and’’ at the 

end; 

(iii) in subparagraph (C), by striking ‘‘(except’’ and 

all that follows through ‘‘; and’’ and inserting ‘‘or a 

State savings association.’’; and 

(iv) by striking subparagraph (D); 

(B) in subsection (g)(1), by striking ‘‘the Director of the 

Office of Thrift Supervision’’ and inserting ‘‘the Comptroller 

of the Currency’’; 

(C) in subsection (i)(2)(C), by striking ‘‘Director of the 

Office of Thrift Supervision’’ and inserting ‘‘Corporation’’; 

and 

(D) in subsection (m)— 

(i) in paragraph (1)— 

(I) in subparagraph (A), by striking ‘‘and the 

Director of the Office of Thrift Supervision’’ and 

inserting ‘‘or the Comptroller of the Currency, as 

appropriate,’’; and 

(II) in subparagraph (B), by striking ‘‘and orders of the Director of the Office of Thrift Supervision’’ and inserting ‘‘of the Comptroller of the 

Currency and orders of the Corporation and the 

Comptroller of the Currency’’; 

(ii) in paragraph (2)— 

(I) in subparagraph (A), by striking ‘‘Director 

of the Office of Thrift Supervision’’ and inserting 

‘‘Comptroller of the Currency, as appropriate,’’; 

and 

(II) in subparagraph (B)— 

(aa) in the matter before clause (i), by 

striking ‘‘Director of the Office of Thrift Supervision’’ and inserting ‘‘Corporation or the 

Comptroller of the Currency, as appropriate,’’; 

and 

(bb) in the matter following clause (ii)— 

(AA) in the first sentence, by striking 

‘‘Director of the Office of Thrift Supervision’’ and inserting ‘‘Office of the Comptroller of the Currency, as appropriate,’’; 

and 


sroberts on DSKD5P82C1PROD with HEARING
183 

(BB) by striking the second sentence 

and inserting the following: ‘‘The Corporation or the Comptroller of the Currency, as 

appropriate, may take any other corrective 

measures with respect to the subsidiary, 

including the authority to require the subsidiary to terminate the activities or operations posing such risks, as the Corporation or the Comptroller of the Currency, 

respectively, may deem appropriate.’’; and 

(iii) in paragraph (3)— 

(I) in subparagraph (A), in the second sentence— 

(aa) by inserting ‘‘, in the case of a Federal savings association,’’ before ‘‘consult 

with’’; and 

(bb) by striking ‘‘Director of the Office of 

Thrift Supervision’’ and inserting ‘‘Comptroller of the Currency’’; and 

(II) in subparagraph (B)— 

(aa) in the subparagraph heading, by 

striking ‘‘DIRECTOR’’ and inserting ‘‘COMP- TROLLER OF THE CURRENCY’’; 

(bb) by striking ‘‘Office of Thrift Supervision’’ and inserting ‘‘Comptroller of the Currency’’; 

(cc) by inserting a comma after ‘‘soundness’’; and 

(dd) by inserting ‘‘as to Federal savings 

associations’’ after ‘‘compliance’’; 

(8) in section 19(e) (12 U.S.C. 1829(e))— 

(A) in paragraph (1), by striking ‘‘Director of the Office 

of Thrift Supervision’’ and inserting ‘‘Board of Governors of 

the Federal Reserve System’’; and 

(B) in paragraph (2), by striking ‘‘Director of the Office 

of Thrift Supervision’’ and inserting ‘‘Board of Governors of 

the Federal Reserve System’’; 

(9) in section 28 (12 U.S.C. 1831e)— 

(A) in subsection (e)— 

(i) in paragraph (2)— 

(I) in subparagraph (A)(ii), by striking ‘‘Director of the Office of Thrift Supervision’’ and inserting ‘‘Comptroller of the Currency or the Corporation, as appropriate’’; 

(II) in subparagraph (C), by striking ‘‘Director 

of the Office of Thrift Supervision’’ and inserting 

‘‘Comptroller of the Currency or the Corporation, 

as appropriate,’’; and 

(III) in subparagraph (F), by striking ‘‘Director 

of the Office of Thrift Supervision’’ and inserting 

‘‘Comptroller of the Currency or the Corporation, 

as appropriate’’; and 

(ii) in paragraph (3)— 

(I) in subparagraph (A), by striking ‘‘Director 

of the Office of Thrift Supervision’’ and inserting 


sroberts on DSKD5P82C1PROD with HEARING
184 

‘‘Comptroller of the Currency or the Corporation, 

as appropriate’’; and 

(II) in subparagraph (B), by striking ‘‘Director 

of the Office of Thrift Supervision’’ and inserting 

‘‘Comptroller of the Currency or the Corporation, 

as appropriate,’’; and 

(B) in subsection (h)(2), by striking ‘‘Director of the Office of Thrift Supervision’’ and inserting ‘‘Comptroller of the 

Currency, of the Corporation,’’; and 

(10) in section 33(e) (12 U.S.C. 1831j(e)), by striking ‘‘Federal Housing Finance Board, the Comptroller of the Currency, 

and the Director of the Office of Thrift Supervision’’ and inserting ‘‘Federal Housing Finance Agency and the Comptroller of 

the Currency’’. 

SEC. 364. FEDERAL HOME LOAN BANK ACT. 

(a) REPEAL OF SECTION 18(c).—Effective 90 days after the 

transfer date, section 18(c) of the Federal Home Loan Bank Act (12 

U.S.C. 1438(c)) is repealed. 

(b) REPEAL OF SECTION 21A.—Section 21A of the Federal Home 

Loan Bank Act (12 U.S.C. 1441a) is repealed. 

SEC. 365. FEDERAL HOUSING ENTERPRISES FINANCIAL SAFETY AND 

SOUNDNESS ACT OF 1992. 

The Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 4501 et seq.) is amended— 

(1) in section 1315(b) (12 U.S.C. 4515(b)), by striking ‘‘the 

Federal Deposit Insurance Corporation, and the Office of Thrift 

Supervision.’’ and inserting ‘‘and the Federal Deposit Insurance 

Corporation.’’; and 

(2) in section 1317(c) (12 U.S.C. 4517(c)), by striking ‘‘the 

Federal Deposit Insurance Corporation, or the Director of the 

Office of Thrift Supervision’’ and inserting ‘‘or the Federal Deposit Insurance Corporation’’. 

SEC. 366. FEDERAL RESERVE ACT. 

The Federal Reserve Act (12 U.S.C. 221 et seq.) is amended— 

(1) in section 11(a)(2) (12 U.S.C. 248(a)(2))— 

(A) by inserting ‘‘State savings associations that are insured depository institutions (as defined in section 3 of the 

Federal Deposit Insurance Act),’’ after ‘‘case of insured’’; 

(B) by striking ‘‘Director of the Office of Thrift Supervision’’ and inserting ‘‘Comptroller of the Currency’’; 

(C) by inserting ‘‘Federal’’ before ‘‘savings association 

which’’; and 

(D) by striking ‘‘savings and loan association’’ and inserting ‘‘savings association’’; and 

(2) in section 19(b) (12 U.S.C. 461(b))— 

(A) in paragraph (1)(F), by striking ‘‘Director of the Office of Thrift Supervision’’ and inserting ‘‘Comptroller of the 

Currency’’; and 

(B) in paragraph (4)(B), by striking ‘‘Director of the Office of Thrift Supervision’’ and inserting ‘‘Comptroller of the 

Currency’’. 


sroberts on DSKD5P82C1PROD with HEARING
185 

SEC. 367. FINANCIAL INSTITUTIONS REFORM, RECOVERY, AND ENFORCEMENT ACT OF 1989. 

The Financial Institutions Reform, Recovery, and Enforcement 

Act of 1989 is amended— 

(1) in section 203 (12 U.S.C. 1812 note), by striking subsection (b); 

(2) in section 302(1) (12 U.S.C. 1467a note), by striking ‘‘Director of the Office of Thrift Supervision’’ and inserting ‘‘Comptroller of the Currency’’; 

(3) in section 305 (12 U.S.C. 1464 note), by striking subsection (b); 

(4) in section 308 (12 U.S.C. 1463 note)— 

(A) in subsection (a), by striking ‘‘Director of the Office 

of Thrift Supervision’’ and inserting ‘‘Chairman of the 

Board of Governors of the Federal Reserve System, the 

Comptroller of the Currency, the Chairman of the National 

Credit Union Administration,’’; and 

(B) by adding at the end the following new subsection: 

‘‘(c) REPORTS.—The Secretary of the Treasury, the Chairman of 

the Board of Governors of the Federal Reserve System, the Comptroller of the Currency, the Chairman of the National Credit Union 

Administration, and the Chairperson of Board of Directors of the 

Federal Deposit Insurance Corporation shall each submit an annual 

report to the Congress containing a description of actions taken to 

carry out this section.’’; 

(5) in section 402 (12 U.S.C. 1437 note)— 

(A) in subsection (a), by striking ‘‘Director of the Office 

of Thrift Supervision’’ and inserting ‘‘Comptroller of the 

Currency’’; 

(B) by striking subsection (b); 

(C) in subsection (e)— 

(i) in paragraph (1), by striking ‘‘Office of Thrift 

Supervision’’ and inserting ‘‘Comptroller of the Currency’’; and 

(ii) in each of paragraphs (2), (3), and (4), by striking ‘‘Director of the Office of Thrift Supervision’’ each 

place that term appears and inserting ‘‘Comptroller of 

the Currency’’; and 

(D) by striking ‘‘Federal Housing Finance Board’’ each 

place that term appears and inserting ‘‘Federal Housing Finance Agency’’; 

(6) in section 1103(a) (12 U.S.C. 3332(a)), by striking ‘‘and 

the Resolution Trust Corporation’’; 

(7) in section 1205(b) (12 U.S.C. 1818 note)— 

(A) in paragraph (1)— 

(i) by striking subparagraph (B); and 

(ii) by redesignating subparagraphs (C) through 

(F) as subparagraphs (B) through (E), respectively; and 

(B) in paragraph (2), by striking ‘‘paragraph (1)(F)’’ 

and inserting ‘‘paragraph (1)(E)’’; 

(8) in section 1206 (12 U.S.C. 1833b)— 

(A) by striking ‘‘Board, the Oversight Board of the Resolution Trust Corporation’’ and inserting ‘‘Agency, and’’; 

and 

(B) by striking ‘‘, and the Office of Thrift Supervision’’; 


sroberts on DSKD5P82C1PROD with HEARING
186 

(9) in section 1216 (12 U.S.C. 1833e)— 

(A) in subsection (a)— 

(i) in paragraph (3), by adding ‘‘and’’ at the end; 

(ii) in paragraph (4), by striking the semicolon at 

the end and inserting a period; 

(iii) by striking paragraphs (2), (5), and (6); and 

(iv) by redesignating paragraphs (3) and (4), as 

paragraphs (2) and (3), respectively; 

(B) in subsection (c)— 

(i) by striking ‘‘the Director of the Office of Thrift 

Supervision,’’ and inserting ‘‘and’’; and 

(ii) by striking ‘‘the Thrift Depositor Protection 

Oversight Board of the Resolution Trust Corporation, 

and the Resolution Trust Corporation’’; and 

(C) in subsection (d)— 

(i) by striking paragraphs (3), (5), and (6); and 

(ii) by redesignating paragraphs (4), (7), and (8) as 

paragraphs (3), (4), and (5), respectively. 

SEC. 368. FLOOD DISASTER PROTECTION ACT OF 1973. 

Section 3(a)(5) of the Flood Disaster Protection Act of 1973 (42 

U.S.C. 4003(a)(5)) is amended by striking ‘‘, the Office of Thrift Supervision’’. 

SEC. 369. HOME OWNERS’ LOAN ACT. 

The Home Owners’ Loan Act (12 U.S.C. 1461 et seq.) is amended— 

(1) in section 1 (12 U.S.C. 1461), by striking the table of 

contents; 

(2) in section 2 (12 U.S.C. 1462), as amended by this Act— 

(A) by striking paragraphs (1) and (3); 

(B) by redesignating paragraph (2) as paragraph (1); 

(C) by redesignating paragraphs (4) through (9) as 

paragraphs (2) through (7), respectively; and 

(D) by adding at the end the following: 

‘‘(8) BOARD.—The term ‘Board’, other than in the context of 

the Board of Directors of the Corporation, means the Board of 

Governors of the Federal Reserve System. 

‘‘(9) COMPTROLLER.—The term ‘Comptroller’ means the 

Comptroller of the Currency.’’; 

(3) in section 3 (12 U.S.C. 1462a)— 

(A) by striking the section heading and inserting the 

following: 

‘‘SEC. 3. ADMINISTRATIVE PROVISIONS.’’; 

(B) by striking subsections (a), (b), (c), (d), (g), (h), (i), 

and (j); 

(C) by redesignating subsections (e) and (f) as subsections (a) and (b), respectively; 

(D) in subsection (a), as so redesignated— 

(i) in the heading by striking ‘‘OF THE DIRECTOR’’; 

and 

(ii) in the matter preceding paragraph (1), by striking ‘‘The Director’’ and inserting ‘‘In accordance with 

subtitle A of title III of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the appropriate 

Federal banking agency’’; and 


sroberts on DSKD5P82C1PROD with HEARING
187 

(E) in subsection (b), as so redesignated, by striking 

‘‘Director’’ and inserting ‘‘appropriate Federal banking 

agency’’; 

(4) in section 4 (12 U.S.C. 1463)— 

(A) in subsection (a)— 

(i) in the subsection heading, by striking ‘‘FED- ERAL’’; 

(ii) by striking paragraphs (1) and (2) and inserting the following: 

‘‘(1) EXAMINATION AND SAFE AND SOUND OPERATION.— ‘‘(A) FEDERAL SAVINGS ASSOCIATIONS.—The Comptroller shall provide for the examination and safe and 

sound operation of Federal savings associations. 

‘‘(B) STATE SAVINGS ASSOCIATIONS.—The Corporation 

shall provide for the examination and safe and sound operation of State savings associations. 

‘‘(2) REGULATIONS FOR SAVINGS ASSOCIATIONS.—The Comptroller may prescribe regulations with respect to savings associations, as the Comptroller determines to be appropriate to 

carry out the purposes of this Act.’’; and 

(iii) in paragraph (3), by striking ‘‘Director’’ each 

place that term appears and inserting ‘‘Comptroller 

and the Corporation’’; 

(B) in subsection (b)— 

(i) in paragraph (2)— 

(I) in subparagraph (A), by adding ‘‘and’’ at 

the end; 

(II) in subparagraph (B), by striking ‘‘; and’’ 

and inserting a period; and 

(III) by striking subparagraph (C); and 

(ii) by striking ‘‘Director’’ each place that term appears and inserting ‘‘Comptroller’’; 

(C) in subsection (c)— 

(i) by striking ‘‘All regulations and policies of the 

Director’’ and inserting ‘‘The regulations of the Comptroller and the policies of the Comptroller and the Corporation’’; and 

(ii) by striking ‘‘of the Currency’’; 

(D) in subsection (e)(5), by striking ‘‘Director’’ and inserting ‘‘Comptroller’’; 

(E) in subsection (f), by striking ‘‘Director’’ each place 

that term appears and inserting ‘‘appropriate Federal banking agency’’; and 

(F) in subsection (h), by striking ‘‘Director’’ each place 

that term appears and inserting ‘‘appropriate Federal banking agency’’; 

(5) in section 5 (12 U.S.C. 1464)— 

(A) in subsection (a), by striking ‘‘Director’’, each place 

such term appears and inserting ‘‘Comptroller of the Currency’’; 

(B) in subsection (b), by striking ‘‘Director’’, each place 

such term appears and inserting ‘‘Comptroller of the Currency’’; 

(C) in subsection (c)— 

(i) in paragraph (5)— 


sroberts on DSKD5P82C1PROD with HEARING
188 

(I) in subparagraph (A), by striking ‘‘Director’’ 

and inserting ‘‘appropriate Federal banking agency’’; and 

(II) in subparagraph (B)— 

(aa) by striking ‘‘The Director’’ and inserting ‘‘The appropriate Federal banking agency’’; 

and 

(bb) by striking ‘‘the Director’’ and inserting ‘‘the appropriate Federal banking agency’’; 

(D) in subsection (d)— 

(i) in paragraph (1)— 

(I) in subparagraph (A)— 

(aa) in the first sentence, by striking ‘‘Director’’ and inserting ‘‘appropriate Federal 

banking agency’’; 

(bb) in the second sentence— 

(AA) by striking ‘‘Director’s own name 

and through the Director’s own attorneys’’ 

and inserting ‘‘name of the appropriate 

Federal banking agency and through the 

attorneys of the appropriate Federal banking agency’’; and 

(BB) by striking ‘‘Director’’ each place 

that term appears and inserting ‘‘appropriate Federal banking agency’’; and 

(cc) in the third sentence, by striking ‘‘Director’’ each place that term appears and inserting ‘‘Comptroller’’; 

(II) in subparagraph (B)— 

(aa) in clauses (i) through (iv), by striking 

‘‘Director’’ each place that term appears and 

inserting ‘‘appropriate Federal banking agency’’; 

(III) in clause (v)— 

(aa) in the matter preceding subclause (I), 

by striking ‘‘Director’’ and inserting ‘‘appropriate Federal banking agency’’; 

(bb) in subclause (II), by striking ‘‘subpenas’’ and inserting ‘‘subpoenas’’; and 

(cc) in the matter following subclause (II), 

by striking ‘‘subpena’’ and inserting ‘‘subpoena’’; 

(IV) in clause (vi)— 

(aa) in the first sentence, by striking ‘‘Director’’ and inserting ‘‘appropriate Federal 

banking agency’’; and 

(bb) in the second sentence, by striking 

‘‘Director’’ and inserting ‘‘Comptroller’’; 

(V) in clause (vii)— 

(aa) in the first sentence, by striking ‘‘subpena’’ and inserting ‘‘subpoena’’; 

(bb) in the second sentence, by striking 

‘‘subpenaed’’ and inserting ‘‘subpoenaed’’; and 


sroberts on DSKD5P82C1PROD with HEARING
189 

(cc) in the third sentence, by striking ‘‘Director’’ and inserting ‘‘appropriate Federal 

banking agency’’; 

(ii) in paragraph (2)— 

(I) in subparagraph (A)— 

(aa) by striking ‘‘Director of the Office of 

Thrift Supervision’’ and inserting ‘‘appropriate 

Federal banking agency’’; 

(bb) by striking ‘‘any insured savings association’’ and inserting ‘‘an insured savings association’’; and 

(cc) by striking ‘‘Director determines, in 

the Director’s discretion’’ and inserting ‘‘appropriate Federal banking agency determines, in 

the discretion of the appropriate Federal banking agency’’; 

(II) in subparagraph (B), by striking ‘‘Director’’ each place that term appears and inserting 

‘‘appropriate Federal banking agency’’; 

(III) in subparagraphs (C) and (D), by striking 

‘‘Director’’ and inserting ‘‘appropriate Federal 

banking agency’’; 

(IV) in subparagraph (E)— 

(aa) in clause (ii)— 

(AA) in the clause heading, by striking 

‘‘OR RTC’’; and 

(BB) by striking ‘‘or the Resolution Trust 

Corporation, as appropriate,’’ each place that 

term appears; and 

(bb) by striking ‘‘Director’’ each place that 

term appears and inserting ‘‘appropriate Federal banking agency’’; and 

(iii) in paragraph (3)— 

(I) in subparagraph (A), by striking ‘‘Director’’ 

each place that term appears and inserting ‘‘Comptroller’’; and 

(II) in subparagraph (B)— 

(aa) in the subparagraph heading, by 

striking ‘‘OR RTC’’; 

(bb) by striking ‘‘Corporation or the Resolution Trust’’; and 

(cc) by striking ‘‘Director’’ and inserting 

‘‘Comptroller’’; 

(iv) in paragraph (4), by striking ‘‘Director’’ and inserting ‘‘appropriate Federal banking agency’’; 

(v) in paragraph (6)— 

(I) in subparagraph (A), by striking ‘‘Director’’ 

and inserting ‘‘Comptroller’’; and 

(II) in subparagraphs (B) and (C), by striking 

‘‘Director’’ each place that term appears and inserting ‘‘appropriate Federal banking agency’’; 

(vi) in paragraph (7)— 

(I) in subparagraphs (A), (B), and (D), by 

striking ‘‘Director’’ each place that term appears 


sroberts on DSKD5P82C1PROD with HEARING
190 

and inserting ‘‘appropriate Federal banking agency’’; 

(II) in subparagraph (C), by striking ‘‘Director’’ and inserting ‘‘Federal Deposit Insurance Corporation or the Comptroller, as appropriate,’’; and 

(III) by striking subparagraph (E) and inserting the following: 

‘‘(E) ADMINISTRATION BY THE COMPTROLLER AND THE

CORPORATION.—The Comptroller may issue such regulations, and the appropriate Federal banking agency may 

issue such orders, including those issued pursuant to section 8 of the Federal Deposit Insurance Act, as may be necessary to administer and carry out this paragraph and to 

prevent evasion of this paragraph.’’; 

(E) in subsection (e)(2), strike ‘‘Director’’ and insert 

‘‘Comptroller’’; 

(F) in subsection (i)— 

(i) by striking ‘‘Director’’, each place such term appears, and inserting ‘‘Comptroller’’; 

(ii) in paragraph (2), in the heading, by striking 

‘‘DIRECTOR’’ and inserting ‘‘COMPTROLLER’’; 

(iii) in paragraph (5)(A), by striking ‘‘of the Currency’’; and 

(iv) except as provided in clauses (i) through (iii), 

by striking ‘‘Director’’ each place such term appears 

and inserting ‘‘Comptroller’’; 

(G) in subsection (o)— 

(i) in paragraph (1), by striking ‘‘Director’’ and inserting ‘‘Comptroller’’; and 

(ii) in paragraph (2)(B), by striking ‘‘Director’s determination’’ and inserting ‘‘determination of the 

Comptroller’’; 

(H) in subsections (m), (n), (o), and (p), by striking ‘‘Director’’, each place such term appears, and inserting 

‘‘Comptroller’’; 

(I) in subsection (q)— 

(i) in paragraph (6), by striking ‘‘of Governors of 

the Federal Reserve System’’; 

(ii) by striking ‘‘Director’’ each place that term appears and inserting ‘‘Board’’; and 

(iii) by inserting ‘‘in consultation with the Comptroller and the Corporation,’’ before ‘‘considers’’; 

(J) in subsection (r)(3), by striking ‘‘Director’’ and inserting ‘‘Comptroller of the Currency’’; 

(K) in subsection (s)— 

(i) in paragraph (1), strike ‘‘Director’’ and insert 

‘‘Comptroller of the Currency’’; 

(ii) in paragraph (2), strike ‘‘Director’’ and insert 

‘‘Comptroller of the Currency’’; 

(iii) in paragraph (3), by striking ‘‘Director’s discretion, the Director’’ and inserting ‘‘discretion of the 

appropriate Federal banking agency, the appropriate 

Federal banking agency,’’; 


sroberts on DSKD5P82C1PROD with HEARING
191 

(iv) in paragraph (4), by striking ‘‘Director’’ each 

place that term appears and inserting ‘‘appropriate 

Federal banking agency’’; and 

(v) in paragraph (5)— 

(I) by striking ‘‘Director’’, each place such term 

appears, and inserting ‘‘appropriate Federal banking agency’’; and 

(II) by striking ‘‘Director’s approval’’ and inserting ‘‘approval of the appropriate Federal banking agency’’; 

(L) in subsection (t)— 

(i) in paragraph (1), by striking subparagraph (D); 

(ii) by striking paragraph (3) and inserting the following: 

‘‘(3) [Repealed].’’; 

(iii) in paragraph (5)— 

(I) in subparagraph (B), by striking ‘‘Corporation, in its sole discretion’’ and inserting ‘‘appropriate Federal banking agency, in the sole discretion of the appropriate Federal banking agency’’; 

and 

(II) by striking subparagraph (D); 

(iv) in paragraph (6)— 

(I) by striking subparagraph (A) and inserting 

the following: 

‘‘(A) [Reserved].’’; 

(II) in subparagraph (B), by striking ‘‘Director’’ each place that term appears and inserting 

‘‘appropriate Federal banking agency’’; 

(III) in subparagraph (C)— 

(aa) in clause (i), by striking ‘‘Director’s 

prior approval’’ and inserting ‘‘prior approval 

of the appropriate Federal banking agency’’; 

(bb) in clause (ii), by striking ‘‘Director’s 

discretion’’ and inserting ‘‘discretion of the appropriate Federal banking agency’’; and 

(cc) by striking ‘‘Director’’ each place that 

term appears and inserting ‘‘appropriate Federal banking agency’’; 

(IV) in subparagraph (E), by striking ‘‘Director 

shall’’ and inserting ‘‘appropriate Federal banking 

agency may’’; and 

(V) in subparagraph (F), by striking ‘‘Director’’ 

and all that follows through the end of the subparagraph and inserting ‘‘appropriate Federal 

banking agency under this Act or any other provision of law.’’; 

(v) in paragraph (7), by striking ‘‘Director’’ each 

place that term appears and inserting ‘‘appropriate 

Federal banking agency’’; 

(vi) by striking paragraph (8) and inserting the following: 

‘‘(8) [Repealed].’’; 

(vii) in paragraph (9)— 


sroberts on DSKD5P82C1PROD with HEARING
192 

(I) in subparagraph (A), by striking ‘‘Director’’ 

and inserting ‘‘Comptroller’’; 

(II) in subparagraph (C), by striking ‘‘of the 

Currency’’; and 

(III) by striking subparagraph (B) and redesignating subparagraphs (C) and (D) as subparagraphs (B) and (C), respectively; and 

(viii) except as provided in clauses (i) through (vii), 

by striking ‘‘Director’’ each place that term appears and 

inserting ‘‘appropriate Federal banking agency’’; 

(M) in subsection (u), by striking ‘‘Director’’ each place 

that term appears and inserting ‘‘appropriate Federal banking agency’’; 

(N) in subsection (v)— 

(i) in paragraph (2), by striking ‘‘Director’s determinations’’ and inserting ‘‘determinations of the appropriate Federal banking agency’’; and 

(ii) by striking ‘‘Director’’ each place that term appears and inserting ‘‘appropriate Federal banking 

agency’’; 

(O) in subsection (w)(1)— 

(i) in subparagraph (A)(II), by striking ‘‘Director’s 

intention’’ and inserting ‘‘intention of the Comptroller’’; 

and 

(ii) in subparagraph (B), by striking ‘‘Director’s intention’’ and inserting ‘‘intention of the Comptroller’’; 

and 

(P) except as provided in subparagraphs (A) through 

(J), by striking ‘‘Director’’ each place that term appears and 

inserting ‘‘Comptroller’’; 

(6) in section 8 (12 U.S.C. 1466a), by striking ‘‘Director’’ 

each place that term appears and inserting ‘‘Comptroller’’; 

(7) in section 9 (12 U.S.C. 1467)— 

(A) in subsection (a), by striking ‘‘assessed by the Director’’ and all that follows through the end of the subsection 

and inserting the following: ‘‘assessed by— 

‘‘(1) the Comptroller, against each such Federal savings association, as the Comptroller deems necessary or appropriate; 

and 

‘‘(2) the Corporation, against each such State savings association, as the Corporation deems necessary or appropriate.’’; 

(B) in subsection (b), by striking ‘‘Director’’, each place 

such term appears, and inserting ‘‘Comptroller or Corporation, as appropriate’’; 

(C) in subsection (e)— 

(i) by striking ‘‘Only the Director’’ and inserting 

‘‘The Comptroller’’; and 

(ii) by striking ‘‘Director’s designee’’ and inserting 

‘‘designee of the Comptroller’’; 

(D) by striking subsection (f) and inserting the following: 

‘‘(f) [Reserved].’’; 

(E) in subsection (g)— 

(i) in paragraph (1), by striking ‘‘Director’’ and inserting ‘‘appropriate Federal banking agency’’; and 


sroberts on DSKD5P82C1PROD with HEARING
193 

(ii) in paragraph (2), by striking ‘‘Director, or the 

Corporation, as the case may be,’’ and inserting ‘‘appropriate Federal banking agency for the savings association’’; 

(F) in subsection (i), by striking ‘‘Director’’ each place 

that term appears and inserting ‘‘appropriate Federal banking agency’’; 

(G) in subsection (j), by striking ‘‘Director’s sole discretion’’ and inserting ‘‘sole discretion of the appropriate Federal banking agency’’; 

(H) in subsection (k), by striking ‘‘Director may assess 

against institutions for which the Director is the appropriate Federal banking agency, as defined in section 3 of 

the Federal Deposit Insurance Act,’’ and inserting ‘‘appropriate Federal banking agency may assess against an institution’’; and 

(I) except as provided in subparagraphs (A) through 

(G), by striking ‘‘Director’’ each place that term appears and 

inserting ‘‘appropriate Federal banking agency’’; 

(8) in section 10 (12 U.S.C. 1467a)— 

(A) in subsection (a)(1), by striking ‘‘Director’’ each 

place that term appears and inserting ‘‘appropriate Federal 

banking agency’’; 

(B) in subsection (b)— 

(i) in paragraph (2), by striking ‘‘and the regional 

office of the Director of the district in which its principal office is located,’’; and 

(ii) in paragraph (6), by striking ‘‘Director’s own 

motion or application’’ and inserting ‘‘motion or application of the Board’’; 

(C) in subsection (c)— 

(i) in paragraph (2)(F), by striking ‘‘of Governors of 

the Federal Reserve System’’; 

(ii) in paragraph (4)(B), in the subparagraph 

heading, by striking ‘‘BY DIRECTOR’’; 

(iii) in paragraph (6)(D), in the subparagraph 

heading, by striking ‘‘BY DIRECTOR’’; and 

(iv) in paragraph (9)(E), by inserting ‘‘(in consultation with the appropriate Federal banking agency)’’ 

after ‘‘including a determination’’; 

(D) in subsection (g)(5)(B), by striking ‘‘the Director’s 

discretion’’ and inserting ‘‘the discretion of the Board’’; 

(E) in subsection (l), by striking ‘‘Director’’ each place 

that term appears and inserting ‘‘appropriate Federal banking agency’’; 

(F) in subsection (m), by striking ‘‘Director’’ and inserting ‘‘appropriate Federal banking agency’’; 

(G) in subsection (p)— 

(i) in paragraph (1)— 

(I) by striking ‘‘Director determines’’ the 1st 

place such term appears and inserting ‘‘Board or 

the appropriate Federal banking agency for the 

savings association determines’’; 

(II) by striking ‘‘Director may’’ and inserting 

‘‘Board may’’; and 


sroberts on DSKD5P82C1PROD with HEARING
194 

(III) by striking ‘‘Director determines’’ the 2nd 

place such term appears and inserting ‘‘Board, in 

consultation with the appropriate Federal banking 

agency for the savings association determines’’; 

and 

(ii) in paragraph (2), by striking ‘‘Director’’, each 

place such term appears, and inserting ‘‘Board’’; 

(H) in subsection (q), by striking ‘‘Director’’, each place 

such term appears, and inserting ‘‘Board’’; 

(I) in subsection (r), by striking ‘‘Director’’, each place 

such term appears, and inserting ‘‘Board or appropriate 

Federal banking agency’’; 

(J) in subsection (s)— 

(i) in paragraph (2)— 

(I) in subparagraph (B)(ii), by striking ‘‘Director’s judgment’’ and inserting ‘‘judgment of the appropriate Federal banking agency for the savings 

association’’; and 

(II) by striking ‘‘Director’’ each place that term 

appears and inserting ‘‘appropriate Federal banking agency for the savings association’’; and 

(ii) in paragraph (4), by striking ‘‘Director’’ and inserting ‘‘Comptroller’’; and 

(K) except as provided in subparagraphs (A) through 

(J), by striking ‘‘Director’’ each place that term appears and 

inserting ‘‘Board’’; 

(9) in section 11 (12 U.S.C. 1468), by striking ‘‘Director’’ 

each place that term appears and inserting ‘‘appropriate Federal banking agency’’; 

(10) in section 12 (12 U.S.C. 1468a), by striking ‘‘the Director’’ and inserting ‘‘a Federal banking agency’’; and 

(11) in section 13 (12 U.S.C. 1468a) is amended by striking 

‘‘Director’’ and inserting ‘‘a Federal banking agency’’. 

SEC. 370. HOUSING ACT OF 1948. 

Section 502(c) of the Housing Act of 1948 (12 U.S.C. 1701c(c)) 

is amended— 

(1) in the matter preceding paragraph (1), by striking ‘‘and 

the Director of the Office of Thrift Supervision’’ and inserting 

‘‘, the Comptroller of the Currency, and the Federal Deposit Insurance Corporation’’; and 

(2) in paragraph (3), by striking ‘‘Board’’ and inserting 

‘‘Agency’’. 

SEC. 371. HOUSING AND COMMUNITY DEVELOPMENT ACT OF 1992. 

Section 543 of the Housing and Community Development Act of 

1992 (Public Law 102–550; 106 Stat. 3798) is amended— 

(1) in subsection (c)(1)— 

(A) by striking subparagraphs (D) through (F); and 

(B) by redesignating subparagraphs (G) and (H) as 

subparagraphs (D) and (E), respectively; and 

(2) in subsection (f)— 

(A) in paragraph (2), by striking ‘‘the Office of Thrift 

Supervision,’’ each place that term appears; and 

(B) in paragraph (3)— 


sroberts on DSKD5P82C1PROD with HEARING
195 

(i) in the matter preceding subparagraph (A), by 

striking ‘‘the Office of Thrift Supervision,’’; and 

(ii) in subparagraph (D), by striking ‘‘Office of 

Thrift Supervision,’’. 

SEC. 372. HOUSING AND URBAN-RURAL RECOVERY ACT OF 1983. 

Section 469 of the Housing and Urban-Rural Recovery Act of 

1983 (12 U.S.C. 1701p–1) is amended in the first sentence, by striking ‘‘Federal Home Loan Bank Board’’ and inserting ‘‘Federal Housing Finance Agency’’. 

SEC. 373. NATIONAL HOUSING ACT. 

Section 202(f) of the National Housing Act (12 U.S.C. 1708(f)) 

is amended— 

(1) by striking paragraph (5) and inserting the following: 

‘‘(5) if the mortgagee is a national bank, a subsidiary or affiliate of such bank, a Federal savings association or a subsidiary or affiliate of a savings association, the Comptroller of 

the Currency;’’; 

(2) in paragraph (6), by adding ‘‘and’’ at the end; 

(3) in paragraph (7)— 

(A) by inserting ‘‘or State savings association’’ after 

‘‘State bank’’; and 

(B) by striking ‘‘; and’’ and inserting a period; and 

(4) by striking paragraph (8). 

SEC. 374. NEIGHBORHOOD REINVESTMENT CORPORATION ACT. 

Section 606(c)(3) of the Neighborhood Reinvestment Corporation 

Act (42 U.S.C. 8105(c)(3)) is amended by striking ‘‘Federal Home 

Loan Bank Board’’ and inserting ‘‘Federal Housing Finance Agency’’. 

SEC. 375. PUBLIC LAW 93–100. 

Section 5(d) of Public Law 93–100 (12 U.S.C. 1470(a)) is 

amended— 

(1) in paragraph (1), by striking ‘‘Federal Savings and 

Loan Insurance Corporation with respect to insured institutions, the Board of Governors of the Federal Reserve System 

with respect to State member insured banks, and the Federal 

Deposit Insurance Corporation with respect to State nonmember 

insured banks’’ and inserting ‘‘appropriate Federal banking 

agency, with respect to the institutions subject to the jurisdiction of each such agency,’’; and 

(2) in paragraph (2), by striking ‘‘supervisory’’ and inserting ‘‘banking’’. 

SEC. 376. SECURITIES EXCHANGE ACT OF 1934. 

The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is 

amended— 

(1) in section 3(a)(34) (15 U.S.C. 78c(a)(34))— 

(A) in subparagraph (A)— 

(i) in clause (i), by striking ‘‘or a subsidiary or a 

department or division of any such bank’’ and inserting 

‘‘a subsidiary or a department or division of any such 

bank, a Federal savings association (as defined in section 3(b)(2) of the Federal Deposit Insurance Act (12 

U.S.C. 1813(b)(2))), the deposits of which are insured 

by the Federal Deposit Insurance Corporation, or a 


sroberts on DSKD5P82C1PROD with HEARING
196 

subsidiary or department or division of any such Federal savings association’’; 

(ii) in clause (ii), by striking ‘‘or a subsidiary or a 

department or division of such subsidiary’’ and inserting ‘‘a subsidiary or a department or division of such 

subsidiary, or a savings and loan holding company’’; 

(iii) in clause (iii), by striking ‘‘or a subsidiary or 

department or division thereof;’’ and inserting ‘‘a subsidiary or department or division of any such bank, a 

State savings association (as defined in section 3(b)(3) 

of the Federal Deposit Insurance Act (12 U.S.C. 

1813(b)(3))), the deposits of which are insured by the 

Federal Deposit Insurance Corporation, or a subsidiary 

or a department or division of any such State savings 

association; and’’; 

(iv) by striking clause (iv); and 

(v) by redesignating clause (v) as clause (iv); 

(B) in subparagraph (B)— 

(i) in clause (i), by striking ‘‘or a subsidiary of any 

such bank’’ and inserting ‘‘a subsidiary of any such 

bank, a Federal savings association (as defined in section 3(b)(2) of the Federal Deposit Insurance Act (12 

U.S.C. 1813(b)(2))), the deposits of which are insured 

by the Federal Deposit Insurance Corporation, or a 

subsidiary of any such Federal savings association’’; 

(ii) in clause (ii), by striking ‘‘or a subsidiary of a 

bank holding company which is a bank other than a 

bank specified in clause (i), (iii), or (iv) of this subparagraph’’ and inserting ‘‘a subsidiary of a bank holding 

company that is a bank other than a bank specified in 

clause (i) or (iii) of this subparagraph, or a savings 

and loan holding company’’; 

(iii) in clause (iii), by striking ‘‘or a subsidiary 

thereof;’’ and inserting ‘‘a subsidiary of any such bank, 

a State savings association (as defined in section 

3(b)(3) of the Federal Deposit Insurance Act (12 U.S.C. 

1813(b)(3))), the deposits of which are insured by the 

Federal Deposit Insurance Corporation, or a subsidiary 

of any such State savings association; and’’; 

(iv) by striking clause (iv); and 

(v) by redesignating clause (v) as clause (iv); 

(C) in subparagraph (C)— 

(i) in clause (i), by striking ‘‘bank’’ and inserting 

‘‘bank or a Federal savings association (as defined in 

section 3(b)(2) of the Federal Deposit Insurance Act (12 

U.S.C. 1813(b)(2))), the deposits of which are insured 

by the Federal Deposit Insurance Corporation’’; 

(ii) in clause (ii), by striking ‘‘or a subsidiary of a 

bank holding company which is a bank other than a 

bank specified in clause (i), (iii), or (iv) of this subparagraph’’ and inserting ‘‘a subsidiary of a bank holding 

company that is a bank other than a bank specified in 

clause (i) or (iii) of this subparagraph, or a savings 

and loan holding company’’; 


sroberts on DSKD5P82C1PROD with HEARING
197 

(iii) in clause (iii), by striking ‘‘System)’’ and inserting, ‘‘System) or a State savings association (as defined in section 3(b)(3) of the Federal Deposit Insurance Act (12 U.S.C. 1813(b)(3))), the deposits of which 

are insured by the Federal Deposit Insurance Corporation; and’’; 

(iv) by striking clause (iv); and 

(v) by redesignating clause (v) as clause (iv); 

(D) in subparagraph (D)— 

(i) in clause (i), by inserting after ‘‘bank’’ the following: ‘‘or a Federal savings association (as defined in 

section 3(b)(2) of the Federal Deposit Insurance Act (12 

U.S.C. 1813(b)(2))), the deposits of which are insured 

by the Federal Deposit Insurance Corporation’’; 

(ii) in clause (ii), by adding ‘‘and’’ at the end; 

(iii) by striking clause (iii); 

(iv) by redesignating clause (iv) as clause (iii); and 

(v) in clause (iii), as so redesignated, by inserting 

after ‘‘bank’’ the following: ‘‘or a State savings association (as defined in section 3(b)(3) of the Federal Deposit 

Insurance Act (12 U.S.C. 1813(b)(3))), the deposits of 

which are insured by the Federal Deposit Insurance 

Corporation’’; 

(E) in subparagraph (F)— 

(i) in clause (i), by inserting after ‘‘bank’’ the following: ‘‘or a Federal savings association (as defined in 

section 3(b)(2) of the Federal Deposit Insurance Act (12 

U.S.C. 1813(b)(2))), the deposits of which are insured 

by the Federal Deposit Insurance Corporation’’; 

(ii) by striking clause (ii); 

(iii) by redesignating clauses (iii), (iv), and (v) as 

clauses (ii), (iii), and (iv), respectively; and 

(iv) in clause (iii), as so redesignated, by inserting 

before the semicolon the following: ‘‘or a State savings 

association (as defined in section 3(b)(3) of the Federal 

Deposit Insurance Act (12 U.S.C. 1813(b)(3))), the deposits of which are insured by the Federal Deposit Insurance Corporation’’; 

(F) in subparagraph (G)— 

(i) in clause (i), by inserting after ‘‘national bank’’ 

the following: ‘‘, a Federal savings association (as defined in section 3(b)(2) of the Federal Deposit Insurance Act), the deposits of which are insured by the Federal Deposit Insurance Corporation,’’; 

(ii) in clause (iii)— 

(I) by inserting after ‘‘bank)’’ the following: ‘‘, 

a State savings association (as defined in section 

3(b)(3) of the Federal Deposit Insurance Act), the 

deposits of which are insured by the Federal Deposit Insurance Corporation,’’; and 

(II) by adding ‘‘and’’ at the end; 

(iii) by striking clause (iv); and 

(iv) by redesignating clause (v) as clause (iv); and 

(G) in the undesignated matter following subparagraph 

(H), by striking ‘‘, and the term ‘District of Columbia savVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00201 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
198 

ings and loan association’ means any association subject to 

examination and supervision by the Office of Thrift Supervision under section 8 of the Home Owners’ Loan Act of 

1933’’; 

(2) in section 12(i) (15 U.S.C. 78l(i))— 

(A) in paragraph (1), by inserting after ‘‘national 

banks’’ the following: ‘‘and Federal savings associations, 

the accounts of which are insured by the Federal Deposit 

Insurance Corporation’’; 

(B) by striking ‘‘(3)’’ and all that follows through ‘‘vested in the Office of Thrift Supervision’’ and inserting ‘‘and 

(3) with respect to all other insured banks and State savings associations, the accounts of which are insured by the 

Federal Deposit Insurance Corporation, are vested in the 

Federal Deposit Insurance Corporation’’; and 

(C) in the second sentence, by striking ‘‘the Federal Deposit Insurance Corporation, and the Office of Thrift Supervision’’ and inserting ‘‘and the Federal Deposit Insurance 

Corporation’’; 

(3) in section 15C(g)(1) (15 U.S.C. 78o–5(g)(1)), by striking 

‘‘the Director of the Office of Thrift Supervision, the Federal 

Savings and Loan Insurance Corporation,’’; and 

(4) in section 23(b)(1) (15 U.S.C. 78w(b)(1)), by striking ‘‘, 

other than the Office of Thrift Supervision,’’. 

SEC. 377. TITLE 18, UNITED STATES CODE. 

Title 18, United States Code, is amended— 

(1) in section 212(c)(2)— 

(A) by striking subparagraph (C); and 

(B) by redesignating subparagraphs (D) through (H) as 

subparagraphs (C) through (G), respectively; 

(2) in section 657, by striking ‘‘Office of Thrift Supervision, 

the Resolution Trust Corporation,’’; 

(3) in section 981(a)(1)(D)— 

(A) by striking ‘‘Resolution Trust Corporation,’’; and 

(B) by striking ‘‘or the Office of Thrift Supervision’’; 

(4) in section 982(a)(3)— 

(A) by striking ‘‘Resolution Trust Corporation,’’; and 

(B) by striking ‘‘or the Office of Thrift Supervision’’; 

(5) in section 1006— 

(A) by striking ‘‘Office of Thrift Supervision,’’; and 

(B) by striking ‘‘the Resolution Trust Corporation,’’; 

(6) in section 1014— 

(A) by striking ‘‘the Office of Thrift Supervision’’; and 

(B) by striking ‘‘the Resolution Trust Corporation,’’; 

and 

(7) in section 1032(1)— 

(A) by striking ‘‘the Resolution Trust Corporation,’’; 

and 

(B) by striking ‘‘or the Director of the Office of Thrift 

Supervision’’. 

SEC. 378. TITLE 31, UNITED STATES CODE. 

Title 31, United States Code, is amended— 

(1) in section 321— 

(A) in subsection (c)— 


sroberts on DSKD5P82C1PROD with HEARING
199 

(i) in paragraph (1), by adding ‘‘and’’ at the end; 

(ii) in paragraph (2), by striking ‘‘; and’’ and inserting a period; and 

(iii) by striking paragraph (3); and 

(B) by striking subsection (e); and 

(2) in section 714(a), by striking ‘‘the Office of the Comptroller of the Currency, and the Office of Thrift Supervision.’’ 

and inserting ‘‘and the Office of the Comptroller of the Currency.’’. 

TITLE IV—REGULATION OF ADVISERS TO HEDGE FUNDS 

AND OTHERS 

SEC. 401. SHORT TITLE. 

This title may be cited as the ‘‘Private Fund Investment Advisers Registration Act of 2010’’. 

SEC. 402. DEFINITIONS. 

(a) INVESTMENT ADVISERS ACT OF 1940 DEFINITIONS.—Section 

202(a) of the Investment Advisers Act of 1940 (15 U.S.C. 80b–2(a)) 

is amended by adding at the end the following: 

‘‘(29) The term ‘private fund’ means an issuer that would 

be an investment company, as defined in section 3 of the Investment Company Act of 1940 (15 U.S.C. 80a–3), but for section 

3(c)(1) or 3(c)(7) of that Act. 

‘‘(30) The term ‘foreign private adviser’ means any investment adviser who— 

‘‘(A) has no place of business in the United States; 

‘‘(B) has, in total, fewer than 15 clients and investors 

in the United States in private funds advised by the investment adviser; 

‘‘(C) has aggregate assets under management attributable to clients in the United States and investors in the 

United States in private funds advised by the investment 

adviser of less than $25,000,000, or such higher amount as 

the Commission may, by rule, deem appropriate in accordance with the purposes of this title; and 

‘‘(D) neither— 

‘‘(i) holds itself out generally to the public in the 

United States as an investment adviser; nor 

‘‘(ii) acts as— 

‘‘(I) an investment adviser to any investment 

company registered under the Investment Company Act of 1940; or 

‘‘(II) a company that has elected to be a business development company pursuant to section 54 

of the Investment Company Act of 1940 (15 U.S.C. 

80a–53), and has not withdrawn its election.’’. 

(b) OTHER DEFINITIONS.—As used in this title, the terms ‘‘investment adviser’’ and ‘‘private fund’’ have the same meanings as in 

section 202 of the Investment Advisers Act of 1940, as amended by 

this title. 


sroberts on DSKD5P82C1PROD with HEARING
200 

SEC. 403. ELIMINATION OF PRIVATE ADVISER EXEMPTION; LIMITED 

EXEMPTION FOR FOREIGN PRIVATE ADVISERS; LIMITED 

INTRASTATE EXEMPTION. 

Section 203(b) of the Investment Advisers Act of 1940 (15 

U.S.C. 80b–3(b)) is amended— 

(1) in paragraph (1), by inserting ‘‘, other than an investment adviser who acts as an investment adviser to any private 

fund,’’ before ‘‘all of whose’’; 

(2) by striking paragraph (3) and inserting the following: 

‘‘(3) any investment adviser that is a foreign private adviser;’’; and 

(3) in paragraph (5), by striking ‘‘or’’ at the end; 

(4) in paragraph (6)— 

(A) by striking ‘‘any investment adviser’’ and inserting 

‘‘(A) any investment adviser’’; 

(B) by redesignating subparagraphs (A) and (B) as 

clauses (i) and (ii), respectively; and 

(C) in clause (ii) (as so redesignated), by striking the 

period at the end and inserting ‘‘; or’’; and 

(D) by adding at the end the following: 

‘‘(B) any investment adviser that is registered with the Commodity Futures Trading Commission as a commodity trading advisor and advises a private fund, provided that, if after the date of 

enactment of the Private Fund Investment Advisers Registration Act 

of 2010, the business of the advisor should become predominately 

the provision of securities-related advice, then such adviser shall 

register with the Commission.’’. 

(5) by adding at the end the following: 

‘‘(7) any investment adviser, other than any entity that has 

elected to be regulated or is regulated as a business development company pursuant to section 54 of the Investment Company Act of 1940 (15 U.S.C. 80a–54), who solely advises— 

‘‘(A) small business investment companies that are licensees under the Small Business Investment Act of 1958; 

‘‘(B) entities that have received from the Small Business Administration notice to proceed to qualify for a license as a small business investment company under the 

Small Business Investment Act of 1958, which notice or license has not been revoked; or 

‘‘(C) applicants that are affiliated with 1 or more licensed small business investment companies described in 

subparagraph (A) and that have applied for another license 

under the Small Business Investment Act of 1958, which 

application remains pending.’’. 

SEC. 404. COLLECTION OF SYSTEMIC RISK DATA; REPORTS; EXAMINATIONS; DISCLOSURES. 

Section 204 of the Investment Advisers Act of 1940 (15 U.S.C. 

80b–4) is amended— 

(1) by redesignating subsections (b) and (c) as subsections 

(c) and (d), respectively; and 

(2) by inserting after subsection (a) the following: 

‘‘(b) RECORDS AND REPORTS OF PRIVATE FUNDS.— 

‘‘(1) IN GENERAL.—The Commission may require any investment adviser registered under this title— 


sroberts on DSKD5P82C1PROD with HEARING
201 

‘‘(A) to maintain such records of, and file with the 

Commission such reports regarding, private funds advised 

by the investment adviser, as necessary and appropriate in 

the public interest and for the protection of investors, or for 

the assessment of systemic risk by the Financial Stability 

Oversight Council (in this subsection referred to as the 

‘Council’); and 

‘‘(B) to provide or make available to the Council those 

reports or records or the information contained therein. 

‘‘(2) TREATMENT OF RECORDS.—The records and reports of 

any private fund to which an investment adviser registered 

under this title provides investment advice shall be deemed to 

be the records and reports of the investment adviser. 

‘‘(3) REQUIRED INFORMATION.—The records and reports required to be maintained by an investment adviser and subject 

to inspection by the Commission under this subsection shall include, for each private fund advised by the investment adviser, 

a description of— 

‘‘(A) the amount of assets under management and use 

of leverage, including off-balance-sheet leverage; 

‘‘(B) counterparty credit risk exposure; 

‘‘(C) trading and investment positions; 

‘‘(D) valuation policies and practices of the fund; 

‘‘(E) types of assets held; 

‘‘(F) side arrangements or side letters, whereby certain 

investors in a fund obtain more favorable rights or entitlements than other investors; 

‘‘(G) trading practices; and 

‘‘(H) such other information as the Commission, in consultation with the Council, determines is necessary and appropriate in the public interest and for the protection of investors or for the assessment of systemic risk, which may 

include the establishment of different reporting requirements for different classes of fund advisers, based on the 

type or size of private fund being advised. 

‘‘(4) MAINTENANCE OF RECORDS.—An investment adviser 

registered under this title shall maintain such records of private funds advised by the investment adviser for such period or 

periods as the Commission, by rule, may prescribe as necessary 

and appropriate in the public interest and for the protection of 

investors, or for the assessment of systemic risk. 

‘‘(5) FILING OF RECORDS.—The Commission shall issue 

rules requiring each investment adviser to a private fund to file 

reports containing such information as the Commission deems 

necessary and appropriate in the public interest and for the protection of investors or for the assessment of systemic risk. 

‘‘(6) EXAMINATION OF RECORDS.— 

‘‘(A) PERIODIC AND SPECIAL EXAMINATIONS.—The Commission— 

‘‘(i) shall conduct periodic inspections of the 

records of private funds maintained by an investment 

adviser registered under this title in accordance with a 

schedule established by the Commission; and 

‘‘(ii) may conduct at any time and from time to 

time such additional, special, and other examinations 


sroberts on DSKD5P82C1PROD with HEARING
202 

as the Commission may prescribe as necessary and appropriate in the public interest and for the protection 

of investors, or for the assessment of systemic risk. 

‘‘(B) AVAILABILITY OF RECORDS.—An investment adviser 

registered under this title shall make available to the Commission any copies or extracts from such records as may be 

prepared without undue effort, expense, or delay, as the 

Commission or its representatives may reasonably request. 

‘‘(7) INFORMATION SHARING.— ‘‘(A) IN GENERAL.—The Commission shall make available to the Council copies of all reports, documents, records, 

and information filed with or provided to the Commission 

by an investment adviser under this subsection as the 

Council may consider necessary for the purpose of assessing 

the systemic risk posed by a private fund. 

‘‘(B) CONFIDENTIALITY.—The Council shall maintain 

the confidentiality of information received under this paragraph in all such reports, documents, records, and information, in a manner consistent with the level of confidentiality 

established for the Commission pursuant to paragraph (8). 

The Council shall be exempt from section 552 of title 5, 

United States Code, with respect to any information in any 

report, document, record, or information made available, to 

the Council under this subsection.’’. 

‘‘(8) COMMISSION CONFIDENTIALITY OF REPORTS.—Notwithstanding any other provision of law, the Commission may not 

be compelled to disclose any report or information contained 

therein required to be filed with the Commission under this 

subsection, except that nothing in this subsection authorizes the 

Commission— 

‘‘(A) to withhold information from Congress, upon an 

agreement of confidentiality; or 

‘‘(B) prevent the Commission from complying with— 

‘‘(i) a request for information from any other Federal department or agency or any self-regulatory organization requesting the report or information for purposes within the scope of its jurisdiction; or 

‘‘(ii) an order of a court of the United States in an 

action brought by the United States or the Commission. 

‘‘(9) OTHER RECIPIENTS CONFIDENTIALITY.—Any department, agency, or self-regulatory organization that receives reports or information from the Commission under this subsection shall maintain the confidentiality of such reports, documents, records, and information in a manner consistent with 

the level of confidentiality established for the Commission 

under paragraph (8). 

‘‘(10) PUBLIC INFORMATION EXCEPTION.— 

‘‘(A) IN GENERAL.—The Commission, the Council, and 

any other department, agency, or self-regulatory organization that receives information, reports, documents, records, 

or information from the Commission under this subsection, 

shall be exempt from the provisions of section 552 of title 

5, United States Code, with respect to any such report, document, record, or information. Any proprietary information 


sroberts on DSKD5P82C1PROD with HEARING
203 

of an investment adviser ascertained by the Commission 

from any report required to be filed with the Commission 

pursuant to this subsection shall be subject to the same 

limitations on public disclosure as any facts ascertained 

during an examination, as provided by section 210(b) of 

this title. 

‘‘(B) PROPRIETARY INFORMATION.—For purposes of this 

paragraph, proprietary information includes sensitive, nonpublic information regarding— 

‘‘(i) the investment or trading strategies of the investment adviser; 

‘‘(ii) analytical or research methodologies; 

‘‘(iii) trading data; 

‘‘(iv) computer hardware or software containing intellectual property; and 

‘‘(v) any additional information that the Commission determines to be proprietary. 

‘‘(11) ANNUAL REPORT TO CONGRESS.—The Commission 

shall report annually to Congress on how the Commission has 

used the data collected pursuant to this subsection to monitor 

the markets for the protection of investors and the integrity of 

the markets.’’. 

SEC. 405. DISCLOSURE PROVISION AMENDMENT. 

Section 210(c) of the Investment Advisers Act of 1940 (15 U.S.C. 

80b–10(c)) is amended by inserting before the period at the end the 

following: ‘‘or for purposes of assessment of potential systemic risk’’. 

SEC. 406. CLARIFICATION OF RULEMAKING AUTHORITY. 

Section 211 of the Investment Advisers Act of 1940 (15 U.S.C. 

80b–11) is amended— 

(1) in subsection (a), by inserting before the period at the 

end of the first sentence the following: ‘‘, including rules and 

regulations defining technical, trade, and other terms used in 

this title, except that the Commission may not define the term 

‘client’ for purposes of paragraphs (1) and (2) of section 206 to 

include an investor in a private fund managed by an investment adviser, if such private fund has entered into an advisory 

contract with such adviser’’; and 

(2) by adding at the end the following: 

‘‘(e) DISCLOSURE RULES ON PRIVATE FUNDS.—The Commission 

and the Commodity Futures Trading Commission shall, after consultation with the Council but not later than 12 months after the 

date of enactment of the Private Fund Investment Advisers Registration Act of 2010, jointly promulgate rules to establish the form and 

content of the reports required to be filed with the Commission 

under subsection 204(b) and with the Commodity Futures Trading 

Commission by investment advisers that are registered both under 

this title and the Commodity Exchange Act (7 U.S.C. 1a et seq.).’’. 

SEC. 407. EXEMPTION OF AND REPORTING BY VENTURE CAPITAL 

FUND ADVISERS. 

Section 203 of the Investment Advisers Act of 1940 (15 U.S.C. 

80b–3) is amended by adding at the end the following: 

‘‘(l) EXEMPTION OF VENTURE CAPITAL FUND ADVISERS.—No investment adviser that acts as an investment adviser solely to 1 or 

more venture capital funds shall be subject to the registration reVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00207 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
204 

quirements of this title with respect to the provision of investment 

advice relating to a venture capital fund. Not later than 1 year after 

the date of enactment of this subsection, the Commission shall issue 

final rules to define the term ‘venture capital fund’ for purposes of 

this subsection. The Commission shall require such advisers to 

maintain such records and provide to the Commission such annual 

or other reports as the Commission determines necessary or appropriate in the public interest or for the protection of investors.’’. 

SEC. 408. EXEMPTION OF AND REPORTING BY CERTAIN PRIVATE FUND 

ADVISERS. 

Section 203 of the Investment Advisers Act of 1940 (15 U.S.C. 

80b–3) is amended by adding at the end the following: 

‘‘(m) EXEMPTION OF AND REPORTING BY CERTAIN PRIVATE FUND

ADVISERS.— 

‘‘(1) IN GENERAL.—The Commission shall provide an exemption from the registration requirements under this section to 

any investment adviser of private funds, if each of such investment adviser acts solely as an adviser to private funds and has 

assets under management in the United States of less than 

$150,000,000. 

‘‘(2) REPORTING.—The Commission shall require investment 

advisers exempted by reason of this subsection to maintain such 

records and provide to the Commission such annual or other reports as the Commission determines necessary or appropriate in 

the public interest or for the protection of investors. 

‘‘(n) REGISTRATION AND EXAMINATION OF MID-SIZED PRIVATE

FUND ADVISERS.—In prescribing regulations to carry out the requirements of this section with respect to investment advisers acting 

as investment advisers to mid-sized private funds, the Commission 

shall take into account the size, governance, and investment strategy 

of such funds to determine whether they pose systemic risk, and 

shall provide for registration and examination procedures with respect to the investment advisers of such funds which reflect the level 

of systemic risk posed by such funds.’’. 

SEC. 409. FAMILY OFFICES. 

(a) IN GENERAL.—Section 202(a)(11) of the Investment Advisers 

Act of 1940 (15 U.S.C. 80b–2(a)(11)) is amended by striking ‘‘or (G)’’ 

and inserting the following: ‘‘; (G) any family office, as defined by 

rule, regulation, or order of the Commission, in accordance with the 

purposes of this title; or (H)’’. 

(b) RULEMAKING.—The rules, regulations, or orders issued by 

the Commission pursuant to section 202(a)(11)(G) of the Investment 

Advisers Act of 1940, as added by this section, regarding the definition of the term ‘‘family office’’ shall provide for an exemption that— 

(1) is consistent with the previous exemptive policy of the 

Commission, as reflected in exemptive orders for family offices 

in effect on the date of enactment of this Act, and the 

grandfathering provisions in paragraph (3); 

(2) recognizes the range of organizational, management, 

and employment structures and arrangements employed by 

family offices; and 

(3) does not exclude any person who was not registered or 

required to be registered under the Investment Advisers Act of 

1940 on January 1, 2010 from the definition of the term ‘‘family 


sroberts on DSKD5P82C1PROD with HEARING
205 

office’’, solely because such person provides investment advice 

to, and was engaged before January 1, 2010 in providing investment advice to— 

(A) natural persons who, at the time of their applicable 

investment, are officers, directors, or employees of the family office who— 

(i) have invested with the family office before January 1, 2010; and 

(ii) are accredited investors, as defined in Regulation D of the Commission (or any successor thereto) 

under the Securities Act of 1933, or, as the Commission 

may prescribe by rule, the successors-in-interest thereto; 

(B) any company owned exclusively and controlled by 

members of the family of the family office, or as the Commission may prescribe by rule; 

(C) any investment adviser registered under the Investment Adviser Act of 1940 that provides investment advice 

to the family office and who identifies investment opportunities to the family office, and invests in such transactions 

on substantially the same terms as the family office invests, 

but does not invest in other funds advised by the family office, and whose assets as to which the family office directly 

or indirectly provides investment advice represent, in the 

aggregate, not more than 5 percent of the value of the total 

assets as to which the family office provides investment advice. 

(c) ANTIFRAUD AUTHORITY.—A family office that would not be 

a family office, but for subsection (b)(3), shall be deemed to be an 

investment adviser for the purposes of paragraphs (1), (2) and (4) 

of section 206 of the Investment Advisers Act of 1940. 

SEC. 410. STATE AND FEDERAL RESPONSIBILITIES; ASSET THRESHOLD 

FOR FEDERAL REGISTRATION OF INVESTMENT ADVISERS. 

Section 203A(a) of the of the Investment Advisers Act of 1940 

(15 U.S.C. 80b–3a(a)) is amended— 

(1) by redesignating paragraph (2) as paragraph (3); and 

(2) by inserting after paragraph (1) the following: 

‘‘(2) TREATMENT OF MID-SIZED INVESTMENT ADVISERS.— 

‘‘(A) IN GENERAL.—No investment adviser described in 

subparagraph (B) shall register under section 203, unless 

the investment adviser is an adviser to an investment company registered under the Investment Company Act of 1940, 

or a company which has elected to be a business development company pursuant to section 54 of the Investment 

Company Act of 1940, and has not withdrawn the election, 

except that, if by effect of this paragraph an investment adviser would be required to register with 15 or more States, 

then the adviser may register under section 203. 

‘‘(B) COVERED PERSONS.—An investment adviser described in this subparagraph is an investment adviser 

that— 

‘‘(i) is required to be registered as an investment 

adviser with the securities commissioner (or any agency 

or office performing like functions) of the State in 

which it maintains its principal office and place of 

business and, if registered, would be subject to examVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00209 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
206 

ination as an investment adviser by any such commissioner, agency, or office; and 

‘‘(ii) has assets under management between— 

‘‘(I) the amount specified under subparagraph 

(A) of paragraph (1), as such amount may have 

been adjusted by the Commission pursuant to that 

subparagraph; and 

‘‘(II) $100,000,000, or such higher amount as 

the Commission may, by rule, deem appropriate in 

accordance with the purposes of this title.’’. 

SEC. 411. CUSTODY OF CLIENT ASSETS. 

The Investment Advisers Act of 1940 (15 U.S.C. 80b–1 et seq.) 

is amended by adding at the end the following new section: 

‘‘SEC. 223. CUSTODY OF CLIENT ACCOUNTS. 

‘‘An investment adviser registered under this title shall take 

such steps to safeguard client assets over which such adviser has 

custody, including, without limitation, verification of such assets by 

an independent public accountant, as the Commission may, by rule, 

prescribe.’’. 

SEC. 412. COMPTROLLER GENERAL STUDY ON CUSTODY RULE COSTS. 

The Comptroller General of the United States shall— 

(1) conduct a study of— 

(A) the compliance costs associated with the current Securities and Exchange Commission rules 204–2 (17 C.F.R. 

Parts 275.204–2) and rule 206(4)–2 (17 C.F.R. 275.206(4)– 

2) under the Investment Advisers Act of 1940 regarding 

custody of funds or securities of clients by investment advisers; and 

(B) the additional costs if subsection (b)(6) of rule 

206(4)–2 (17 C.F.R. 275.206(4)–2(b)(6)) relating to operational independence were eliminated; and 

(2) submit a report to the Committee on Banking, Housing, 

and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives on the results of 

such study, not later than 3 years after the date of enactment 

of this Act. 

SEC. 413. ADJUSTING THE ACCREDITED INVESTOR STANDARD. 

(a) IN GENERAL.—The Commission shall adjust any net worth 

standard for an accredited investor, as set forth in the rules of the 

Commission under the Securities Act of 1933, so that the individual 

net worth of any natural person, or joint net worth with the spouse 

of that person, at the time of purchase, is more than $1,000,000 (as 

such amount is adjusted periodically by rule of the Commission), excluding the value of the primary residence of such natural person, 

except that during the 4-year period that begins on the date of enactment of this Act, any net worth standard shall be $1,000,000, excluding the value of the primary residence of such natural person. 

(b) REVIEW AND ADJUSTMENT.— (1) INITIAL REVIEW AND ADJUSTMENT.— (A) INITIAL REVIEW.—The Commission may undertake 

a review of the definition of the term ‘‘accredited investor’’, 

as such term applies to natural persons, to determine 

whether the requirements of the definition, excluding the reVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00210 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
207 

quirement relating to the net worth standard described in 

subsection (a), should be adjusted or modified for the protection of investors, in the public interest, and in light of 

the economy. 

(B) ADJUSTMENT OR MODIFICATION.—Upon completion 

of a review under subparagraph (A), the Commission may, 

by notice and comment rulemaking, make such adjustments to the definition of the term ‘‘accredited investor’’, excluding adjusting or modifying the requirement relating to 

the net worth standard described in subsection (a), as such 

term applies to natural persons, as the Commission may 

deem appropriate for the protection of investors, in the public interest, and in light of the economy. 

(2) SUBSEQUENT REVIEWS AND ADJUSTMENT.— 

(A) SUBSEQUENT REVIEWS.—Not earlier than 4 years 

after the date of enactment of this Act, and not less frequently than once every 4 years thereafter, the Commission 

shall undertake a review of the definition, in its entirety, of 

the term ‘‘accredited investor’’, as defined in section 230.215 

of title 17, Code of Federal Regulations, or any successor 

thereto, as such term applies to natural persons, to determine whether the requirements of the definition should be 

adjusted or modified for the protection of investors, in the 

public interest, and in light of the economy. 

(B) ADJUSTMENT OR MODIFICATION.—Upon completion 

of a review under subparagraph (A), the Commission may, 

by notice and comment rulemaking, make such adjustments to the definition of the term ‘‘accredited investor’’, as 

defined in section 230.215 of title 17, Code of Federal Regulations, or any successor thereto, as such term applies to 

natural persons, as the Commission may deem appropriate 

for the protection of investors, in the public interest, and in 

light of the economy. 

SEC. 414. RULE OF CONSTRUCTION RELATING TO THE COMMODITIES 

EXCHANGE ACT. 

The Investment Advisers Act of 1940 (15 U.S.C. 80b–1 et seq.) 

is further amended by adding at the end the following new section: 

‘‘SEC. 224. RULE OF CONSTRUCTION RELATING TO THE COMMODITIES 

EXCHANGE ACT. 

‘‘Nothing in this title shall relieve any person of any obligation 

or duty, or affect the availability of any right or remedy available 

to the Commodity Futures Trading Commission or any private 

party, arising under the Commodity Exchange Act (7 U.S.C. 1 et 

seq.) governing commodity pools, commodity pool operators, or commodity trading advisors.’’. 

SEC. 415. GAO STUDY AND REPORT ON ACCREDITED INVESTORS. 

The Comptroller General of the United States shall conduct a 

study on the appropriate criteria for determining the financial 

thresholds or other criteria needed to qualify for accredited investor 

status and eligibility to invest in private funds, and shall submit a 

report to the Committee on Banking, Housing, and Urban Affairs 

of the Senate and the Committee on Financial Services of the House 

of Representatives on the results of such study not later than 3 years 

after the date of enactment of this Act. 


sroberts on DSKD5P82C1PROD with HEARING
208 

SEC. 416. GAO STUDY ON SELF-REGULATORY ORGANIZATION FOR PRIVATE FUNDS. 

The Comptroller General of the United States shall— 

(1) conduct a study of the feasibility of forming a self-regulatory organization to oversee private funds; and 

(2) submit a report to the Committee on Banking, Housing, 

and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives on the results of 

such study, not later than 1 year after the date of enactment of 

this Act. 

SEC. 417. COMMISSION STUDY AND REPORT ON SHORT SELLING. 

(a) STUDIES.—The Division of Risk, Strategy, and Financial Innovation of the Commission shall conduct— 

(1) a study, taking into account current scholarship, on the 

state of short selling on national securities exchanges and in the 

over-the-counter markets, with particular attention to the impact of recent rule changes and the incidence of— 

(A) the failure to deliver shares sold short; or 

(B) delivery of shares on the fourth day following the 

short sale transaction; and 

(2) a study of— 

(A) the feasibility, benefits, and costs of requiring reporting publicly, in real time short sale positions of publicly 

listed securities, or, in the alternative, reporting such short 

positions in real time only to the Commission and the Financial Industry Regulatory Authority; and 

(B) the feasibility, benefits, and costs of conducting a 

voluntary pilot program in which public companies will 

agree to have all trades of their shares marked ‘‘short’’, 

‘‘market maker short’’, ‘‘buy’’, ‘‘buy-to-cover’’, or ‘‘long’’, and 

reported in real time through the Consolidated Tape. 

(b) REPORTS.—The Commission shall submit a report to the 

Committee on Banking, Housing, and Urban Affairs of the Senate 

and the Committee on Financial Services of the House of Representatives— 

(1) on the results of the study required under subsection 

(a)(1), including recommendations for market improvements, 

not later than 2 years after the date of enactment of this Act; 

and 

(2) on the results of the study required under subsection 

(a)(2), not later than 1 year after the date of enactment of this 

Act. 

SEC. 418. QUALIFIED CLIENT STANDARD. 

Section 205(e) of the Investment Advisers Act of 1940 (15 U.S.C. 

80b–5(e)) is amended by adding at the end the following: ‘‘With respect to any factor used in any rule or regulation by the Commission 

in making a determination under this subsection, if the Commission 

uses a dollar amount test in connection with such factor, such as 

a net asset threshold, the Commission shall, by order, not later than 

1 year after the date of enactment of the Private Fund Investment 

Advisers Registration Act of 2010, and every 5 years thereafter, adjust for the effects of inflation on such test. Any such adjustment 

that is not a multiple of $100,000 shall be rounded to the nearest 

multiple of $100,000.’’. 


sroberts on DSKD5P82C1PROD with HEARING
209 

SEC. 419. TRANSITION PERIOD. 

Except as otherwise provided in this title, this title and the 

amendments made by this title shall become effective 1 year after 

the date of enactment of this Act, except that any investment adviser 

may, at the discretion of the investment adviser, register with the 

Commission under the Investment Advisers Act of 1940 during that 

1-year period, subject to the rules of the Commission. 

TITLE V—INSURANCE 

Subtitle A—Federal Insurance Office 

SEC. 501. SHORT TITLE. 

This subtitle may be cited as the ‘‘Federal Insurance Office Act 

of 2010’’. 

SEC. 502. FEDERAL INSURANCE OFFICE. 

(a) ESTABLISHMENT OF OFFICE.—Subchapter I of chapter 3 of 

subtitle I of title 31, United States Code, is amended— 

(1) by redesignating section 312 as section 315; 

(2) by redesignating section 313 as section 312; and 

(3) by inserting after section 312 (as so redesignated) the 

following new sections: 

‘‘SEC. 313. FEDERAL INSURANCE OFFICE. 

‘‘(a) ESTABLISHMENT.—There is established within the Department of the Treasury the Federal Insurance Office. 

‘‘(b) LEADERSHIP.—The Office shall be headed by a Director, 

who shall be appointed by the Secretary of the Treasury. The position of Director shall be a career reserved position in the Senior Executive Service, as that position is defined under section 3132 of title 

5, United States Code. 

‘‘(c) FUNCTIONS.— 

‘‘(1) AUTHORITY PURSUANT TO DIRECTION OF SECRETARY.— 

The Office, pursuant to the direction of the Secretary, shall 

have the authority— 

‘‘(A) to monitor all aspects of the insurance industry, 

including identifying issues or gaps in the regulation of insurers that could contribute to a systemic crisis in the insurance industry or the United States financial system; 

‘‘(B) to monitor the extent to which traditionally underserved communities and consumers, minorities (as such 

term is defined in section 1204(c) of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 

U.S.C. 1811 note)), and low- and moderate-income persons 

have access to affordable insurance products regarding all 

lines of insurance, except health insurance; 

‘‘(C) to recommend to the Financial Stability Oversight 

Council that it designate an insurer, including the affiliates 

of such insurer, as an entity subject to regulation as a 

nonbank financial company supervised by the Board of 

Governors pursuant to title I of the Dodd-Frank Wall Street 

Reform and Consumer Protection Act; 

‘‘(D) to assist the Secretary in administering the Terrorism Insurance Program established in the Department of 

the Treasury under the Terrorism Risk Insurance Act of 

2002 (15 U.S.C. 6701 note); 


sroberts on DSKD5P82C1PROD with HEARING
210 

‘‘(E) to coordinate Federal efforts and develop Federal 

policy on prudential aspects of international insurance 

matters, including representing the United States, as appropriate, in the International Association of Insurance Supervisors (or a successor entity) and assisting the Secretary 

in negotiating covered agreements (as such term is defined 

in subsection (r)); 

‘‘(F) to determine, in accordance with subsection (f), 

whether State insurance measures are preempted by covered agreements; 

‘‘(G) to consult with the States (including State insurance regulators) regarding insurance matters of national 

importance and prudential insurance matters of international importance; and 

‘‘(H) to perform such other related duties and authorities as may be assigned to the Office by the Secretary. 

‘‘(2) ADVISORY FUNCTIONS.—The Office shall advise the Secretary on major domestic and prudential international insurance policy issues. 

‘‘(3) ADVISORY CAPACITY ON COUNCIL.—The Director shall 

serve in an advisory capacity on the Financial Stability Oversight Council established under the Financial Stability Act of 

2010. 

‘‘(d) SCOPE.—The authority of the Office shall extend to all lines 

of insurance except— 

‘‘(1) health insurance, as determined by the Secretary in coordination with the Secretary of Health and Human Services 

based on section 2791 of the Public Health Service Act (42 

U.S.C. 300gg–91); 

‘‘(2) long-term care insurance, except long-term care insurance that is included with life or annuity insurance components, as determined by the Secretary in coordination with the 

Secretary of Health and Human Services, and in the case of 

long-term care insurance that is included with such components, the Secretary shall coordinate with the Secretary of 

Health and Human Services in performing the functions of the 

Office; and 

‘‘(3) crop insurance, as established by the Federal Crop Insurance Act (7 U.S.C. 1501 et seq.). 

‘‘(e) GATHERING OF INFORMATION.— 

‘‘(1) IN GENERAL.—In carrying out the functions required 

under subsection (c), the Office may— 

‘‘(A) receive and collect data and information on and 

from the insurance industry and insurers; 

‘‘(B) enter into information-sharing agreements; 

‘‘(C) analyze and disseminate data and information; 

and 

‘‘(D) issue reports regarding all lines of insurance except health insurance. 

‘‘(2) COLLECTION OF INFORMATION FROM INSURERS AND AFFILIATES.— 

‘‘(A) IN GENERAL.—Except as provided in paragraph 

(3), the Office may require an insurer, or any affiliate of an 

insurer, to submit such data or information as the Office 


sroberts on DSKD5P82C1PROD with HEARING
211 

may reasonably require in carrying out the functions described under subsection (c). 

‘‘(B) RULE OF CONSTRUCTION.—Notwithstanding any 

other provision of this section, for purposes of subparagraph (A), the term ‘insurer’ means any entity that writes 

insurance or reinsures risks and issues contracts or policies 

in 1 or more States. 

‘‘(3) EXCEPTION FOR SMALL INSURERS.—Paragraph (2) shall 

not apply with respect to any insurer or affiliate thereof that 

meets a minimum size threshold that the Office may establish, 

whether by order or rule. 

‘‘(4) ADVANCE COORDINATION.—Before collecting any data 

or information under paragraph (2) from an insurer, or affiliate 

of an insurer, the Office shall coordinate with each relevant 

Federal agency and State insurance regulator (or other relevant 

Federal or State regulatory agency, if any, in the case of an affiliate of an insurer) and any publicly available sources to determine if the information to be collected is available from, and 

may be obtained in a timely manner by, such Federal agency 

or State insurance regulator, individually or collectively, other 

regulatory agency, or publicly available sources. If the Director 

determines that such data or information is available, and may 

be obtained in a timely manner, from such an agency, regulator, regulatory agency, or source, the Director shall obtain the 

data or information from such agency, regulator, regulatory 

agency, or source. If the Director determines that such data or 

information is not so available, the Director may collect such 

data or information from an insurer (or affiliate) only if the Director complies with the requirements of subchapter I of chapter 

35 of title 44, United States Code (relating to Federal information policy; commonly known as the Paperwork Reduction Act), 

in collecting such data or information. Notwithstanding any 

other provision of law, each such relevant Federal agency and 

State insurance regulator or other Federal or State regulatory 

agency is authorized to provide to the Office such data or information. 

‘‘(5) CONFIDENTIALITY.— 

‘‘(A) RETENTION OF PRIVILEGE.—The submission of any 

nonpublicly available data and information to the Office 

under this subsection shall not constitute a waiver of, or 

otherwise affect, any privilege arising under Federal or 

State law (including the rules of any Federal or State 

court) to which the data or information is otherwise subject. 

‘‘(B) CONTINUED APPLICATION OF PRIOR CONFIDENTIALITY AGREEMENTS.—Any requirement under Federal or 

State law to the extent otherwise applicable, or any requirement pursuant to a written agreement in effect between the 

original source of any nonpublicly available data or information and the source of such data or information to the 

Office, regarding the privacy or confidentiality of any data 

or information in the possession of the source to the Office, 

shall continue to apply to such data or information after 

the data or information has been provided pursuant to this 

subsection to the Office. 


sroberts on DSKD5P82C1PROD with HEARING
212 

‘‘(C) INFORMATION-SHARING AGREEMENT.—Any data or 

information obtained by the Office may be made available 

to State insurance regulators, individually or collectively, 

through an information-sharing agreement that— 

‘‘(i) shall comply with applicable Federal law; and 

‘‘(ii) shall not constitute a waiver of, or otherwise 

affect, any privilege under Federal or State law (including the rules of any Federal or State court) to 

which the data or information is otherwise subject. 

‘‘(D) AGENCY DISCLOSURE REQUIREMENTS.—Section 552 

of title 5, United States Code, shall apply to any data or 

information submitted to the Office by an insurer or an affiliate of an insurer. 

‘‘(6) SUBPOENAS AND ENFORCEMENT.—The Director shall 

have the power to require by subpoena the production of the 

data or information requested under paragraph (2), but only 

upon a written finding by the Director that such data or information is required to carry out the functions described under 

subsection (c) and that the Office has coordinated with such 

regulator or agency as required under paragraph (4). Subpoenas shall bear the signature of the Director and shall be 

served by any person or class of persons designated by the Director for that purpose. In the case of contumacy or failure to 

obey a subpoena, the subpoena shall be enforceable by order of 

any appropriate district court of the United States. Any failure 

to obey the order of the court may be punished by the court as 

a contempt of court. 

‘‘(f) PREEMPTION OF STATE INSURANCE MEASURES.— ‘‘(1) STANDARD.—A State insurance measure shall be preempted pursuant to this section or section 314 if, and only to 

the extent that the Director determines, in accordance with this 

subsection, that the measure— 

‘‘(A) results in less favorable treatment of a non-United 

States insurer domiciled in a foreign jurisdiction that is 

subject to a covered agreement than a United States insurer 

domiciled, licensed, or otherwise admitted in that State; 

and 

‘‘(B) is inconsistent with a covered agreement. 

‘‘(2) DETERMINATION.— ‘‘(A) NOTICE OF POTENTIAL INCONSISTENCY.—Before 

making any determination under paragraph (1), the Director shall— 

‘‘(i) notify and consult with the appropriate State 

regarding any potential inconsistency or preemption; 

‘‘(ii) notify and consult with the United States 

Trade Representative regarding any potential inconsistency or preemption; 

‘‘(iii) cause to be published in the Federal Register 

notice of the issue regarding the potential inconsistency 

or preemption, including a description of each State insurance measure at issue and any applicable covered 

agreement; 

‘‘(iv) provide interested parties a reasonable opportunity to submit written comments to the Office; and 

‘‘(v) consider any comments received. 


sroberts on DSKD5P82C1PROD with HEARING
213 

‘‘(B) SCOPE OF REVIEW.—For purposes of this subsection, any determination of the Director regarding State 

insurance measures, and any preemption under paragraph 

(1) as a result of such determination, shall be limited to the 

subject matter contained within the covered agreement involved and shall achieve a level of protection for insurance 

or reinsurance consumers that is substantially equivalent to 

the level of protection achieved under State insurance or reinsurance regulation. 

‘‘(C) NOTICE OF DETERMINATION OF INCONSISTENCY.— Upon making any determination under paragraph (1), the 

Director shall— 

‘‘(i) notify the appropriate State of the determination and the extent of the inconsistency; 

‘‘(ii) establish a reasonable period of time, which 

shall not be less than 30 days, before the determination 

shall become effective; and 

‘‘(iii) notify the Committees on Financial Services 

and Ways and Means of the House of Representatives 

and the Committees on Banking, Housing, and Urban 

Affairs and Finance of the Senate. 

‘‘(3) NOTICE OF EFFECTIVENESS.—Upon the conclusion of 

the period referred to in paragraph (2)(C)(ii), if the basis for 

such determination still exists, the determination shall become 

effective and the Director shall— 

‘‘(A) cause to be published a notice in the Federal Register that the preemption has become effective, as well as 

the effective date; and 

‘‘(B) notify the appropriate State. 

‘‘(4) LIMITATION.—No State may enforce a State insurance 

measure to the extent that such measure has been preempted 

under this subsection. 

‘‘(g) APPLICABILITY OF ADMINISTRATIVE PROCEDURES ACT.—Determinations of inconsistency made pursuant to subsection (f)(2) 

shall be subject to the applicable provisions of subchapter II of 

chapter 5 of title 5, United States Code (relating to administrative 

procedure), and chapter 7 of such title (relating to judicial review), 

except that in any action for judicial review of a determination of 

inconsistency, the court shall determine the matter de novo. 

‘‘(h) REGULATIONS, POLICIES, AND PROCEDURES.—The Secretary 

may issue orders, regulations, policies, and procedures to implement 

this section. 

‘‘(i) CONSULTATION.—The Director shall consult with State insurance regulators, individually or collectively, to the extent the Director determines appropriate, in carrying out the functions of the 

Office. 

‘‘(j) SAVINGS PROVISIONS.—Nothing in this section shall— 

‘‘(1) preempt— 

‘‘(A) any State insurance measure that governs any insurer’s rates, premiums, underwriting, or sales practices; 

‘‘(B) any State coverage requirements for insurance; 

‘‘(C) the application of the antitrust laws of any State 

to the business of insurance; or 

‘‘(D) any State insurance measure governing the capital 

or solvency of an insurer, except to the extent that such 


sroberts on DSKD5P82C1PROD with HEARING
214 

State insurance measure results in less favorable treatment 

of a non-United States insurer than a United States insurer; 

‘‘(2) be construed to alter, amend, or limit any provision of 

the Consumer Financial Protection Agency Act of 2010; or 

‘‘(3) affect the preemption of any States insurance measure 

otherwise inconsistent with and preempted by Federal law. 

‘‘(k) RETENTION OF EXISTING STATE REGULATORY AUTHORITY.— 

Nothing in this section or section 314 shall be construed to establish 

or provide the Office or the Department of the Treasury with general 

supervisory or regulatory authority over the business of insurance. 

‘‘(l) RETENTION OF AUTHORITY OF FEDERAL FINANCIAL REGULATORY AGENCIES.—Nothing in this section or section 314 shall be 

construed to limit the authority of any Federal financial regulatory 

agency, including the authority to develop and coordinate policy, negotiate, and enter into agreements with foreign governments, authorities, regulators, and multinational regulatory committees and 

to preempt State measures to affect uniformity with international 

regulatory agreements. 

‘‘(m) RETENTION OF AUTHORITY OF UNITED STATES TRADE REPRESENTATIVE.—Nothing in this section or section 314 shall be construed to affect the authority of the Office of the United States Trade 

Representative pursuant to section 141 of the Trade Act of 1974 (19 

U.S.C. 2171) or any other provision of law, including authority over 

the development and coordination of United States international 

trade policy and the administration of the United States trade 

agreements program. 

‘‘(n) ANNUAL REPORTS TO CONGRESS.— 

‘‘(1) SECTION 313(f) REPORTS.—Beginning September 30, 

2011, the Director shall submit a report on or before September 

30 of each calendar year to the President and to the Committees 

on Financial Services and Ways and Means of the House of 

Representatives and the Committees on Banking, Housing, and 

Urban Affairs and Finance of the Senate on any actions taken 

by the Office pursuant to subsection (f) (regarding preemption 

of inconsistent State insurance measures). 

‘‘(2) INSURANCE INDUSTRY.—Beginning September 30, 2011, 

the Director shall submit a report on or before September 30 of 

each calendar year to the President and to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate 

on the insurance industry and any other information as deemed 

relevant by the Director or requested by such Committees. 

‘‘(o) REPORTS ON U.S. AND GLOBAL REINSURANCE MARKET.— 

The Director shall submit to the Committee on Financial Services 

of the House of Representatives and the Committee on Banking, 

Housing, and Urban Affairs of the Senate— 

‘‘(1) a report received not later than September 30, 2012, describing the breadth and scope of the global reinsurance market 

and the critical role such market plays in supporting insurance 

in the United States; and 

‘‘(2) a report received not later than January 1, 2013, and 

updated not later than January 1, 2015, describing the impact 

of part II of the Nonadmitted and Reinsurance Reform Act of 


sroberts on DSKD5P82C1PROD with HEARING
215 

2010 on the ability of State regulators to access reinsurance information for regulated companies in their jurisdictions. 

‘‘(p) STUDY AND REPORT ON REGULATION OF INSURANCE.— 

‘‘(1) IN GENERAL.—Not later than 18 months after the date 

of enactment of this section, the Director shall conduct a study 

and submit a report to Congress on how to modernize and improve the system of insurance regulation in the United States. 

‘‘(2) CONSIDERATIONS.—The study and report required 

under paragraph (1) shall be based on and guided by the following considerations: 

‘‘(A) Systemic risk regulation with respect to insurance. 

‘‘(B) Capital standards and the relationship between 

capital allocation and liabilities, including standards relating to liquidity and duration risk. 

‘‘(C) Consumer protection for insurance products and 

practices, including gaps in State regulation. 

‘‘(D) The degree of national uniformity of State insurance regulation. 

‘‘(E) The regulation of insurance companies and affiliates on a consolidated basis. 

‘‘(F) International coordination of insurance regulation. 

‘‘(3) ADDITIONAL FACTORS.—The study and report required 

under paragraph (1) shall also examine the following factors: 

‘‘(A) The costs and benefits of potential Federal regulation of insurance across various lines of insurance (except 

health insurance). 

‘‘(B) The feasibility of regulating only certain lines of 

insurance at the Federal level, while leaving other lines8 of 

insurance to be regulated at the State level. 

‘‘(C) The ability of any potential Federal regulation or 

Federal regulators to eliminate or minimize regulatory arbitrage. 

‘‘(D) The impact that developments in the regulation of 

insurance in foreign jurisdictions might have on the potential Federal regulation of insurance. 

‘‘(E) The ability of any potential Federal regulation or 

Federal regulator to provide robust consumer protection for 

policyholders. 

‘‘(F) The potential consequences of subjecting insurance 

companies to a Federal resolution authority, including the 

effects of any Federal resolution authority— 

‘‘(i) on the operation of State insurance guaranty 

fund systems, including the loss of guaranty fund coverage if an insurance company is subject to a Federal 

resolution authority; 

‘‘(ii) on policyholder protection, including the loss 

of the priority status of policyholder claims over other 

unsecured general creditor claims; 

‘‘(iii) in the case of life insurance companies, on the 

loss of the special status of separate account assets and 

separate account liabilities; and 

‘‘(iv) on the international competitiveness of insurance companies. 


sroberts on DSKD5P82C1PROD with HEARING
216 

‘‘(G) Such other factors as the Director determines necessary or appropriate, consistent with the principles set 

forth in paragraph (2). 

‘‘(4) REQUIRED RECOMMENDATIONS.—The study and report 

required under paragraph (1) shall also contain any legislative, 

administrative, or regulatory recommendations, as the Director 

determines appropriate, to carry out or effectuate the findings 

set forth in such report. 

‘‘(5) CONSULTATION.—With respect to the study and report 

required under paragraph (1), the Director shall consult with 

the State insurance regulators, consumer organizations, representatives of the insurance industry and policyholders, and 

other organizations and experts, as appropriate. 

‘‘(q) USE OF EXISTING RESOURCES.—To carry out this section, 

the Office may employ personnel, facilities, and any other resource 

of the Department of the Treasury available to the Secretary and the 

Secretary shall dedicate specific personnel to the Office. 

‘‘(r) DEFINITIONS.—In this section and section 314, the following 

definitions shall apply: 

‘‘(1) AFFILIATE.—The term ‘affiliate’ means, with respect to 

an insurer, any person who controls, is controlled by, or is 

under common control with the insurer. 

‘‘(2) COVERED AGREEMENT.—The term ‘covered agreement’ 

means a written bilateral or multilateral agreement regarding 

prudential measures with respect to the business of insurance 

or reinsurance that— 

‘‘(A) is entered into between the United States and one 

or more foreign governments, authorities, or regulatory entities; and 

‘‘(B) relates to the recognition of prudential measures 

with respect to the business of insurance or reinsurance 

that achieves a level of protection for insurance or reinsurance consumers that is substantially equivalent to the level 

of protection achieved under State insurance or reinsurance 

regulation. 

‘‘(3) INSURER.—The term ‘insurer’ means any person engaged in the business of insurance, including reinsurance. 

‘‘(4) FEDERAL FINANCIAL REGULATORY AGENCY.—The term 

‘Federal financial regulatory agency’ means the Department of 

the Treasury, the Board of Governors of the Federal Reserve 

System, the Office of the Comptroller of the Currency, the Office 

of Thrift Supervision, the Securities and Exchange Commission, 

the Commodity Futures Trading Commission, the Federal Deposit Insurance Corporation, the Federal Housing Finance 

Agency, or the National Credit Union Administration. 

‘‘(5) NON-UNITED STATES INSURER.—The term ‘non-United 

States insurer’ means an insurer that is organized under the 

laws of a jurisdiction other than a State, but does not include 

any United States branch of such an insurer. 

‘‘(6) OFFICE.—The term ‘Office’ means the Federal Insurance Office established by this section. 

‘‘(7) STATE INSURANCE MEASURE.—The term ‘State insurance measure’ means any State law, regulation, administrative 

ruling, bulletin, guideline, or practice relating to or affecting 

prudential measures applicable to insurance or reinsurance. 


sroberts on DSKD5P82C1PROD with HEARING
217 

‘‘(8) STATE INSURANCE REGULATOR.—The term ‘State insurance regulator’ means any State regulatory authority responsible for the supervision of insurers. 

‘‘(9) SUBSTANTIALLY EQUIVALENT TO THE LEVEL OF PROTEC- TION ACHIEVED.—The term ‘substantially equivalent to the level 

of protection achieved’ means the prudential measures of a foreign government, authority, or regulatory entity achieve a similar outcome in consumer protection as the outcome achieved 

under State insurance or reinsurance regulation. 

‘‘(10) UNITED STATES INSURER.—The term ‘United States 

insurer’ means— 

‘‘(A) an insurer that is organized under the laws of a 

State; or 

‘‘(B) a United States branch of a non-United States insurer. 

‘‘(s) AUTHORIZATION OF APPROPRIATIONS.—There are authorized 

to be appropriated for the Office for each fiscal year such sums as 

may be necessary. 

‘‘SEC. 314. COVERED AGREEMENTS. 

‘‘(a) AUTHORITY.—The Secretary and the United States Trade 

Representative are authorized, jointly, to negotiate and enter into 

covered agreements on behalf of the United States. 

‘‘(b) REQUIREMENTS FOR CONSULTATION WITH CONGRESS.— ‘‘(1) IN GENERAL.—Before initiating negotiations to enter 

into a covered agreement under subsection (a), during such negotiations, and before entering into any such agreement, the 

Secretary and the United States Trade Representative shall 

jointly consult with the Committee on Financial Services and 

the Committee on Ways and Means of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs and the Committee on Finance of the Senate. 

‘‘(2) SCOPE.—The consultation described in paragraph (1) 

shall include consultation with respect to— 

‘‘(A) the nature of the agreement; 

‘‘(B) how and to what extent the agreement will achieve 

the applicable purposes, policies, priorities, and objectives 

of section 313 and this section; and 

‘‘(C) the implementation of the agreement, including 

the general effect of the agreement on existing State laws. 

‘‘(c) SUBMISSION AND LAYOVER PROVISIONS.—A covered agreement under subsection (a) may enter into force with respect to the 

United States only if— 

‘‘(1) the Secretary and the United States Trade Representative jointly submit to the congressional committees specified in 

subsection (b)(1), on a day on which both Houses of Congress 

are in session, a copy of the final legal text of the agreement; 

and 

‘‘(2) a period of 90 calendar days beginning on the date on 

which the copy of the final legal text of the agreement is submitted to the congressional committees under paragraph (1) has 

expired.’’. 

(b) DUTIES OF SECRETARY.—Section 321(a) of title 31, United 

States Code, is amended— 

(1) in paragraph (7), by striking ‘‘; and’’ and inserting a 

semicolon; 


sroberts on DSKD5P82C1PROD with HEARING
218 

(2) in paragraph (8)(C), by striking the period at the end 

and inserting ‘‘; and’’; and 

(3) by adding at the end the following new paragraph: 

‘‘(9) advise the President on major domestic and international prudential policy issues in connection with all lines of 

insurance except health insurance.’’. 

(c) CLERICAL AMENDMENT.—The table of sections for subchapter 

I of chapter 3 of title 31, United States Code, is amended by striking 

the item relating to section 312 and inserting the following new 

items: 

‘‘Sec. 312. Terrorism and financial intelligence. 

‘‘Sec. 313. Federal Insurance Office. 

‘‘Sec. 314. Covered agreements. 

‘‘Sec. 315. Continuing in office.’’. 

Subtitle B—State-Based Insurance Reform 

SEC. 511. SHORT TITLE. 

This subtitle may be cited as the ‘‘Nonadmitted and Reinsurance Reform Act of 2010’’. 

SEC. 512. EFFECTIVE DATE. 

Except as otherwise specifically provided in this subtitle, this 

subtitle shall take effect upon the expiration of the 12-month period 

beginning on the date of the enactment of this subtitle. 

PART I—NONADMITTED INSURANCE 

SEC. 521. REPORTING, PAYMENT, AND ALLOCATION OF PREMIUM 

TAXES. 

(a) HOME STATE’S EXCLUSIVE AUTHORITY.—No State other than 

the home State of an insured may require any premium tax payment for nonadmitted insurance. 

(b) ALLOCATION OF NONADMITTED PREMIUM TAXES.— 

(1) IN GENERAL.—The States may enter into a compact or 

otherwise establish procedures to allocate among the States the 

premium taxes paid to an insured’s home State described in 

subsection (a). 

(2) EFFECTIVE DATE.—Except as expressly otherwise provided in such compact or other procedures, any such compact 

or other procedures— 

(A) if adopted on or before the expiration of the 330-day 

period that begins on the date of the enactment of this subtitle, shall apply to any premium taxes that, on or after 

such date of enactment, are required to be paid to any State 

that is subject to such compact or procedures; and 

(B) if adopted after the expiration of such 330-day period, shall apply to any premium taxes that, on or after 

January 1 of the first calendar year that begins after the 

expiration of such 330-day period, are required to be paid 

to any State that is subject to such compact or procedures. 

(3) REPORT.—Upon the expiration of the 330-day period referred to in paragraph (2), the NAIC may submit a report to the 

Committee on Financial Services and the Committee on the Judiciary of the House of Representatives and the Committee on 

Banking, Housing, and Urban Affairs of the Senate identifying 


sroberts on DSKD5P82C1PROD with HEARING
219 

and describing any compact or other procedures for allocation 

among the States of premium taxes that have been adopted during such period by any States. 

(4) NATIONWIDE SYSTEM.—The Congress intends that each 

State adopt nationwide uniform requirements, forms, and procedures, such as an interstate compact, that provide for the reporting, payment, collection, and allocation of premium taxes 

for nonadmitted insurance consistent with this section. 

(c) ALLOCATION BASED ON TAX ALLOCATION REPORT.—To facilitate the payment of premium taxes among the States, an insured’s 

home State may require surplus lines brokers and insureds who 

have independently procured insurance to annually file tax allocation reports with the insured’s home State detailing the portion of 

the nonadmitted insurance policy premium or premiums attributable to properties, risks, or exposures located in each State. The 

filing of a nonadmitted insurance tax allocation report and the payment of tax may be made by a person authorized by the insured to 

act as its agent. 

SEC. 522. REGULATION OF NONADMITTED INSURANCE BY INSURED’S 

HOME STATE. 

(a) HOME STATE AUTHORITY.—Except as otherwise provided in 

this section, the placement of nonadmitted insurance shall be subject to the statutory and regulatory requirements solely of the insured’s home State. 

(b) BROKER LICENSING.—No State other than an insured’s home 

State may require a surplus lines broker to be licensed in order to 

sell, solicit, or negotiate nonadmitted insurance with respect to such 

insured. 

(c) ENFORCEMENT PROVISION.—With respect to section 521 and 

subsections (a) and (b) of this section, any law, regulation, provision, or action of any State that applies or purports to apply to nonadmitted insurance sold to, solicited by, or negotiated with an insured whose home State is another State shall be preempted with 

respect to such application. 

(d) WORKERS’ COMPENSATION EXCEPTION.—This section may 

not be construed to preempt any State law, rule, or regulation that 

restricts the placement of workers’ compensation insurance or excess 

insurance for self-funded workers’ compensation plans with a nonadmitted insurer. 

SEC. 523. PARTICIPATION IN NATIONAL PRODUCER DATABASE. 

After the expiration of the 2-year period beginning on the date 

of the enactment of this subtitle, a State may not collect any fees relating to licensing of an individual or entity as a surplus lines 

broker in the State unless the State has in effect at such time laws 

or regulations that provide for participation by the State in the national insurance producer database of the NAIC, or any other equivalent uniform national database, for the licensure of surplus lines 

brokers and the renewal of such licenses. 

SEC. 524. UNIFORM STANDARDS FOR SURPLUS LINES ELIGIBILITY. 

A State may not— 

(1) impose eligibility requirements on, or otherwise establish eligibility criteria for, nonadmitted insurers domiciled in a 

United States jurisdiction, except in conformance with such requirements and criteria in sections 5A(2) and 5C(2)(a) of the 


sroberts on DSKD5P82C1PROD with HEARING
220 

Non-Admitted Insurance Model Act, unless the State has adopted nationwide uniform requirements, forms, and procedures developed in accordance with section 521(b) of this subtitle that 

include alternative nationwide uniform eligibility requirements; 

or 

(2) prohibit a surplus lines broker from placing nonadmitted insurance with, or procuring nonadmitted insurance 

from, a nonadmitted insurer domiciled outside the United 

States that is listed on the Quarterly Listing of Alien Insurers 

maintained by the International Insurers Department of the 

NAIC. 

SEC. 525. STREAMLINED APPLICATION FOR COMMERCIAL PURCHASERS. 

A surplus lines broker seeking to procure or place nonadmitted 

insurance in a State for an exempt commercial purchaser shall not 

be required to satisfy any State requirement to make a due diligence 

search to determine whether the full amount or type of insurance 

sought by such exempt commercial purchaser can be obtained from 

admitted insurers if— 

(1) the broker procuring or placing the surplus lines insurance has disclosed to the exempt commercial purchaser that 

such insurance may or may not be available from the admitted 

market that may provide greater protection with more regulatory oversight; and 

(2) the exempt commercial purchaser has subsequently requested in writing the broker to procure or place such insurance 

from a nonadmitted insurer. 

SEC. 526. GAO STUDY OF NONADMITTED INSURANCE MARKET. 

(a) IN GENERAL.—The Comptroller General of the United States 

shall conduct a study of the nonadmitted insurance market to determine the effect of the enactment of this part on the size and market 

share of the nonadmitted insurance market for providing coverage 

typically provided by the admitted insurance market. 

(b) CONTENTS.—The study shall determine and analyze— 

(1) the change in the size and market share of the nonadmitted insurance market and in the number of insurance 

companies and insurance holding companies providing such 

business in the 18-month period that begins upon the effective 

date of this subtitle; 

(2) the extent to which insurance coverage typically provided by the admitted insurance market has shifted to the nonadmitted insurance market; 

(3) the consequences of any change in the size and market 

share of the nonadmitted insurance market, including differences in the price and availability of coverage available in 

both the admitted and nonadmitted insurance markets; 

(4) the extent to which insurance companies and insurance 

holding companies that provide both admitted and nonadmitted insurance have experienced shifts in the volume of 

business between admitted and nonadmitted insurance; and 

(5) the extent to which there has been a change in the number of individuals who have nonadmitted insurance policies, the 

type of coverage provided under such policies, and whether such 

coverage is available in the admitted insurance market. 


sroberts on DSKD5P82C1PROD with HEARING
221 

(c) CONSULTATION WITH NAIC.—In conducting the study under 

this section, the Comptroller General shall consult with the NAIC. 

(d) REPORT.—The Comptroller General shall complete the study 

under this section and submit a report to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee 

on Financial Services of the House of Representatives regarding the 

findings of the study not later than 30 months after the effective 

date of this subtitle. 

SEC. 527. DEFINITIONS. 

For purposes of this part, the following definitions shall apply: 

(1) ADMITTED INSURER.—The term ‘‘admitted insurer’’ 

means, with respect to a State, an insurer licensed to engage in 

the business of insurance in such State. 

(2) AFFILIATE.—The term ‘‘affiliate’’ means, with respect to 

an insured, any entity that controls, is controlled by, or is under 

common control with the insured. 

(3) AFFILIATED GROUP.—The term ‘‘affiliated group’’ means 

any group of entities that are all affiliated. 

(4) CONTROL.—An entity has ‘‘control’’ over another entity 

if— 

(A) the entity directly or indirectly or acting through 1 

or more other persons owns, controls, or has the power to 

vote 25 percent or more of any class of voting securities of 

the other entity; or 

(B) the entity controls in any manner the election of a 

majority of the directors or trustees of the other entity. 

(5) EXEMPT COMMERCIAL PURCHASER.—The term ‘‘exempt 

commercial purchaser’’ means any person purchasing commercial insurance that, at the time of placement, meets the following requirements: 

(A) The person employs or retains a qualified risk 

manager to negotiate insurance coverage. 

(B) The person has paid aggregate nationwide commercial property and casualty insurance premiums in excess of 

$100,000 in the immediately preceding 12 months. 

(C)(i) The person meets at least 1 of the following criteria: 

(I) The person possesses a net worth in excess of $20,000,000, as such amount is adjusted pursuant to 

clause (ii). 

(II) The person generates annual revenues in excess of $50,000,000, as such amount is adjusted pursuant to 

clause (ii). 

(III) The person employs more than 500 full-time 

or full-time equivalent employees per individual insured or is a member of an affiliated group employing 

more than 1,000 employees in the aggregate. 

(IV) The person is a not-for-profit organization or 

public entity generating annual budgeted expenditures 

of at least $30,000,000, as such amount is adjusted 

pursuant to clause (ii). 

(V) The person is a municipality with a population 

in excess of 50,000 persons. 

(ii) Effective on the fifth January 1 occurring after the 

date of the enactment of this subtitle and each fifth JanuVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00225 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
222 

ary 1 occurring thereafter, the amounts in subclauses (I), 

(II), and (IV) of clause (i) shall be adjusted to reflect the 

percentage change for such 5-year period in the Consumer 

Price Index for All Urban Consumers published by the Bureau of Labor Statistics of the Department of Labor. 

(6) HOME STATE.— (A) IN GENERAL.—Except as provided in subparagraph 

(B), the term ‘‘home State’’ means, with respect to an insured— 

(i) the State in which an insured maintains its 

principal place of business or, in the case of an individual, the individual’s principal residence; or 

(ii) if 100 percent of the insured risk is located out 

of the State referred to in clause (i), the State to which 

the greatest percentage of the insured’s taxable premium for that insurance contract is allocated. 

(B) AFFILIATED GROUPS.—If more than 1 insured from 

an affiliated group are named insureds on a single nonadmitted insurance contract, the term ‘‘home State’’ means 

the home State, as determined pursuant to subparagraph 

(A), of the member of the affiliated group that has the largest percentage of premium attributed to it under such insurance contract. 

(7) INDEPENDENTLY PROCURED INSURANCE.—The term 

‘‘independently procured insurance’’ means insurance procured 

directly by an insured from a nonadmitted insurer. 

(8) NAIC.—The term ‘‘NAIC’’ means the National Association of Insurance Commissioners or any successor entity. 

(9) NONADMITTED INSURANCE.—The term ‘‘nonadmitted insurance’’ means any property and casualty insurance permitted 

to be placed directly or through a surplus lines broker with a 

nonadmitted insurer eligible to accept such insurance. 

(10) NON-ADMITTED INSURANCE MODEL ACT.—The term 

‘‘Non-Admitted Insurance Model Act’’ means the provisions of 

the Non-Admitted Insurance Model Act, as adopted by the 

NAIC on August 3, 1994, and amended on September 30, 1996, 

December 6, 1997, October 2, 1999, and June 8, 2002. 

(11) NONADMITTED INSURER.—The term ‘‘nonadmitted insurer’’— 

(A) means, with respect to a State, an insurer not licensed to engage in the business of insurance in such State; 

but 

(B) does not include a risk retention group, as that 

term is defined in section 2(a)(4) of the Liability Risk Retention Act of 1986 (15 U.S.C. 3901(a)(4)). 

(12) PREMIUM TAX.—The term ‘‘premium tax’’ means, with 

respect to surplus lines or independently procured insurance 

coverage, any tax, fee, assessment, or other charge imposed by 

a government entity directly or indirectly based on any payment 

made as consideration for an insurance contract for such insurance, including premium deposits, assessments, registration 

fees, and any other compensation given in consideration for a 

contract of insurance. 

(13) QUALIFIED RISK MANAGER.—The term ‘‘qualified risk 

manager’’ means, with respect to a policyholder of commercial 


sroberts on DSKD5P82C1PROD with HEARING
223 

insurance, a person who meets all of the following requirements: 

(A) The person is an employee of, or third-party consultant retained by, the commercial policyholder. 

(B) The person provides skilled services in loss prevention, loss reduction, or risk and insurance coverage analysis, and purchase of insurance. 

(C) The person— 

(i)(I) has a bachelor’s degree or higher from an accredited college or university in risk management, business administration, finance, economics, or any other 

field determined by a State insurance commissioner or 

other State regulatory official or entity to demonstrate 

minimum competence in risk management; and 

(II)(aa) has 3 years of experience in risk financing, 

claims administration, loss prevention, risk and insurance analysis, or purchasing commercial lines of insurance; or 

(bb) has— 

(AA) a designation as a Chartered Property 

and Casualty Underwriter (in this subparagraph 

referred to as ‘‘CPCU’’) issued by the American Institute for CPCU/Insurance Institute of America; 

(BB) a designation as an Associate in Risk 

Management (ARM) issued by the American Institute for CPCU/Insurance Institute of America; 

(CC) a designation as Certified Risk Manager 

(CRM) issued by the National Alliance for Insurance Education & Research; 

(DD) a designation as a RIMS Fellow (RF) 

issued by the Global Risk Management Institute; 

or 

(EE) any other designation, certification, or license determined by a State insurance commissioner or other State insurance regulatory official 

or entity to demonstrate minimum competency in 

risk management; 

(ii)(I) has at least 7 years of experience in risk financing, claims administration, loss prevention, risk 

and insurance coverage analysis, or purchasing commercial lines of insurance; and 

(II) has any 1 of the designations specified in 

subitems (AA) through (EE) of clause (i)(II)(bb); 

(iii) has at least 10 years of experience in risk financing, claims administration, loss prevention, risk 

and insurance coverage analysis, or purchasing commercial lines of insurance; or 

(iv) has a graduate degree from an accredited college or university in risk management, business administration, finance, economics, or any other field determined by a State insurance commissioner or other 

State regulatory official or entity to demonstrate minimum competence in risk management. 


sroberts on DSKD5P82C1PROD with HEARING
224 

(14) REINSURANCE.—The term ‘‘reinsurance’’ means the assumption by an insurer of all or part of a risk undertaken originally by another insurer. 

(15) SURPLUS LINES BROKER.—The term ‘‘surplus lines 

broker’’ means an individual, firm, or corporation which is licensed in a State to sell, solicit, or negotiate insurance on properties, risks, or exposures located or to be performed in a State 

with nonadmitted insurers. 

(16) STATE.—The term ‘‘State’’ includes any State of the 

United States, the District of Columbia, the Commonwealth of 

Puerto Rico, Guam, the Northern Mariana Islands, the Virgin 

Islands, and American Samoa. 

PART II—REINSURANCE 

SEC. 531. REGULATION OF CREDIT FOR REINSURANCE AND REINSURANCE AGREEMENTS. 

(a) CREDIT FOR REINSURANCE.—If the State of domicile of a 

ceding insurer is an NAIC-accredited State, or has financial solvency requirements substantially similar to the requirements necessary for NAIC accreditation, and recognizes credit for reinsurance 

for the insurer’s ceded risk, then no other State may deny such credit for reinsurance. 

(b) ADDITIONAL PREEMPTION OF EXTRATERRITORIAL APPLICA- TION OF STATE LAW.—In addition to the application of subsection 

(a), all laws, regulations, provisions, or other actions of a State that 

is not the domiciliary State of the ceding insurer, except those with 

respect to taxes and assessments on insurance companies or insurance income, are preempted to the extent that they— 

(1) restrict or eliminate the rights of the ceding insurer or 

the assuming insurer to resolve disputes pursuant to contractual arbitration to the extent such contractual provision is not 

inconsistent with the provisions of title 9, United States Code; 

(2) require that a certain State’s law shall govern the reinsurance contract, disputes arising from the reinsurance contract, or requirements of the reinsurance contract; 

(3) attempt to enforce a reinsurance contract on terms different than those set forth in the reinsurance contract, to the extent that the terms are not inconsistent with this part; or 

(4) otherwise apply the laws of the State to reinsurance 

agreements of ceding insurers not domiciled in that State. 

SEC. 532. REGULATION OF REINSURER SOLVENCY. 

(a) DOMICILIARY STATE REGULATION.—If the State of domicile 

of a reinsurer is an NAIC-accredited State or has financial solvency 

requirements substantially similar to the requirements necessary for 

NAIC accreditation, such State shall be solely responsible for regulating the financial solvency of the reinsurer. 

(b) NONDOMICILIARY STATES.— (1) LIMITATION ON FINANCIAL INFORMATION REQUIRE- MENTS.—If the State of domicile of a reinsurer is an NAIC-accredited State or has financial solvency requirements substantially similar to the requirements necessary for NAIC accreditation, no other State may require the reinsurer to provide any 

additional financial information other than the information the 

reinsurer is required to file with its domiciliary State. 


sroberts on DSKD5P82C1PROD with HEARING
225 

(2) RECEIPT OF INFORMATION.—No provision of this section 

shall be construed as preventing or prohibiting a State that is 

not the State of domicile of a reinsurer from receiving a copy 

of any financial statement filed with its domiciliary State. 

SEC. 533. DEFINITIONS. 

For purposes of this part, the following definitions shall apply: 

(1) CEDING INSURER.—The term ‘‘ceding insurer’’ means an 

insurer that purchases reinsurance. 

(2) DOMICILIARY STATE.—The terms ‘‘State of domicile’’ and 

‘‘domiciliary State’’ mean, with respect to an insurer or reinsurer, the State in which the insurer or reinsurer is incorporated or entered through, and licensed. 

(3) NAIC.—The term ‘‘NAIC’’ means the National Association of Insurance Commissioners or any successor entity. 

(4) REINSURANCE.—The term ‘‘reinsurance’’ means the assumption by an insurer of all or part of a risk undertaken originally by another insurer. 

(5) REINSURER.— 

(A) IN GENERAL.—The term ‘‘reinsurer’’ means an insurer to the extent that the insurer— 

(i) is principally engaged in the business of reinsurance; 

(ii) does not conduct significant amounts of direct 

insurance as a percentage of its net premiums; and 

(iii) is not engaged in an ongoing basis in the business of soliciting direct insurance. 

(B) DETERMINATION.—A determination of whether an 

insurer is a reinsurer shall be made under the laws of the 

State of domicile in accordance with this paragraph. 

(6) STATE.—The term ‘‘State’’ includes any State of the 

United States, the District of Columbia, the Commonwealth of 

Puerto Rico, Guam, the Northern Mariana Islands, the Virgin 

Islands, and American Samoa. 

PART III—RULE OF CONSTRUCTION 

SEC. 541. RULE OF CONSTRUCTION. 

Nothing in this subtitle or the amendments made by this subtitle shall be construed to modify, impair, or supersede the application of the antitrust laws. Any implied or actual conflict between 

this subtitle and any amendments to this subtitle and the antitrust 

laws shall be resolved in favor of the operation of the antitrust laws. 

SEC. 542. SEVERABILITY. 

If any section or subsection of this subtitle, or any application 

of such provision to any person or circumstance, is held to be unconstitutional, the remainder of this subtitle, and the application of the 

provision to any other person or circumstance, shall not be affected. 


sroberts on DSKD5P82C1PROD with HEARING
226 

TITLE VI—IMPROVEMENTS TO REGULATION OF BANK 

AND SAVINGS ASSOCIATION HOLDING COMPANIES 

AND DEPOSITORY INSTITUTIONS 

SEC. 601. SHORT TITLE. 

This title may be cited as the ‘‘Bank and Savings Association 

Holding Company and Depository Institution Regulatory Improvements Act of 2010’’. 

SEC. 602. DEFINITION. 

For purposes of this title, a company is a ‘‘commercial firm’’ if 

the annual gross revenues derived by the company and all of its affiliates from activities that are financial in nature (as defined in 

section 4(k) of the Bank Holding Company Act of 1956 (12 U.S.C. 

1843(k))) and, if applicable, from the ownership or control of one or 

more insured depository institutions, represent less than 15 percent 

of the consolidated annual gross revenues of the company. 

SEC. 603. MORATORIUM AND STUDY ON TREATMENT OF CREDIT CARD 

BANKS, INDUSTRIAL LOAN COMPANIES, AND CERTAIN 

OTHER COMPANIES UNDER THE BANK HOLDING COMPANY ACT OF 1956. 

(a) MORATORIUM.— 

(1) DEFINITIONS.—In this subsection— 

(A) the term ‘‘credit card bank’’ means an institution 

described in section 2(c)(2)(F) of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(c)(2)(F)); 

(B) the term ‘‘industrial bank’’ means an institution described in section 2(c)(2)(H) of the Bank Holding Company 

Act of 1956 (12 U.S.C. 1841(c)(2)(H)); and 

(C) the term ‘‘trust bank’’ means an institution described in section 2(c)(2)(D) of the Bank Holding Company 

Act of 1956 (12 U.S.C. 1841(c)(2)(D)). 

(2) MORATORIUM ON PROVISION OF DEPOSIT INSURANCE.— 

The Corporation may not approve an application for deposit insurance under section 5 of the Federal Deposit Insurance Act 

(12 U.S.C. 1815) that is received after November 23, 2009, for 

an industrial bank, a credit card bank, or a trust bank that is 

directly or indirectly owned or controlled by a commercial firm. 

(3) CHANGE IN CONTROL.— 

(A) IN GENERAL.—Except as provided in subparagraph 

(B), the appropriate Federal banking agency shall disapprove a change in control, as provided in section 7(j) of 

the Federal Deposit Insurance Act (12 U.S.C. 1817(j)), of an 

industrial bank, a credit card bank, or a trust bank if the 

change in control would result in direct or indirect control 

of the industrial bank, credit card bank, or trust bank by 

a commercial firm. 

(B) EXCEPTIONS.—Subparagraph (A) shall not apply to 

a change in control of an industrial bank, credit card bank, 

or trust bank— 

(i) that— 

(I) is in danger of default, as determined by 

the appropriate Federal banking agency; 

(II) results from the merger or whole acquisition of a commercial firm that directly or indirectly controls the industrial bank, credit card 


sroberts on DSKD5P82C1PROD with HEARING
227 

bank, or trust bank in a bona fide merger with or 

acquisition by another commercial firm, as determined by the appropriate Federal banking agency; 

or 

(III) results from an acquisition of voting 

shares of a publicly traded company that controls 

an industrial bank, credit card bank, or trust 

bank, if, after the acquisition, the acquiring shareholder (or group of shareholders acting in concert) 

holds less than 25 percent of any class of the voting shares of the company; and 

(ii) that has obtained all regulatory approvals otherwise required for such change of control under any 

applicable Federal or State law, including section 7(j) 

of the Federal Deposit Insurance Act (12 U.S.C. 

1817(j)). 

(4) SUNSET.—This subsection shall cease to have effect 3 

years after the date of enactment of this Act. 

(b) GOVERNMENT ACCOUNTABILITY OFFICE STUDY OF EXCEP- TIONS UNDER THE BANK HOLDING COMPANY ACT OF 1956.— 

(1) STUDY REQUIRED.—The Comptroller General of the 

United States shall carry out a study to determine whether it 

is necessary, in order to strengthen the safety and soundness of 

institutions or the stability of the financial system, to eliminate 

the exceptions under section 2 of the Bank Holding Company 

Act of 1956 (12 U.S.C. 1841) for institutions described in— 

(A) section 2(a)(5)(E) of the Bank Holding Company 

Act of 1956 (12 U.S.C. 1841(a)(5)(E)); 

(B) section 2(a)(5)(F) of the Bank Holding Company 

Act of 1956 (12 U.S.C. 1841(a)(5)(F)); 

(C) section 2(c)(2)(D) of the Bank Holding Company 

Act of 1956 (12 U.S.C. 1841(c)(2)(D)); 

(D) section 2(c)(2)(F) of the Bank Holding Company Act 

of 1956 (12 U.S.C. 1841(c)(2)(F)); 

(E) section 2(c)(2)(H) of the Bank Holding Company 

Act of 1956 (12 U.S.C. 1841(c)(2)(H)); and 

(F) section 2(c)(2)(B) of the Bank Holding Company Act 

of 1956 (12 U.S.C. 1841(c)(2)(B)). 

(2) CONTENT OF STUDY.— (A) IN GENERAL.—The study required under paragraph 

(1), with respect to the institutions referenced in each of 

subparagraphs (A) through (E) of paragraph (1), shall, to 

the extent feasible be based on information provided to the 

Comptroller General by the appropriate Federal or State 

regulator, and shall— 

(i) identify the types and number of institutions excepted from section 2 of the Bank Holding Company 

Act of 1956 (12 U.S.C. 1841) under each of the subparagraphs described in subparagraphs (A) through 

(E) of paragraph (1); 

(ii) generally describe the size and geographic locations of the institutions described in clause (i); 

(iii) determine the extent to which the institutions 

described in clause (i) are held by holding companies 

that are commercial firms; 


sroberts on DSKD5P82C1PROD with HEARING
228 

(iv) determine whether the institutions described in 

clause (i) have any affiliates that are commercial firms; 

(v) identify the Federal banking agency responsible 

for the supervision of the institutions described in 

clause (i) on and after the transfer date; 

(vi) determine the adequacy of the Federal bank 

regulatory framework applicable to each category of institution described in clause (i), including any restrictions (including limitations on affiliate transactions or 

cross-marketing) that apply to transactions between an 

institution, the holding company of the institution, and 

any other affiliate of the institution; and 

(vii) evaluate the potential consequences of subjecting the institutions described in clause (i) to the requirements of the Bank Holding Company Act of 1956, 

including with respect to the availability and allocation of credit, the stability of the financial system and 

the economy, the safe and sound operation of each category of institution, and the impact on the types of activities in which such institutions, and the holding 

companies of such institutions, may engage. 

(B) SAVINGS ASSOCIATIONS.—With respect to institutions described in paragraph (1)(F), the study required 

under paragraph (1) shall— 

(i) determine the adequacy of the Federal bank regulatory framework applicable to such institutions, including any restrictions (including limitations on affiliate transactions or cross-marketing) that apply to 

transactions between an institution, the holding company of the institution, and any other affiliate of the 

institution; and 

(ii) evaluate the potential consequences of subjecting the institutions described in paragraph (1)(F) to 

the requirements of the Bank Holding Company Act of 

1956, including with respect to the availability and allocation of credit, the stability of the financial system 

and the economy, the safe and sound operation of such 

institutions, and the impact on the types of activities in 

which such institutions, and the holding companies of 

such institutions, may engage. 

(3) REPORT.—Not later than 18 months after the date of enactment of this Act, the Comptroller General shall submit to the 

Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of 

Representatives a report on the study required under paragraph 

(1). 

SEC. 604. REPORTS AND EXAMINATIONS OF HOLDING COMPANIES; 

REGULATION OF FUNCTIONALLY REGULATED SUBSIDIARIES. 

(a) REPORTS BY BANK HOLDING COMPANIES.—Sections 5(c)(1) of 

the Bank Holding Company Act of 1956 (12 U.S.C. 1844(c)(1)) is 

amended— 

(1) by striking subclause (A)(ii) and inserting the following: 

‘‘(ii) compliance by the bank holding company or 

subsidiary with— 


sroberts on DSKD5P82C1PROD with HEARING
229 

‘‘(I) this Act; 

‘‘(II) Federal laws that the Board has specific 

jurisdiction to enforce against the company or subsidiary; and 

‘‘(III) other than in the case of an insured depository institution or functionally regulated subsidiary, any other applicable provision of Federal 

law.’’; 

(2) by striking subparagraph (B) and inserting the following: 

‘‘(B) USE OF EXISTING REPORTS AND OTHER SUPER- VISORY INFORMATION.—The Board shall, to the fullest extent possible, use— 

‘‘(i) reports and other supervisory information that 

the bank holding company or any subsidiary thereof 

has been required to provide to other Federal or State 

regulatory agencies; 

‘‘(ii) externally audited financial statements of the 

bank holding company or subsidiary; 

‘‘(iii) information otherwise available from Federal 

or State regulatory agencies; and 

‘‘(iv) information that is otherwise required to be 

reported publicly.’’; and 

(3) by adding at the end the following: 

‘‘(C) AVAILABILITY.—Upon the request of the Board, the 

bank holding company or a subsidiary of the bank holding 

company shall promptly provide to the Board any information described in clauses (i) through (iii) of subparagraph 

(B).’’. 

(b) EXAMINATIONS OF BANK HOLDING COMPANIES.—Section 

5(c)(2) of the Bank Holding Company Act of 1956 (12 U.S.C. 

1844(c)(2)) is amended to read as follows: 

‘‘(2) EXAMINATIONS.— ‘‘(A) IN GENERAL.—Subject to subtitle B of the Consumer Financial Protection Act of 2010, the Board may 

make examinations of a bank holding company and each 

subsidiary of a bank holding company in order to— 

‘‘(i) inform the Board of— 

‘‘(I) the nature of the operations and financial 

condition of the bank holding company and the 

subsidiary; 

‘‘(II) the financial, operational, and other risks 

within the bank holding company system that may 

pose a threat to— 

‘‘(aa) the safety and soundness of the bank 

holding company or of any depository institution subsidiary of the bank holding company; 

or 

‘‘(bb) the stability of the financial system 

of the United States; and 

‘‘(III) the systems of the bank holding company 

for monitoring and controlling the risks described 

in subclause (II); and 

‘‘(ii) monitor the compliance of the bank holding 

company and the subsidiary with— 


sroberts on DSKD5P82C1PROD with HEARING
230 

‘‘(I) this Act; 

‘‘(II) Federal laws that the Board has specific 

jurisdiction to enforce against the company or subsidiary; and 

‘‘(III) other than in the case of an insured depository institution or functionally regulated subsidiary, any other applicable provisions of Federal 

law. 

‘‘(B) USE OF REPORTS TO REDUCE EXAMINATIONS.—For 

purposes of this paragraph, the Board shall, to the fullest 

extent possible, rely on— 

‘‘(i) examination reports made by other Federal or 

State regulatory agencies relating to a bank holding 

company and any subsidiary of a bank holding company; and 

‘‘(ii) the reports and other information required 

under paragraph (1). 

‘‘(C) COORDINATION WITH OTHER REGULATORS.—The 

Board shall— 

‘‘(i) provide reasonable notice to, and consult with, 

the appropriate Federal banking agency, the Securities 

and Exchange Commission, the Commodity Futures 

Trading Commission, or State regulatory agency, as 

appropriate, for a subsidiary that is a depository institution or a functionally regulated subsidiary of a bank 

holding company before commencing an examination of 

the subsidiary under this section; and 

‘‘(ii) to the fullest extent possible, avoid duplication 

of examination activities, reporting requirements, and 

requests for information.’’. 

(c) AUTHORITY TO REGULATE FUNCTIONALLY REGULATED SUBSIDIARIES OF BANK HOLDING COMPANIES.—The Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.) is amended— 

(1) in section 5(c)(5)(B) (12 U.S.C. 1844(c)(5)(B)), by striking clause (v) and inserting the following: 

‘‘(v) an entity that is subject to regulation by, or 

registration with, the Commodity Futures Trading 

Commission, with respect to activities conducted as a 

futures commission merchant, commodity trading adviser, commodity pool, commodity pool operator, swap 

execution facility, swap data repository, swap dealer, 

major swap participant, and activities that are incidental to such commodities and swaps activities.’’; and 

(2) by striking section 10A (12 U.S.C. 1848a). 

(d) ACQUISITIONS OF BANKS.—Section 3(c) of the Bank Holding 

Company Act of 1956 (12 U.S.C. 1842(c)) is amended by adding at 

the end the following: 

‘‘(7) FINANCIAL STABILITY.—In every case, the Board shall 

take into consideration the extent to which a proposed acquisition, merger, or consolidation would result in greater or more 

concentrated risks to the stability of the United States banking 

or financial system.’’. 

(e) ACQUISITIONS OF NONBANKS.— 

(1) NOTICE PROCEDURES.—Section 4(j)(2)(A) of the Bank 

Holding Company Act of 1956 (12 U.S.C. 1843(j)(2)(A)) is 


sroberts on DSKD5P82C1PROD with HEARING
231 

amended by striking ‘‘or unsound banking practices’’ and inserting ‘‘unsound banking practices, or risk to the stability of 

the United States banking or financial system’’. 

(2) ACTIVITIES THAT ARE FINANCIAL IN NATURE.—Section 

4(k)(6)(B) of the Bank Holding Company Act of 1956 (12 U.S.C. 

1843(k)(6)(B)) is amended to read as follows: 

‘‘(B) APPROVAL NOT REQUIRED FOR CERTAIN FINANCIAL

ACTIVITIES.— 

‘‘(i) IN GENERAL.—Except as provided in subsection 

(j) with regard to the acquisition of a savings association and clause (ii), a financial holding company may 

commence any activity, or acquire any company, pursuant to paragraph (4) or any regulation prescribed or 

order issued under paragraph (5), without prior approval of the Board. 

‘‘(ii) EXCEPTION.—A financial holding company 

may not acquire a company, without the prior approval 

of the Board, in a transaction in which the total consolidated assets to be acquired by the financial holding 

company exceed $10,000,000,000. 

‘‘(iii) HART-SCOTT-RODINO FILING REQUIREMENT.— 

Solely for purposes of section 7A(c)(8) of the Clayton 

Act (15 U.S.C. 18a(c)(8)), the transactions subject to the 

requirements of this paragraph shall be treated as if 

the approval of the Board is not required.’’. 

(f) BANK MERGER ACT TRANSACTIONS.—Section 18(c)(5) of the 

Federal Deposit Insurance Act (12 U.S.C. 1828(c)(5)) is amended, in 

the matter immediately following subparagraph (B), by striking 

‘‘and the convenience and needs of the community to be served’’ and 

inserting ‘‘the convenience and needs of the community to be served, 

and the risk to the stability of the United States banking or financial system’’. 

(g) REPORTS BY SAVINGS AND LOAN HOLDING COMPANIES.—Section 10(b)(2) of the Home Owners’ Loan Act (12 U.S.C. 1467a(b)(2) 

is amended— 

(1) by striking ‘‘Each savings’’ and inserting the following: 

‘‘(A) IN GENERAL.—Each savings’’; and 

(2) by adding at the end the following: 

‘‘(B) USE OF EXISTING REPORTS AND OTHER SUPERVISORY INFORMATION.—The Board shall, to the fullest extent possible, use— 

‘‘(i) reports and other supervisory information that 

the savings and loan holding company or any subsidiary thereof has been required to provide to other 

Federal or State regulatory agencies; 

‘‘(ii) externally audited financial statements of the 

savings and loan holding company or subsidiary; 

‘‘(iii) information that is otherwise available from 

Federal or State regulatory agencies; and 

‘‘(iv) information that is otherwise required to be 

reported publicly. 

‘‘(C) AVAILABILITY.—Upon the request of the Board, a 

savings and loan holding company or a subsidiary of a 

savings and loan holding company shall promptly provide 


sroberts on DSKD5P82C1PROD with HEARING
232 

to the Board any information described in clauses (i) 

through (iii) of subparagraph (B).’’. 

(h) EXAMINATION OF SAVINGS AND LOAN HOLDING COMPANIES.— 

(1) DEFINITIONS.—Section 2 of the Home Owners’ Loan Act 

(12 U.S.C. 1462) is amended by adding at the end the following: 

‘‘(10) APPROPRIATE FEDERAL BANKING AGENCY.—The term 

‘appropriate Federal banking agency’ has the same meaning as 

in section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. 

1813(q)). 

‘‘(11) FUNCTIONALLY REGULATED SUBSIDIARY.—The term 

‘functionally regulated subsidiary’ has the same meaning as in 

section 5(c)(5) of the Bank Holding Company Act of 1956 (12 

U.S.C. 1844(c)(5)).’’. 

(2) EXAMINATION.—Section 10(b) of the Home Owners’ Loan 

Act (12 U.S.C. 1467a(b)) is amended by striking paragraph (4) 

and inserting the following: 

‘‘(4) EXAMINATIONS.— 

‘‘(A) IN GENERAL.—Subject to subtitle B of the Consumer Financial Protection Act of 2010, the Board may 

make examinations of a savings and loan holding company 

and each subsidiary of a savings and loan holding company system, in order to— 

‘‘(i) inform the Board of— 

‘‘(I) the nature of the operations and financial 

condition of the savings and loan holding company 

and the subsidiary; 

‘‘(II) the financial, operational, and other risks 

within the savings and loan holding company system that may pose a threat to— 

‘‘(aa) the safety and soundness of the savings and loan holding company or of any depository institution subsidiary of the savings 

and loan holding company; or 

‘‘(bb) the stability of the financial system 

of the United States; and 

‘‘(III) the systems of the savings and loan holding company for monitoring and controlling the 

risks described in subclause (II); and 

‘‘(ii) monitor the compliance of the savings and 

loan holding company and the subsidiary with— 

‘‘(I) this Act; 

‘‘(II) Federal laws that the Board has specific 

jurisdiction to enforce against the company or subsidiary; and 

‘‘(III) other than in the case of an insured depository institution or functionally regulated subsidiary, any other applicable provisions of Federal 

law. 

‘‘(B) USE OF REPORTS TO REDUCE EXAMINATIONS.—For 

purposes of this subsection, the Board shall, to the fullest 

extent possible, rely on— 


sroberts on DSKD5P82C1PROD with HEARING
233 

‘‘(i) the examination reports made by other Federal 

or State regulatory agencies relating to a savings and 

loan holding company and any subsidiary; and 

‘‘(ii) the reports and other information required 

under paragraph (2). 

‘‘(C) COORDINATION WITH OTHER REGULATORS.—The 

Board shall— 

‘‘(i) provide reasonable notice to, and consult with, 

the appropriate Federal banking agency, the Securities 

and Exchange Commission, the Commodity Futures 

Trading Commission, or State regulatory agency, as 

appropriate, for a subsidiary that is a depository institution or a functionally regulated subsidiary of a savings and loan holding company before commencing an 

examination of the subsidiary under this section; and 

‘‘(ii) to the fullest extent possible, avoid duplication 

of examination activities, reporting requirements, and 

requests for information.’’. 

(i) DEFINITION OF THE TERM ‘‘SAVINGS AND LOAN HOLDING

COMPANY’’.—Section 10(a)(1)(D)(ii) of the Home Owners’ Loan Act 

(12 U.S.C. 1467a(a)(1)(D)(ii)) is amended to read as follows: 

‘‘(ii) EXCLUSION.—The term ‘savings and loan 

holding company’ does not include— 

‘‘(I) a bank holding company that is registered 

under, and subject to, the Bank Holding Company 

Act of 1956 (12 U.S.C. 1841 et seq.), or to any company directly or indirectly controlled by such company (other than a savings association); 

‘‘(II) a company that controls a savings association that functions solely in a trust or fiduciary 

capacity as described in section 2(c)(2)(D) of the 

Bank Holding Company Act of 1956 (12 U.S.C. 

1841(c)(2)(D)); or 

‘‘(III) a company described in subsection 

(c)(9)(C) solely by virtue of such company’s control 

of an intermediate holding company established 

pursuant to section 10A.’’. 

(j) EFFECTIVE DATE.—The amendments made by this section 

shall take effect on the transfer date. 

SEC. 605. ASSURING CONSISTENT OVERSIGHT OF PERMISSIBLE ACTIVITIES OF DEPOSITORY INSTITUTION SUBSIDIARIES OF 

HOLDING COMPANIES. 

(a) IN GENERAL.—The Federal Deposit Insurance Act (12 U.S.C. 

1811 et seq.) is amended by inserting after section 25 the following 

new section: 

‘‘SEC. 26. ASSURING CONSISTENT OVERSIGHT OF SUBSIDIARIES OF 

HOLDING COMPANIES. 

‘‘(a) DEFINITIONS.—For purposes of this section: 

‘‘(1) BOARD.—The term ‘Board’ means the Board of Governors of the Federal Reserve System. 

‘‘(2) FUNCTIONALLY REGULATED SUBSIDIARY.—The term 

‘functionally regulated subsidiary’ has the same meaning as in 

section 5(c)(5) of the Bank Holding Company Act. 


sroberts on DSKD5P82C1PROD with HEARING
234 

‘‘(3) LEAD INSURED DEPOSITORY INSTITUTION.—The term 

‘lead insured depository institution’ has the same meaning as in 

section 2(o)(8) of the Bank Holding Company Act. 

‘‘(b) EXAMINATION REQUIREMENTS.—Subject to subtitle B of the 

Consumer Financial Protection Act of 2010, the Board shall examine the activities of a nondepository institution subsidiary (other 

than a functionally regulated subsidiary or a subsidiary of a depository institution) of a depository institution holding company that 

are permissible for the insured depository institution subsidiaries of 

the depository institution holding company in the same manner, 

subject to the same standards, and with the same frequency as 

would be required if such activities were conducted in the lead insured depository institution of the depository institution holding 

company. 

‘‘(c) STATE COORDINATION.— ‘‘(1) CONSULTATION AND COORDINATION.—If a nondepository institution subsidiary is supervised by a State bank supervisor or other State regulatory authority, the Board, in conducting the examinations required in subsection (b), shall consult and coordinate with such State regulator. 

‘‘(2) ALTERNATING EXAMINATIONS PERMITTED.—The examinations required under subsection (b) may be conducted in joint 

or alternating manner with a State regulator, if the Board determines that an examination of a nondepository institution 

subsidiary conducted by the State carries out the purposes of 

this section. 

‘‘(d) APPROPRIATE FEDERAL BANKING AGENCY BACKUP EXAM- INATION AUTHORITY.— ‘‘(1) IN GENERAL.—In the event that the Board does not conduct examinations required under subsection (b) in the same 

manner, subject to the same standards, and with the same frequency as would be required if such activities were conducted 

by the lead insured depository institution subsidiary of the depository institution holding company, the appropriate Federal 

banking agency for the lead insured depository institution may 

recommend in writing (which shall include a written explanation of the concerns giving rise to the recommendation) that 

the Board perform the examination required under subsection 

(b). 

‘‘(2) EXAMINATION BY AN APPROPRIATE FEDERAL BANKING

AGENCY.—If the Board does not, before the end of the 60-day period beginning on the date on which the Board receives a recommendation under paragraph (1), begin an examination as required under subsection (b) or provide a written explanation or 

plan to the appropriate Federal banking agency making such 

recommendation responding to the concerns raised by the appropriate Federal banking agency for the lead insured depository institution, the appropriate Federal banking agency for the 

lead insured depository institution may, subject to the Consumer Financial Protection Act of 2010, examine the activities 

that are permissible for a depository institution subsidiary conducted by such nondepository institution subsidiary (other than 

a functionally regulated subsidiary or a subsidiary of a depository institution) of the depository institution holding company 

as if the nondepository institution subsidiary were an insured 


sroberts on DSKD5P82C1PROD with HEARING
235 

depository institution for which the appropriate Federal banking agency of the lead insured depository institution was the 

appropriate Federal banking agency, to determine whether the 

activities— 

‘‘(A) pose a material threat to the safety and soundness 

of any insured depository institution subsidiary of the depository institution holding company; 

‘‘(B) are conducted in accordance with applicable Federal law; and 

‘‘(C) are subject to appropriate systems for monitoring 

and controlling the financial, operating, and other material 

risks of the activities that may pose a material threat to the 

safety and soundness of the insured depository institution 

subsidiaries of the holding company. 

‘‘(3) AGENCY COORDINATION WITH THE BOARD.—An appropriate Federal banking agency that conducts an examination 

pursuant to paragraph (2) shall coordinate examination of the 

activities of nondepository institution subsidiaries described in 

subsection (b) with the Board in a manner that— 

‘‘(A) avoids duplication; 

‘‘(B) shares information relevant to the supervision of 

the depository institution holding company; 

‘‘(C) achieves the objectives of subsection (b); and 

‘‘(D) ensures that the depository institution holding 

company and the subsidiaries of the depository institution 

holding company are not subject to conflicting supervisory 

demands by such agency and the Board. 

‘‘(4) FEE PERMITTED FOR EXAMINATION COSTS.—An appropriate Federal banking agency that conducts an examination or 

enforcement action pursuant to this section may collect an assessment, fee, or such other charge from the subsidiary as the 

appropriate Federal banking agency determines necessary or 

appropriate to carry out the responsibilities of the appropriate 

Federal banking agency in connection with such examination. 

‘‘(e) REFERRALS FOR ENFORCEMENT BY APPROPRIATE FEDERAL

BANKING AGENCY.— ‘‘(1) RECOMMENDATION OF ENFORCEMENT ACTION.—The appropriate Federal banking agency for the lead insured depository institution, based upon its examination of a nondepository 

institution subsidiary conducted pursuant to subsection (d), or 

other relevant information, may submit to the Board, in writing, a recommendation that the Board take enforcement action 

against such nondepository institution subsidiary, together with 

an explanation of the concerns giving rise to the recommendation, if the appropriate Federal banking agency determines (by 

a vote of its members, if applicable) that the activities of the 

nondepository institution subsidiary pose a material threat to 

the safety and soundness of any insured depository institution 

subsidiary of the depository institution holding company. 

‘‘(2) BACK-UP AUTHORITY OF THE APPROPRIATE FEDERAL

BANKING AGENCY.—If, within the 60-day period beginning on 

the date on which the Board receives a recommendation under 

paragraph (1), the Board does not take enforcement action 

against the nondepository institution subsidiary or provide a 

plan for supervisory or enforcement action that is acceptable to 


sroberts on DSKD5P82C1PROD with HEARING
236 

the appropriate Federal banking agency that made the recommendation pursuant to paragraph (1), such agency may take 

the recommended enforcement action against the nondepository 

institution subsidiary, in the same manner as if the nondepository institution subsidiary were an insured depository institution for which the agency was the appropriate Federal banking 

agency. 

‘‘(f) COORDINATION AMONG APPROPRIATE FEDERAL BANKING

AGENCIES.—Each Federal banking agency, prior to or when exercising authority under subsection (d) or (e) shall— 

‘‘(1) provide reasonable notice to, and consult with, the appropriate Federal banking agency or State bank supervisor (or 

other State regulatory agency) of the nondepository institution 

subsidiary of a depository institution holding company that is 

described in subsection (d) before commencing any examination 

of the subsidiary; 

‘‘(2) to the fullest extent possible— 

‘‘(A) rely on the examinations, inspections, and reports 

of the appropriate Federal banking agency or the State 

bank supervisor (or other State regulatory agency) of the 

subsidiary; 

‘‘(B) avoid duplication of examination activities, reporting requirements, and requests for information; and 

‘‘(C) ensure that the depository institution holding company and the subsidiaries of the depository institution 

holding company are not subject to conflicting supervisory 

demands by the appropriate Federal banking agencies. 

‘‘(g) RULE OF CONSTRUCTION.—No provision of this section 

shall be construed as limiting any authority of the Board, the Corporation, or the Comptroller of the Currency under any other provision of law.’’. 

(b) EFFECTIVE DATE.—The amendment made by subsection (a) 

shall take effect on the transfer date. 

SEC. 606. REQUIREMENTS FOR FINANCIAL HOLDING COMPANIES TO 

REMAIN WELL CAPITALIZED AND WELL MANAGED. 

(a) AMENDMENT.—Section 4(l)(1) of the Bank Holding Company 

Act of 1956 (12 U.S.C. 1843(l)(1)) is amended— 

(1) in subparagraph (B), by striking ‘‘and’’ at the end; 

(2) by redesignating subparagraph (C) as subparagraph 

(D); 

(3) by inserting after subparagraph (B) the following: 

‘‘(C) the bank holding company is well capitalized and 

well managed; and’’; and 

(4) in subparagraph (D)(ii), as so redesignated, by striking 

‘‘subparagraphs (A) and (B)’’ and inserting ‘‘subparagraphs (A), 

(B), and (C)’’. 

(b) HOME OWNERS’ LOAN ACT AMENDMENT.—Section 10(c)(2) of 

the Home Owners’ Loan Act (12 U.S.C. 1467a(c)(2)) is amended by 

adding at the end the following new subparagraph: 

‘‘(H) Any activity that is permissible for a financial 

holding company (as such term is defined under section 

2(p) of the Bank Holding Company Act of 1956 (12 U.S.C. 

1841(p)) to conduct under section 4(k) of the Bank Holding 

Company Act of 1956 if— 


sroberts on DSKD5P82C1PROD with HEARING
237 

‘‘(i) the savings and loan holding company meets 

all of the criteria to qualify as a financial holding company, and complies with all of the requirements applicable to a financial holding company, under sections 

4(l) and 4(m) of the Bank Holding Company Act and 

section 804(c) of the Community Reinvestment Act of 

1977 (12 U.S.C. 2903(c)) as if the savings and loan 

holding company was a bank holding company; and 

‘‘(ii) the savings and loan holding company conducts the activity in accordance with the same terms, 

conditions, and requirements that apply to the conduct 

of such activity by a bank holding company under the 

Bank Holding Company Act of 1956 and the Board’s 

regulations and interpretations under such Act.’’. 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall take effect on the transfer date. 

SEC. 607. STANDARDS FOR INTERSTATE ACQUISITIONS. 

(a) ACQUISITION OF BANKS.—Section 3(d)(1)(A) of the Bank 

Holding Company Act of 1956 (12 U.S.C. 1842(d)(1)(A)) is amended 

by striking ‘‘adequately capitalized and adequately managed’’ and 

inserting ‘‘well capitalized and well managed’’. 

(b) INTERSTATE BANK MERGERS.—Section 44(b)(4)(B) of the 

Federal Deposit Insurance Act (12 U.S.C. 1831u(b)(4)(B)) is amended by striking ‘‘will continue to be adequately capitalized and adequately managed’’ and inserting ‘‘will be well capitalized and well 

managed’’. 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall take effect on the transfer date. 

SEC. 608. ENHANCING EXISTING RESTRICTIONS ON BANK TRANSACTIONS WITH AFFILIATES. 

(a) AFFILIATE TRANSACTIONS.—Section 23A of the Federal Reserve Act (12 U.S.C. 371c) is amended— 

(1) in subsection (b)— 

(A) in paragraph (1), by striking subparagraph (D) and 

inserting the following: 

‘‘(D) any investment fund with respect to which a member bank or affiliate thereof is an investment adviser; and’’; 

and 

(B) in paragraph (7)— 

(i) in subparagraph (A), by inserting before the 

semicolon at the end the following: ‘‘, including a purchase of assets subject to an agreement to repurchase’’; 

(ii) in subparagraph (C), by striking ‘‘, including 

assets subject to an agreement to repurchase,’’; 

(iii) in subparagraph (D)— 

(I) by inserting ‘‘or other debt obligations’’ 

after ‘‘acceptance of securities’’; and 

(II) by striking ‘‘or’’ at the end; and 

(iv) by adding at the end the following: 

‘‘(F) a transaction with an affiliate that involves the 

borrowing or lending of securities, to the extent that the 

transaction causes a member bank or a subsidiary to have 

credit exposure to the affiliate; or 


sroberts on DSKD5P82C1PROD with HEARING
238 

‘‘(G) a derivative transaction, as defined in paragraph 

(3) of section 5200(b) of the Revised Statutes of the United 

States (12 U.S.C. 84(b)), with an affiliate, to the extent that 

the transaction causes a member bank or a subsidiary to 

have credit exposure to the affiliate;’’; 

(2) in subsection (c)— 

(A) in paragraph (1)— 

(i) in the matter preceding subparagraph (A), by 

striking ‘‘subsidiary’’ and all that follows through 

‘‘time of the transaction’’ and inserting ‘‘subsidiary, 

and any credit exposure of a member bank or a subsidiary to an affiliate resulting from a securities borrowing or lending transaction, or a derivative transaction, shall be secured at all times’’; and 

(ii) in each of subparagraphs (A) through (D), by 

striking ‘‘or letter of credit’’ and inserting ‘‘letter of 

credit, or credit exposure’’; 

(B) by striking paragraph (2); 

(C) by redesignating paragraphs (3) through (5) as 

paragraphs (2) through (4), respectively; 

(D) in paragraph (2), as so redesignated, by inserting 

before the period at the end ‘‘, or credit exposure to an affiliate resulting from a securities borrowing or lending transaction, or derivative transaction’’; and 

(E) in paragraph (3), as so redesignated— 

(i) by inserting ‘‘or other debt obligations’’ after ‘‘securities’’; and 

(ii) by striking ‘‘or guarantee’’ and all that follows 

through ‘‘behalf of,’’ and inserting ‘‘guarantee, acceptance, or letter of credit issued on behalf of, or credit exposure from a securities borrowing or lending transaction, or derivative transaction to,’’; 

(3) in subsection (d)(4), in the matter preceding subparagraph (A), by striking ‘‘or issuing’’ and all that follows through 

‘‘behalf of,’’ and inserting ‘‘issuing a guarantee, acceptance, or 

letter of credit on behalf of, or having credit exposure resulting 

from a securities borrowing or lending transaction, or derivative transaction to,’’; and 

(4) in subsection (f)— 

(A) in paragraph (2)— 

(i) by striking ‘‘or order’’; 

(ii) by striking ‘‘if it finds’’ and all that follows 

through the end of the paragraph and inserting the following: ‘‘if— 

‘‘(i) the Board finds the exemption to be in the public interest and consistent with the purposes of this section, and notifies the Federal Deposit Insurance Corporation of such finding; and 

‘‘(ii) before the end of the 60-day period beginning 

on the date on which the Federal Deposit Insurance 

Corporation receives notice of the finding under clause 

(i), the Federal Deposit Insurance Corporation does not 

object, in writing, to the finding, based on a determination that the exemption presents an unacceptable risk 

to the Deposit Insurance Fund.’’; 


sroberts on DSKD5P82C1PROD with HEARING
239 

(iii) by striking the Board and inserting the following: 

‘‘(A) IN GENERAL.—The Board’’; and 

(iv) by adding at the end the following: 

‘‘(B) ADDITIONAL EXEMPTIONS.— ‘‘(i) NATIONAL BANKS.—The Comptroller of the 

Currency may, by order, exempt a transaction of a national bank from the requirements of this section if— 

‘‘(I) the Board and the Office of the Comptroller of the Currency jointly find the exemption to 

be in the public interest and consistent with the 

purposes of this section and notify the Federal Deposit Insurance Corporation of such finding; and 

‘‘(II) before the end of the 60-day period beginning on the date on which the Federal Deposit Insurance Corporation receives notice of the finding 

under subclause (I), the Federal Deposit Insurance 

Corporation does not object, in writing, to the finding, based on a determination that the exemption 

presents an unacceptable risk to the Deposit Insurance Fund. 

‘‘(ii) STATE BANKS.—The Federal Deposit Insurance 

Corporation may, by order, exempt a transaction of a 

State nonmember bank, and the Board may, by order, 

exempt a transaction of a State member bank, from the 

requirements of this section if— 

‘‘(I) the Board and the Federal Deposit Insurance Corporation jointly find that the exemption is 

in the public interest and consistent with the purposes of this section; and 

‘‘(II) the Federal Deposit Insurance Corporation finds that the exemption does not present an 

unacceptable risk to the Deposit Insurance Fund.’’; 

and 

(B) by adding at the end the following: 

‘‘(4) AMOUNTS OF COVERED TRANSACTIONS.—The Board 

may issue such regulations or interpretations as the Board determines are necessary or appropriate with respect to the manner in which a netting agreement may be taken into account in 

determining the amount of a covered transaction between a 

member bank or a subsidiary and an affiliate, including the extent to which netting agreements between a member bank or a 

subsidiary and an affiliate may be taken into account in determining whether a covered transaction is fully secured for purposes of subsection (d)(4). An interpretation under this paragraph with respect to a specific member bank, subsidiary, or affiliate shall be issued jointly with the appropriate Federal 

banking agency for such member bank, subsidiary, or affiliate.’’. 

(b) TRANSACTIONS WITH AFFILIATES.—Section 23B(e) of the 

Federal Reserve Act (12 U.S.C. 371c–1(e)) is amended— 

(1) by striking the undesignated matter following subparagraph (B); 

(2) by redesignating subparagraphs (A) and (B) as clauses 

(i) and (ii), respectively, and adjusting the clause margins accordingly; 


sroberts on DSKD5P82C1PROD with HEARING
240 

(3) by redesignating paragraphs (1) and (2) as subparagraphs (A) and (B), respectively, and adjusting the subparagraph margins accordingly; 

(4) by striking ‘‘The Board’’ and inserting the following: 

‘‘(1) IN GENERAL.—The Board’’; 

(5) in paragraph (1)(B), as so redesignated— 

(A) in the matter preceding clause (i), by inserting before ‘‘regulations’’ the following: ‘‘subject to paragraph (2), 

if the Board finds that an exemption or exclusion is in the 

public interest and is consistent with the purposes of this 

section, and notifies the Federal Deposit Insurance Corporation of such finding,’’; and 

(B) in clause (ii), by striking the comma at the end and 

inserting a period; and 

(6) by adding at the end the following: 

‘‘(2) EXCEPTION.—The Board may grant an exemption or exclusion under this subsection only if, during the 60-day period 

beginning on the date of receipt of notice of the finding from the 

Board under paragraph (1)(B), the Federal Deposit Insurance 

Corporation does not object, in writing, to such exemption or exclusion, based on a determination that the exemption presents 

an unacceptable risk to the Deposit Insurance Fund.’’. 

(c) HOME OWNERS’ LOAN ACT.—Section 11 of the Home Owners’ 

Loan Act (12 U.S.C. 1468) is amended by adding at the end the following: 

‘‘(d) EXEMPTIONS.— 

‘‘(1) FEDERAL SAVINGS ASSOCIATIONS.—The Comptroller of 

the Currency may, by order, exempt a transaction of a Federal 

savings association from the requirements of this section if— 

‘‘(A) the Board and the Office of the Comptroller of the 

Currency jointly find the exemption to be in the public interest and consistent with the purposes of this section and 

notify the Federal Deposit Insurance Corporation of such 

finding; and 

‘‘(B) before the end of the 60-day period beginning on 

the date on which the Federal Deposit Insurance Corporation receives notice of the finding under subparagraph (A), 

the Federal Deposit Insurance Corporation does not object, 

in writing, to the finding, based on a determination that 

the exemption presents an unacceptable risk to the Deposit 

Insurance Fund. 

‘‘(2) STATE SAVINGS ASSOCIATION.—The Federal Deposit Insurance Corporation may, by order, exempt a transaction of a 

State savings association from the requirements of this section 

if the Board and the Federal Deposit Insurance Corporation 

jointly find that— 

‘‘(A) the exemption is in the public interest and consistent with the purposes of this section; and 

‘‘(B) the exemption does not present an unacceptable 

risk to the Deposit Insurance Fund.’’. 

(d) EFFECTIVE DATE.—The amendments made by this section 

shall take effect 1 year after the transfer date. 


sroberts on DSKD5P82C1PROD with HEARING
241 

SEC. 609. ELIMINATING EXCEPTIONS FOR TRANSACTIONS WITH FINANCIAL SUBSIDIARIES. 

(a) AMENDMENT.—Section 23A(e) of the Federal Reserve Act (12 

U.S.C. 371c(e)) is amended— 

(1) by striking paragraph (3); and 

(2) by redesignating paragraph (4) as paragraph (3). 

(b) PROSPECTIVE APPLICATION OF AMENDMENT.—The amendments made by this section shall apply with respect to any covered 

transaction between a bank and a subsidiary of the bank, as those 

terms are defined in section 23A of the Federal Reserve Act (12 

U.S.C. 371c), that is entered into on or after the date of enactment 

of this Act. 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall take effect 1 year after the transfer date. 

SEC. 610. LENDING LIMITS APPLICABLE TO CREDIT EXPOSURE ON DERIVATIVE TRANSACTIONS, REPURCHASE AGREEMENTS, 

REVERSE REPURCHASE AGREEMENTS, AND SECURITIES 

LENDING AND BORROWING TRANSACTIONS. 

(a) NATIONAL BANKS.—Section 5200(b) of the Revised Statutes 

of the United States (12 U.S.C. 84(b)) is amended— 

(1) in paragraph (1), by striking ‘‘shall include’’ and all 

that follows through the end of the paragraph and inserting the 

following: ‘‘shall include— 

‘‘(A) all direct or indirect advances of funds to a person 

made on the basis of any obligation of that person to repay 

the funds or repayable from specific property pledged by or 

on behalf of the person; 

‘‘(B) to the extent specified by the Comptroller of the 

Currency, any liability of a national banking association to 

advance funds to or on behalf of a person pursuant to a 

contractual commitment; and 

‘‘(C) any credit exposure to a person arising from a derivative transaction, repurchase agreement, reverse repurchase agreement, securities lending transaction, or securities borrowing transaction between the national banking 

association and the person;’’; 

(2) in paragraph (2), by striking the period at the end and 

inserting ‘‘; and’’; and 

(3) by adding at the end the following: 

‘‘(3) the term ‘derivative transaction’ includes any transaction that is a contract, agreement, swap, warrant, note, or option that is based, in whole or in part, on the value of, any interest in, or any quantitative measure or the occurrence of any 

event relating to, one or more commodities, securities, currencies, interest or other rates, indices, or other assets.’’. 

(b) SAVINGS ASSOCIATIONS.—Section 5(u)(3) of the Home Owners’ Loan Act (12 U.S.C. 1464(u)(3)) is amended by striking ‘‘Director’’ each place that term appears and inserting ‘‘Comptroller of the 

Currency’’. 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall take effect 1 year after the transfer date. 

SEC. 611. CONSISTENT TREATMENT OF DERIVATIVE TRANSACTIONS IN 

LENDING LIMITS. 

(a) AMENDMENT.—Section 18 of the Federal Deposit Insurance 

Act (12 U.S.C. 1828) is amended by adding at the end the following: 


sroberts on DSKD5P82C1PROD with HEARING
242 

‘‘(y) STATE LENDING LIMIT TREATMENT OF DERIVATIVES TRANSACTIONS.—An insured State bank may engage in a derivative transaction, as defined in section 5200(b)(3) of the Revised Statutes of the 

United States (12 U.S.C. 84(b)(3)), only if the law with respect to 

lending limits of the State in which the insured State bank is chartered takes into consideration credit exposure to derivative transactions.’’. 

(b) EFFECTIVE DATE.—The amendment made by this section 

shall take effect 18 months after the transfer date. 

SEC. 612. RESTRICTION ON CONVERSIONS OF TROUBLED BANKS. 

(a) CONVERSION OF A NATIONAL BANKING ASSOCIATION.—The 

Act entitled ‘‘An Act to provide for the conversion of national banking associations into and their merger or consolidation with State 

banks, and for other purposes.’’ (12 U.S.C. 214 et seq.) is amended 

by adding at the end the following: 

‘‘SEC. 10. PROHIBITION ON CONVERSION. 

‘‘A national banking association may not convert to a State 

bank or State savings association during any period in which the 

national banking association is subject to a cease and desist order 

(or other formal enforcement order) issued by, or a memorandum of 

understanding entered into with, the Comptroller of the Currency 

with respect to a significant supervisory matter.’’. 

(b) CONVERSION OF A STATE BANK OR SAVINGS ASSOCIATION.— 

Section 5154 of the Revised Statutes of the United States (12 U.S.C. 

35) is amended by adding at the end the following: ‘‘The Comptroller of the Currency may not approve the conversion of a State 

bank or State savings association to a national banking association 

or Federal savings association during any period in which the State 

bank or State savings association is subject to a cease and desist 

order (or other formal enforcement order) issued by, or a memorandum of understanding entered into with, a State bank supervisor or the appropriate Federal banking agency with respect to a 

significant supervisory matter or a final enforcement action by a 

State Attorney General.’’. 

(c) CONVERSION OF A FEDERAL SAVINGS ASSOCIATION.—Section 

5(i) of the Home Owners’ Loan Act (12 U.S.C. 1464(i)) is amended 

by adding at the end the following: 

‘‘(6) LIMITATION ON CERTAIN CONVERSIONS BY FEDERAL SAVINGS ASSOCIATIONS.—A Federal savings association may not 

convert to a State bank or State savings association during any 

period in which the Federal savings association is subject to a 

cease and desist order (or other formal enforcement order) 

issued by, or a memorandum of understanding entered into 

with, the Office of Thrift Supervision or the Comptroller of the 

Currency with respect to a significant supervisory matter.’’. 

(d) EXCEPTION.—The prohibition on the approval of conversions 

under the amendments made by subsections (a), (b), and (c) shall 

not apply, if— 

(1) the Federal banking agency that would be the appropriate Federal banking agency after the proposed conversion 

gives the appropriate Federal banking agency or State bank supervisor that issued the cease and desist order (or other formal 

enforcement order) or memorandum of understanding, as appropriate, written notice of the proposed conversion including a 


sroberts on DSKD5P82C1PROD with HEARING
243 

plan to address the significant supervisory matter in a manner 

that is consistent with the safe and sound operation of the institution; 

(2) within 30 days of receipt of the written notice required 

under paragraph (1), the appropriate Federal banking agency 

or State bank supervisor that issued the cease and desist order 

(or other formal enforcement order) or memorandum of understanding, as appropriate, does not object to the conversion or 

the plan to address the significant supervisory matter; 

(3) after conversion of the insured depository institution, 

the appropriate Federal banking agency after the conversion implements such plan; and 

(4) in the case of a final enforcement action by a State Attorney General, approval of the conversion is conditioned on 

compliance by the insured depository institution with the terms 

of such final enforcement action. 

(e) NOTIFICATION OF PENDING ENFORCEMENT ACTIONS.— 

(1) COPY OF CONVERSION APPLICATION.—At the time an insured depository institution files a conversion application, the 

insured depository institution shall transmit a copy of the conversion application to— 

(A) the appropriate Federal banking agency for the insured depository institution; and 

(B) the Federal banking agency that would be the appropriate Federal banking agency of the insured depository 

institution after the proposed conversion. 

(2) NOTIFICATION AND ACCESS TO INFORMATION.—Upon receipt of a copy of the application described in paragraph (1), the 

appropriate Federal banking agency for the insured depository 

institution proposing the conversion shall— 

(A) notify the Federal banking agency that would be 

the appropriate Federal banking agency for the institution 

after the proposed conversion in writing of any ongoing supervisory or investigative proceedings that the appropriate 

Federal banking agency for the institution proposing to 

convert believes is likely to result, in the near term and absent the proposed conversion, in a cease and desist order (or 

other formal enforcement order) or memorandum of understanding with respect to a significant supervisory matter; 

and 

(B) provide the Federal banking agency that would be 

the appropriate Federal banking agency for the institution 

after the proposed conversion access to all investigative and 

supervisory information relating to the proceedings described in subparagraph (A). 

SEC. 613. DE NOVO BRANCHING INTO STATES. 

(a) NATIONAL BANKS.—Section 5155(g)(1)(A) of the Revised 

Statutes of the United States (12 U.S.C. 36(g)(1)(A)) is amended to 

read as follows: 

‘‘(A) the law of the State in which the branch is located, or is to be located, would permit establishment of the 

branch, if the national bank were a State bank chartered 

by such State; and’’. 


sroberts on DSKD5P82C1PROD with HEARING
244 

(b) STATE INSURED BANKS.—Section 18(d)(4)(A)(i) of the Federal Deposit Insurance Act (12 U.S.C. 1828(d)(4)(A)(i)) is amended 

to read as follows: 

‘‘(i) the law of the State in which the branch is located, or is to be located, would permit establishment 

of the branch, if the bank were a State bank chartered 

by such State; and’’. 

SEC. 614. LENDING LIMITS TO INSIDERS. 

(a) EXTENSIONS OF CREDIT.—Section 22(h)(9)(D)(i) of the Federal Reserve Act (12 U.S.C. 375b(9)(D)(i)) is amended— 

(1) by striking the period at the end and inserting ‘‘; or’’; 

(2) by striking ‘‘a person’’ and inserting ‘‘the person’’; 

(3) by striking ‘‘extends credit by making’’ and inserting the 

following: ‘‘extends credit to a person by— 

‘‘(I) making’’; and 

(4) by adding at the end the following: 

‘‘(II) having credit exposure to the person arising from a derivative transaction (as defined in 

section 5200(b) of the Revised Statutes of the 

United States (12 U.S.C. 84(b))), repurchase agreement, reverse repurchase agreement, securities 

lending transaction, or securities borrowing transaction between the member bank and the person.’’. 

(b) EFFECTIVE DATE.—The amendments made by this section 

shall take effect 1 year after the transfer date. 

SEC. 615. LIMITATIONS ON PURCHASES OF ASSETS FROM INSIDERS. 

(a) AMENDMENT TO THE FEDERAL DEPOSIT INSURANCE ACT.— 

Section 18 of the Federal Deposit Insurance Act (12 U.S.C. 1828) is 

amended by adding at the end the following: 

‘‘(z) GENERAL PROHIBITION ON SALE OF ASSETS.— 

‘‘(1) IN GENERAL.—An insured depository institution may 

not purchase an asset from, or sell an asset to, an executive officer, director, or principal shareholder of the insured depository 

institution, or any related interest of such person (as such terms 

are defined in section 22(h) of Federal Reserve Act), unless— 

‘‘(A) the transaction is on market terms; and 

‘‘(B) if the transaction represents more than 10 percent 

of the capital stock and surplus of the insured depository 

institution, the transaction has been approved in advance 

by a majority of the members of the board of directors of 

the insured depository institution who do not have an interest in the transaction. 

‘‘(2) RULEMAKING.—The Board of Governors of the Federal 

Reserve System may issue such rules as may be necessary to define terms and to carry out the purposes of this subsection. Before proposing or adopting a rule under this paragraph, the 

Board of Governors of the Federal Reserve System shall consult 

with the Comptroller of the Currency and the Corporation as to 

the terms of the rule.’’. 

(b) AMENDMENTS TO THE FEDERAL RESERVE ACT.—Section 

22(d) of the Federal Reserve Act (12 U.S.C. 375) is amended to read 

as follows: 

‘‘(d) [Reserved]’’. 


sroberts on DSKD5P82C1PROD with HEARING
245 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall take effect on the transfer date. 

SEC. 616. REGULATIONS REGARDING CAPITAL LEVELS. 

(a) CAPITAL LEVELS OF BANK HOLDING COMPANIES.—Section 

5(b) of the Bank Holding Company Act of 1956 (12 U.S.C. 1844(b)) 

is amended— 

(1) by inserting after ‘‘orders’’ the following: ‘‘, including 

regulations and orders relating to the capital requirements for 

bank holding companies,’’; and 

(2) by adding at the end the following: ‘‘In establishing capital regulations pursuant to this subsection, the Board shall 

seek to make such requirements countercyclical, so that the 

amount of capital required to be maintained by a company increases in times of economic expansion and decreases in times 

of economic contraction, consistent with the safety and soundness of the company.’’. 

(b) CAPITAL LEVELS OF SAVINGS AND LOAN HOLDING COMPANIES.—Section 10(g)(1) of the Home Owners’ Loan Act (12 U.S.C. 

1467a(g)(1)) is amended— 

(1) by inserting after ‘‘orders’’ the following: ‘‘, including 

regulations and orders relating to capital requirements for savings and loan holding companies,’’; and 

(2) by inserting at the end the following: ‘‘In establishing 

capital regulations pursuant to this subsection, the appropriate 

Federal banking agency shall seek to make such requirements 

countercyclical so that the amount of capital required to be 

maintained by a company increases in times of economic expansion and decreases in times of economic contraction, consistent 

with the safety and soundness of the company.’’. 

(c) CAPITAL LEVELS OF INSURED DEPOSITORY INSTITUTIONS.— 

Section 908(a)(1) of the International Lending Supervision Act of 

1983 (12 U.S.C. 3907(a)(1)) is amended by adding at the end the 

following: ‘‘Each appropriate Federal banking agency shall seek to 

make the capital standards required under this section or other provisions of Federal law for insured depository institutions countercyclical so that the amount of capital required to be maintained by 

an insured depository institution increases in times of economic expansion and decreases in times of economic contraction, consistent 

with the safety and soundness of the insured depository institution.’’ 

(d) SOURCE OF STRENGTH.—The Federal Deposit Insurance Act 

(12 U.S.C. 1811 et seq.) is amended by inserting after section 38 (12 

U.S.C. 1831o) the following: 

‘‘SEC. 38A. SOURCE OF STRENGTH. 

‘‘(a) HOLDING COMPANIES.—The appropriate Federal banking 

agency for a bank holding company or savings and loan holding 

company shall require the bank holding company or savings and 

loan holding company to serve as a source of financial strength for 

any subsidiary of the bank holding company or savings and loan 

holding company that is a depository institution. 

‘‘(b) OTHER COMPANIES.—If an insured depository institution is 

not the subsidiary of a bank holding company or savings and loan 

holding company, the appropriate Federal banking agency for the 

insured depository institution shall require any company that diVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00249 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
246 

rectly or indirectly controls the insured depository institution to 

serve as a source of financial strength for such institution. 

‘‘(c) REPORTS.—The appropriate Federal banking agency for an 

insured depository institution described in subsection (b) may, from 

time to time, require the company, or a company that directly or indirectly controls the insured depository institution, to submit a report, under oath, for the purposes of— 

‘‘(1) assessing the ability of such company to comply with 

the requirement under subsection (b); and 

‘‘(2) enforcing the compliance of such company with the requirement under subsection (b). 

‘‘(d) RULES.—Not later than 1 year after the transfer date, as 

defined in section 311 of the Enhancing Financial Institution Safety 

and Soundness Act of 2010, the appropriate Federal banking agencies shall jointly issue final rules to carry out this section. 

‘‘(e) DEFINITION.—In this section, the term ‘source of financial 

strength’ means the ability of a company that directly or indirectly 

owns or controls an insured depository institution to provide financial assistance to such insured depository institution in the event of 

the financial distress of the insured depository institution.’’. 

(e) EFFECTIVE DATE.—The amendments made by this section 

shall take effect on the transfer date. 

SEC. 617. ELIMINATION OF ELECTIVE INVESTMENT BANK HOLDING 

COMPANY FRAMEWORK. 

(a) AMENDMENT.—Section 17 of the Securities Exchange Act of 

1934 (15 U.S.C. 78q) is amended— 

(1) by striking subsection (i); and 

(2) by redesignating subsections (j) and (k) as subsections 

(i) and (j), respectively. 

(b) EFFECTIVE DATE.—The amendments made by this section 

shall take effect on the transfer date. 

SEC. 618. SECURITIES HOLDING COMPANIES. 

(a) DEFINITIONS.—In this section— 

(1) the term ‘‘associated person of a securities holding company’’ means a person directly or indirectly controlling, controlled by, or under common control with, a securities holding 

company; 

(2) the term ‘‘foreign bank’’ has the same meaning as in section 1(b)(7) of the International Banking Act of 1978 (12 U.S.C. 

3101(7)); 

(3) the term ‘‘insured bank’’ has the same meaning as in 

section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813); 

(4) the term ‘‘securities holding company’’— 

(A) means— 

(i) a person (other than a natural person) that 

owns or controls 1 or more brokers or dealers registered 

with the Commission; and 

(ii) the associated persons of a person described in 

clause (i); and 

(B) does not include a person that is— 

(i) a nonbank financial company supervised by the 

Board under title I; 

(ii) an insured bank (other than an institution described in subparagraphs (D), (F), or (H) of section 


sroberts on DSKD5P82C1PROD with HEARING
247 

2(c)(2) of the Bank Holding Company Act of 1956 (12 

U.S.C. 1841(c)(2)) or a savings association; 

(iii) an affiliate of an insured bank (other than an 

institution described in subparagraphs (D), (F), or (H) 

of section 2(c)(2) of the Bank Holding Company Act of 

1956 (12 U.S.C. 1841(c)(2)) or an affiliate of a savings 

association; 

(iv) a foreign bank, foreign company, or company 

that is described in section 8(a) of the International 

Banking Act of 1978 (12 U.S.C. 3106(a)); 

(v) a foreign bank that controls, directly or indirectly, a corporation chartered under section 25A of the 

Federal Reserve Act (12 U.S.C. 611 et seq.); or 

(vi) subject to comprehensive consolidated supervision by a foreign regulator; 

(5) the term ‘‘supervised securities holding company’’ means 

a securities holding company that is supervised by the Board of 

Governors under this section; and 

(6) the terms ‘‘affiliate’’, ‘‘bank’’, ‘‘bank holding company’’, 

‘‘company’’, ‘‘control’’, ‘‘savings association’’, and ‘‘subsidiary’’ 

have the same meanings as in section 2 of the Bank Holding 

Company Act of 1956. 

(b) SUPERVISION OF A SECURITIES HOLDING COMPANY NOT

HAVING A BANK OR SAVINGS ASSOCIATION AFFILIATE.— (1) IN GENERAL.—A securities holding company that is required by a foreign regulator or provision of foreign law to be 

subject to comprehensive consolidated supervision may register 

with the Board of Governors under paragraph (2) to become a 

supervised securities holding company. Any securities holding 

company filing such a registration shall be supervised in accordance with this section, and shall comply with the rules and 

orders prescribed by the Board of Governors applicable to supervised securities holding companies. 

(2) REGISTRATION AS A SUPERVISED SECURITIES HOLDING

COMPANY.— 

(A) REGISTRATION.—A securities holding company that 

elects to be subject to comprehensive consolidated supervision shall register by filing with the Board of Governors 

such information and documents as the Board of Governors, by regulation, may prescribe as necessary or appropriate in furtherance of the purposes of this section. 

(B) EFFECTIVE DATE.—A securities holding company 

that registers under subparagraph (A) shall be deemed to 

be a supervised securities holding company, effective on the 

date that is 45 days after the date of receipt of the registration information and documents under subparagraph (A) 

by the Board of Governors, or within such shorter period as 

the Board of Governors, by rule or order, may determine. 

(c) SUPERVISION OF SECURITIES HOLDING COMPANIES.— (1) RECORDKEEPING AND REPORTING.— (A) RECORDKEEPING AND REPORTING REQUIRED.—Each 

supervised securities holding company and each affiliate of 

a supervised securities holding company shall make and 

keep for periods determined by the Board of Governors such 

records, furnish copies of such records, and make such reVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00251 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
248 

ports, as the Board of Governors determines to be necessary 

or appropriate to carry out this section, to prevent evasions 

thereof, and to monitor compliance by the supervised securities holding company or affiliate with applicable provisions of law. 

(B) FORM AND CONTENTS.— (i) IN GENERAL.—Any record or report required to 

be made, furnished, or kept under this paragraph 

shall— 

(I) be prepared in such form and according to 

such specifications (including certification by a 

registered public accounting firm), as the Board of 

Governors may require; and 

(II) be provided promptly to the Board of Governors at any time, upon request by the Board of 

Governors. 

(ii) CONTENTS.—Records and reports required to 

be made, furnished, or kept under this paragraph may 

include— 

(I) a balance sheet or income statement of the 

supervised securities holding company or an affiliate of a supervised securities holding company; 

(II) an assessment of the consolidated capital 

and liquidity of the supervised securities holding 

company; 

(III) a report by an independent auditor attesting to the compliance of the supervised securities 

holding company with the internal risk management and internal control objectives of the supervised securities holding company; and 

(IV) a report concerning the extent to which 

the supervised securities holding company or affiliate has complied with the provisions of this section and any regulations prescribed and orders 

issued under this section. 

(2) USE OF EXISTING REPORTS.— (A) IN GENERAL.—The Board of Governors shall, to the 

fullest extent possible, accept reports in fulfillment of the requirements of this paragraph that a supervised securities 

holding company or an affiliate of a supervised securities 

holding company has been required to provide to another 

regulatory agency or a self-regulatory organization. 

(B) AVAILABILITY.—A supervised securities holding 

company or an affiliate of a supervised securities holding 

company shall promptly provide to the Board of Governors, 

at the request of the Board of Governors, any report described in subparagraph (A), as permitted by law. 

(3) EXAMINATION AUTHORITY.— 

(A) FOCUS OF EXAMINATION AUTHORITY.—The Board of 

Governors may make examinations of any supervised securities holding company and any affiliate of a supervised securities holding company to carry out this subsection, to 

prevent evasions thereof, and to monitor compliance by the 

supervised securities holding company or affiliate with applicable provisions of law. 


sroberts on DSKD5P82C1PROD with HEARING
249 

(B) DEFERENCE TO OTHER EXAMINATIONS.—For purposes of this subparagraph, the Board of Governors shall, 

to the fullest extent possible, use the reports of examination 

made by other appropriate Federal or State regulatory authorities with respect to any functionally regulated subsidiary or any institution described in subparagraph (D), 

(F), or (H) of section 2(c)(2) of the Bank Holding Company 

Act of 1956 (12 U.S.C. 1841(c)(2)). 

(d) CAPITAL AND RISK MANAGEMENT.— (1) IN GENERAL.—The Board of Governors shall, by regulation or order, prescribe capital adequacy and other risk management standards for supervised securities holding companies 

that are appropriate to protect the safety and soundness of the 

supervised securities holding companies and address the risks 

posed to financial stability by supervised securities holding 

companies. 

(2) DIFFERENTIATION.—In imposing standards under this 

subsection, the Board of Governors may differentiate among supervised securities holding companies on an individual basis, 

or by category, taking into consideration the requirements 

under paragraph (3). 

(3) CONTENT.—Any standards imposed on a supervised securities holding company under this subsection shall take into 

account— 

(A) the differences among types of business activities 

carried out by the supervised securities holding company; 

(B) the amount and nature of the financial assets of the 

supervised securities holding company; 

(C) the amount and nature of the liabilities of the supervised securities holding company, including the degree 

of reliance on short-term funding; 

(D) the extent and nature of the off-balance sheet exposures of the supervised securities holding company; 

(E) the extent and nature of the transactions and relationships of the supervised securities holding company with 

other financial companies; 

(F) the importance of the supervised securities holding 

company as a source of credit for households, businesses, 

and State and local governments, and as a source of liquidity for the financial system; and 

(G) the nature, scope, and mix of the activities of the 

supervised securities holding company. 

(4) NOTICE.—A capital requirement imposed under this 

subsection may not take effect earlier than 180 days after the 

date on which a supervised securities holding company is provided notice of the capital requirement. 

(e) OTHER PROVISIONS OF LAW APPLICABLE TO SUPERVISED SE- CURITIES HOLDING COMPANIES.— 

(1) FEDERAL DEPOSIT INSURANCE ACT.—Subsections (b), (c) 

through (s), and (u) of section 8 of the Federal Deposit Insurance Act (12 U.S.C. 1818) shall apply to any supervised securities holding company, and to any subsidiary (other than a bank 

or an institution described in subparagraph (D), (F), or (H) of 

section 2(c)(2) of the Bank Holding Company Act of 1956 (12 

U.S.C. 1841(c)(2))) of a supervised securities holding company, 


sroberts on DSKD5P82C1PROD with HEARING
250 

in the same manner as such subsections apply to a bank holding company for which the Board of Governors is the appropriate Federal banking agency. For purposes of applying such 

subsections to a supervised securities holding company or a 

subsidiary (other than a bank or an institution described in 

subparagraph (D), (F), or (H) of section 2(c)(2) of the Bank 

Holding Company Act of 1956 (12 U.S.C. 1841(c)(2))) of a supervised securities holding company, the Board of Governors 

shall be deemed the appropriate Federal banking agency for the 

supervised securities holding company or subsidiary. 

(2) BANK HOLDING COMPANY ACT OF 1956.—Except as the 

Board of Governors may otherwise provide by regulation or 

order, a supervised securities holding company shall be subject 

to the provisions of the Bank Holding Company Act of 1956 (12 

U.S.C. 1841 et seq.) in the same manner and to the same extent 

a bank holding company is subject to such provisions, except 

that a supervised securities holding company may not, by reason of this paragraph, be deemed to be a bank holding company 

for purposes of section 4 of the Bank Holding Company Act of 

1956 (12 U.S.C. 1843). 

SEC. 619. PROHIBITIONS ON PROPRIETARY TRADING AND CERTAIN 

RELATIONSHIPS WITH HEDGE FUNDS AND PRIVATE EQUITY FUNDS. 

The Bank Holding Company Act of 1956 (12 U.S.C. 1841 et 

seq.) is amended by adding at the end the following: 

‘‘SEC. 13. PROHIBITIONS ON PROPRIETARY TRADING AND CERTAIN 

RELATIONSHIPS WITH HEDGE FUNDS AND PRIVATE EQUITY FUNDS. 

‘‘(a) IN GENERAL.— 

‘‘(1) PROHIBITION.—Unless otherwise provided in this section, a banking entity shall not— 

‘‘(A) engage in proprietary trading; or 

‘‘(B) acquire or retain any equity, partnership, or other 

ownership interest in or sponsor a hedge fund or a private 

equity fund. 

‘‘(2) NONBANK FINANCIAL COMPANIES SUPERVISED BY THE

BOARD.—Any nonbank financial company supervised by the 

Board that engages in proprietary trading or takes or retains 

any equity, partnership, or other ownership interest in or sponsors a hedge fund or a private equity fund shall be subject, by 

rule, as provided in subsection (b)(2), to additional capital requirements for and additional quantitative limits with regards 

to such proprietary trading and taking or retaining any equity, 

partnership, or other ownership interest in or sponsorship of a 

hedge fund or a private equity fund, except that permitted activities as described in subsection (d) shall not be subject to the 

additional capital and additional quantitative limits except as 

provided in subsection (d)(3), as if the nonbank financial company supervised by the Board were a banking entity. 

‘‘(b) STUDY AND RULEMAKING.— 

‘‘(1) STUDY.—Not later than 6 months after the date of enactment of this section, the Financial Stability Oversight Council shall study and make recommendations on implementing the 

provisions of this section so as to— 


sroberts on DSKD5P82C1PROD with HEARING
251 

‘‘(A) promote and enhance the safety and soundness of 

banking entities; 

‘‘(B) protect taxpayers and consumers and enhance financial stability by minimizing the risk that insured depository institutions and the affiliates of insured depository institutions will engage in unsafe and unsound activities; 

‘‘(C) limit the inappropriate transfer of Federal subsidies from institutions that benefit from deposit insurance 

and liquidity facilities of the Federal Government to unregulated entities; 

‘‘(D) reduce conflicts of interest between the self-interest 

of banking entities and nonbank financial companies supervised by the Board, and the interests of the customers of 

such entities and companies; 

‘‘(E) limit activities that have caused undue risk or loss 

in banking entities and nonbank financial companies supervised by the Board, or that might reasonably be expected 

to create undue risk or loss in such banking entities and 

nonbank financial companies supervised by the Board; 

‘‘(F) appropriately accommodate the business of insurance within an insurance company, subject to regulation in 

accordance with the relevant insurance company investment laws, while protecting the safety and soundness of 

any banking entity with which such insurance company is 

affiliated and of the United States financial system; and 

‘‘(G) appropriately time the divestiture of illiquid assets 

that are affected by the implementation of the prohibitions 

under subsection (a). 

‘‘(2) RULEMAKING.— ‘‘(A) IN GENERAL.—Unless otherwise provided in this 

section, not later than 9 months after the completion of the 

study under paragraph (1), the appropriate Federal banking agencies, the Securities and Exchange Commission, and 

the Commodity Futures Trading Commission, shall consider the findings of the study under paragraph (1) and 

adopt rules to carry out this section, as provided in subparagraph (B). 

‘‘(B) COORDINATED RULEMAKING.— ‘‘(i) REGULATORY AUTHORITY.—The regulations 

issued under this paragraph shall be issued by— 

‘‘(I) the appropriate Federal banking agencies, 

jointly, with respect to insured depository institutions; 

‘‘(II) the Board, with respect to any company 

that controls an insured depository institution, or 

that is treated as a bank holding company for purposes of section 8 of the International Banking Act, 

any nonbank financial company supervised by the 

Board, and any subsidiary of any of the foregoing 

(other than a subsidiary for which an agency described in subclause (I), (III), or (IV) is the primary financial regulatory agency); 

‘‘(III) the Commodity Futures Trading Commission, with respect to any entity for which the 

Commodity Futures Trading Commission is the 


sroberts on DSKD5P82C1PROD with HEARING
252 

primary financial regulatory agency, as defined in 

section 2 of the Dodd-Frank Wall Street Reform 

and Consumer Protection Act; and 

‘‘(IV) the Securities and Exchange Commission, with respect to any entity for which the Securities and Exchange Commission is the primary financial regulatory agency, as defined in section 2 

of the Dodd-Frank Wall Street Reform and Consumer Protection Act. 

‘‘(ii) COORDINATION, CONSISTENCY, AND COMPARABILITY.—In developing and issuing regulations 

pursuant to this section, the appropriate Federal banking agencies, the Securities and Exchange Commission, 

and the Commodity Futures Trading Commission 

shall consult and coordinate with each other, as appropriate, for the purposes of assuring, to the extent possible, that such regulations are comparable and provide for consistent application and implementation of 

the applicable provisions of this section to avoid providing advantages or imposing disadvantages to the 

companies affected by this subsection and to protect the 

safety and soundness of banking entities and nonbank 

financial companies supervised by the Board. 

‘‘(iii) COUNCIL ROLE.—The Chairperson of the Financial Stability Oversight Council shall be responsible for coordination of the regulations issued under 

this section. 

‘‘(c) EFFECTIVE DATE.— 

‘‘(1) IN GENERAL.—Except as provided in paragraphs (2) 

and (3), this section shall take effect on the earlier of— 

‘‘(A) 12 months after the date of the issuance of final 

rules under subsection (b); or 

‘‘(B) 2 years after the date of enactment of this section. 

‘‘(2) CONFORMANCE PERIOD FOR DIVESTITURE.—A banking 

entity or nonbank financial company supervised by the Board 

shall bring its activities and investments into compliance with 

the requirements of this section not later than 2 years after the 

date on which the requirements become effective pursuant to 

this section or 2 years after the date on which the entity or company becomes a nonbank financial company supervised by the 

Board. The Board may, by rule or order, extend this two-year 

period for not more than one year at a time, if, in the judgment 

of the Board, such an extension is consistent with the purposes 

of this section and would not be detrimental to the public interest. The extensions made by the Board under the preceding sentence may not exceed an aggregate of 3 years. 

‘‘(3) EXTENDED TRANSITION FOR ILLIQUID FUNDS.— 

‘‘(A) APPLICATION.—The Board may, upon the application of a banking entity, extend the period during which the 

banking entity, to the extent necessary to fulfill a contractual obligation that was in effect on May 1, 2010, may take 

or retain its equity, partnership, or other ownership interest 

in, or otherwise provide additional capital to, an illiquid 

fund. 


sroberts on DSKD5P82C1PROD with HEARING
253 

‘‘(B) TIME LIMIT ON APPROVAL.—The Board may grant 

1 extension under subparagraph (A), which may not exceed 

5 years. 

‘‘(4) DIVESTITURE REQUIRED.—Except as otherwise provided 

in subsection (d)(1)(G), a banking entity may not engage in any 

activity prohibited under subsection (a)(1)(B) after the earlier 

of— 

‘‘(A) the date on which the contractual obligation to invest in the illiquid fund terminates; and 

‘‘(B) the date on which any extensions granted by the 

Board under paragraph (3) expire. 

‘‘(5) ADDITIONAL CAPITAL DURING TRANSITION PERIOD.— 

Notwithstanding paragraph (2), on the date on which the rules 

are issued under subsection (b)(2), the appropriate Federal 

banking agencies, the Securities and Exchange Commission, 

and the Commodity Futures Trading Commission shall issue 

rules, as provided in subsection (b)(2), to impose additional capital requirements, and any other restrictions, as appropriate, on 

any equity, partnership, or ownership interest in or sponsorship 

of a hedge fund or private equity fund by a banking entity. 

‘‘(6) SPECIAL RULEMAKING.—Not later than 6 months after 

the date of enactment of this section, the Board shall issue rules 

to implement paragraphs (2) and (3). 

‘‘(d) PERMITTED ACTIVITIES.— 

‘‘(1) IN GENERAL.—Notwithstanding the restrictions under 

subsection (a), to the extent permitted by any other provision of 

Federal or State law, and subject to the limitations under paragraph (2) and any restrictions or limitations that the appropriate Federal banking agencies, the Securities and Exchange 

Commission, and the Commodity Futures Trading Commission, 

may determine, the following activities (in this section referred 

to as ‘permitted activities’) are permitted: 

‘‘(A) The purchase, sale, acquisition, or disposition of 

obligations of the United States or any agency thereof, obligations, participations, or other instruments of or issued by 

the Government National Mortgage Association, the Federal National Mortgage Association, the Federal Home 

Loan Mortgage Corporation, a Federal Home Loan Bank, 

the Federal Agricultural Mortgage Corporation, or a Farm 

Credit System institution chartered under and subject to 

the provisions of the Farm Credit Act of 1971 (12 U.S.C. 

2001 et seq.), and obligations of any State or of any political subdivision thereof. 

‘‘(B) The purchase, sale, acquisition, or disposition of 

securities and other instruments described in subsection 

(h)(4) in connection with underwriting or market-makingrelated activities, to the extent that any such activities permitted by this subparagraph are designed not to exceed the 

reasonably expected near term demands of clients, customers, or counterparties. 

‘‘(C) Risk-mitigating hedging activities in connection 

with and related to individual or aggregated positions, contracts, or other holdings of a banking entity that are designed to reduce the specific risks to the banking entity in 


sroberts on DSKD5P82C1PROD with HEARING
254 

connection with and related to such positions, contracts, or 

other holdings. 

‘‘(D) The purchase, sale, acquisition, or disposition of 

securities and other instruments described in subsection 

(h)(4) on behalf of customers. 

‘‘(E) Investments in one or more small business investment companies, as defined in section 102 of the Small 

Business Investment Act of 1958 (15 U.S.C. 662), investments designed primarily to promote the public welfare, of 

the type permitted under paragraph (11) of section 5136 of 

the Revised Statutes of the United States (12 U.S.C. 24), or 

investments that are qualified rehabilitation expenditures 

with respect to a qualified rehabilitated building or certified historic structure, as such terms are defined in section 47 of the Internal Revenue Code of 1986 or a similar 

State historic tax credit program. 

‘‘(F) The purchase, sale, acquisition, or disposition of 

securities and other instruments described in subsection 

(h)(4) by a regulated insurance company directly engaged 

in the business of insurance for the general account of the 

company and by any affiliate of such regulated insurance 

company, provided that such activities by any affiliate are 

solely for the general account of the regulated insurance 

company, if— 

‘‘(i) the purchase, sale, acquisition, or disposition is 

conducted in compliance with, and subject to, the insurance company investment laws, regulations, and 

written guidance of the State or jurisdiction in which 

each such insurance company is domiciled; and 

‘‘(ii) the appropriate Federal banking agencies, 

after consultation with the Financial Stability Oversight Council and the relevant insurance commissioners of the States and territories of the United 

States, have not jointly determined, after notice and 

comment, that a particular law, regulation, or written 

guidance described in clause (i) is insufficient to protect the safety and soundness of the banking entity, or 

of the financial stability of the United States. 

‘‘(G) Organizing and offering a private equity or hedge 

fund, including serving as a general partner, managing 

member, or trustee of the fund and in any manner selecting 

or controlling (or having employees, officers, directors, or 

agents who constitute) a majority of the directors, trustees, 

or management of the fund, including any necessary expenses for the foregoing, only if— 

‘‘(i) the banking entity provides bona fide trust, fiduciary, or investment advisory services; 

‘‘(ii) the fund is organized and offered only in connection with the provision of bona fide trust, fiduciary, 

or investment advisory services and only to persons 

that are customers of such services of the banking entity; 

‘‘(iii) the banking entity does not acquire or retain 

an equity interest, partnership interest, or other ownership interest in the funds except for a de minimis inVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00258 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
255 

vestment subject to and in compliance with paragraph 

(4); 

‘‘(iv) the banking entity complies with the restrictions under paragraphs (1) and (2) of subparagraph 

(f); 

‘‘(v) the banking entity does not, directly or indirectly, guarantee, assume, or otherwise insure the obligations or performance of the hedge fund or private equity fund or of any hedge fund or private equity fund 

in which such hedge fund or private equity fund invests; 

‘‘(vi) the banking entity does not share with the 

hedge fund or private equity fund, for corporate, marketing, promotional, or other purposes, the same name 

or a variation of the same name; 

‘‘(vii) no director or employee of the banking entity 

takes or retains an equity interest, partnership interest, 

or other ownership interest in the hedge fund or private 

equity fund, except for any director or employee of the 

banking entity who is directly engaged in providing investment advisory or other services to the hedge fund 

or private equity fund; and 

‘‘(viii) the banking entity discloses to prospective 

and actual investors in the fund, in writing, that any 

losses in such hedge fund or private equity fund are 

borne solely by investors in the fund and not by the 

banking entity, and otherwise complies with any additional rules of the appropriate Federal banking agencies, the Securities and Exchange Commission, or the 

Commodity Futures Trading Commission, as provided 

in subsection (b)(2), designed to ensure that losses in 

such hedge fund or private equity fund are borne solely 

by investors in the fund and not by the banking entity. 

‘‘(H) Proprietary trading conducted by a banking entity 

pursuant to paragraph (9) or (13) of section 4(c), provided 

that the trading occurs solely outside of the United States 

and that the banking entity is not directly or indirectly controlled by a banking entity that is organized under the laws 

of the United States or of one or more States. 

‘‘(I) The acquisition or retention of any equity, partnership, or other ownership interest in, or the sponsorship of, 

a hedge fund or a private equity fund by a banking entity 

pursuant to paragraph (9) or (13) of section 4(c) solely outside of the United States, provided that no ownership interest in such hedge fund or private equity fund is offered for 

sale or sold to a resident of the United States and that the 

banking entity is not directly or indirectly controlled by a 

banking entity that is organized under the laws of the 

United States or of one or more States. 

‘‘(J) Such other activity as the appropriate Federal 

banking agencies, the Securities and Exchange Commission, and the Commodity Futures Trading Commission determine, by rule, as provided in subsection (b)(2), would 

promote and protect the safety and soundness of the banking entity and the financial stability of the United States. 


sroberts on DSKD5P82C1PROD with HEARING
256 

‘‘(2) LIMITATION ON PERMITTED ACTIVITIES.— 

‘‘(A) IN GENERAL.—No transaction, class of transactions, or activity may be deemed a permitted activity 

under paragraph (1) if the transaction, class of transactions, or activity— 

‘‘(i) would involve or result in a material conflict 

of interest (as such term shall be defined by rule as 

provided in subsection (b)(2)) between the banking entity and its clients, customers, or counterparties; 

‘‘(ii) would result, directly or indirectly, in a material exposure by the banking entity to high-risk assets 

or high-risk trading strategies (as such terms shall be 

defined by rule as provided in subsection (b)(2)); 

‘‘(iii) would pose a threat to the safety and soundness of such banking entity; or 

‘‘(iv) would pose a threat to the financial stability 

of the United States. 

‘‘(B) RULEMAKING.—The appropriate Federal banking 

agencies, the Securities and Exchange Commission, and the 

Commodity Futures Trading Commission shall issue regulations to implement subparagraph (A), as part of the regulations issued under subsection (b)(2). 

‘‘(3) CAPITAL AND QUANTITATIVE LIMITATIONS.—The appropriate Federal banking agencies, the Securities and Exchange 

Commission, and the Commodity Futures Trading Commission 

shall, as provided in subsection (b)(2), adopt rules imposing additional capital requirements and quantitative limitations, including diversification requirements, regarding the activities 

permitted under this section if the appropriate Federal banking 

agencies, the Securities and Exchange Commission, and the 

Commodity Futures Trading Commission determine that additional capital and quantitative limitations are appropriate to 

protect the safety and soundness of banking entities engaged in 

such activities. 

‘‘(4) DE MINIMIS INVESTMENT.— 

‘‘(A) IN GENERAL.—A banking entity may make and retain an investment in a hedge fund or private equity fund 

that the banking entity organizes and offers, subject to the 

limitations and restrictions in subparagraph (B) for the 

purposes of— 

‘‘(i) establishing the fund and providing the fund 

with sufficient initial equity for investment to permit 

the fund to attract unaffiliated investors; or 

‘‘(ii) making a de minimis investment. 

‘‘(B) LIMITATIONS AND RESTRICTIONS ON INVESTMENTS.— 

‘‘(i) REQUIREMENT TO SEEK OTHER INVESTORS.—A 

banking entity shall actively seek unaffiliated investors 

to reduce or dilute the investment of the banking entity 

to the amount permitted under clause (ii). 

‘‘(ii) LIMITATIONS ON SIZE OF INVESTMENTS.—Notwithstanding any other provision of law, investments 

by a banking entity in a hedge fund or private equity 

fund shall— 


sroberts on DSKD5P82C1PROD with HEARING
257 

‘‘(I) not later than 1 year after the date of establishment of the fund, be reduced through redemption, sale, or dilution to an amount that is 

not more than 3 percent of the total ownership interests of the fund; 

‘‘(II) be immaterial to the banking entity, as 

defined, by rule, pursuant to subsection (b)(2), but 

in no case may the aggregate of all of the interests 

of the banking entity in all such funds exceed 3 

percent of the Tier 1 capital of the banking entity. 

‘‘(iii) CAPITAL.—For purposes of determining compliance with applicable capital standards under paragraph (3), the aggregate amount of the outstanding investments by a banking entity under this paragraph, 

including retained earnings, shall be deducted from 

the assets and tangible equity of the banking entity, 

and the amount of the deduction shall increase commensurate with the leverage of the hedge fund or private equity fund. 

‘‘(C) EXTENSION.—Upon an application by a banking 

entity, the Board may extend the period of time to meet the 

requirements under subparagraph (B)(ii)(I) for 2 additional 

years, if the Board finds that an extension would be consistent with safety and soundness and in the public interest. 

‘‘(e) ANTI-EVASION.— 

‘‘(1) RULEMAKING.—The appropriate Federal banking agencies, the Securities and Exchange Commission, and the Commodity Futures Trading Commission shall issue regulations, as 

part of the rulemaking provided for in subsection (b)(2), regarding internal controls and recordkeeping, in order to insure compliance with this section. 

‘‘(2) TERMINATION OF ACTIVITIES OR INVESTMENT.—Notwithstanding any other provision of law, whenever an appropriate Federal banking agency, the Securities and Exchange 

Commission, or the Commodity Futures Trading Commission, 

as appropriate, has reasonable cause to believe that a banking 

entity or nonbank financial company supervised by the Board 

under the respective agency’s jurisdiction has made an investment or engaged in an activity in a manner that functions as 

an evasion of the requirements of this section (including 

through an abuse of any permitted activity) or otherwise violates the restrictions under this section, the appropriate Federal 

banking agency, the Securities and Exchange Commission, or 

the Commodity Futures Trading Commission, as appropriate, 

shall order, after due notice and opportunity for hearing, the 

banking entity or nonbank financial company supervised by the 

Board to terminate the activity and, as relevant, dispose of the 

investment. Nothing in this paragraph shall be construed to 

limit the inherent authority of any Federal agency or State regulatory authority to further restrict any investments or activities 

under otherwise applicable provisions of law. 

‘‘(f) LIMITATIONS ON RELATIONSHIPS WITH HEDGE FUNDS AND

PRIVATE EQUITY FUNDS.— 


sroberts on DSKD5P82C1PROD with HEARING
258 

‘‘(1) IN GENERAL.—No banking entity that serves, directly or 

indirectly, as the investment manager, investment adviser, or 

sponsor to a hedge fund or private equity fund, or that organizes and offers a hedge fund or private equity fund pursuant 

to paragraph (d)(1)(G), and no affiliate of such entity, may 

enter into a transaction with the fund, or with any other hedge 

fund or private equity fund that is controlled by such fund, that 

would be a covered transaction, as defined in section 23A of the 

Federal Reserve Act (12 U.S.C. 371c), with the hedge fund or 

private equity fund, as if such banking entity and the affiliate 

thereof were a member bank and the hedge fund or private equity fund were an affiliate thereof. 

‘‘(2) TREATMENT AS MEMBER BANK.—A banking entity that 

serves, directly or indirectly, as the investment manager, investment adviser, or sponsor to a hedge fund or private equity fund, 

or that organizes and offers a hedge fund or private equity fund 

pursuant to paragraph (d)(1)(G), shall be subject to section 23B 

of the Federal Reserve Act (12 U.S.C. 371c–1), as if such banking entity were a member bank and such hedge fund or private 

equity fund were an affiliate thereof. 

‘‘(3) PERMITTED SERVICES.— ‘‘(A) IN GENERAL.—Notwithstanding paragraph (1), the 

Board may permit a banking entity to enter into any prime 

brokerage transaction with any hedge fund or private equity fund in which a hedge fund or private equity fund 

managed, sponsored, or advised by such banking entity has 

taken an equity, partnership, or other ownership interest, 

if— 

‘‘(i) the banking entity is in compliance with each 

of the limitations set forth in subsection (d)(1)(G) with 

regard to a hedge fund or private equity fund organized and offered by such banking entity; 

‘‘(ii) the chief executive officer (or equivalent officer) 

of the banking entity certifies in writing annually (with 

a duty to update the certification if the information in 

the certification materially changes) that the conditions 

specified in subsection (d)(1)(g)(v) are satisfied; and 

‘‘(iii) the Board has determined that such transaction is consistent with the safe and sound operation 

and condition of the banking entity. 

‘‘(B) TREATMENT OF PRIME BROKERAGE TRANSACTIONS.—For purposes of subparagraph (A), a prime brokerage transaction described in subparagraph (A) shall be 

subject to section 23B of the Federal Reserve Act (12 U.S.C. 

371c–1) as if the counterparty were an affiliate of the banking entity. 

‘‘(4) APPLICATION TO NONBANK FINANCIAL COMPANIES SU- PERVISED BY THE BOARD.—The appropriate Federal banking 

agencies, the Securities and Exchange Commission, and the 

Commodity Futures Trading Commission shall adopt rules, as 

provided in subsection (b)(2), imposing additional capital 

charges or other restrictions for nonbank financial companies 

supervised by the Board to address the risks to and conflicts of 

interest of banking entities described in paragraphs (1), (2), and 

(3) of this subsection. 


sroberts on DSKD5P82C1PROD with HEARING
259 

‘‘(g) RULES OF CONSTRUCTION.— ‘‘(1) LIMITATION ON CONTRARY AUTHORITY.—Except as provided in this section, notwithstanding any other provision of 

law, the prohibitions and restrictions under this section shall 

apply to activities of a banking entity or nonbank financial 

company supervised by the Board, even if such activities are authorized for a banking entity or nonbank financial company supervised by the Board. 

‘‘(2) SALE OR SECURITIZATION OF LOANS.—Nothing in this 

section shall be construed to limit or restrict the ability of a 

banking entity or nonbank financial company supervised by the 

Board to sell or securitize loans in a manner otherwise permitted by law. 

‘‘(3) AUTHORITY OF FEDERAL AGENCIES AND STATE REGU- LATORY AUTHORITIES.—Nothing in this section shall be construed to limit the inherent authority of any Federal agency or 

State regulatory authority under otherwise applicable provisions of law. 

‘‘(h) DEFINITIONS.—In this section, the following definitions 

shall apply: 

‘‘(1) BANKING ENTITY.—The term ‘banking entity’ means 

any insured depository institution (as defined in section 3 of the 

Federal Deposit Insurance Act (12 U.S.C. 1813)), any company 

that controls an insured depository institution, or that is treated as a bank holding company for purposes of section 8 of the 

International Banking Act of 1978, and any affiliate or subsidiary of any such entity. For purposes of this paragraph, the 

term ‘insured depository institution’ does not include an institution that functions solely in a trust or fiduciary capacity, if— 

‘‘(A) all or substantially all of the deposits of such institution are in trust funds and are received in a bona fide 

fiduciary capacity; 

‘‘(B) no deposits of such institution which are insured 

by the Federal Deposit Insurance Corporation are offered or 

marketed by or through an affiliate of such institution; 

‘‘(C) such institution does not accept demand deposits 

or deposits that the depositor may withdraw by check or 

similar means for payment to third parties or others or 

make commercial loans; and 

‘‘(D) such institution does not— 

‘‘(i) obtain payment or payment related services 

from any Federal Reserve bank, including any service 

referred to in section 11A of the Federal Reserve Act 

(12 U.S.C. 248a); or 

‘‘(ii) exercise discount or borrowing privileges pursuant to section 19(b)(7) of the Federal Reserve Act (12 

U.S.C. 461(b)(7)). 

‘‘(2) HEDGE FUND; PRIVATE EQUITY FUND.—The terms ‘hedge 

fund’ and ‘private equity fund’ mean an issuer that would be 

an investment company, as defined in the Investment Company 

Act of 1940 (15 U.S.C. 80a–1 et seq.), but for section 3(c)(1) or 

3(c)(7) of that Act, or such similar funds as the appropriate 

Federal banking agencies, the Securities and Exchange Commission, and the Commodity Futures Trading Commission 

may, by rule, as provided in subsection (b)(2), determine. 


sroberts on DSKD5P82C1PROD with HEARING
260 

‘‘(3) NONBANK FINANCIAL COMPANY SUPERVISED BY THE

BOARD.—The term ‘nonbank financial company supervised by 

the Board’ means a nonbank financial company supervised by 

the Board of Governors, as defined in section 102 of the Financial Stability Act of 2010. 

‘‘(4) PROPRIETARY TRADING.—The term ‘proprietary trading’, when used with respect to a banking entity or nonbank financial company supervised by the Board, means engaging as 

a principal for the trading account of the banking entity or 

nonbank financial company supervised by the Board in any 

transaction to purchase or sell, or otherwise acquire or dispose 

of, any security, any derivative, any contract of sale of a commodity for future delivery, any option on any such security, derivative, or contract, or any other security or financial instrument that the appropriate Federal banking agencies, the Securities and Exchange Commission, and the Commodity Futures 

Trading Commission may, by rule as provided in subsection 

(b)(2), determine. 

‘‘(5) SPONSOR.—The term to ‘sponsor’ a fund means— 

‘‘(A) to serve as a general partner, managing member, 

or trustee of a fund; 

‘‘(B) in any manner to select or to control (or to have 

employees, officers, or directors, or agents who constitute) a 

majority of the directors, trustees, or management of a 

fund; or 

‘‘(C) to share with a fund, for corporate, marketing, 

promotional, or other purposes, the same name or a variation of the same name. 

‘‘(6) TRADING ACCOUNT.—The term ‘trading account’ means 

any account used for acquiring or taking positions in the securities and instruments described in paragraph (4) principally for 

the purpose of selling in the near term (or otherwise with the 

intent to resell in order to profit from short-term price movements), and any such other accounts as the appropriate Federal 

banking agencies, the Securities and Exchange Commission, 

and the Commodity Futures Trading Commission may, by rule 

as provided in subsection (b)(2), determine. 

‘‘(7) ILLIQUID FUND.— 

‘‘(A) IN GENERAL.—The term ‘illiquid fund’ means a 

hedge fund or private equity fund that— 

‘‘(i) as of May 1, 2010, was principally invested in, 

or was invested and contractually committed to principally invest in, illiquid assets, such as portfolio companies, real estate investments, and venture capital investments; and 

‘‘(ii) makes all investments pursuant to, and consistent with, an investment strategy to principally invest in illiquid assets. In issuing rules regarding this 

subparagraph, the Board shall take into consideration 

the terms of investment for the hedge fund or private 

equity fund, including contractual obligations, the ability of the fund to divest of assets held by the fund, and 

any other factors that the Board determines are appropriate. 


sroberts on DSKD5P82C1PROD with HEARING
261 

‘‘(B) HEDGE FUND.—For the purposes of this paragraph, the term ‘hedge fund’ means any fund identified 

under subsection (h)(2), and does not include a private equity fund, as such term is used in section 203(m) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-3(m)).’’. 

SEC. 620. STUDY OF BANK INVESTMENT ACTIVITIES. 

(a) STUDY.— 

(1) IN GENERAL.—Not later than 18 months after the date 

of enactment of this Act, the appropriate Federal banking agencies shall jointly review and prepare a report on the activities 

that a banking entity, as such term is defined in the Bank 

Holding Company Act of 1956 (12 U.S.C. 1841 et seq.), may engage in under Federal and State law, including activities authorized by statute and by order, interpretation and guidance. 

(2) CONTENT.—In carrying out the study under paragraph 

(1), the appropriate Federal banking agencies shall review and 

consider— 

(A) the type of activities or investments; 

(B) any financial, operational, managerial, or reputation risks associated with or presented as a result of the 

banking entity engaged in the activity or making the investment; and 

(C) risk mitigation activities undertaken by the banking entity with regard to the risks. 

(b) REPORT AND RECOMMENDATIONS TO THE COUNCIL AND TO

CONGRESS.—The appropriate Federal banking agencies shall submit to the Council, the Committee on Financial Services of the 

House of Representatives, and the Committee on Banking, Housing, 

and Urban Affairs of the Senate the study conducted pursuant to 

subsection (a) no later than 2 months after its completion. In addition to the information described in subsection (a), the report shall 

include recommendations regarding— 

(1) whether each activity or investment has or could have 

a negative effect on the safety and soundness of the banking entity or the United States financial system; 

(2) the appropriateness of the conduct of each activity or 

type of investment by banking entities; and 

(3) additional restrictions as may be necessary to address 

risks to safety and soundness arising from the activities or types 

of investments described in subsection (a). 

SEC. 621. CONFLICTS OF INTEREST. 

(a) IN GENERAL.—The Securities Act of 1933 (15 U.S.C. 77a et 

seq.) is amended by inserting after section 27A the following: 

‘‘SEC. 27B. CONFLICTS OF INTEREST RELATING TO CERTAIN 

SECURITIZATIONS. 

‘‘(a) IN GENERAL.—An underwriter, placement agent, initial 

purchaser, or sponsor, or any affiliate or subsidiary of any such entity, of an asset-backed security (as such term is defined in section 

3 of the Securities and Exchange Act of 1934 (15 U.S.C. 78c), which 

for the purposes of this section shall include a synthetic assetbacked security), shall not, at any time for a period ending on the 

date that is one year after the date of the first closing of the sale 

of the asset-backed security, engage in any transaction that would 


sroberts on DSKD5P82C1PROD with HEARING
262 

involve or result in any material conflict of interest with respect to 

any investor in a transaction arising out of such activity. 

‘‘(b) RULEMAKING.—Not later than 270 days after the date of enactment of this section, the Commission shall issue rules for the 

purpose of implementing subsection (a). 

‘‘(c) EXCEPTION.—The prohibitions of subsection (a) shall not 

apply to— 

‘‘(1) risk-mitigating hedging activities in connection with 

positions or holdings arising out of the underwriting, placement, initial purchase, or sponsorship of an asset-backed security, provided that such activities are designed to reduce the 

specific risks to the underwriter, placement agent, initial purchaser, or sponsor associated with positions or holdings arising 

out of such underwriting, placement, initial purchase, or sponsorship; or 

‘‘(2) purchases or sales of asset-backed securities made pursuant to and consistent with— 

‘‘(A) commitments of the underwriter, placement agent, 

initial purchaser, or sponsor, or any affiliate or subsidiary 

of any such entity, to provide liquidity for the asset-backed 

security, or 

‘‘(B) bona fide market-making in the asset backed security. 

‘‘(d) RULE OF CONSTRUCTION.—This subsection shall not otherwise limit the application of section 15G of the Securities Exchange 

Act of 1934.’’. 

(b) EFFECTIVE DATE.—Section 27B of the Securities Act of 1933, 

as added by this section, shall take effect on the effective date of 

final rules issued by the Commission under subsection (b) of such 

section 27B, except that subsections (b) and (d) of such section 27B 

shall take effect on the date of enactment of this Act. 

SEC. 622. CONCENTRATION LIMITS ON LARGE FINANCIAL FIRMS. 

The Bank Holding Company Act of 1956 (12 U.S.C. 1841 et 

seq.) is amended by adding at the end the following: 

‘‘SEC. 14. CONCENTRATION LIMITS ON LARGE FINANCIAL FIRMS. 

‘‘(a) DEFINITIONS.—In this section— 

‘‘(1) the term ‘Council’ means the Financial Stability Oversight Council; 

‘‘(2) the term ‘financial company’ means— 

‘‘(A) an insured depository institution; 

‘‘(B) a bank holding company; 

‘‘(C) a savings and loan holding company; 

‘‘(D) a company that controls an insured depository institution; 

‘‘(E) a nonbank financial company supervised by the 

Board under title I of the Dodd-Frank Wall Street Reform 

and Consumer Protection Act; and 

‘‘(F) a foreign bank or company that is treated as a 

bank holding company for purposes of this Act; and 

‘‘(3) the term ‘liabilities’ means— 

‘‘(A) with respect to a United States financial company— 

‘‘(i) the total risk-weighted assets of the financial 

company, as determined under the risk-based capital 


sroberts on DSKD5P82C1PROD with HEARING
263 

rules applicable to bank holding companies, as adjusted to reflect exposures that are deducted from regulatory capital; less 

‘‘(ii) the total regulatory capital of the financial 

company under the risk-based capital rules applicable 

to bank holding companies; 

‘‘(B) with respect to a foreign-based financial company— 

‘‘(i) the total risk-weighted assets of the United 

States operations of the financial company, as determined under the applicable risk-based capital rules, as 

adjusted to reflect exposures that are deducted from 

regulatory capital; less 

‘‘(ii) the total regulatory capital of the United 

States operations of the financial company, as determined under the applicable risk-based capital rules; 

and 

‘‘(C) with respect to an insurance company or other 

nonbank financial company supervised by the Board, such 

assets of the company as the Board shall specify by rule, in 

order to provide for consistent and equitable treatment of 

such companies. 

‘‘(b) CONCENTRATION LIMIT.—Subject to the recommendations 

by the Council under subsection (e), a financial company may not 

merge or consolidate with, acquire all or substantially all of the assets of, or otherwise acquire control of, another company, if the total 

consolidated liabilities of the acquiring financial company upon 

consummation of the transaction would exceed 10 percent of the aggregate consolidated liabilities of all financial companies at the end 

of the calendar year preceding the transaction. 

‘‘(c) EXCEPTION TO CONCENTRATION LIMIT.—With the prior 

written consent of the Board, the concentration limit under subsection (b) shall not apply to an acquisition— 

‘‘(1) of a bank in default or in danger of default; 

‘‘(2) with respect to which assistance is provided by the Federal Deposit Insurance Corporation under section 13(c) of the 

Federal Deposit Insurance Act (12 U.S.C. 1823(c)); or 

‘‘(3) that would result only in a de minimis increase in the 

liabilities of the financial company. 

‘‘(d) RULEMAKING AND GUIDANCE.—The Board shall issue regulations implementing this section in accordance with the recommendations of the Council under subsection (e), including the 

definition of terms, as necessary. The Board may issue interpretations or guidance regarding the application of this section to an individual financial company or to financial companies in general. 

‘‘(e) COUNCIL STUDY AND RULEMAKING.— 

‘‘(1) STUDY AND RECOMMENDATIONS.—Not later than 6 

months after the date of enactment of this section, the Council 

shall— 

‘‘(A) complete a study of the extent to which the concentration limit under this section would affect financial 

stability, moral hazard in the financial system, the efficiency and competitiveness of United States financial firms 

and financial markets, and the cost and availability of 


sroberts on DSKD5P82C1PROD with HEARING
264 

credit and other financial services to households and businesses in the United States; and 

‘‘(B) make recommendations regarding any modifications to the concentration limit that the Council determines 

would more effectively implement this section. 

‘‘(2) RULEMAKING.—Not later than 9 months after the date 

of completion of the study under paragraph (1), and notwithstanding subsections (b) and (d), the Board shall issue final 

regulations implementing this section, which shall reflect any 

recommendations by the Council under paragraph (1)(B).’’. 

SEC. 623. INTERSTATE MERGER TRANSACTIONS. 

(a) INTERSTATE MERGER TRANSACTIONS.—Section 18(c) of the 

Federal Deposit Insurance Act (12 U.S.C. 1828(c)) is amended by 

adding at the end the following: 

‘‘(13)(A) Except as provided in subparagraph (B), the responsible agency may not approve an application for an interstate merger transaction if the resulting insured depository institution (including all insured depository institutions which are affiliates of the resulting insured depository institution), upon consummation of the 

transaction, would control more than 10 percent of the total amount 

of deposits of insured depository institutions in the United States. 

‘‘(B) Subparagraph (A) shall not apply to an interstate merger 

transaction that involves 1 or more insured depository institutions 

in default or in danger of default, or with respect to which the Corporation provides assistance under section 13. 

‘‘(C) In this paragraph— 

‘‘(i) the term ‘interstate merger transaction’ means a merger 

transaction involving 2 or more insured depository institutions 

that have different home States and that are not affiliates; and 

‘‘(ii) the term ‘home State’ means— 

‘‘(I) with respect to a national bank, the State in which 

the main office of the bank is located; 

‘‘(II) with respect to a State bank or State savings association, the State by which the State bank or State savings 

association is chartered; and 

‘‘(III) with respect to a Federal savings association, the 

State in which the home office (as defined by the regulations of the Director of the Office of Thrift Supervision, or, 

on and after the transfer date, the Comptroller of the Currency) of the Federal savings association is located.’’. 

(b) ACQUISITIONS BY BANK HOLDING COMPANIES.— 

(1) IN GENERAL.—Section 4 of the Bank Holding Company 

Act of 1956 (12 U.S.C. 1843) is amended— 

(A) in subsection (i), by adding at the end the following: 

‘‘(8) INTERSTATE ACQUISITIONS.— 

‘‘(A) IN GENERAL.—The Board may not approve an application by a bank holding company to acquire an insured 

depository institution under subsection (c)(8) or any other 

provision of this Act if— 

‘‘(i) the home State of such insured depository institution is a State other than the home State of the 

bank holding company; and 

‘‘(ii) the applicant (including all insured depository 

institutions which are affiliates of the applicant) conVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00268 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
265 

trols, or upon consummation of the transaction would 

control, more than 10 percent of the total amount of deposits of insured depository institutions in the United 

States. 

‘‘(B) EXCEPTION.—Subparagraph (A) shall not apply to 

an acquisition that involves an insured depository institution in default or in danger of default, or with respect to 

which the Federal Deposit Insurance Corporation provides 

assistance under section 13 of the Federal Deposit Insurance Act (12 U.S.C. 1823).’’; and 

(B) in subsection (k)(6)(B), by striking ‘‘savings association’’ and inserting ‘‘insured depository institution’’. 

(2) DEFINITIONS.—Section 2(o)(4) of the Bank Holding 

Company Act of 1956 (12 U.S.C. 1841(o)(4)) is amended— 

(A) in subparagraph (B), by striking ‘‘and’’ at the end; 

(B) in subparagraph (C)(ii), by striking the period at 

the end and inserting a semicolon; and 

(C) by adding at the end the following: 

‘‘(D) with respect to a State savings association, the 

State by which the savings association is chartered; and 

‘‘(E) with respect to a Federal savings association, the 

State in which the home office (as defined by the regulations of the Director of the Office of Thrift Supervision, or, 

on and after the transfer date, the Comptroller of the Currency) of the Federal savings association is located.’’. 

(c) ACQUISITIONS BY SAVINGS AND LOAN HOLDING COMPA- NIES.—Section 10(e)(2) of the Home Owners’ Loan Act (12 U.S.C. 

1467a(e)(2)) is amended— 

(1) in paragraph (2)— 

(A) in subparagraph (C), by striking ‘‘or’’ at the end; 

(B) in subparagraph (D), by striking the period at the 

end and inserting ‘‘, or’’; and 

(C) by adding at the end the following: 

‘‘(E) in the case of an application by a savings and 

loan holding company to acquire an insured depository institution, if— 

‘‘(i) the home State of the insured depository institution is a State other than the home State of the savings and loan holding company; 

‘‘(ii) the applicant (including all insured depository 

institutions which are affiliates of the applicant) controls, or upon consummation of the transaction would 

control, more than 10 percent of the total amount of deposits of insured depository institutions in the United 

States; and 

‘‘(iii) the acquisition does not involve an insured 

depository institution in default or in danger of default, or with respect to which the Federal Deposit Insurance Corporation provides assistance under section 

13 of the Federal Deposit Insurance Act (12 U.S.C. 

1823).’’; and 

(2) by adding at the end the following: 

‘‘(7) DEFINITIONS.—For purposes of paragraph (2)(E)— 

‘‘(A) the terms ‘default’, ‘in danger of default’, and ‘insured depository institution’ have the same meanings as in 


sroberts on DSKD5P82C1PROD with HEARING
266 

section 3 of the Federal Deposit Insurance Act (12 U.S.C. 

1813); and 

‘‘(B) the term ‘home State’ means— 

‘‘(i) with respect to a national bank, the State in 

which the main office of the bank is located; 

‘‘(ii) with respect to a State bank or State savings 

association, the State by which the savings association 

is chartered; 

‘‘(iii) with respect to a Federal savings association, 

the State in which the home office (as defined by the 

regulations of the Director of the Office of Thrift Supervision, or, on and after the transfer date, the Comptroller of the Currency) of the Federal savings association is located; and 

‘‘(iv) with respect to a savings and loan holding 

company, the State in which the amount of total deposits of all insured depository institution subsidiaries of 

such company was the greatest on the date on which 

the company became a savings and loan holding company.’’. 

SEC. 624. QUALIFIED THRIFT LENDERS. 

Section 10(m)(3) of the Home Owners’ Loan Act (12 U.S.C. 

1467a(m)(3)) is amended— 

(1) by striking subparagraph (A) and inserting the following: 

‘‘(A) IN GENERAL.—A savings association that fails to 

become or remain a qualified thrift lender shall immediately be subject to the restrictions under subparagraph 

(B).’’; and 

(2) in subparagraph (B)(i), by striking subclause (III) and 

inserting the following: 

‘‘(III) DIVIDENDS.—The savings association 

may not pay dividends, except for dividends that— 

‘‘(aa) would be permissible for a national 

bank; 

‘‘(bb) are necessary to meet obligations of 

a company that controls such savings association; and 

‘‘(cc) are specifically approved by the 

Comptroller of the Currency and the Board 

after a written request submitted to the Comptroller of the Currency and the Board by the 

savings association not later than 30 days before the date of the proposed payment. 

‘‘(IV) REGULATORY AUTHORITY.—A savings association that fails to become or remain a qualified 

thrift lender shall be deemed to have violated section 5 of the Home Owners’ Loan Act (12 U.S.C. 

1464) and subject to actions authorized by section 

5(d) of the Home Owners’ Loan Act (12 U.S.C. 

1464(d)).’’. 


sroberts on DSKD5P82C1PROD with HEARING
267 

SEC. 625. TREATMENT OF DIVIDENDS BY CERTAIN MUTUAL HOLDING 

COMPANIES. 

(a) IN GENERAL.—Section 10(o) of the Home Owners’ Loan Act 

(12 U.S.C. 1467a(o) is amended by adding at the end the following: 

‘‘(11) DIVIDENDS.— 

‘‘(A) DECLARATION OF DIVIDENDS.— 

‘‘(i) ADVANCE NOTICE REQUIRED.—Each subsidiary 

of a mutual holding company that is a savings association shall give the appropriate Federal banking agency 

and the Board notice not later than 30 days before the 

date of a proposed declaration by the board of directors 

of the savings association of any dividend on the guaranty, permanent, or other nonwithdrawable stock of the 

savings association. 

‘‘(ii) INVALID DIVIDENDS.—Any dividend described 

in clause (i) that is declared without giving notice to 

the appropriate Federal banking agency and the Board 

under clause (i), or that is declared during the 30-day 

period preceding the date of a proposed declaration for 

which notice is given to the appropriate Federal banking agency and the Board under clause (i), shall be invalid and shall confer no rights or benefits upon the 

holder of any such stock. 

‘‘(B) WAIVER OF DIVIDENDS.—A mutual holding company may waive the right to receive any dividend declared 

by a subsidiary of the mutual holding company, if— 

‘‘(i) no insider of the mutual holding company, associate of an insider, or tax-qualified or non-tax-qualified employee stock benefit plan of the mutual holding 

company holds any share of the stock in the class of 

stock to which the waiver would apply; or 

‘‘(ii) the mutual holding company gives written notice to the Board of the intent of the mutual holding 

company to waive the right to receive dividends, not 

later than 30 days before the date of the proposed date 

of payment of the dividend, and the Board does not object to the waiver. 

‘‘(C) RESOLUTION INCLUDED IN WAIVER NOTICE.—A notice of a waiver under subparagraph (B) shall include a 

copy of the resolution of the board of directors of the mutual holding company, in such form and substance as the 

Board may determine, together with any supporting materials relied upon by the board of directors of the mutual 

holding company, concluding that the proposed dividend 

waiver is consistent with the fiduciary duties of the board 

of directors to the mutual members of the mutual holding 

company. 

‘‘(D) STANDARDS FOR WAIVER OF DIVIDEND.—The Board 

may not object to a waiver of dividends under subparagraph (B) if— 

‘‘(i) the waiver would not be detrimental to the safe 

and sound operation of the savings association; 

‘‘(ii) the board of directors of the mutual holding 

company expressly determines that a waiver of the dividend by the mutual holding company is consistent with 


sroberts on DSKD5P82C1PROD with HEARING
268 

the fiduciary duties of the board of directors to the mutual members of the mutual holding company; and 

‘‘(iii) the mutual holding company has, prior to December 1, 2009— 

‘‘(I) reorganized into a mutual holding company under subsection (o); 

‘‘(II) issued minority stock either from its midtier stock holding company or its subsidiary stock 

savings association; and 

‘‘(III) waived dividends it had a right to receive from the subsidiary stock savings association. 

‘‘(E) VALUATION.— 

‘‘(i) IN GENERAL.—The appropriate Federal banking agency shall consider waived dividends in determining an appropriate exchange ratio in the event of a 

full conversion to stock form. 

‘‘(ii) EXCEPTION.—In the case of a savings association that has reorganized into a mutual holding company, has issued minority stock from a mid-tier stock 

holding company or a subsidiary stock savings association of the mutual holding company, and has waived 

dividends it had a right to receive from a subsidiary 

savings association before December 1, 2009, the appropriate Federal banking agency shall not consider 

waived dividends in determining an appropriate exchange ratio in the event of a full conversion to stock 

form.’’. 

(b) EFFECTIVE DATE.—The amendment made by subsection (a) 

shall take effect on the transfer date. 

SEC. 626. INTERMEDIATE HOLDING COMPANIES. 

The Home Owners’ Loan Act (12 U.S.C. 1461 et seq.) is amended by inserting after section 10 (12 U.S.C. 1467a) the following new 

section: 

‘‘SEC. 10A. INTERMEDIATE HOLDING COMPANIES. 

‘‘(a) DEFINITION.—For purposes of this section: 

‘‘(1) FINANCIAL ACTIVITIES.—The term ‘financial activities’ 

means activities described in clauses (i) and (ii) of section 

10(c)(9)(A). 

‘‘(2) GRANDFATHERED UNITARY SAVINGS AND LOAN HOLDING

COMPANY.—The term ‘grandfathered unitary savings and loan 

holding company’ means a company described in section 

10(c)(9)(C). 

‘‘(3) INTERNAL FINANCIAL ACTIVITIES.—The term ‘internal 

financial activities’ includes— 

‘‘(A) internal financial activities conducted by a grandfathered savings and loan holding company or any affiliate; and 

‘‘(B) internal treasury, investment, and employee benefit functions. 

‘‘(b) REQUIREMENT.— 

‘‘(1) IN GENERAL.— 

‘‘(A) ACTIVITIES OTHER THAN FINANCIAL ACTIVITIES.—If 

a grandfathered unitary savings and loan holding company conducts activities other than financial activities, the 


sroberts on DSKD5P82C1PROD with HEARING
269 

Board may require such company to establish and conduct 

all or a portion of such financial activities in or through an 

intermediate holding company, which shall be a savings 

and loan holding company, established pursuant to regulations of the Board, not later than 90 days (or such longer 

period as the Board may deem appropriate) after the transfer date. 

‘‘(B) OTHER ACTIVITIES.—Notwithstanding subparagraph (A), the Board shall require a grandfathered unitary 

savings and loan holding company to establish an intermediate holding company if the Board makes a determination that the establishment of such intermediate holding 

company is necessary— 

‘‘(i) to appropriately supervise activities that are 

determined to be financial activities; or 

‘‘(ii) to ensure that supervision by the Board does 

not extend to the activities of such company that are 

not financial activities. 

‘‘(2) INTERNAL FINANCIAL ACTIVITIES.— 

‘‘(A) TREATMENT OF INTERNAL FINANCIAL ACTIVITIES.— 

For purposes of this subsection, the internal financial activities of a grandfathered unitary savings and loan holding company shall not be required to be placed in an intermediate holding company. 

‘‘(B) GRANDFATHERED ACTIVITIES.—A grandfathered 

unitary savings and loan holding company may continue to 

engage in an internal financial activity, subject to review 

by the Board to determine whether engaging in such activity presents undue risk to the grandfathered unitary savings and loan holding company or to the financial stability 

of the United States, if— 

‘‘(i) the grandfathered unitary savings and loan 

holding company engaged in the activity during the 

year before the date of enactment of this section; and 

‘‘(ii) at least 2⁄3 of the assets or 2⁄3 of the revenues 

generated from the activity are from or attributable to 

the grandfathered unitary savings and loan holding 

company. 

‘‘(3) SOURCE OF STRENGTH.—A grandfathered unitary savings and loan holding company that directly or indirectly controls an intermediate holding company established under this 

section shall serve as a source of strength to its subsidiary intermediate holding company. 

‘‘(4) PARENT COMPANY REPORTS.—The Board, may from 

time to time, examine and require reports under oath from a 

grandfathered unitary savings and loan holding company that 

controls an intermediate holding company, and from the appropriate officers or directors of such company, solely for purposes 

of ensuring compliance with the provisions of this section, including assessing the ability of the company to serve as a source 

of strength to its subsidiary intermediate holding company as 

required under paragraph (3) and enforcing compliance with 

such requirement. 

‘‘(5) LIMITED PARENT COMPANY ENFORCEMENT.— 


sroberts on DSKD5P82C1PROD with HEARING
270 

‘‘(A) IN GENERAL.—In addition to any other authority 

of the Board, the Board may enforce compliance with the 

provisions of this subsection that are applicable to any company described in paragraph (1)(A) that controls an intermediate holding company under section 8 of the Federal 

Deposit Insurance Act, and a company described in paragraph (1)(A) shall be subject to such section (solely for purposes of this subparagraph) in the same manner and to the 

same extent as if the company described in paragraph 

(1)(A) were a savings and loan holding company. 

‘‘(B) APPLICATION OF OTHER ACT.—Any violation of this 

subsection by a grandfathered unitary savings and loan 

holding company that controls an intermediate holding 

company may also be treated as a violation of the Federal 

Deposit Insurance Act for purposes of subparagraph (A). 

‘‘(C) NO EFFECT ON OTHER AUTHORITY.—No provision 

of this paragraph shall be construed as limiting any authority of the Board or any other Federal agency under any 

other provision of law. 

‘‘(c) REGULATIONS.—The Board— 

‘‘(1) shall promulgate regulations to establish the criteria 

for determining whether to require a grandfathered unitary savings and loan holding company to establish an intermediate 

holding company under subsection (b); and 

‘‘(2) may promulgate regulations to establish any restrictions or limitations on transactions between an intermediate 

holding company or a parent of such company and its affiliates, 

as necessary to prevent unsafe and unsound practices in connection with transactions between the intermediate holding company, or any subsidiary thereof, and its parent company or affiliates that are not subsidiaries of the intermediate holding 

company, except that such regulations shall not restrict or limit 

any transaction in connection with the bona fide acquisition or 

lease by an unaffiliated person of assets, goods, or services. 

‘‘(d) RULES OF CONSTRUCTION.— 

‘‘(1) ACTIVITIES.—Nothing in this section shall be construed 

to require a grandfathered unitary savings and loan holding 

company to conform its activities to permissible activities. 

‘‘(2) PERMISSIBLE CORPORATE REORGANIZATION.—The formation of an intermediate holding company as required in subsection (b) shall be presumed to be a permissible corporate reorganization as described in section 10(c)(9)(D).’’. 

SEC. 627. INTEREST-BEARING TRANSACTION ACCOUNTS AUTHORIZED. 

(a) REPEAL OF PROHIBITION ON PAYMENT OF INTEREST ON DEMAND DEPOSITS.— 

(1) FEDERAL RESERVE ACT.—Section 19(i) of the Federal Reserve Act (12 U.S.C. 371a) is amended to read as follows: 

‘‘(i) [Repealed]’’. 

(2) HOME OWNERS’ LOAN ACT.—The first sentence of section 

5(b)(1)(B) of the Home Owners’ Loan Act (12 U.S.C. 

1464(b)(1)(B)) is amended by striking ‘‘savings association may 

not—’’ and all that follows through ‘‘(ii) permit any’’ and inserting ‘‘savings association may not permit any’’. 


sroberts on DSKD5P82C1PROD with HEARING
271 

(3) FEDERAL DEPOSIT INSURANCE ACT.—Section 18(g) of the 

Federal Deposit Insurance Act (12 U.S.C. 1828(g)) is amended 

to read as follows: 

‘‘(g) [Repealed]’’. 

(b) EFFECTIVE DATE.—The amendments made by subsection (a) 

shall take effect 1 year after the date of the enactment of this Act. 

SEC. 628. CREDIT CARD BANK SMALL BUSINESS LENDING. 

Section 2(c)(2)(F)(v) of the Bank Holding Company Act of 1956 

(12 U.S.C. 1841(c)(2)(F)(v)) is amended by inserting before the period the following: ‘‘, other than credit card loans that are made to 

businesses that meet the criteria for a small business concern to be 

eligible for business loans under regulations established by the 

Small Business Administration under part 121 of title 13, Code of 

Federal Regulations’’. 

TITLE VII—WALL STREET TRANSPARENCY AND 

ACCOUNTABILITY 

SEC. 701. SHORT TITLE. 

This title may be cited as the ‘‘Wall Street Transparency and 

Accountability Act of 2010’’. 

Subtitle A—Regulation of Over-the-Counter Swaps Markets 

PART I—REGULATORY AUTHORITY 

SEC. 711. DEFINITIONS. 

In this subtitle, the terms ‘‘prudential regulator’’, ‘‘swap’’, ‘‘swap 

dealer’’, ‘‘major swap participant’’, ‘‘swap data repository’’, ‘‘associated person of a swap dealer or major swap participant’’, ‘‘eligible 

contract participant’’, ‘‘swap execution facility’’, ‘‘security-based 

swap’’, ‘‘security-based swap dealer’’, ‘‘major security-based swap 

participant’’, and ‘‘associated person of a security-based swap dealer 

or major security-based swap participant’’ have the meanings given 

the terms in section 1a of the Commodity Exchange Act (7 U.S.C. 

1a), including any modification of the meanings under section 

721(b) of this Act. 

SEC. 712. REVIEW OF REGULATORY AUTHORITY. 

(a) CONSULTATION.— (1) COMMODITY FUTURES TRADING COMMISSION.—Before 

commencing any rulemaking or issuing an order regarding 

swaps, swap dealers, major swap participants, swap data repositories, derivative clearing organizations with regard to 

swaps, persons associated with a swap dealer or major swap 

participant, eligible contract participants, or swap execution facilities pursuant to this subtitle, the Commodity Futures Trading Commission shall consult and coordinate to the extent possible with the Securities and Exchange Commission and the 

prudential regulators for the purposes of assuring regulatory 

consistency and comparability, to the extent possible. 

(2) SECURITIES AND EXCHANGE COMMISSION.—Before commencing any rulemaking or issuing an order regarding security-based swaps, security-based swap dealers, major securitybased swap participants, security-based swap data repositories, 

clearing agencies with regard to security-based swaps, persons 


sroberts on DSKD5P82C1PROD with HEARING
272 

associated with a security-based swap dealer or major securitybased swap participant, eligible contract participants with regard to security-based swaps, or security-based swap execution 

facilities pursuant to subtitle B, the Securities and Exchange 

Commission shall consult and coordinate to the extent possible 

with the Commodity Futures Trading Commission and the prudential regulators for the purposes of assuring regulatory consistency and comparability, to the extent possible. 

(3) PROCEDURES AND DEADLINE.—Such regulations shall be 

prescribed in accordance with applicable requirements of title 5, 

United States Code, and shall be issued in final form not later 

than 360 days after the date of enactment of this Act. 

(4) APPLICABILITY.—The requirements of paragraphs (1) 

and (2) shall not apply to an order issued— 

(A) in connection with or arising from a violation or 

potential violation of any provision of the Commodity Exchange Act (7 U.S.C. 1 et seq.); 

(B) in connection with or arising from a violation or 

potential violation of any provision of the securities laws; or 

(C) in any proceeding that is conducted on the record 

in accordance with sections 556 and 557 of title 5, United 

States Code. 

(5) EFFECT.—Nothing in this subsection authorizes any 

consultation or procedure for consultation that is not consistent 

with the requirements of subchapter II of chapter 5, and chapter 7, of title 5, United States Code (commonly known as the 

‘‘Administrative Procedure Act’’). 

(6) RULES; ORDERS.—In developing and promulgating rules 

or orders pursuant to this subsection, each Commission shall 

consider the views of the prudential regulators. 

(7) TREATMENT OF SIMILAR PRODUCTS AND ENTITIES.— 

(A) IN GENERAL.—In adopting rules and orders under 

this subsection, the Commodity Futures Trading Commission and the Securities and Exchange Commission shall 

treat functionally or economically similar products or entities described in paragraphs (1) and (2) in a similar manner. 

(B) EFFECT.—Nothing in this subtitle requires the 

Commodity Futures Trading Commission or the Securities 

and Exchange Commission to adopt joint rules or orders 

that treat functionally or economically similar products or 

entities described in paragraphs (1) and (2) in an identical 

manner. 

(8) MIXED SWAPS.—The Commodity Futures Trading Commission and the Securities and Exchange Commission, after 

consultation with the Board of Governors, shall jointly prescribe 

such regulations regarding mixed swaps, as described in section 

1a(47)(D) of the Commodity Exchange Act (7 U.S.C. 1a(47)(D)) 

and in section 3(a)(68)(D) of the Securities Exchange Act of 

1934 (15 U.S.C. 78c(a)(68)(D)), as may be necessary to carry out 

the purposes of this title. 

(b) LIMITATION.— 

(1) COMMODITY FUTURES TRADING COMMISSION.—Nothing 

in this title, unless specifically provided, confers jurisdiction on 


sroberts on DSKD5P82C1PROD with HEARING
273 

the Commodity Futures Trading Commission to issue a rule, 

regulation, or order providing for oversight or regulation of— 

(A) security-based swaps; or 

(B) with regard to its activities or functions concerning 

security-based swaps— 

(i) security-based swap dealers; 

(ii) major security-based swap participants; 

(iii) security-based swap data repositories; 

(iv) associated persons of a security-based swap 

dealer or major security-based swap participant; 

(v) eligible contract participants with respect to security-based swaps; or 

(vi) swap execution facilities with respect to security-based swaps. 

(2) SECURITIES AND EXCHANGE COMMISSION.—Nothing in 

this title, unless specifically provided, confers jurisdiction on 

the Securities and Exchange Commission or State securities 

regulators to issue a rule, regulation, or order providing for 

oversight or regulation of— 

(A) swaps; or 

(B) with regard to its activities or functions concerning 

swaps— 

(i) swap dealers; 

(ii) major swap participants; 

(iii) swap data repositories; 

(iv) persons associated with a swap dealer or 

major swap participant; 

(v) eligible contract participants with respect to 

swaps; or 

(vi) swap execution facilities with respect to swaps. 

(3) PROHIBITION ON CERTAIN FUTURES ASSOCIATIONS AND

NATIONAL SECURITIES ASSOCIATIONS.— 

(A) FUTURES ASSOCIATIONS.—Notwithstanding any 

other provision of law (including regulations), unless otherwise authorized by this title, no futures association registered under section 17 of the Commodity Exchange Act (7 

U.S.C. 21) may issue a rule, regulation, or order for the 

oversight or regulation of, or otherwise assert jurisdiction 

over, for any purpose, any security-based swap, except that 

this subparagraph shall not limit the authority of a registered futures association to examine for compliance with, 

and enforce, its rules on capital adequacy. 

(B) NATIONAL SECURITIES ASSOCIATIONS.—Notwithstanding any other provision of law (including regulations), 

unless otherwise authorized by this title, no national securities association registered under section 15A of the Securities Exchange Act of 1934 (15 U.S.C. 78o–3) may issue a 

rule, regulation, or order for the oversight or regulation of, 

or otherwise assert jurisdiction over, for any purpose, any 

swap, except that this subparagraph shall not limit the authority of a national securities association to examine for 

compliance with, and enforce, its rules on capital adequacy. 

(c) OBJECTION TO COMMISSION REGULATION.— 

(1) FILING OF PETITION FOR REVIEW.— 


sroberts on DSKD5P82C1PROD with HEARING
274 

(A) IN GENERAL.—If either Commission referred to in 

this section determines that a final rule, regulation, or 

order of the other Commission conflicts with subsection 

(a)(7) or (b), then the complaining Commission may obtain 

review of the final rule, regulation, or order in the United 

States Court of Appeals for the District of Columbia Circuit 

by filing in the court, not later than 60 days after the date 

of publication of the final rule, regulation, or order, a written petition requesting that the rule, regulation, or order be 

set aside. 

(B) EXPEDITED PROCEEDING.—A proceeding described 

in subparagraph (A) shall be expedited by the United 

States Court of Appeals for the District of Columbia Circuit. 

(2) TRANSMITTAL OF PETITION AND RECORD.— 

(A) IN GENERAL.—A copy of a petition described in 

paragraph (1) shall be transmitted not later than 1 business day after the date of filing by the complaining Commission to the Secretary of the responding Commission. 

(B) DUTY OF RESPONDING COMMISSION.—On receipt of 

the copy of a petition described in paragraph (1), the responding Commission shall file with the United States 

Court of Appeals for the District of Columbia Circuit— 

(i) a copy of the rule, regulation, or order under review (including any documents referred to therein); 

and 

(ii) any other materials prescribed by the United 

States Court of Appeals for the District of Columbia 

Circuit. 

(3) STANDARD OF REVIEW.—The United States Court of Appeals for the District of Columbia Circuit shall— 

(A) give deference to the views of neither Commission; 

and 

(B) determine to affirm or set aside a rule, regulation, 

or order of the responding Commission under this subsection, based on the determination of the court as to 

whether the rule, regulation, or order is in conflict with 

subsection (a)(7) or (b), as applicable. 

(4) JUDICIAL STAY.—The filing of a petition by the complaining Commission pursuant to paragraph (1) shall operate 

as a stay of the rule, regulation, or order until the date on 

which the determination of the United States Court of Appeals 

for the District of Columbia Circuit is final (including any appeal of the determination). 

(d) JOINT RULEMAKING.— 

(1) IN GENERAL.—Notwithstanding any other provision of 

this title and subsections (b) and (c), the Commodity Futures 

Trading Commission and the Securities and Exchange Commission, in consultation with the Board of Governors, shall further define the terms ‘‘swap’’, ‘‘security-based swap’’, ‘‘swap dealer’’, ‘‘security-based swap dealer’’, ‘‘major swap participant’’, 

‘‘major security-based swap participant’’, ‘‘eligible contract participant’’, and ‘‘security-based swap agreement’’ in section 

1a(47)(A)(v) of the Commodity Exchange Act (7 U.S.C. 


sroberts on DSKD5P82C1PROD with HEARING
275 

1a(47)(A)(v)) and section 3(a)(78) of the Securities Exchange Act 

of 1934 (15 U.S.C. 78c(a)(78)). 

(2) AUTHORITY OF THE COMMISSIONS.— (A) IN GENERAL.—Notwithstanding any other provision 

of this title, the Commodity Futures Trading Commission 

and the Securities and Exchange Commission, in consultation with the Board of Governors, shall jointly adopt such 

other rules regarding such definitions as the Commodity 

Futures Trading Commission and the Securities and Exchange Commission determine are necessary and appropriate, in the public interest, and for the protection of investors. 

(B) TRADE REPOSITORY RECORDKEEPING.—Notwithstanding any other provision of this title, the Commodity 

Futures Trading Commission and the Securities and Exchange Commission, in consultation with the Board of Governors, shall engage in joint rulemaking to jointly adopt a 

rule or rules governing the books and records that are required to be kept and maintained regarding security-based 

swap agreements by persons that are registered as swap 

data repositories under the Commodity Exchange Act, including uniform rules that specify the data elements that 

shall be collected and maintained by each repository. 

(C) BOOKS AND RECORDS.—Notwithstanding any other 

provision of this title, the Commodity Futures Trading 

Commission and the Securities and Exchange Commission, 

in consultation with the Board of Governors, shall engage 

in joint rulemaking to jointly adopt a rule or rules governing books and records regarding security-based swap 

agreements, including daily trading records, for swap dealers, major swap participants, security-based swap dealers, 

and security-based swap participants. 

(D) COMPARABLE RULES.—Rules and regulations prescribed jointly under this title by the Commodity Futures 

Trading Commission and the Securities and Exchange 

Commission shall be comparable to the maximum extent 

possible, taking into consideration differences in instruments and in the applicable statutory requirements. 

(E) TRACKING UNCLEARED TRANSACTIONS.—Any rules 

prescribed under subparagraph (A) shall require the maintenance of records of all activities relating to security-based 

swap agreement transactions defined under subparagraph 

(A) that are not cleared. 

(F) SHARING OF INFORMATION.—The Commodity Futures Trading Commission shall make available to the Securities and Exchange Commission information relating to 

security-based swap agreement transactions defined in subparagraph (A) that are not cleared. 

(3) FINANCIAL STABILITY OVERSIGHT COUNCIL.—In the event 

that the Commodity Futures Trading Commission and the Securities and Exchange Commission fail to jointly prescribe rules 

pursuant to paragraph (1) or (2) in a timely manner, at the request of either Commission, the Financial Stability Oversight 

Council shall resolve the dispute— 

(A) within a reasonable time after receiving the request; 


sroberts on DSKD5P82C1PROD with HEARING
276 

(B) after consideration of relevant information provided 

by each Commission; and 

(C) by agreeing with 1 of the Commissions regarding 

the entirety of the matter or by determining a compromise 

position. 

(4) JOINT INTERPRETATION.—Any interpretation of, or guidance by either Commission regarding, a provision of this title, 

shall be effective only if issued jointly by the Commodity Futures Trading Commission and the Securities and Exchange 

Commission, after consultation with the Board of Governors, if 

this title requires the Commodity Futures Trading Commission 

and the Securities and Exchange Commission to issue joint regulations to implement the provision. 

(e) GLOBAL RULEMAKING TIMEFRAME.—Unless otherwise provided in this title, or an amendment made by this title, the Commodity Futures Trading Commission or the Securities and Exchange Commission, or both, shall individually, and not jointly, 

promulgate rules and regulations required of each Commission 

under this title or an amendment made by this title not later than 

360 days after the date of enactment of this Act. 

(f) RULES AND REGISTRATION BEFORE FINAL EFFECTIVE

DATES.—Beginning on the date of enactment of this Act and notwithstanding the effective date of any provision of this Act, the Commodity Futures Trading Commission and the Securities and Exchange Commission may, in order to prepare for the effective dates 

of the provisions of this Act— 

(1) promulgate rules, regulations, or orders permitted or required by this Act; 

(2) conduct studies and prepare reports and recommendations required by this Act; 

(3) register persons under the provisions of this Act; and 

(4) exempt persons, agreements, contracts, or transactions 

from provisions of this Act, under the terms contained in this 

Act, 

provided, however, that no action by the Commodity Futures Trading Commission or the Securities and Exchange Commission described in paragraphs (1) through (4) shall become effective prior to 

the effective date applicable to such action under the provisions of 

this Act. 

SEC. 713. PORTFOLIO MARGINING CONFORMING CHANGES. 

(a) SECURITIES EXCHANGE ACT OF 1934.—Section 15(c)(3) of the 

Securities Exchange Act of 1934 (15 U.S.C. 78o(c)(3)) is amended by 

adding at the end the following: 

‘‘(C) Notwithstanding any provision of sections 

2(a)(1)(C)(i) or 4d(a)(2) of the Commodity Exchange Act 

and the rules and regulations thereunder, and pursuant to 

an exemption granted by the Commission under section 36 

of this title or pursuant to a rule or regulation, cash and 

securities may be held by a broker or dealer registered pursuant to subsection (b)(1) and also registered as a futures 

commission merchant pursuant to section 4f(a)(1) of the 

Commodity Exchange Act, in a portfolio margining account 

carried as a futures account subject to section 4d of the 

Commodity Exchange Act and the rules and regulations 

thereunder, pursuant to a portfolio margining program apVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00280 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
277 

proved by the Commodity Futures Trading Commission, 

and subject to subchapter IV of chapter 7 of title 11 of the 

United States Code and the rules and regulations thereunder. The Commission shall consult with the Commodity 

Futures Trading Commission to adopt rules to ensure that 

such transactions and accounts are subject to comparable 

requirements to the extent practicable for similar products.’’. 

(b) COMMODITY EXCHANGE ACT.—Section 4d of the Commodity 

Exchange Act (7 U.S.C. 6d) is amended by adding at the end the 

following: 

‘‘(h) Notwithstanding subsection (a)(2) or the rules and regulations thereunder, and pursuant to an exemption granted by the 

Commission under section 4(c) of this Act or pursuant to a rule or 

regulation, a futures commission merchant that is registered pursuant to section 4f(a)(1) of this Act and also registered as a broker or 

dealer pursuant to section 15(b)(1) of the Securities Exchange Act of 

1934 may, pursuant to a portfolio margining program approved by 

the Securities and Exchange Commission pursuant to section 19(b) 

of the Securities Exchange Act of 1934, hold in a portfolio margining account carried as a securities account subject to section 

15(c)(3) of the Securities Exchange Act of 1934 and the rules and 

regulations thereunder, a contract for the purchase or sale of a commodity for future delivery or an option on such a contract, and any 

money, securities or other property received from a customer to margin, guarantee or secure such a contract, or accruing to a customer 

as the result of such a contract. The Commission shall consult with 

the Securities and Exchange Commission to adopt rules to ensure 

that such transactions and accounts are subject to comparable requirements to the extent practical for similar products.’’. 

(c) DUTY OF COMMODITY FUTURES TRADING COMMISSION.—Section 20 of the Commodity Exchange Act (7 U.S.C. 24) is amended 

by adding at the end the following: 

‘‘(c) The Commission shall exercise its authority to ensure that 

securities held in a portfolio margining account carried as a futures 

account are customer property and the owners of those accounts are 

customers for the purposes of subchapter IV of chapter 7 of title 11 

of the United States Code.’’. 

SEC. 714. ABUSIVE SWAPS. 

The Commodity Futures Trading Commission or the Securities 

and Exchange Commission, or both, individually may, by rule or 

order— 

(1) collect information as may be necessary concerning the 

markets for any types of— 

(A) swap (as defined in section 1a of the Commodity 

Exchange Act (7 U.S.C. 1a)); or 

(B) security-based swap (as defined in section 1a of the 

Commodity Exchange Act (7 U.S.C. 1a)); and 

(2) issue a report with respect to any types of swaps or security-based swaps that the Commodity Futures Trading Commission or the Securities and Exchange Commission determines to 

be detrimental to— 

(A) the stability of a financial market; or 

(B) participants in a financial market. 


sroberts on DSKD5P82C1PROD with HEARING
278 

SEC. 715. AUTHORITY TO PROHIBIT PARTICIPATION IN SWAP ACTIVITIES. 

Except as provided in section 4 of the Commodity Exchange Act 

(7 U.S.C. 6), if the Commodity Futures Trading Commission or the 

Securities and Exchange Commission determines that the regulation 

of swaps or security-based swaps markets in a foreign country undermines the stability of the United States financial system, either 

Commission, in consultation with the Secretary of the Treasury, 

may prohibit an entity domiciled in the foreign country from participating in the United States in any swap or security-based swap 

activities. 

SEC. 716. PROHIBITION AGAINST FEDERAL GOVERNMENT BAILOUTS 

OF SWAPS ENTITIES. 

(a) PROHIBITION ON FEDERAL ASSISTANCE.—Notwithstanding 

any other provision of law (including regulations), no Federal assistance may be provided to any swaps entity with respect to any 

swap, security-based swap, or other activity of the swaps entity. 

(b) DEFINITIONS.—In this section: 

(1) FEDERAL ASSISTANCE.—The term ‘‘Federal assistance’’ 

means the use of any advances from any Federal Reserve credit 

facility or discount window that is not part of a program or facility with broad-based eligibility under section 13(3)(A) of the 

Federal Reserve Act, Federal Deposit Insurance Corporation insurance or guarantees for the purpose of— 

(A) making any loan to, or purchasing any stock, equity interest, or debt obligation of, any swaps entity; 

(B) purchasing the assets of any swaps entity; 

(C) guaranteeing any loan or debt issuance of any 

swaps entity; or 

(D) entering into any assistance arrangement (including tax breaks), loss sharing, or profit sharing with any 

swaps entity. 

(2) SWAPS ENTITY.— 

(A) IN GENERAL.—The term ‘‘swaps entity’’ means any 

swap dealer, security-based swap dealer, major swap participant, major security-based swap participant, that is registered under— 

(i) the Commodity Exchange Act (7 U.S.C. 1 et 

seq.); or 

(ii) the Securities Exchange Act of 1934 (15 U.S.C. 

78a et seq.). 

(B) EXCLUSION.—The term ‘‘swaps entity’’ does not include any major swap participant or major security-based 

swap participant that is an insured depository institution. 

(c) AFFILIATES OF INSURED DEPOSITORY INSTITUTIONS.—The 

prohibition on Federal assistance contained in subsection (a) does 

not apply to and shall not prevent an insured depository institution 

from having or establishing an affiliate which is a swaps entity, as 

long as such insured depository institution is part of a bank holding 

company, or savings and loan holding company, that is supervised 

by the Federal Reserve and such swaps entity affiliate complies with 

sections 23A and 23B of the Federal Reserve Act and such other requirements as the Commodity Futures Trading Commission or the 

Securities Exchange Commission, as appropriate, and the Board of 


sroberts on DSKD5P82C1PROD with HEARING
279 

Governors of the Federal Reserve System, may determine to be necessary and appropriate. 

(d) ONLY BONA FIDE HEDGING AND TRADITIONAL BANK ACTIVI- TIES PERMITTED.—The prohibition in subsection (a) shall apply to 

any insured depository institution unless the insured depository institution limits its swap or security-based swap activities to: 

(1) Hedging and other similar risk mitigating activities directly related to the insured depository institution’s activities. 

(2) Acting as a swaps entity for swaps or security-based 

swaps involving rates or reference assets that are permissible 

for investment by a national bank under the paragraph designated as ‘‘Seventh.’’ of section 5136 of the Revised Statutes of 

the United States ( 12 U.S.C. 24), other than as described in 

paragraph (3). 

(3) LIMITATION ON CREDIT DEFAULT SWAPS.—Acting as a 

swaps entity for credit default swaps, including swaps or security-based swaps referencing the credit risk of asset-backed securities as defined in section 3(a)(77) of the Securities Exchange 

Act of 1934 (15 U.S.C. 78c(a)(77)) (as amended by this Act) 

shall not be considered a bank permissible activity for purposes 

of subsection (d)(2) unless such swaps or security-based swaps 

are cleared by a derivatives clearing organization (as such term 

is defined in section la of the Commodity Exchange Act (7 

U.S.C. la)) or a clearing agency (as such term is defined in section 3 of the Securities Exchange Act (15 U.S.C. 78c)) that is 

registered, or exempt from registration, as a derivatives clearing 

organization under the Commodity Exchange Act or as a clearing agency under the Securities Exchange Act, respectively. 

(e) EXISTING SWAPS AND SECURITY-BASED SWAPS.—The prohibition in subsection (a) shall only apply to swaps or security-based 

swaps entered into by an insured depository institution after the end 

of the transition period described in subsection (f). 

(f) TRANSITION PERIOD.—To the extent an insured depository institution qualifies as a ‘‘swaps entity’’ and would be subject to the 

Federal assistance prohibition in subsection (a), the appropriate 

Federal banking agency, after consulting with and considering the 

views of the Commodity Futures Trading Commission or the Securities Exchange Commission, as appropriate, shall permit the insured 

depository institution up to 24 months to divest the swaps entity or 

cease the activities that require registration as a swaps entity. In establishing the appropriate transition period to effect such divestiture 

or cessation of activities, which may include making the swaps entity an affiliate of the insured depository institution, the appropriate 

Federal banking agency shall take into account and make written 

findings regarding the potential impact of such divestiture or cessation of activities on the insured depository institution’s (1) mortgage lending, (2) small business lending, (3) job creation, and (4) 

capital formation versus the potential negative impact on insured 

depositors and the Deposit Insurance Fund of the Federal Deposit 

Insurance Corporation. The appropriate Federal banking agency 

may consider such other factors as may be appropriate. The appropriate Federal banking agency may place such conditions on the insured depository institution’s divestiture or ceasing of activities of 

the swaps entity as it deems necessary and appropriate. The transition period under this subsection may be extended by the approVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00283 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
280 

priate Federal banking agency, after consultation with the Commodity Futures Trading Commission and the Securities and Exchange Commission, for a period of up to 1 additional year. 

(g) EXCLUDED ENTITIES.—For purposes of this section, the term 

‘‘swaps entity’’ shall not include any insured depository institution 

under the Federal Deposit Insurance Act or a covered financial company under title II which is in a conservatorship, receivership, or 

a bridge bank operated by the Federal Deposit Insurance Corporation. 

(h) EFFECTIVE DATE.—The prohibition in subsection (a) shall be 

effective 2 years following the date on which this Act is effective. 

(i) LIQUIDATION REQUIRED.— (1) IN GENERAL.— (A) FDIC INSURED INSTITUTIONS.—All swaps entities 

that are FDIC insured institutions that are put into receivership or declared insolvent as a result of swap or securitybased swap activity of the swaps entities shall be subject to 

the termination or transfer of that swap or security-based 

swap activity in accordance with applicable law prescribing 

the treatment of those contracts. No taxpayer funds shall be 

used to prevent the receivership of any swap entity resulting 

from swap or security-based swap activity of the swaps entity. 

(B) INSTITUTIONS THAT POSE A SYSTEMIC RISK AND ARE

SUBJECT TO HEIGHTENED PRUDENTIAL SUPERVISION AS REG- ULATED UNDER SECTION 113.—All swaps entities that are 

institutions that pose a systemic risk and are subject to 

heightened prudential supervision as regulated under section 113, that are put into receivership or declared insolvent as a result of swap or security-based swap activity of 

the swaps entities shall be subject to the termination or 

transfer of that swap or security-based swap activity in accordance with applicable law prescribing the treatment of 

those contracts. No taxpayer funds shall be used to prevent 

the receivership of any swap entity resulting from swap or 

security-based swap activity of the swaps entity. 

(C) NON-FDIC INSURED, NON-SYSTEMICALLY SIGNIFI- CANT INSTITUTIONS NOT SUBJECT TO HEIGHTENED PRUDEN- TIAL SUPERVISION AS REGULATED UNDER SECTION 113.—No 

taxpayer resources shall be used for the orderly liquidation 

of any swaps entities that are non-FDIC insured, non-systemically significant institutions not subject to heightened 

prudential supervision as regulated under section 113. 

(2) RECOVERY OF FUNDS.—All funds expended on the termination or transfer of the swap or security-based swap activity 

of the swaps entity shall be recovered in accordance with applicable law from the disposition of assets of such swap entity or 

through assessments, including on the financial sector as provided under applicable law. 

(3) NO LOSSES TO TAXPAYERS.—Taxpayers shall bear no 

losses from the exercise of any authority under this title. 

(j) PROHIBITION ON UNREGULATED COMBINATION OF SWAPS EN- TITIES AND BANKING.—At no time following adoption of the rules in 

subsection (k) may a bank or bank holding company be permitted 

to be or become a swap entity unless it conducts its swap or secuVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00284 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
281 

rity-based swap activity in compliance with such minimum standards set by its prudential regulator as are reasonably calculated to 

permit the swaps entity to conduct its swap or security-based swap 

activities in a safe and sound manner and mitigate systemic risk. 

(k) RULES.—In prescribing rules, the prudential regulator for a 

swaps entity shall consider the following factors: 

(1) The expertise and managerial strength of the swaps entity, including systems for effective oversight. 

(2) The financial strength of the swaps entity. 

(3) Systems for identifying, measuring and controlling risks 

arising from the swaps entity’s operations. 

(4) Systems for identifying, measuring and controlling the 

swaps entity’s participation in existing markets. 

(5) Systems for controlling the swaps entity’s participation 

or entry into in new markets and products. 

(l) AUTHORITY OF THE FINANCIAL STABILITY OVERSIGHT COUN- CIL.—The Financial Stability Oversight Council may determine 

that, when other provisions established by this Act are insufficient 

to effectively mitigate systemic risk and protect taxpayers, that 

swaps entities may no longer access Federal assistance with respect 

to any swap, security-based swap, or other activity of the swaps entity. Any such determination by the Financial Stability Oversight 

Council of a prohibition of federal assistance shall be made on an 

institution-by-institution basis, and shall require the vote of not 

fewer than two-thirds of the members of the Financial Stability 

Oversight Council, which must include the vote by the Chairman of 

the Council, the Chairman of the Board of Governors of the Federal 

Reserve System, and the Chairperson of the Federal Deposit Insurance Corporation. Notice and hearing requirements for such determinations shall be consistent with the standards provided in title 

I. 

(m) BAN ON PROPRIETARY TRADING IN DERIVATIVES.—An insured depository institution shall comply with the prohibition on 

proprietary trading in derivatives as required by section 619 of the 

Dodd-Frank Wall Street Reform and Consumer Protection Act. 

SEC. 717. NEW PRODUCT APPROVAL CFTC—SEC PROCESS. 

(a) AMENDMENTS TO THE COMMODITY EXCHANGE ACT.—Section 

2(a)(1)(C) of the Commodity Exchange Act (7 U.S.C. 2(a)(1)(C)) is 

amended— 

(1) in clause (i) by striking ‘‘This’’ and inserting ‘‘(I) Except 

as provided in subclause (II), this’’; and 

(2) by adding at the end of clause (i) the following: 

‘‘(II) This Act shall apply to and the Commission shall have jurisdiction with respect to accounts, agreements, and transactions involving, 

and may permit the listing for trading pursuant to 

section 5c(c) of, a put, call, or other option on 1 or 

more securities (as defined in section 2(a)(1) of the 

Securities Act of 1933 or section 3(a)(10) of the Securities Exchange Act of 1934 on the date of enactment of the Futures Trading Act of 1982), including any group or index of such securities, or any 

interest therein or based on the value thereof, that 

is exempted by the Securities and Exchange Commission pursuant to section 36(a)(1) of the SecuriVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00285 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
282 

ties Exchange Act of 1934 with the condition that 

the Commission exercise concurrent jurisdiction 

over such put, call, or other option; provided, however, that nothing in this paragraph shall be construed to affect the jurisdiction and authority of 

the Securities and Exchange Commission over 

such put, call, or other option.’’. 

(b) AMENDMENTS TO THE SECURITIES EXCHANGE ACT OF

1934.—The Securities Exchange Act of 1934 is amended by adding 

the following section after section 3A (15 U.S.C. 78c–1): 

‘‘SEC. 3B. SECURITIES-RELATED DERIVATIVES. 

‘‘(a) Any agreement, contract, or transaction (or class thereof) 

that is exempted by the Commodity Futures Trading Commission 

pursuant to section 4(c)(1) of the Commodity Exchange Act (7 U.S.C. 

6(c)(1)) with the condition that the Commission exercise concurrent 

jurisdiction over such agreement, contract, or transaction (or class 

thereof) shall be deemed a security for purposes of the securities 

laws. 

‘‘(b) With respect to any agreement, contract, or transaction (or 

class thereof) that is exempted by the Commodity Futures Trading 

Commission pursuant to section 4(c)(1) of the Commodity Exchange 

Act (7 U.S.C. 6(c)(1)) with the condition that the Commission exercise concurrent jurisdiction over such agreement, contract, or transaction (or class thereof), references in the securities laws to the ‘purchase’ or ‘sale’ of a security shall be deemed to include the execution, 

termination (prior to its scheduled maturity date), assignment, exchange, or similar transfer or conveyance of, or extinguishing of 

rights or obligations under such agreement, contract, or transaction, 

as the context may require.’’. 

(c) AMENDMENT TO SECURITIES EXCHANGE ACT OF 1934.—Section 19(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78s(b)) 

is amended by adding at the end the following: 

‘‘(10) Notwithstanding paragraph (2), the time period within which the Commission is required by order to approve a proposed rule change or institute proceedings to determine whether 

the proposed rule change should be disapproved is stayed pending a determination by the Commission upon the request of the 

Commodity Futures Trading Commission or its Chairman that 

the Commission issue a determination as to whether a product 

that is the subject of such proposed rule change is a security 

pursuant to section 718 of the Wall Street Transparency and 

Accountability Act of 2010.’’. 

(d) AMENDMENT TO COMMODITY EXCHANGE ACT.—Section 

5c(c)(1) of the Commodity Exchange Act (7 U.S.C. 7a–2(c)(1)) is 

amended— 

(1) by striking ‘‘Subject to paragraph (2)’’ and inserting the 

following: 

‘‘(A) ELECTION.—Subject to paragraph (2)’’; and 

(2) by adding at the end the following: 

‘‘(B) CERTIFICATION.—The certification of a product 

pursuant to this paragraph shall be stayed pending a determination by the Commission upon the request of the Securities and Exchange Commission or its Chairman that 

the Commission issue a determination as to whether the 

product that is the subject of such certification is a contract 


sroberts on DSKD5P82C1PROD with HEARING
283 

of sale of a commodity for future delivery, an option on 

such a contract, or an option on a commodity pursuant to 

section 718 of the Wall Street Transparency and Accountability Act of 2010.’’. 

SEC. 718. DETERMINING STATUS OF NOVEL DERIVATIVE PRODUCTS. 

(a) PROCESS FOR DETERMINING THE STATUS OF A NOVEL DERIV- ATIVE PRODUCT.— (1) NOTICE.— (A) IN GENERAL.—Any person filing a proposal to list 

or trade a novel derivative product that may have elements 

of both securities and contracts of sale of a commodity for 

future delivery (or options on such contracts or options on 

commodities) may concurrently provide notice and furnish 

a copy of such filing with the Securities and Exchange 

Commission and the Commodity Futures Trading Commission. Any such notice shall state that notice has been made 

with both Commissions. 

(B) NOTIFICATION.—If no concurrent notice is made 

pursuant to subparagraph (A), within 5 business days after 

determining that a proposal that seeks to list or trade a 

novel derivative product may have elements of both securities and contracts of sale of a commodity for future delivery 

(or options on such contracts or options on commodities), 

the Securities and Exchange Commission or the Commodity 

Futures Trading Commission, as applicable, shall notify 

the other Commission and provide a copy of such filing to 

the other Commission. 

(2) REQUEST FOR DETERMINATION.— (A) IN GENERAL.—No later than 21 days after receipt 

of a notice under paragraph (1), or upon its own initiative 

if no such notice is received, the Commodity Futures Trading Commission may request that the Securities and Exchange Commission issue a determination as to whether a 

product is a security, as defined in section 3(a)(10) of the 

Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(10)). 

(B) REQUEST.—No later than 21 days after receipt of a 

notice under paragraph (1), or upon its own initiative if no 

such notice is received, the Securities and Exchange Commission may request that the Commodity Futures Trading 

Commission issue a determination as to whether a product 

is a contract of sale of a commodity for future delivery, an 

option on such a contract, or an option on a commodity 

subject to the Commodity Futures Trading Commission’s 

exclusive jurisdiction under section 2(a)(1)(A) of the Commodity Exchange Act (7 U.S.C. 2(a)(1)(A)). 

(C) REQUIREMENT RELATING TO REQUEST.—A request 

under subparagraph (A) or (B) shall be made by submitting 

such request, in writing, to the Securities and Exchange 

Commission or the Commodity Futures Trading Commission, as applicable. 

(D) EFFECT.—Nothing in this paragraph shall be construed to prevent— 

(i) the Commodity Futures Trading Commission 

from requesting that the Securities and Exchange Commission grant an exemption pursuant to section 


sroberts on DSKD5P82C1PROD with HEARING
284 

36(a)(1) of the Securities Exchange Act of 1934 (15 

U.S.C. 78mm(a)(1)) with respect to a product that is 

the subject of a filing under paragraph (1); or 

(ii) the Securities and Exchange Commission from 

requesting that the Commodity Futures Trading Commission grant an exemption pursuant to section 4(c)(1) 

of the Commodity Exchange Act (7 U.S.C. 6(c)(1)) with 

respect to a product that is the subject of a filing under 

paragraph (1), 

Provided, however, that nothing in this subparagraph shall 

be construed to require the Commodity Futures Trading 

Commission or the Securities and Exchange Commission to 

issue an exemption requested pursuant to this subparagraph; provided further, That an order granting or denying 

an exemption described in this subparagraph and issued 

under paragraph (3)(B) shall not be subject to judicial review pursuant to subsection (b). 

(E) WITHDRAWAL OF REQUEST.—A request under subparagraph (A) or (B) may be withdrawn by the Commission 

making the request at any time prior to a determination 

being made pursuant to paragraph (3) for any reason by 

providing written notice to the head of the other Commission. 

(3) DETERMINATION.—Notwithstanding any other provision 

of law, no later than 120 days after the date of receipt of a request— 

(A) under subparagraph (A) or (B) of paragraph (2), 

unless such request has been withdrawn pursuant to paragraph (2)(E), the Securities and Exchange Commission or 

the Commodity Futures Trading Commission, as applicable, shall, by order, issue the determination requested in 

subparagraph (A) or (B) of paragraph (2), as applicable, 

and the reasons therefor; or 

(B) under paragraph (2)(D), unless such request has 

been withdrawn, the Securities and Exchange Commission 

or the Commodity Futures Trading Commission, as applicable, shall grant an exemption or provide reasons for not 

granting such exemption, provided that any decision by the 

Securities and Exchange Commission not to grant such exemption shall not be reviewable under section 25 of the Securities Exchange Act of 1934 (15 U.S.C. 78y). 

(b) JUDICIAL RESOLUTION.— 

(1) IN GENERAL.—The Commodity Futures Trading Commission or the Securities and Exchange Commission may petition the United States Court of Appeals for the District of Columbia Circuit for review of a final order of the other Commission issued pursuant to subsection (a)(3)(A), with respect to a 

novel derivative product that may have elements of both securities and contracts of sale of a commodity for future delivery (or 

options on such contracts or options on commodities) that it believes affects its statutory jurisdiction within 60 days after the 

date of entry of such order, a written petition requesting a review of the order. Any such proceeding shall be expedited by the 

Court of Appeals. 


sroberts on DSKD5P82C1PROD with HEARING
285 

(2) TRANSMITTAL OF PETITION AND RECORD.—A copy of a 

petition described in paragraph (1) shall be transmitted not 

later than 1 business day after filing by the complaining Commission to the responding Commission. On receipt of the petition, the responding Commission shall file with the court a copy 

of the order under review and any documents referred to therein, and any other materials prescribed by the court. 

(3) STANDARD OF REVIEW.—The court, in considering a petition filed pursuant to paragraph (1), shall give no deference to, 

or presumption in favor of, the views of either Commission. 

(4) JUDICIAL STAY.—The filing of a petition by the complaining Commission pursuant to paragraph (1) shall operate 

as a stay of the order, until the date on which the determination 

of the court is final (including any appeal of the determination). 

SEC. 719. STUDIES. 

(a) STUDY ON EFFECTS OF POSITION LIMITS ON TRADING ON EX- CHANGES IN THE UNITED STATES.— (1) STUDY.—The Commodity Futures Trading Commission, 

in consultation with each entity that is a designated contract 

market under the Commodity Exchange Act, shall conduct a 

study of the effects (if any) of the position limits imposed pursuant to the other provisions of this title on excessive speculation 

and on the movement of transactions from exchanges in the 

United States to trading venues outside the United States. 

(2) REPORT TO THE CONGRESS.—Within 12 months after the 

imposition of position limits pursuant to the other provisions of 

this title, the Commodity Futures Trading Commission, in consultation with each entity that is a designated contract market 

under the Commodity Exchange Act, shall submit to the Congress a report on the matters described in paragraph (1). 

(3) REQUIRED HEARING.—Within 30 legislative days after 

the submission to the Congress of the report described in paragraph (2), the Committee on Agriculture of the House of Representatives shall hold a hearing examining the findings of the 

report. 

(4) BIENNIAL REPORTING.—In addition to the study required in paragraph (1), the Chairman of the Commodity Futures Trading Commission shall prepare and submit to the 

Congress biennial reports on the growth or decline of the derivatives markets in the United States and abroad, which shall 

include assessments of the causes of any such growth or decline, 

the effectiveness of regulatory regimes in managing systemic 

risk, a comparison of the costs of compliance at the time of the 

report for market participants subject to regulation by the 

United States with the costs of compliance in December 2008 

for the market participants, and the quality of the available 

data. In preparing the report, the Chairman shall solicit the 

views of, consult with, and address the concerns raised by, market participants, regulators, legislators, and other interested 

parties. 

(b) STUDY ON FEASIBILITY OF REQUIRING USE OF STANDARDIZED ALGORITHMIC DESCRIPTIONS FOR FINANCIAL DERIVATIVES.— 

(1) IN GENERAL.—The Securities and Exchange Commission and the Commodity Futures Trading Commission shall 

conduct a joint study of the feasibility of requiring the derivaVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00289 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
286 

tives industry to adopt standardized computer-readable algorithmic descriptions which may be used to describe complex 

and standardized financial derivatives. 

(2) GOALS.—The algorithmic descriptions defined in the 

study shall be designed to facilitate computerized analysis of individual derivative contracts and to calculate net exposures to 

complex derivatives. The algorithmic descriptions shall be optimized for simultaneous use by— 

(A) commercial users and traders of derivatives; 

(B) derivative clearing houses, exchanges and electronic 

trading platforms; 

(C) trade repositories and regulator investigations of 

market activities; and 

(D) systemic risk regulators. 

The study will also examine the extent to which the algorithmic 

description, together with standardized and extensible legal 

definitions, may serve as the binding legal definition of derivative contracts. The study will examine the logistics of possible 

implementations of standardized algorithmic descriptions for 

derivatives contracts. The study shall be limited to electronic 

formats for exchange of derivative contract descriptions and 

will not contemplate disclosure of proprietary valuation models. 

(3) INTERNATIONAL COORDINATION.—In conducting the 

study, the Securities and Exchange Commission and the Commodity Futures Trading Commission shall coordinate the study 

with international financial institutions and regulators as appropriate and practical. 

(4) REPORT.—Within 8 months after the date of the enactment of this Act, the Securities and Exchange Commission and 

the Commodity Futures Trading Commission shall jointly submit to the Committees on Agriculture and on Financial Services 

of the House of Representatives and the Committees on Agriculture, Nutrition, and Forestry and on Banking, Housing, and 

Urban Affairs of the Senate a written report which contains the 

results of the study required by paragraphs (1) through (3). 

(c) INTERNATIONAL SWAP REGULATION.— 

(1) IN GENERAL.—The Commodity Futures Trading Commission and the Securities and Exchange Commission shall 

jointly conduct a study— 

(A) relating to— 

(i) swap regulation in the United States, Asia, and 

Europe; and 

(ii) clearing house and clearing agency regulation 

in the United States, Asia, and Europe; and 

(B) that identifies areas of regulation that are similar 

in the United States, Asia and Europe and other areas of 

regulation that could be harmonized 

(2) REPORT.—Not later than 18 months after the date of enactment of this Act, the Commodity Futures Trading Commission and the Securities and Exchange Commission shall submit 

to the Committee on Agriculture, Nutrition, and Forestry and 

the Committee on Banking, Housing, and Urban Affairs of the 

Senate and the Committee on Agriculture and the Committee on 

Financial Services of the House of Representatives a report that 


sroberts on DSKD5P82C1PROD with HEARING
287 

includes a description of the results of the study under subsection (a), including— 

(A) identification of the major exchanges and their regulator in each geographic area for the trading of swaps and 

security-based swaps including a listing of the major contracts and their trading volumes and notional values as 

well as identification of the major swap dealers participating in such markets; 

(B) identification of the major clearing houses and 

clearing agencies and their regulator in each geographic 

area for the clearing of swaps and security-based swaps, including a listing of the major contracts and the clearing 

volumes and notional values as well as identification of the 

major clearing members of such clearing houses and clearing agencies in such markets; 

(C) a description of the comparative methods of clearing swaps in the United States, Asia, and Europe; and 

(D) a description of the various systems used for establishing margin on individual swaps, security-based swaps, 

and swap portfolios. 

(d) STABLE VALUE CONTRACTS.— (1) DETERMINATION.— (A) STATUS.—Not later than 15 months after the date 

of the enactment of this Act, the Securities and Exchange 

Commission and the Commodity Futures Trading Commission shall, jointly, conduct a study to determine whether 

stable value contracts fall within the definition of a swap. 

In making the determination required under this subparagraph, the Commissions jointly shall consult with the Department of Labor, the Department of the Treasury, and the 

State entities that regulate the issuers of stable value contracts. 

(B) REGULATIONS.—If the Commissions determine that 

stable value contracts fall within the definition of a swap, 

the Commissions jointly shall determine if an exemption for 

stable value contracts from the definition of swap is appropriate and in the public interest. The Commissions shall 

issue regulations implementing the determinations required 

under this paragraph. Until the effective date of such regulations, and notwithstanding any other provision of this 

title, the requirements of this title shall not apply to stable 

value contracts. 

(C) LEGAL CERTAINTY.—Stable value contracts in effect 

prior to the effective date of the regulations described in 

subparagraph (B) shall not be considered swaps. 

(2) DEFINITION.—For purposes of this subsection, the term 

‘‘stable value contract’’ means any contract, agreement, or transaction that provides a crediting interest rate and guaranty or 

financial assurance of liquidity at contract or book value prior 

to maturity offered by a bank, insurance company, or other 

State or federally regulated financial institution for the benefit 

of any individual or commingled fund available as an investment in an employee benefit plan (as defined in section 3(3) of 

the Employee Retirement Income Security Act of 1974, including plans described in section 3(32) of such Act) subject to parVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00291 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
288 

ticipant direction, an eligible deferred compensation plan (as 

defined in section 457(b) of the Internal Revenue Code of 1986) 

that is maintained by an eligible employer described in section 

457(e)(1)(A) of such Code, an arrangement described in section 

403(b) of such Code, or a qualified tuition program (as defined 

in section 529 of such Code). 

SEC. 720. MEMORANDUM. 

(a)(1) The Commodity Futures Trading Commission and the 

Federal Energy Regulatory Commission shall, not later than 180 

days after the date of the enactment of this Act, negotiate a memorandum of understanding to establish procedures for— 

(A) applying their respective authorities in a manner so as 

to ensure effective and efficient regulation in the public interest; 

(B) resolving conflicts concerning overlapping jurisdiction 

between the 2 agencies; and 

(C) avoiding, to the extent possible, conflicting or duplicative regulation. 

(2) Such memorandum and any subsequent amendments to the 

memorandum shall be promptly submitted to the appropriate committees of Congress. 

(b) The Commodity Futures Trading Commission and the Federal Energy Regulatory Commission shall, not later than 180 days 

after the date of the enactment of this section, negotiate a memorandum of understanding to share information that may be requested where either Commission is conducting an investigation 

into potential manipulation, fraud, or market power abuse in markets subject to such Commission’s regulation or oversight. Shared 

information shall remain subject to the same restrictions on disclosure applicable to the Commission initially holding the information. 

PART II—REGULATION OF SWAP MARKETS 

SEC. 721. DEFINITIONS. 

(a) IN GENERAL.—Section 1a of the Commodity Exchange Act (7 

U.S.C. 1a) is amended— 

(1) by redesignating paragraphs (2), (3) and (4), (5) through 

(17), (18) through (23), (24) through (28), (29), (30), (31) 

through (33), and (34) as paragraphs (6), (8) and (9), (11) 

through (23), (26) through (31), (34) through (38), (40), (41), 

(44) through (46), and (51), respectively; 

(2) by inserting after paragraph (1) the following: 

‘‘(2) APPROPRIATE FEDERAL BANKING AGENCY.—The term 

‘appropriate Federal banking agency’— 

‘‘(A) has the meaning given the term in section 3 of the 

Federal Deposit Insurance Act (12 U.S.C. 1813); 

‘‘(B) means the Board in the case of a noninsured State 

bank; and 

‘‘(C) is the Farm Credit Administration for farm credit 

system institutions. 

‘‘(3) ASSOCIATED PERSON OF A SECURITY-BASED SWAP DEALER OR MAJOR SECURITY-BASED SWAP PARTICIPANT.—The term 

‘associated person of a security-based swap dealer or major security-based swap participant’ has the meaning given the term 


sroberts on DSKD5P82C1PROD with HEARING
289 

in section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 

78c(a)). 

‘‘(4) ASSOCIATED PERSON OF A SWAP DEALER OR MAJOR

SWAP PARTICIPANT.— ‘‘(A) IN GENERAL.—The term ‘associated person of a 

swap dealer or major swap participant’ means a person 

who is associated with a swap dealer or major swap participant as a partner, officer, employee, or agent (or any person occupying a similar status or performing similar functions), in any capacity that involves— 

‘‘(i) the solicitation or acceptance of swaps; or 

‘‘(ii) the supervision of any person or persons so engaged. 

‘‘(B) EXCLUSION.—Other than for purposes of section 

4s(b)(6), the term ‘associated person of a swap dealer or 

major swap participant’ does not include any person associated with a swap dealer or major swap participant the 

functions of which are solely clerical or ministerial. 

‘‘(5) BOARD.—The term ‘Board’ means the Board of Governors of the Federal Reserve System.’’; 

(3) by inserting after paragraph (6) (as redesignated by 

paragraph (1)) the following: 

‘‘(7) CLEARED SWAP.—The term ‘cleared swap’ means any 

swap that is, directly or indirectly, submitted to and cleared by 

a derivatives clearing organization registered with the Commission.’’; 

(4) in paragraph (9) (as redesignated by paragraph (1)), by 

striking ‘‘except onions’’ and all that follows through the period 

at the end and inserting the following: ‘‘except onions (as provided by the first section of Public Law 85–839 (7 U.S.C. 13– 

1)) and motion picture box office receipts (or any index, measure, value, or data related to such receipts), and all services, 

rights, and interests (except motion picture box office receipts, or 

any index, measure, value or data related to such receipts) in 

which contracts for future delivery are presently or in the future 

dealt in.’’; 

(5) by inserting after paragraph (9) (as redesignated by 

paragraph (1)) the following: 

‘‘(10) COMMODITY POOL.— ‘‘(A) IN GENERAL.—The term ‘commodity pool’ means 

any investment trust, syndicate, or similar form of enterprise operated for the purpose of trading in commodity interests, including any— 

‘‘(i) commodity for future delivery, security futures 

product, or swap; 

‘‘(ii) agreement, contract, or transaction described 

in section 2(c)(2)(C)(i) or section 2(c)(2)(D)(i); 

‘‘(iii) commodity option authorized under section 

4c; or 

‘‘(iv) leverage transaction authorized under section 

19. 

‘‘(B) FURTHER DEFINITION.—The Commission, by rule 

or regulation, may include within, or exclude from, the 

term ‘commodity pool’ any investment trust, syndicate, or 

similar form of enterprise if the Commission determines 


sroberts on DSKD5P82C1PROD with HEARING
290 

that the rule or regulation will effectuate the purposes of 

this Act.’’; 

(6) by striking paragraph (11) (as redesignated by paragraph (1)) and inserting the following: 

‘‘(11) COMMODITY POOL OPERATOR.— 

‘‘(A) IN GENERAL.—The term ‘commodity pool operator’ 

means any person— 

‘‘(i) engaged in a business that is of the nature of 

a commodity pool, investment trust, syndicate, or similar form of enterprise, and who, in connection therewith, solicits, accepts, or receives from others, funds, 

securities, or property, either directly or through capital contributions, the sale of stock or other forms of securities, or otherwise, for the purpose of trading in 

commodity interests, including any— 

‘‘(I) commodity for future delivery, security futures product, or swap; 

‘‘(II) agreement, contract, or transaction described in section 2(c)(2)(C)(i) or section 

2(c)(2)(D)(i); 

‘‘(III) commodity option authorized under section 4c; or 

‘‘(IV) leverage transaction authorized under 

section 19; or 

‘‘(ii) who is registered with the Commission as a 

commodity pool operator. 

‘‘(B) FURTHER DEFINITION.—The Commission, by rule 

or regulation, may include within, or exclude from, the 

term ‘commodity pool operator’ any person engaged in a 

business that is of the nature of a commodity pool, investment trust, syndicate, or similar form of enterprise if the 

Commission determines that the rule or regulation will effectuate the purposes of this Act.’’; 

(7) in paragraph (12) (as redesignated by paragraph (1)), in 

subparagraph (A)— 

(A) in clause (i)— 

(i) in subclause (I), by striking ‘‘made or to be 

made on or subject to the rules of a contract market or 

derivatives transaction execution facility’’ and inserting 

‘‘, security futures product, or swap’’; 

(ii) by redesignating subclauses (II) and (III) as 

subclauses (III) and (IV); 

(iii) by inserting after subclause (I) the following: 

‘‘(II) any agreement, contract, or transaction 

described in section 2(c)(2)(C)(i) or section 

2(c)(2)(D)(i)’’; and 

(iv) in subclause (IV) (as so redesignated), by striking ‘‘or’’; 

(B) in clause (ii), by striking the period at the end and 

inserting a semicolon; and 

(C) by adding at the end the following: 

‘‘(iii) is registered with the Commission as a commodity trading advisor; or 


sroberts on DSKD5P82C1PROD with HEARING
291 

‘‘(iv) the Commission, by rule or regulation, may 

include if the Commission determines that the rule or 

regulation will effectuate the purposes of this Act.’’; 

(8) in paragraph (17) (as redesignated by paragraph (1)), in 

subparagraph (A), in the matter preceding clause (i), by striking 

‘‘paragraph (12)(A)’’ and inserting ‘‘paragraph (18)(A)’’; 

(9) in paragraph (18) (as redesignated by paragraph (1))— 

(A) in subparagraph (A)— 

(i) in the matter following clause (vii)(III)— 

(I) by striking ‘‘section 1a (11)(A)’’ and inserting ‘‘paragraph (17)(A)’’; and 

(II) by striking ‘‘$25,000,000’’ and inserting 

‘‘$50,000,000’’; and 

(ii) in clause (xi), in the matter preceding subclause (I), by striking ‘‘total assets in an amount’’ and 

inserting ‘‘amounts invested on a discretionary basis, 

the aggregate of which is’’; 

(10) by striking paragraph (22) (as redesignated by paragraph (1)) and inserting the following: 

‘‘(22) FLOOR BROKER.— 

‘‘(A) IN GENERAL.—The term ‘floor broker’ means any 

person— 

‘‘(i) who, in or surrounding any pit, ring, post, or 

other place provided by a contract market for the meeting of persons similarly engaged, shall purchase or sell 

for any other person— 

‘‘(I) any commodity for future delivery, security 

futures product, or swap; or 

‘‘(II) any commodity option authorized under 

section 4c; or 

‘‘(ii) who is registered with the Commission as a 

floor broker. 

‘‘(B) FURTHER DEFINITION.—The Commission, by rule 

or regulation, may include within, or exclude from, the 

term ‘floor broker’ any person in or surrounding any pit, 

ring, post, or other place provided by a contract market for 

the meeting of persons similarly engaged who trades for 

any other person if the Commission determines that the 

rule or regulation will effectuate the purposes of this Act.’’; 

(11) by striking paragraph (23) (as redesignated by paragraph (1)) and inserting the following: 

‘‘(23) FLOOR TRADER.— 

‘‘(A) IN GENERAL.—The term ‘floor trader’ means any 

person— 

‘‘(i) who, in or surrounding any pit, ring, post, or 

other place provided by a contract market for the meeting of persons similarly engaged, purchases, or sells 

solely for such person’s own account— 

‘‘(I) any commodity for future delivery, security 

futures product, or swap; or 

‘‘(II) any commodity option authorized under 

section 4c; or 

‘‘(ii) who is registered with the Commission as a 

floor trader. 


sroberts on DSKD5P82C1PROD with HEARING
292 

‘‘(B) FURTHER DEFINITION.—The Commission, by rule 

or regulation, may include within, or exclude from, the 

term ‘floor trader’ any person in or surrounding any pit, 

ring, post, or other place provided by a contract market for 

the meeting of persons similarly engaged who trades solely 

for such person’s own account if the Commission determines that the rule or regulation will effectuate the purposes of this Act.’’; 

(12) by inserting after paragraph (23) (as redesignated by 

paragraph (1)) the following: 

‘‘(24) FOREIGN EXCHANGE FORWARD.—The term ‘foreign exchange forward’ means a transaction that solely involves the exchange of 2 different currencies on a specific future date at a 

fixed rate agreed upon on the inception of the contract covering 

the exchange. 

‘‘(25) FOREIGN EXCHANGE SWAP.—The term ‘foreign exchange swap’ means a transaction that solely involves— 

‘‘(A) an exchange of 2 different currencies on a specific 

date at a fixed rate that is agreed upon on the inception of 

the contract covering the exchange; and 

‘‘(B) a reverse exchange of the 2 currencies described in 

subparagraph (A) at a later date and at a fixed rate that 

is agreed upon on the inception of the contract covering the 

exchange.’’; 

(13) by striking paragraph (28) (as redesignated by paragraph (1)) and inserting the following: 

‘‘(28) FUTURES COMMISSION MERCHANT.— ‘‘(A) IN GENERAL.—The term ‘futures commission merchant’ means an individual, association, partnership, corporation, or trust— 

‘‘(i) that— 

‘‘(I) is— 

‘‘(aa) engaged in soliciting or in accepting 

orders for— 

‘‘(AA) the purchase or sale of a commodity 

for future delivery; 

‘‘(BB) a security futures product; 

‘‘(CC) a swap; 

‘‘(DD) any agreement, contract, or transaction described in section 2(c)(2)(C)(i) or section 2(c)(2)(D)(i); 

‘‘(EE) any commodity option authorized 

under section 4c; or 

‘‘(FF) any leverage transaction authorized 

under section 19; or 

‘‘(bb) acting as a counterparty in any 

agreement, contract, or transaction described 

in section 2(c)(2)(C)(i) or section 2(c)(2)(D)(i); 

and 

‘‘(II) in or in connection with the activities described in items (aa) or (bb) of subclause (I), accepts any money, securities, or property (or extends 

credit in lieu thereof) to margin, guarantee, or secure any trades or contracts that result or may result therefrom; or 


sroberts on DSKD5P82C1PROD with HEARING
293 

‘‘(ii) that is registered with the Commission as a 

futures commission merchant. 

‘‘(B) FURTHER DEFINITION.—The Commission, by rule 

or regulation, may include within, or exclude from, the 

term ‘futures commission merchant’ any person who engages in soliciting or accepting orders for, or acting as a 

counterparty in, any agreement, contract, or transaction 

subject to this Act, and who accepts any money, securities, 

or property (or extends credit in lieu thereof) to margin, 

guarantee, or secure any trades or contracts that result or 

may result therefrom, if the Commission determines that 

the rule or regulation will effectuate the purposes of this 

Act.’’; 

(14) in paragraph (30) (as redesignated by paragraph (1)), 

in subparagraph (B), by striking ‘‘state’’ and inserting ‘‘State’’; 

(15) by striking paragraph (31) (as redesignated by paragraph (1)) and inserting the following: 

‘‘(31) INTRODUCING BROKER.— ‘‘(A) IN GENERAL.—The term ‘introducing broker’ means 

any person (except an individual who elects to be and is 

registered as an associated person of a futures commission 

merchant)— 

‘‘(i) who— 

‘‘(I) is engaged in soliciting or in accepting orders for— 

‘‘(aa) the purchase or sale of any commodity for future delivery, security futures 

product, or swap; 

‘‘(bb) any agreement, contract, or transaction described in section 2(c)(2)(C)(i) or section 2(c)(2)(D)(i); 

‘‘(cc) any commodity option authorized 

under section 4c; or 

‘‘(dd) any leverage transaction authorized 

under section 19; and 

‘‘(II) does not accept any money, securities, or 

property (or extend credit in lieu thereof) to margin, guarantee, or secure any trades or contracts 

that result or may result therefrom; or 

‘‘(ii) who is registered with the Commission as an 

introducing broker. 

‘‘(B) FURTHER DEFINITION.—The Commission, by rule 

or regulation, may include within, or exclude from, the 

term ‘introducing broker’ any person who engages in soliciting or accepting orders for any agreement, contract, or 

transaction subject to this Act, and who does not accept any 

money, securities, or property (or extend credit in lieu thereof) to margin, guarantee, or secure any trades or contracts 

that result or may result therefrom, if the Commission determines that the rule or regulation will effectuate the purposes of this Act.’’; 

(16) by inserting after paragraph (31) (as redesignated by 

paragraph (1)) the following: 

‘‘(32) MAJOR SECURITY-BASED SWAP PARTICIPANT.—The 

term ‘major security-based swap participant’ has the meaning 


sroberts on DSKD5P82C1PROD with HEARING
294 

given the term in section 3(a) of the Securities Exchange Act of 

1934 (15 U.S.C. 78c(a)). 

‘‘(33) MAJOR SWAP PARTICIPANT.— 

‘‘(A) IN GENERAL.—The term ‘major swap participant’ 

means any person who is not a swap dealer, and— 

‘‘(i) maintains a substantial position in swaps for 

any of the major swap categories as determined by the 

Commission, excluding— 

‘‘(I) positions held for hedging or mitigating 

commercial risk; and 

‘‘(II) positions maintained by any employee 

benefit plan (or any contract held by such a plan) 

as defined in paragraphs (3) and (32) of section 3 

of the Employee Retirement Income Security Act of 

1974 (29 U.S.C. 1002) for the primary purpose of 

hedging or mitigating any risk directly associated 

with the operation of the plan; 

‘‘(ii) whose outstanding swaps create substantial 

counterparty exposure that could have serious adverse 

effects on the financial stability of the United States 

banking system or financial markets; or 

‘‘(iii)(I) is a financial entity that is highly leveraged relative to the amount of capital it holds and that 

is not subject to capital requirements established by an 

appropriate Federal banking agency; and 

‘‘(II) maintains a substantial position in outstanding swaps in any major swap category as determined by the Commission. 

‘‘(B) DEFINITION OF SUBSTANTIAL POSITION.—For purposes of subparagraph (A), the Commission shall define by 

rule or regulation the term ‘substantial position’ at the 

threshold that the Commission determines to be prudent for 

the effective monitoring, management, and oversight of entities that are systemically important or can significantly 

impact the financial system of the United States. In setting 

the definition under this subparagraph, the Commission 

shall consider the person’s relative position in uncleared as 

opposed to cleared swaps and may take into consideration 

the value and quality of collateral held against 

counterparty exposures. 

‘‘(C) SCOPE OF DESIGNATION.—For purposes of subparagraph (A), a person may be designated as a major 

swap participant for 1 or more categories of swaps without 

being classified as a major swap participant for all classes 

of swaps. 

‘‘(D) EXCLUSIONS.—The definition under this paragraph shall not include an entity whose primary business 

is providing financing, and uses derivatives for the purpose 

of hedging underlying commercial risks related to interest 

rate and foreign currency exposures, 90 percent or more of 

which arise from financing that facilitates the purchase or 

lease of products, 90 percent or more of which are manufactured by the parent company or another subsidiary of the 

parent company.’’; 


sroberts on DSKD5P82C1PROD with HEARING
295 

(17) by inserting after paragraph (38) (as redesignated by 

paragraph (1)) the following: 

‘‘(39) PRUDENTIAL REGULATOR.—The term ‘prudential regulator’ means— 

‘‘(A) the Board in the case of a swap dealer, major 

swap participant, security-based swap dealer, or major security-based swap participant that is— 

‘‘(i) a State-chartered bank that is a member of the 

Federal Reserve System; 

‘‘(ii) a State-chartered branch or agency of a foreign bank; 

‘‘(iii) any foreign bank which does not operate an 

insured branch; 

‘‘(iv) any organization operating under section 25A 

of the Federal Reserve Act or having an agreement 

with the Board under section 225 of the Federal Reserve Act; 

‘‘(v) any bank holding company (as defined in section 2 of the Bank Holding Company Act of 1965 (12 

U.S.C. 1841)), any foreign bank (as defined in section 

1(b)(7) of the International Banking Act of 1978 (12 

U.S.C. 3101(b)(7)) that is treated as a bank holding 

company under section 8(a) of the International Banking Act of 1978 (12 U.S.C. 3106(a)), and any subsidiary of such a company or foreign bank (other than 

a subsidiary that is described in subparagraph (A) or 

(B) or that is required to be registered with the Commission as a swap dealer or major swap participant 

under this Act or with the Securities and Exchange 

Commission as a security-based swap dealer or major 

security-based swap participant); 

‘‘(vi) after the transfer date (as defined in section 

311 of the Dodd-Frank Wall Street Reform and Consumer Protection Act), any savings and loan holding 

company (as defined in section 10 of the Home Owners’ 

Loan Act (12 U.S.C. 1467a)) and any subsidiary of 

such company (other than a subsidiary that is described in subparagraph (A) or (B) or that is required 

to be registered as a swap dealer or major swap participant with the Commission under this Act or with the 

Securities and Exchange Commission as a securitybased swap dealer or major security-based swap participant); or 

‘‘(vii) any organization operating under section 25A 

of the Federal Reserve Act (12 U.S.C. 611 et seq.) or 

having an agreement with the Board under section 25 

of the Federal Reserve Act (12 U.S.C. 601 et seq.); 

‘‘(B) the Office of the Comptroller of the Currency in the 

case of a swap dealer, major swap participant, securitybased swap dealer, or major security-based swap participant that is— 

‘‘(i) a national bank; 

‘‘(ii) a federally chartered branch or agency of a 

foreign bank; or 

‘‘(iii) any Federal savings association; 


sroberts on DSKD5P82C1PROD with HEARING
296 

‘‘(C) the Federal Deposit Insurance Corporation in the 

case of a swap dealer, major swap participant, securitybased swap dealer, or major security-based swap participant that is— 

‘‘(i) a State-chartered bank that is not a member of 

the Federal Reserve System; or 

‘‘(ii) any State savings association; 

‘‘(D) the Farm Credit Administration, in the case of a 

swap dealer, major swap participant, security-based swap 

dealer, or major security-based swap participant that is an 

institution chartered under the Farm Credit Act of 1971 (12 

U.S.C. 2001 et seq.); and 

‘‘(E) the Federal Housing Finance Agency in the case of 

a swap dealer, major swap participant, security-based 

swap dealer, or major security-based swap participant that 

is a regulated entity (as such term is defined in section 

1303 of the Federal Housing Enterprises Financial Safety 

and Soundness Act of 1992).’’; 

(18) in paragraph (40) (as redesignated by paragraph (1))— 

(A) by striking subparagraph (B); 

(B) by redesignating subparagraphs (C), (D), and (E) 

as subparagraphs (B), (C), and (F), respectively; 

(C) in subparagraph (C) (as so redesignated), by striking ‘‘and’’; and 

(D) by inserting after subparagraph (C) (as so redesignated) the following: 

‘‘(D) a swap execution facility registered under section 

5h; 

‘‘(E) a swap data repository registered under section 21; 

and’’; 

(19) by inserting after paragraph (41) (as redesignated by 

paragraph (1)) the following: 

‘‘(42) SECURITY-BASED SWAP.—The term ‘security-based 

swap’ has the meaning given the term in section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)). 

‘‘(43) SECURITY-BASED SWAP DEALER.—The term ‘securitybased swap dealer’ has the meaning given the term in section 

3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)).’’; 

(20) in paragraph (46) (as redesignated by paragraph (1)), 

by striking ‘‘subject to section 2(h)(7)’’ and inserting ‘‘subject to 

section 2(h)(5)’’; 

(21) by inserting after paragraph (46) (as redesignated by 

paragraph (1)) the following: 

‘‘(47) SWAP.— 

‘‘(A) IN GENERAL.—Except as provided in subparagraph 

(B), the term ‘swap’ means any agreement, contract, or 

transaction— 

‘‘(i) that is a put, call, cap, floor, collar, or similar 

option of any kind that is for the purchase or sale, or 

based on the value, of 1 or more interest or other rates, 

currencies, commodities, securities, instruments of indebtedness, indices, quantitative measures, or other financial or economic interests or property of any kind; 

‘‘(ii) that provides for any purchase, sale, payment, 

or delivery (other than a dividend on an equity secuVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00300 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
297 

rity) that is dependent on the occurrence, nonoccurrence, or the extent of the occurrence of an event or contingency associated with a potential financial, economic, or commercial consequence; 

‘‘(iii) that provides on an executory basis for the exchange, on a fixed or contingent basis, of 1 or more 

payments based on the value or level of 1 or more interest or other rates, currencies, commodities, securities, 

instruments of indebtedness, indices, quantitative 

measures, or other financial or economic interests or 

property of any kind, or any interest therein or based 

on the value thereof, and that transfers, as between the 

parties to the transaction, in whole or in part, the financial risk associated with a future change in any 

such value or level without also conveying a current or 

future direct or indirect ownership interest in an asset 

(including any enterprise or investment pool) or liability that incorporates the financial risk so transferred, 

including any agreement, contract, or transaction commonly known as— 

‘‘(I) an interest rate swap; 

‘‘(II) a rate floor; 

‘‘(III) a rate cap; 

‘‘(IV) a rate collar; 

‘‘(V) a cross-currency rate swap; 

‘‘(VI) a basis swap; 

‘‘(VII) a currency swap; 

‘‘(VIII) a foreign exchange swap; 

‘‘(IX) a total return swap; 

‘‘(X) an equity index swap; 

‘‘(XI) an equity swap; 

‘‘(XII) a debt index swap; 

‘‘(XIII) a debt swap; 

‘‘(XIV) a credit spread; 

‘‘(XV) a credit default swap; 

‘‘(XVI) a credit swap; 

‘‘(XVII) a weather swap; 

‘‘(XVIII) an energy swap; 

‘‘(XIX) a metal swap; 

‘‘(XX) an agricultural swap; 

‘‘(XXI) an emissions swap; and 

‘‘(XXII) a commodity swap; 

‘‘(iv) that is an agreement, contract, or transaction 

that is, or in the future becomes, commonly known to 

the trade as a swap; 

‘‘(v) including any security-based swap agreement 

which meets the definition of ‘swap agreement’ as defined in section 206A of the Gramm-Leach-Bliley Act 

(15 U.S.C. 78c note) of which a material term is based 

on the price, yield, value, or volatility of any security 

or any group or index of securities, or any interest 

therein; or 

‘‘(vi) that is any combination or permutation of, or 

option on, any agreement, contract, or transaction described in any of clauses (i) through (v). 


sroberts on DSKD5P82C1PROD with HEARING
298 

‘‘(B) EXCLUSIONS.—The term ‘swap’ does not include— 

‘‘(i) any contract of sale of a commodity for future 

delivery (or option on such a contract), leverage contract authorized under section 19, security futures 

product, or agreement, contract, or transaction described in section 2(c)(2)(C)(i) or section 2(c)(2)(D)(i); 

‘‘(ii) any sale of a nonfinancial commodity or security for deferred shipment or delivery, so long as the 

transaction is intended to be physically settled; 

‘‘(iii) any put, call, straddle, option, or privilege on 

any security, certificate of deposit, or group or index of 

securities, including any interest therein or based on 

the value thereof, that is subject to— 

‘‘(I) the Securities Act of 1933 (15 U.S.C. 77a 

et seq.); and 

‘‘(II) the Securities Exchange Act of 1934 (15 

U.S.C. 78a et seq.); 

‘‘(iv) any put, call, straddle, option, or privilege relating to a foreign currency entered into on a national 

securities exchange registered pursuant to section 6(a) 

of the Securities Exchange Act of 1934 (15 U.S.C. 

78f(a)); 

‘‘(v) any agreement, contract, or transaction providing for the purchase or sale of 1 or more securities 

on a fixed basis that is subject to— 

‘‘(I) the Securities Act of 1933 (15 U.S.C. 77a 

et seq.); and 

‘‘(II) the Securities Exchange Act of 1934 (15 

U.S.C. 78a et seq.); 

‘‘(vi) any agreement, contract, or transaction providing for the purchase or sale of 1 or more securities 

on a contingent basis that is subject to the Securities 

Act of 1933 (15 U.S.C. 77a et seq.) and the Securities 

Exchange Act of 1934 (15 U.S.C. 78a et seq.), unless 

the agreement, contract, or transaction predicates the 

purchase or sale on the occurrence of a bona fide contingency that might reasonably be expected to affect or 

be affected by the creditworthiness of a party other 

than a party to the agreement, contract, or transaction; 

‘‘(vii) any note, bond, or evidence of indebtedness 

that is a security, as defined in section 2(a)(1) of the 

Securities Act of 1933 (15 U.S.C. 77b(a)(1)); 

‘‘(viii) any agreement, contract, or transaction that 

is— 

‘‘(I) based on a security; and 

‘‘(II) entered into directly or through an underwriter (as defined in section 2(a)(11) of the Securities Act of 1933 (15 U.S.C. 77b(a)(11)) by the issuer 

of such security for the purposes of raising capital, 

unless the agreement, contract, or transaction is 

entered into to manage a risk associated with capital raising; 

‘‘(ix) any agreement, contract, or transaction a 

counterparty of which is a Federal Reserve bank, the 

Federal Government, or a Federal agency that is exVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00302 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
299 

pressly backed by the full faith and credit of the United 

States; and 

‘‘(x) any security-based swap, other than a securitybased swap as described in subparagraph (D). 

‘‘(C) RULE OF CONSTRUCTION REGARDING MASTER

AGREEMENTS.— 

‘‘(i) IN GENERAL.—Except as provided in clause (ii), 

the term ‘swap’ includes a master agreement that provides for an agreement, contract, or transaction that is 

a swap under subparagraph (A), together with each 

supplement to any master agreement, without regard to 

whether the master agreement contains an agreement, 

contract, or transaction that is not a swap pursuant to 

subparagraph (A). 

‘‘(ii) EXCEPTION.—For purposes of clause (i), the 

master agreement shall be considered to be a swap only 

with respect to each agreement, contract, or transaction 

covered by the master agreement that is a swap pursuant to subparagraph (A). 

‘‘(D) MIXED SWAP.—The term ‘security-based swap’ includes any agreement, contract, or transaction that is as 

described in section 3(a)(68)(A) of the Securities Exchange 

Act of 1934 (15 U.S.C. 78c(a)(68)(A)) and also is based on 

the value of 1 or more interest or other rates, currencies, 

commodities, instruments of indebtedness, indices, quantitative measures, other financial or economic interest or 

property of any kind (other than a single security or a narrow-based security index), or the occurrence, non-occurrence, or the extent of the occurrence of an event or contingency associated with a potential financial, economic, or 

commercial consequence (other than an event described in 

subparagraph (A)(iii)). 

‘‘(E) TREATMENT OF FOREIGN EXCHANGE SWAPS AND

FORWARDS.— 

‘‘(i) IN GENERAL.—Foreign exchange swaps and foreign exchange forwards shall be considered swaps 

under this paragraph unless the Secretary makes a 

written determination under section 1b that either foreign exchange swaps or foreign exchange forwards or 

both— 

‘‘(I) should be not be regulated as swaps under 

this Act; and 

‘‘(II) are not structured to evade the DoddFrank Wall Street Reform and Consumer Protection Act in violation of any rule promulgated by 

the Commission pursuant to section 721(c) of that 

Act. 

‘‘(ii) CONGRESSIONAL NOTICE; EFFECTIVENESS.— 

The Secretary shall submit any written determination 

under clause (i) to the appropriate committees of Congress, including the Committee on Agriculture, Nutrition, and Forestry of the Senate and the Committee on 

Agriculture of the House of Representatives. Any such 

written determination by the Secretary shall not be efVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00303 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
300 

fective until it is submitted to the appropriate committees of Congress. 

‘‘(iii) REPORTING.—Notwithstanding a written determination by the Secretary under clause (i), all foreign exchange swaps and foreign exchange forwards 

shall be reported to either a swap data repository, or, 

if there is no swap data repository that would accept 

such swaps or forwards, to the Commission pursuant 

to section 4r within such time period as the Commission may by rule or regulation prescribe. 

‘‘(iv) BUSINESS STANDARDS.—Notwithstanding a 

written determination by the Secretary pursuant to 

clause (i), any party to a foreign exchange swap or forward that is a swap dealer or major swap participant 

shall conform to the business conduct standards contained in section 4s(h). 

‘‘(v) SECRETARY.—For purposes of this subparagraph, the term ‘Secretary’ means the Secretary of the 

Treasury. 

‘‘(F) EXCEPTION FOR CERTAIN FOREIGN EXCHANGE

SWAPS AND FORWARDS.— 

‘‘(i) REGISTERED ENTITIES.—Any foreign exchange 

swap and any foreign exchange forward that is listed 

and traded on or subject to the rules of a designated 

contract market or a swap execution facility, or that is 

cleared by a derivatives clearing organization, shall 

not be exempt from any provision of this Act or amendments made by the Wall Street Transparency and Accountability Act of 2010 prohibiting fraud or manipulation. 

‘‘(ii) RETAIL TRANSACTIONS.—Nothing in subparagraph (E) shall affect, or be construed to affect, the applicability of this Act or the jurisdiction of the Commission with respect to agreements, contracts, or transactions in foreign currency pursuant to section 2(c)(2). 

‘‘(48) SWAP DATA REPOSITORY.—The term ‘swap data repository’ means any person that collects and maintains information 

or records with respect to transactions or positions in, or the 

terms and conditions of, swaps entered into by third parties for 

the purpose of providing a centralized recordkeeping facility for 

swaps. 

‘‘(49) SWAP DEALER.— 

‘‘(A) IN GENERAL.—The term ‘swap dealer’ means any 

person who— 

‘‘(i) holds itself out as a dealer in swaps; 

‘‘(ii) makes a market in swaps; 

‘‘(iii) regularly enters into swaps with counterparties as an ordinary course of business for its own account; or 

‘‘(iv) engages in any activity causing the person to 

be commonly known in the trade as a dealer or market 

maker in swaps, 

provided however, in no event shall an insured depository 

institution be considered to be a swap dealer to the extent 


sroberts on DSKD5P82C1PROD with HEARING
301 

it offers to enter into a swap with a customer in connection 

with originating a loan with that customer. 

‘‘(B) INCLUSION.—A person may be designated as a 

swap dealer for a single type or single class or category of 

swap or activities and considered not to be a swap dealer 

for other types, classes, or categories of swaps or activities. 

‘‘(C) EXCEPTION.—The term ‘swap dealer’ does not include a person that enters into swaps for such person’s own 

account, either individually or in a fiduciary capacity, but 

not as a part of a regular business. 

‘‘(D) DE MINIMIS EXCEPTION.—The Commission shall 

exempt from designation as a swap dealer an entity that 

engages in a de minimis quantity of swap dealing in connection with transactions with or on behalf of its customers. The Commission shall promulgate regulations to 

establish factors with respect to the making of this determination to exempt. 

‘‘(50) SWAP EXECUTION FACILITY.—The term ‘swap execution 

facility’ means a trading system or platform in which multiple 

participants have the ability to execute or trade swaps by accepting bids and offers made by multiple participants in the facility or system, through any means of interstate commerce, including any trading facility, that— 

‘‘(A) facilitates the execution of swaps between persons; 

and 

‘‘(B) is not a designated contract market.’’. 

(22) in paragraph (51) (as redesignated by paragraph (1)), 

in subparagraph (A)(i), by striking ‘‘partipants’’ and inserting 

‘‘participants’’. 

(b) AUTHORITY TO DEFINE TERMS.—The Commodity Futures 

Trading Commission may adopt a rule to define— 

(1) the term ‘‘commercial risk’’; and 

(2) any other term included in an amendment to the Commodity Exchange Act (7 U.S.C. 1 et seq.) made by this subtitle. 

(c) MODIFICATION OF DEFINITIONS.—To include transactions 

and entities that have been structured to evade this subtitle (or an 

amendment made by this subtitle), the Commodity Futures Trading 

Commission shall adopt a rule to further define the terms ‘‘swap’’, 

‘‘swap dealer’’, ‘‘major swap participant’’, and ‘‘eligible contract participant’’. 

(d) EXEMPTIONS.—Section 4(c)(1) of the Commodity Exchange 

Act (7 U.S.C. 6(c)(1)) is amended by striking ‘‘except that’’ and all 

that follows through the period at the end and inserting the following: ‘‘except that— 

‘‘(A) unless the Commission is expressly authorized by any 

provision described in this subparagraph to grant exemptions, 

with respect to amendments made by subtitle A of the Wall 

Street Transparency and Accountability Act of 2010— 

‘‘(i) with respect to— 

‘‘(I) paragraphs (2), (3), (4), (5), and (7), paragraph 

(18)(A)(vii)(III), paragraphs (23), (24), (31), (32), (38), 

(39), (41), (42), (46), (47), (48), and (49) of section 1a, 

and sections 2(a)(13), 2(c)(1)(D), 4a(a), 4a(b), 4d(c), 

4d(d), 4r, 4s, 5b(a), 5b(b), 5(d), 5(g), 5(h), 5b(c), 5b(i), 

8e, and 21; and 


sroberts on DSKD5P82C1PROD with HEARING
302 

‘‘(II) section 206(e) of the Gramm-Leach-Bliley Act 

(Public Law 106–102; 15 U.S.C. 78c note); and 

‘‘(ii) in sections 721(c) and 742 of the Dodd-Frank Wall 

Street Reform and Consumer Protection Act; and 

‘‘(B) the Commission and the Securities and Exchange 

Commission may by rule, regulation, or order jointly exclude 

any agreement, contract, or transaction from section 2(a)(1)(D)) 

if the Commissions determine that the exemption would be consistent with the public interest.’’. 

(e) CONFORMING AMENDMENTS.— (1) Section 2(c)(2)(B)(i)(II) of the Commodity Exchange Act 

(7 U.S.C. 2(c)(2)(B)(i)(II)) is amended— 

(A) in item (cc)— 

(i) in subitem (AA), by striking ‘‘section 1a(20)’’ 

and inserting ‘‘section 1a’’; and 

(ii) in subitem (BB), by striking ‘‘section 1a(20)’’ 

and inserting ‘‘section 1a’’; and 

(B) in item (dd), by striking ‘‘section 1a(12)(A)(ii)’’ and 

inserting ‘‘section 1a(18)(A)(ii)’’. 

(2) Section 4m(3) of the Commodity Exchange Act (7 U.S.C. 

6m(3)) is amended by striking ‘‘section 1a(6)’’ and inserting 

‘‘section 1a’’. 

(3) Section 4q(a)(1) of the Commodity Exchange Act (7 

U.S.C. 6o–1(a)(1)) is amended by striking ‘‘section 1a(4)’’ and 

inserting ‘‘section 1a(9)’’. 

(4) Section 5(e)(1) of the Commodity Exchange Act (7 

U.S.C. 7(e)(1)) is amended by striking ‘‘section 1a(4)’’ and inserting ‘‘section 1a(9)’’. 

(5) Section 5a(b)(2)(F) of the Commodity Exchange Act (7 

U.S.C. 7a(b)(2)(F)) is amended by striking ‘‘section 1a(4)’’ and 

inserting ‘‘section 1a(9)’’. 

(6) Section 5b(a) of the Commodity Exchange Act (7 U.S.C. 

7a–1(a)) is amended, in the matter preceding paragraph (1), by 

striking ‘‘section 1a(9)’’ and inserting ‘‘section 1a’’. 

(7) Section 5c(c)(2)(B) of the Commodity Exchange Act (7 

U.S.C. 7a–2(c)(2)(B)) is amended by striking ‘‘section 1a(4)’’ and 

inserting ‘‘section 1a(9)’’. 

(8) Section 6(g)(5)(B)(i) of the Securities Exchange Act of 

1934 (15 U.S.C. 78f(g)(5)(B)(i)) is amended— 

(A) in subclause (I), by striking ‘‘section 1a(12)(B)(ii)’’ 

and inserting ‘‘section 1a(18)(B)(ii)’’; and 

(B) in subclause (II), by striking ‘‘section 1a(12)’’ and 

inserting ‘‘section 1a(18)’’. 

(9) Section 402 of the Legal Certainty for Bank Products 

Act of 2000 (7 U.S.C. 27 et seq.) is amended— 

(A) in subsection (a)(7), by striking ‘‘section 1a(20)’’ and 

inserting ‘‘section 1a’’; 

(B) in subsection (b)(2), by striking ‘‘section 1a(12)’’ and 

inserting ‘‘section 1a’’; and 

(C) in subsection (c), by striking ‘‘section 1a(4)’’ and inserting ‘‘section 1a’’. 

(10) The first section of Public Law 85–839 (7 U.S.C. 13– 

1) is amended in subsection (a), in the first sentence, by inserting ‘‘motion picture box office receipts (or any index, measure, 

value, or data related to such receipts) or’’ after ‘‘sale of’’. 


sroberts on DSKD5P82C1PROD with HEARING
303 

(f) EFFECTIVE DATE.—Notwithstanding any other provision of 

this Act, the amendments made by subsection (a)(4) shall take effect 

on June 1, 2010. 

SEC. 722. JURISDICTION. 

(a) EXCLUSIVE JURISDICTION.—Section 2(a)(1) of the Commodity Exchange Act (7 U.S.C. 2(a)(1)) is amended— 

(1) in subparagraph (A), in the first sentence— 

(A) by inserting ‘‘the Wall Street Transparency and Accountability Act of 2010 (including an amendment made by 

that Act) and’’ after ‘‘otherwise provided in’’; 

(B) by striking ‘‘(C) and (D)’’ and inserting ‘‘(C), (D), 

and (I)’’; 

(C) by striking ‘‘(c) through (i) of this section’’ and inserting ‘‘(c) and (f)’’; 

(D) by striking ‘‘contracts of sale’’ and inserting ‘‘swaps 

or contracts of sale’’; and 

(E) by striking ‘‘or derivatives transaction execution facility registered pursuant to section 5 or 5a’’ and inserting 

‘‘pursuant to section 5 or a swap execution facility pursuant 

to section 5h’’; and 

(2) by adding at the end the following: 

‘‘(G)(i) Nothing in this paragraph shall limit the jurisdiction conferred on the Securities and Exchange Commission by the Wall Street Transparency and Accountability 

Act of 2010 with regard to security-based swap agreements 

as defined pursuant to section 3(a)(78) of the Securities Exchange Act of 1934, and security-based swaps. 

‘‘(ii) In addition to the authority of the Securities and 

Exchange Commission described in clause (i), nothing in 

this subparagraph shall limit or affect any statutory authority of the Commission with respect to an agreement, 

contract, or transaction described in clause (i). 

‘‘(H) Notwithstanding any other provision of law, the 

Wall Street Transparency and Accountability Act of 2010 

shall not apply to, and the Commodity Futures Trading 

Commission shall have no jurisdiction under such Act (or 

any amendments to the Commodity Exchange Act made by 

such Act) with respect to, any security other than a security-based swap.’’. 

(b) REGULATION OF SWAPS UNDER FEDERAL AND STATE LAW.— 

Section 12 of the Commodity Exchange Act (7 U.S.C. 16) is amended by adding at the end the following: 

‘‘(h) REGULATION OF SWAPS AS INSURANCE UNDER STATE

LAW.—A swap— 

‘‘(1) shall not be considered to be insurance; and 

‘‘(2) may not be regulated as an insurance contract under 

the law of any State.’’. 

(c) AGREEMENTS, CONTRACTS, AND TRANSACTIONS TRADED ON

AN ORGANIZED EXCHANGE.—Section 2(c)(2)(A) of the Commodity Exchange Act (7 U.S.C. 2(c)(2)(A)) is amended— 

(1) in clause (i), by striking ‘‘or’’ at the end; 

(2) by redesignating clause (ii) as clause (iii); and 

(3) by inserting after clause (i) the following: 

‘‘(ii) a swap; or’’. 


sroberts on DSKD5P82C1PROD with HEARING
304 

(d) APPLICABILITY.—Section 2 of the Commodity Exchange Act 

(7 U.S.C. 2) (as amended by section 723(a)(3)) is amended by adding at the end the following: 

‘‘(i) APPLICABILITY.—The provisions of this Act relating to swaps 

that were enacted by the Wall Street Transparency and Accountability Act of 2010 (including any rule prescribed or regulation promulgated under that Act), shall not apply to activities outside the 

United States unless those activities— 

‘‘(1) have a direct and significant connection with activities 

in, or effect on, commerce of the United States; or 

‘‘(2) contravene such rules or regulations as the Commission may prescribe or promulgate as are necessary or appropriate to prevent the evasion of any provision of this Act that 

was enacted by the Wall Street Transparency and Accountability Act of 2010.’’. 

(e) FEDERAL ENERGY REGULATORY COMMISSION.—Section 

2(a)(1) of the Commodity Exchange Act (7 U.S.C. 2(a)(1)) is amended by adding at the end the following: 

‘‘(I)(i) Nothing in this Act shall limit or affect any statutory authority of the Federal Energy Regulatory Commission or a State regulatory authority (as defined in section 

3(21) of the Federal Power Act (16 U.S.C. 796(21)) with respect to an agreement, contract, or transaction that is entered into pursuant to a tariff or rate schedule approved by 

the Federal Energy Regulatory Commission or a State regulatory authority and is— 

‘‘(I) not executed, traded, or cleared on a registered 

entity or trading facility; or 

‘‘(II) executed, traded, or cleared on a registered entity or trading facility owned or operated by a regional 

transmission organization or independent system operator. 

‘‘(ii) In addition to the authority of the Federal Energy 

Regulatory Commission or a State regulatory authority described in clause (i), nothing in this subparagraph shall 

limit or affect— 

‘‘(I) any statutory authority of the Commission 

with respect to an agreement, contract, or transaction 

described in clause (i); or 

‘‘(II) the jurisdiction of the Commission under subparagraph (A) with respect to an agreement, contract, 

or transaction that is executed, traded, or cleared on a 

registered entity or trading facility that is not owned or 

operated by a regional transmission organization or 

independent system operator (as defined by sections 

3(27) and (28) of the Federal Power Act (16 U.S.C. 

796(27), 796(28)).’’. 

(f) PUBLIC INTEREST WAIVER.—Section 4(c) of the Commodity 

Exchange Act (7 U.S.C. 6(c)) (as amended by section 721(d)) is 

amended by adding at the end the following: 

‘‘(6) If the Commission determines that the exemption 

would be consistent with the public interest and the purposes 

of this Act, the Commission shall, in accordance with paragraphs (1) and (2), exempt from the requirements of this Act an 

agreement, contract, or transaction that is entered into— 


sroberts on DSKD5P82C1PROD with HEARING
305 

‘‘(A) pursuant to a tariff or rate schedule approved or 

permitted to take effect by the Federal Energy Regulatory 

Commission; 

‘‘(B) pursuant to a tariff or rate schedule establishing 

rates or charges for, or protocols governing, the sale of electric energy approved or permitted to take effect by the regulatory authority of the State or municipality having jurisdiction to regulate rates and charges for the sale of electric 

energy within the State or municipality; or 

‘‘(C) between entities described in section 201(f) of the 

Federal Power Act (16 U.S.C. 824(f)).’’. 

(g) AUTHORITY OF FERC.—Nothing in the Wall Street Transparency and Accountability Act of 2010 or the amendments to the 

Commodity Exchange Act made by such Act shall limit or affect any 

statutory enforcement authority of the Federal Energy Regulatory 

Commission pursuant to section 222 of the Federal Power Act and 

section 4A of the Natural Gas Act that existed prior to the date of 

enactment of the Wall Street Transparency and Accountability Act 

of 2010. 

(h) DETERMINATION.—The Commodity Exchange Act is amended by inserting after section 1a (7 U.S.C. 1a) the following: 

‘‘SEC. 1b. REQUIREMENTS OF SECRETARY OF THE TREASURY REGARDING EXEMPTION OF FOREIGN EXCHANGE SWAPS AND 

FOREIGN EXCHANGE FORWARDS FROM DEFINITION OF 

THE TERM ‘SWAP’. 

‘‘(a) REQUIRED CONSIDERATIONS.—In determining whether to 

exempt foreign exchange swaps and foreign exchange forwards from 

the definition of the term ‘swap’, the Secretary of the Treasury (referred to in this section as the ‘Secretary’) shall consider— 

‘‘(1) whether the required trading and clearing of foreign 

exchange swaps and foreign exchange forwards would create 

systemic risk, lower transparency, or threaten the financial stability of the United States; 

‘‘(2) whether foreign exchange swaps and foreign exchange 

forwards are already subject to a regulatory scheme that is materially comparable to that established by this Act for other 

classes of swaps; 

‘‘(3) the extent to which bank regulators of participants in 

the foreign exchange market provide adequate supervision, including capital and margin requirements; 

‘‘(4) the extent of adequate payment and settlement systems; 

and 

‘‘(5) the use of a potential exemption of foreign exchange 

swaps and foreign exchange forwards to evade otherwise applicable regulatory requirements. 

‘‘(b) DETERMINATION.—If the Secretary makes a determination 

to exempt foreign exchange swaps and foreign exchange forwards 

from the definition of the term ‘swap’, the Secretary shall submit to 

the appropriate committees of Congress a determination that contains— 

‘‘(1) an explanation regarding why foreign exchange swaps 

and foreign exchange forwards are qualitatively different from 

other classes of swaps in a way that would make the foreign exchange swaps and foreign exchange forwards ill-suited for regulation as swaps; and 


sroberts on DSKD5P82C1PROD with HEARING
306 

‘‘(2) an identification of the objective differences of foreign 

exchange swaps and foreign exchange forwards with respect to 

standard swaps that warrant an exempted status. 

‘‘(c) EFFECT OF DETERMINATION.—A determination by the Secretary under subsection (b) shall not exempt any foreign exchange 

swaps and foreign exchange forwards traded on a designated contract market or swap execution facility from any applicable antifraud and antimanipulation provision under this title.’’. 

SEC. 723. CLEARING. 

(a) CLEARING REQUIREMENT.— 

(1) IN GENERAL.—Section 2 of the Commodity Exchange Act 

(7 U.S.C. 2) is amended— 

(A) by striking subsections (d), (e), (g), and (h); and 

(B) by redesignating subsection (i) as subsection (g). 

(2) SWAPS; LIMITATION ON PARTICIPATION.—Section 2 of the 

Commodity Exchange Act (7 U.S.C. 2) (as amended by paragraph (1)) is amended by inserting after subsection (c) the following: 

‘‘(d) SWAPS.—Nothing in this Act (other than subparagraphs 

(A), (B), (C), (D), (G), and (H) of subsection (a)(1), subsections (f) 

and (g), sections 1a, 2(a)(13), 2(c)(2)(A)(ii), 2(e), 2(h), 4(c), 4a, 4b, 

and 4b–1, subsections (a), (b), and (g) of section 4c, sections 4d, 4e, 

4f, 4g, 4h, 4i, 4j, 4k, 4l, 4m, 4n, 4o, 4p, 4r, 4s, 4t, 5, 5b, 5c, 5e, and 

5h, subsections (c) and (d) of section 6, sections 6c, 6d, 8, 8a, and 

9, subsections (e)(2), (f), and (h) of section 12, subsections (a) and 

(b) of section 13, sections 17, 20, 21, and 22(a)(4), and any other 

provision of this Act that is applicable to registered entities or Commission registrants) governs or applies to a swap. 

‘‘(e) LIMITATION ON PARTICIPATION.—It shall be unlawful for 

any person, other than an eligible contract participant, to enter into 

a swap unless the swap is entered into on, or subject to the rules 

of, a board of trade designated as a contract market under section 

5.’’. 

(3) MANDATORY CLEARING OF SWAPS.—Section 2 of the 

Commodity Exchange Act (7 U.S.C. 2) is amended by inserting 

after subsection (g) (as redesignated by paragraph (1)(B)) the 

following: 

‘‘(h) CLEARING REQUIREMENT.— 

‘‘(1) IN GENERAL.— 

‘‘(A) STANDARD FOR CLEARING.—It shall be unlawful 

for any person to engage in a swap unless that person submits such swap for clearing to a derivatives clearing organization that is registered under this Act or a derivatives 

clearing organization that is exempt from registration 

under this Act if the swap is required to be cleared. 

‘‘(B) OPEN ACCESS.—The rules of a derivatives clearing 

organization described in subparagraph (A) shall— 

‘‘(i) prescribe that all swaps (but not contracts of 

sale of a commodity for future delivery or options on 

such contracts) submitted to the derivatives clearing organization with the same terms and conditions are economically equivalent within the derivatives clearing organization and may be offset with each other within 

the derivatives clearing organization; and 


sroberts on DSKD5P82C1PROD with HEARING
307 

‘‘(ii) provide for non-discriminatory clearing of a 

swap (but not a contract of sale of a commodity for future delivery or option on such contract) executed bilaterally or on or through the rules of an unaffiliated designated contract market or swap execution facility. 

‘‘(2) COMMISSION REVIEW.— ‘‘(A) COMMISSION-INITIATED REVIEW.— ‘‘(i) The Commission on an ongoing basis shall review each swap, or any group, category, type, or class 

of swaps to make a determination as to whether the 

swap or group, category, type, or class of swaps should 

be required to be cleared. 

‘‘(ii) The Commission shall provide at least a 30- 

day public comment period regarding any determination made under clause (i). 

‘‘(B) SWAP SUBMISSIONS.— ‘‘(i) A derivatives clearing organization shall submit to the Commission each swap, or any group, category, type, or class of swaps that it plans to accept for 

clearing, and provide notice to its members (in a manner to be determined by the Commission) of the submission. 

‘‘(ii) Any swap or group, category, type, or class of 

swaps listed for clearing by a derivative clearing organization as of the date of enactment of this subsection 

shall be considered submitted to the Commission. 

‘‘(iii) The Commission shall— 

‘‘(I) make available to the public submissions 

received under clauses (i) and (ii); 

‘‘(II) review each submission made under 

clauses (i) and (ii), and determine whether the 

swap, or group, category, type, or class of swaps 

described in the submission is required to be 

cleared; and 

‘‘(III) provide at least a 30-day public comment 

period regarding its determination as to whether 

the clearing requirement under paragraph (1)(A) 

shall apply to the submission. 

‘‘(C) DEADLINE.—The Commission shall make its determination under subparagraph (B)(iii) not later than 90 

days after receiving a submission made under subparagraphs (B)(i) and (B)(ii), unless the submitting derivatives 

clearing organization agrees to an extension for the time 

limitation established under this subparagraph. 

‘‘(D) DETERMINATION.— 

‘‘(i) In reviewing a submission made under subparagraph (B), the Commission shall review whether 

the submission is consistent with section 5b(c)(2). 

‘‘(ii) In reviewing a swap, group of swaps, or class 

of swaps pursuant to subparagraph (A) or a submission made under subparagraph (B), the Commission 

shall take into account the following factors: 

‘‘(I) The existence of significant outstanding 

notional exposures, trading liquidity, and adequate pricing data. 


sroberts on DSKD5P82C1PROD with HEARING
308 

‘‘(II) The availability of rule framework, capacity, operational expertise and resources, and credit 

support infrastructure to clear the contract on 

terms that are consistent with the material terms 

and trading conventions on which the contract is 

then traded. 

‘‘(III) The effect on the mitigation of systemic 

risk, taking into account the size of the market for 

such contract and the resources of the derivatives 

clearing organization available to clear the contract. 

‘‘(IV) The effect on competition, including appropriate fees and charges applied to clearing. 

‘‘(V) The existence of reasonable legal certainty 

in the event of the insolvency of the relevant derivatives clearing organization or 1 or more of its 

clearing members with regard to the treatment of 

customer and swap counterparty positions, funds, 

and property. 

‘‘(iii) In making a determination under subparagraph (A) or (B)(iii) that the clearing requirement shall 

apply, the Commission may require such terms and 

conditions to the requirement as the Commission determines to be appropriate. 

‘‘(E) RULES.—Not later than 1 year after the date of the 

enactment of this subsection, the Commission shall adopt 

rules for a derivatives clearing organization’s submission 

for review, pursuant to this paragraph, of a swap, or a 

group, category, type, or class of swaps, that it seeks to accept for clearing. Nothing in this subparagraph limits the 

Commission from making a determination under subparagraph (B)(iii) for swaps described in subparagraph (B)(ii). 

‘‘(3) STAY OF CLEARING REQUIREMENT.— ‘‘(A) IN GENERAL.—After making a determination pursuant to paragraph (2)(B), the Commission, on application 

of a counterparty to a swap or on its own initiative, may 

stay the clearing requirement of paragraph (1) until the 

Commission completes a review of the terms of the swap (or 

the group, category, type, or class of swaps) and the clearing arrangement. 

‘‘(B) DEADLINE.—The Commission shall complete a review undertaken pursuant to subparagraph (A) not later 

than 90 days after issuance of the stay, unless the derivatives clearing organization that clears the swap, or group, 

category, type, or class of swaps agrees to an extension of 

the time limitation established under this subparagraph. 

‘‘(C) DETERMINATION.—Upon completion of the review 

undertaken pursuant to subparagraph (A), the Commission 

may— 

‘‘(i) determine, unconditionally or subject to such 

terms and conditions as the Commission determines to 

be appropriate, that the swap, or group, category, type, 

or class of swaps must be cleared pursuant to this subsection if it finds that such clearing is consistent with 

paragraph (2)(D); or 


sroberts on DSKD5P82C1PROD with HEARING
309 

‘‘(ii) determine that the clearing requirement of 

paragraph (1) shall not apply to the swap, or group, 

category, type, or class of swaps. 

‘‘(D) RULES.—Not later than 1 year after the date of the 

enactment of the Wall Street Transparency and Accountability Act of 2010, the Commission shall adopt rules for 

reviewing, pursuant to this paragraph, a derivatives clearing organization’s clearing of a swap, or a group, category, 

type, or class of swaps, that it has accepted for clearing. 

‘‘(4) PREVENTION OF EVASION.— ‘‘(A) IN GENERAL.—The Commission shall prescribe 

rules under this subsection (and issue interpretations of 

rules prescribed under this subsection) as determined by 

the Commission to be necessary to prevent evasions of the 

mandatory clearing requirements under this Act. 

‘‘(B) DUTY OF COMMISSION TO INVESTIGATE AND TAKE

CERTAIN ACTIONS.—To the extent the Commission finds 

that a particular swap, group, category, type, or class of 

swaps would otherwise be subject to mandatory clearing 

but no derivatives clearing organization has listed the 

swap, group, category, type, or class of swaps for clearing, 

the Commission shall— 

‘‘(i) investigate the relevant facts and circumstances; 

‘‘(ii) within 30 days issue a public report containing the results of the investigation; and 

‘‘(iii) take such actions as the Commission determines to be necessary and in the public interest, which 

may include requiring the retaining of adequate margin or capital by parties to the swap, group, category, 

type, or class of swaps. 

‘‘(C) EFFECT ON AUTHORITY.—Nothing in this paragraph— 

‘‘(i) authorizes the Commission to adopt rules requiring a derivatives clearing organization to list for 

clearing a swap, group, category, type, or class of 

swaps if the clearing of the swap, group, category, type, 

or class of swaps would threaten the financial integrity 

of the derivatives clearing organization; and 

‘‘(ii) affects the authority of the Commission to enforce the open access provisions of paragraph (1)(B) 

with respect to a swap, group, category, type, or class 

of swaps that is listed for clearing by a derivatives 

clearing organization. 

‘‘(5) REPORTING TRANSITION RULES.—Rules adopted by the 

Commission under this section shall provide for the reporting 

of data, as follows: 

‘‘(A) Swaps entered into before the date of the enactment of this subsection shall be reported to a registered 

swap data repository or the Commission no later than 180 

days after the effective date of this subsection. 

‘‘(B) Swaps entered into on or after such date of enactment shall be reported to a registered swap data repository 

or the Commission no later than the later of— 

‘‘(i) 90 days after such effective date; or 


sroberts on DSKD5P82C1PROD with HEARING
310 

‘‘(ii) such other time after entering into the swap as 

the Commission may prescribe by rule or regulation. 

‘‘(6) CLEARING TRANSITION RULES.— 

‘‘(A) Swaps entered into before the date of the enactment of this subsection are exempt from the clearing requirements of this subsection if reported pursuant to paragraph (5)(A). 

‘‘(B) Swaps entered into before application of the clearing requirement pursuant to this subsection are exempt 

from the clearing requirements of this subsection if reported 

pursuant to paragraph (5)(B). 

‘‘(7) EXCEPTIONS.— 

‘‘(A) IN GENERAL.—The requirements of paragraph 

(1)(A) shall not apply to a swap if 1 of the counterparties 

to the swap— 

‘‘(i) is not a financial entity; 

‘‘(ii) is using swaps to hedge or mitigate commercial risk; and 

‘‘(iii) notifies the Commission, in a manner set 

forth by the Commission, how it generally meets its financial obligations associated with entering into noncleared swaps. 

‘‘(B) OPTION TO CLEAR.—The application of the clearing 

exception in subparagraph (A) is solely at the discretion of 

the counterparty to the swap that meets the conditions of 

clauses (i) through (iii) of subparagraph (A). 

‘‘(C) FINANCIAL ENTITY DEFINITION.— 

‘‘(i) IN GENERAL.—For the purposes of this paragraph, the term ‘financial entity’ means— 

‘‘(I) a swap dealer; 

‘‘(II) a security-based swap dealer; 

‘‘(III) a major swap participant; 

‘‘(IV) a major security-based swap participant; 

‘‘(V) a commodity pool; 

‘‘(VI) a private fund as defined in section 

202(a) of the Investment Advisers Act of 1940 (15 

U.S.C. 80–b–2(a)); 

‘‘(VII) an employee benefit plan as defined in 

paragraphs (3) and (32) of section 3 of the Employee Retirement Income Security Act of 1974 (29 

U.S.C. 1002); 

‘‘(VIII) a person predominantly engaged in activities that are in the business of banking, or in 

activities that are financial in nature, as defined 

in section 4(k) of the Bank Holding Company Act 

of 1956. 

‘‘(ii) EXCLUSION.—The Commission shall consider 

whether to exempt small banks, savings associations, 

farm credit system institutions, and credit unions, including— 

‘‘(I) depository institutions with total assets of 

$10,000,000,000 or less; 

‘‘(II) farm credit system institutions with total 

assets of $10,000,000,000 or less; or 


sroberts on DSKD5P82C1PROD with HEARING
311 

‘‘(III) credit unions with total assets of $10,000,000,000 or less. 

‘‘(iii) LIMITATION.—Such definition shall not include an entity whose primary business is providing financing, and uses derivatives for the purpose of hedging underlying commercial risks related to interest rate 

and foreign currency exposures, 90 percent or more of 

which arise from financing that facilitates the purchase or lease of products, 90 percent or more of which 

are manufactured by the parent company or another 

subsidiary of the parent company. 

‘‘(D) TREATMENT OF AFFILIATES.— ‘‘(i) IN GENERAL.—An affiliate of a person that 

qualifies for an exception under subparagraph (A) (including affiliate entities predominantly engaged in providing financing for the purchase of the merchandise 

or manufactured goods of the person) may qualify for 

the exception only if the affiliate, acting on behalf of 

the person and as an agent, uses the swap to hedge or 

mitigate the commercial risk of the person or other affiliate of the person that is not a financial entity. 

‘‘(ii) PROHIBITION RELATING TO CERTAIN AFFILI- ATES.—The exception in clause (i) shall not apply if the 

affiliate is— 

‘‘(I) a swap dealer; 

‘‘(II) a security-based swap dealer; 

‘‘(III) a major swap participant; 

‘‘(IV) a major security-based swap participant; 

‘‘(V) an issuer that would be an investment 

company, as defined in section 3 of the Investment 

Company Act of 1940 (15 U.S.C. 80a–3), but for 

paragraph (1) or (7) of subsection (c) of that Act 

(15 U.S.C. 80a–3(c)); 

‘‘(VI) a commodity pool; or 

‘‘(VII) a bank holding company with over 

$50,000,000,000 in consolidated assets. 

‘‘(iii) TRANSITION RULE FOR AFFILIATES.—An affiliate, subsidiary, or a wholly owned entity of a person 

that qualifies for an exception under subparagraph (A) 

and is predominantly engaged in providing financing 

for the purchase or lease of merchandise or manufactured goods of the person shall be exempt from the 

margin requirement described in section 4s(e) and the 

clearing requirement described in paragraph (1) with 

regard to swaps entered into to mitigate the risk of the 

financing activities for not less than a 2-year period beginning on the date of enactment of this clause. 

‘‘(E) ELECTION OF COUNTERPARTY.— 

‘‘(i) SWAPS REQUIRED TO BE CLEARED.—With respect to any swap that is subject to the mandatory 

clearing requirement under this subsection and entered 

into by a swap dealer or a major swap participant with 

a counterparty that is not a swap dealer, major swap 

participant, security-based swap dealer, or major security-based swap participant, the counterparty shall 


sroberts on DSKD5P82C1PROD with HEARING
312 

have the sole right to select the derivatives clearing organization at which the swap will be cleared. 

‘‘(ii) SWAPS NOT REQUIRED TO BE CLEARED.—With 

respect to any swap that is not subject to the mandatory clearing requirement under this subsection and entered into by a swap dealer or a major swap participant with a counterparty that is not a swap dealer, 

major swap participant, security-based swap dealer, or 

major security-based swap participant, the 

counterparty— 

‘‘(I) may elect to require clearing of the swap; 

and 

‘‘(II) shall have the sole right to select the derivatives clearing organization at which the swap 

will be cleared. 

‘‘(F) ABUSE OF EXCEPTION.—The Commission may prescribe such rules or issue interpretations of the rules as the 

Commission determines to be necessary to prevent abuse of 

the exceptions described in this paragraph. The Commission may also request information from those persons 

claiming the clearing exception as necessary to prevent 

abuse of the exceptions described in this paragraph. 

‘‘(8) TRADE EXECUTION.— ‘‘(A) IN GENERAL.—With respect to transactions involving swaps subject to the clearing requirement of paragraph 

(1), counterparties shall— 

‘‘(i) execute the transaction on a board of trade designated as a contract market under section 5; or 

‘‘(ii) execute the transaction on a swap execution facility registered under 5h or a swap execution facility 

that is exempt from registration under section 5h(f) of 

this Act. 

‘‘(B) EXCEPTION.—The requirements of clauses (i) and 

(ii) of subparagraph (A) shall not apply if no board of trade 

or swap execution facility makes the swap available to 

trade or for swap transactions subject to the clearing exception under paragraph (7).’’. 

(b) COMMODITY EXCHANGE ACT.—Section 2 of the Commodity 

Exchange Act (7 U.S.C. 2) is amended by adding at the end the following: 

‘‘(j) COMMITTEE APPROVAL BY BOARD.—Exemptions from the requirements of subsection (h)(1) to clear a swap and subsection (h)(8) 

to execute a swap through a board of trade or swap execution facility shall be available to a counterparty that is an issuer of securities 

that are registered under section 12 of the Securities Exchange Act 

of 1934 (15 U.S.C. 78l) or that is required to file reports pursuant 

to section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 

78o) only if an appropriate committee of the issuer’s board or governing body has reviewed and approved its decision to enter into 

swaps that are subject to such exemptions.’’. 

(c) GRANDFATHER PROVISIONS.— 

(1) LEGAL CERTAINTY FOR CERTAIN TRANSACTIONS IN EX- EMPT COMMODITIES.—Not later than 60 days after the date of 

enactment of this Act, a person may submit to the Commodity 

Futures Trading Commission a petition to remain subject to 


sroberts on DSKD5P82C1PROD with HEARING
313 

section 2(h) of the Commodity Exchange Act (7 U.S.C. 2(h)) (as 

in effect on the day before the date of enactment of this Act). 

(2) CONSIDERATION; AUTHORITY OF COMMODITY FUTURES

TRADING COMMISSION.—The Commodity Futures Trading Commission— 

(A) shall consider any petition submitted under subparagraph (A) in a prompt manner; and 

(B) may allow a person to continue operating subject to 

section 2(h) of the Commodity Exchange Act (7 U.S.C. 2(h)) 

(as in effect on the day before the date of enactment of this 

Act) for not longer than a 1-year period. 

(3) AGRICULTURAL SWAPS.— (A) IN GENERAL.—Except as provided in subparagraph 

(B), no person shall offer to enter into, enter into, or confirm the execution of, any swap in an agricultural commodity (as defined by the Commodity Futures Trading 

Commission). 

(B) EXCEPTION.—Notwithstanding subparagraph (A), a 

person may offer to enter into, enter into, or confirm the 

execution of, any swap in an agricultural commodity pursuant to section 4(c) of the Commodity Exchange Act (7 

U.S.C. 6(c)) or any rule, regulation, or order issued thereunder (including any rule, regulation, or order in effect as 

of the date of enactment of this Act) by the Commodity Futures Trading Commission to allow swaps under such 

terms and conditions as the Commission shall prescribe. 

(4) REQUIRED REPORTING.—If the exception described in 

section 2(h)(8)(B) of the Commodity Exchange Act applies, the 

counterparties shall comply with any recordkeeping and transaction reporting requirements that may be prescribed by the 

Commission with respect to swaps subject to section 2(h)(8)(B) 

of the Commodity Exchange Act. 

SEC. 724. SWAPS; SEGREGATION AND BANKRUPTCY TREATMENT. 

(a) SEGREGATION REQUIREMENTS FOR CLEARED SWAPS.—Section 4d of the Commodity Exchange Act (7 U.S.C. 6d) (as amended 

by section 732) is amended by adding at the end the following: 

‘‘(f) SWAPS.— ‘‘(1) REGISTRATION REQUIREMENT.—It shall be unlawful for 

any person to accept any money, securities, or property (or to extend any credit in lieu of money, securities, or property) from, 

for, or on behalf of a swaps customer to margin, guarantee, or 

secure a swap cleared by or through a derivatives clearing organization (including money, securities, or property accruing to 

the customer as the result of such a swap), unless the person 

shall have registered under this Act with the Commission as a 

futures commission merchant, and the registration shall not 

have expired nor been suspended nor revoked. 

‘‘(2) CLEARED SWAPS.— 

‘‘(A) SEGREGATION REQUIRED.—A futures commission 

merchant shall treat and deal with all money, securities, 

and property of any swaps customer received to margin, 

guarantee, or secure a swap cleared by or through a derivatives clearing organization (including money, securities, or 

property accruing to the swaps customer as the result of 

such a swap) as belonging to the swaps customer. 


sroberts on DSKD5P82C1PROD with HEARING
314 

‘‘(B) COMMINGLING PROHIBITED.—Money, securities, 

and property of a swaps customer described in subparagraph (A) shall be separately accounted for and shall not 

be commingled with the funds of the futures commission 

merchant or be used to margin, secure, or guarantee any 

trades or contracts of any swaps customer or person other 

than the person for whom the same are held. 

‘‘(3) EXCEPTIONS.— ‘‘(A) USE OF FUNDS.— ‘‘(i) IN GENERAL.—Notwithstanding paragraph (2), 

money, securities, and property of swap customers of a 

futures commission merchant described in paragraph 

(2) may, for convenience, be commingled and deposited 

in the same account or accounts with any bank or trust 

company or with a derivatives clearing organization. 

‘‘(ii) WITHDRAWAL.—Notwithstanding paragraph 

(2), such share of the money, securities, and property 

described in clause (i) as in the normal course of business shall be necessary to margin, guarantee, secure, 

transfer, adjust, or settle a cleared swap with a derivatives clearing organization, or with any member of the 

derivatives clearing organization, may be withdrawn 

and applied to such purposes, including the payment of 

commissions, brokerage, interest, taxes, storage, and 

other charges, lawfully accruing in connection with the 

cleared swap. 

‘‘(B) COMMISSION ACTION.—Notwithstanding paragraph (2), in accordance with such terms and conditions as 

the Commission may prescribe by rule, regulation, or order, 

any money, securities, or property of the swaps customers 

of a futures commission merchant described in paragraph 

(2) may be commingled and deposited in customer accounts 

with any other money, securities, or property received by the 

futures commission merchant and required by the Commission to be separately accounted for and treated and dealt 

with as belonging to the swaps customer of the futures commission merchant. 

‘‘(4) PERMITTED INVESTMENTS.—Money described in paragraph (2) may be invested in obligations of the United States, 

in general obligations of any State or of any political subdivision of a State, and in obligations fully guaranteed as to principal and interest by the United States, or in any other investment that the Commission may by rule or regulation prescribe, 

and such investments shall be made in accordance with such 

rules and regulations and subject to such conditions as the 

Commission may prescribe. 

‘‘(5) COMMODITY CONTRACT.—A swap cleared by or through 

a derivatives clearing organization shall be considered to be a 

commodity contract as such term is defined in section 761 of 

title 11, United States Code, with regard to all money, securities, and property of any swaps customer received by a futures 

commission merchant or a derivatives clearing organization to 

margin, guarantee, or secure the swap (including money, securities, or property accruing to the customer as the result of the 

swap). 


sroberts on DSKD5P82C1PROD with HEARING
315 

‘‘(6) PROHIBITION.—It shall be unlawful for any person, including any derivatives clearing organization and any depository institution, that has received any money, securities, or 

property for deposit in a separate account or accounts as provided in paragraph (2) to hold, dispose of, or use any such 

money, securities, or property as belonging to the depositing futures commission merchant or any person other than the swaps 

customer of the futures commission merchant.’’. 

(b) BANKRUPTCY TREATMENT OF CLEARED SWAPS.—Section 761 

of title 11, United States Code, is amended— 

(1) in paragraph (4), by striking subparagraph (F) and inserting the following: 

‘‘(F)(i) any other contract, option, agreement, or transaction that is similar to a contract, option, agreement, or 

transaction referred to in this paragraph; and 

‘‘(ii) with respect to a futures commission merchant or 

a clearing organization, any other contract, option, agreement, or transaction, in each case, that is cleared by a 

clearing organization;’’; and 

(2) in paragraph (9)(A)(i), by striking ‘‘the commodity futures account’’ and inserting ‘‘a commodity contract account’’. 

(c) SEGREGATION REQUIREMENTS FOR UNCLEARED SWAPS.—Section 4s of the Commodity Exchange Act (as added by section 731) 

is amended by adding at the end the following: 

‘‘(l) SEGREGATION REQUIREMENTS.— 

‘‘(1) SEGREGATION OF ASSETS HELD AS COLLATERAL IN

UNCLEARED SWAP TRANSACTIONS.— 

‘‘(A) NOTIFICATION.—A swap dealer or major swap participant shall be required to notify the counterparty of the 

swap dealer or major swap participant at the beginning of 

a swap transaction that the counterparty has the right to 

require segregation of the funds or other property supplied 

to margin, guarantee, or secure the obligations of the 

counterparty. 

‘‘(B) SEGREGATION AND MAINTENANCE OF FUNDS.—At 

the request of a counterparty to a swap that provides funds 

or other property to a swap dealer or major swap participant to margin, guarantee, or secure the obligations of the 

counterparty, the swap dealer or major swap participant 

shall— 

‘‘(i) segregate the funds or other property for the 

benefit of the counterparty; and 

‘‘(ii) in accordance with such rules and regulations 

as the Commission may promulgate, maintain the 

funds or other property in a segregated account separate from the assets and other interests of the swap 

dealer or major swap participant. 

‘‘(2) APPLICABILITY.—The requirements described in paragraph (1) shall— 

‘‘(A) apply only to a swap between a counterparty and 

a swap dealer or major swap participant that is not submitted for clearing to a derivatives clearing organization; 

and 

‘‘(B)(i) not apply to variation margin payments; or 


sroberts on DSKD5P82C1PROD with HEARING
316 

‘‘(ii) not preclude any commercial arrangement regarding— 

‘‘(I) the investment of segregated funds or other 

property that may only be invested in such investments 

as the Commission may permit by rule or regulation; 

and 

‘‘(II) the related allocation of gains and losses resulting from any investment of the segregated funds or 

other property. 

‘‘(3) USE OF INDEPENDENT THIRD-PARTY CUSTODIANS.—The 

segregated account described in paragraph (1) shall be— 

‘‘(A) carried by an independent third-party custodian; 

and 

‘‘(B) designated as a segregated account for and on behalf of the counterparty. 

‘‘(4) REPORTING REQUIREMENT.—If the counterparty does 

not choose to require segregation of the funds or other property 

supplied to margin, guarantee, or secure the obligations of the 

counterparty, the swap dealer or major swap participant shall 

report to the counterparty of the swap dealer or major swap 

participant on a quarterly basis that the back office procedures 

of the swap dealer or major swap participant relating to margin and collateral requirements are in compliance with the 

agreement of the counterparties.’’. 

SEC. 725. DERIVATIVES CLEARING ORGANIZATIONS. 

(a) REGISTRATION REQUIREMENT.—Section 5b of the Commodity 

Exchange Act (7 U.S.C. 7a–1) is amended by striking subsections (a) 

and (b) and inserting the following: 

‘‘(a) REGISTRATION REQUIREMENT.— ‘‘(1) IN GENERAL.—Except as provided in paragraph (2), it 

shall be unlawful for a derivatives clearing organization, directly or indirectly, to make use of the mails or any means or 

instrumentality of interstate commerce to perform the functions 

of a derivatives clearing organization with respect to— 

‘‘(A) a contract of sale of a commodity for future delivery (or an option on the contract of sale) or option on a 

commodity, in each case, unless the contract or option is— 

‘‘(i) excluded from this Act by subsection 

(a)(1)(C)(i), (c), or (f) of section 2; or 

‘‘(ii) a security futures product cleared by a clearing agency registered with the Securities and Exchange 

Commission under the Securities Exchange Act of 1934 

(15 U.S.C. 78a et seq.); or 

‘‘(B) a swap. 

‘‘(2) EXCEPTION.—Paragraph (1) shall not apply to a derivatives clearing organization that is registered with the Commission. 

‘‘(b) VOLUNTARY REGISTRATION.—A person that clears 1 or more 

agreements, contracts, or transactions that are not required to be 

cleared under this Act may register with the Commission as a derivatives clearing organization.’’. 

(b) REGISTRATION FOR DEPOSITORY INSTITUTIONS AND CLEARING AGENCIES; EXEMPTIONS; COMPLIANCE OFFICER; ANNUAL REPORTS.—Section 5b of the Commodity Exchange Act (7 U.S.C. 7a– 

1) is amended by adding at the end the following: 


sroberts on DSKD5P82C1PROD with HEARING
317 

‘‘(g) EXISTING DEPOSITORY INSTITUTIONS AND CLEARING AGEN- CIES.— ‘‘(1) IN GENERAL.—A depository institution or clearing agency registered with the Securities and Exchange Commission 

under the Securities Exchange Act of 1934 (15 U.S.C. 78a et 

seq.) that is required to be registered as a derivatives clearing 

organization under this section is deemed to be registered under 

this section to the extent that, before the date of enactment of 

this subsection— 

‘‘(A) the depository institution cleared swaps as a multilateral clearing organization; or 

‘‘(B) the clearing agency cleared swaps. 

‘‘(2) CONVERSION OF DEPOSITORY INSTITUTIONS.—A depository institution to which this subsection applies may, by the 

vote of the shareholders owning not less than 51 percent of the 

voting interests of the depository institution, be converted into 

a State corporation, partnership, limited liability company, or 

similar legal form pursuant to a plan of conversion, if the conversion is not in contravention of applicable State law. 

‘‘(3) SHARING OF INFORMATION.—The Securities and Exchange Commission shall make available to the Commission, 

upon request, all information determined to be relevant by the 

Securities and Exchange Commission regarding a clearing 

agency deemed to be registered with the Commission under 

paragraph (1). 

‘‘(h) EXEMPTIONS.—The Commission may exempt, conditionally 

or unconditionally, a derivatives clearing organization from registration under this section for the clearing of swaps if the Commission determines that the derivatives clearing organization is subject 

to comparable, comprehensive supervision and regulation by the Securities and Exchange Commission or the appropriate government 

authorities in the home country of the organization. Such conditions 

may include, but are not limited to, requiring that the derivatives 

clearing organization be available for inspection by the Commission 

and make available all information requested by the Commission. 

‘‘(i) DESIGNATION OF CHIEF COMPLIANCE OFFICER.— ‘‘(1) IN GENERAL.—Each derivatives clearing organization 

shall designate an individual to serve as a chief compliance officer. 

‘‘(2) DUTIES.—The chief compliance officer shall— 

‘‘(A) report directly to the board or to the senior officer 

of the derivatives clearing organization; 

‘‘(B) review the compliance of the derivatives clearing 

organization with respect to the core principles described in 

subsection (c)(2); 

‘‘(C) in consultation with the board of the derivatives 

clearing organization, a body performing a function similar 

to the board of the derivatives clearing organization, or the 

senior officer of the derivatives clearing organization, resolve any conflicts of interest that may arise; 

‘‘(D) be responsible for administering each policy and 

procedure that is required to be established pursuant to 

this section; 

‘‘(E) ensure compliance with this Act (including regulations) relating to agreements, contracts, or transactions, inVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00321 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
318 

cluding each rule prescribed by the Commission under this 

section; 

‘‘(F) establish procedures for the remediation of noncompliance issues identified by the compliance officer 

through any— 

‘‘(i) compliance office review; 

‘‘(ii) look-back; 

‘‘(iii) internal or external audit finding; 

‘‘(iv) self-reported error; or 

‘‘(v) validated complaint; and 

‘‘(G) establish and follow appropriate procedures for 

the handling, management response, remediation, retesting, 

and closing of noncompliance issues. 

‘‘(3) ANNUAL REPORTS.— 

‘‘(A) IN GENERAL.—In accordance with rules prescribed 

by the Commission, the chief compliance officer shall annually prepare and sign a report that contains a description 

of— 

‘‘(i) the compliance of the derivatives clearing organization of the compliance officer with respect to this 

Act (including regulations); and 

‘‘(ii) each policy and procedure of the derivatives 

clearing organization of the compliance officer (including the code of ethics and conflict of interest policies of 

the derivatives clearing organization). 

‘‘(B) REQUIREMENTS.—A compliance report under subparagraph (A) shall— 

‘‘(i) accompany each appropriate financial report of 

the derivatives clearing organization that is required to 

be furnished to the Commission pursuant to this section; and 

‘‘(ii) include a certification that, under penalty of 

law, the compliance report is accurate and complete.’’. 

(c) CORE PRINCIPLES FOR DERIVATIVES CLEARING ORGANIZATIONS.—Section 5b(c) of the Commodity Exchange Act (7 U.S.C. 7a– 

1(c)) is amended by striking paragraph (2) and inserting the following: 

‘‘(2) CORE PRINCIPLES FOR DERIVATIVES CLEARING ORGANIZATIONS.— 

‘‘(A) COMPLIANCE.— 

‘‘(i) IN GENERAL.—To be registered and to maintain 

registration as a derivatives clearing organization, a 

derivatives clearing organization shall comply with 

each core principle described in this paragraph and 

any requirement that the Commission may impose by 

rule or regulation pursuant to section 8a(5). 

‘‘(ii) DISCRETION OF DERIVATIVES CLEARING ORGANIZATION.—Subject to any rule or regulation prescribed 

by the Commission, a derivatives clearing organization 

shall have reasonable discretion in establishing the 

manner by which the derivatives clearing organization 

complies with each core principle described in this 

paragraph. 

‘‘(B) FINANCIAL RESOURCES.— 


sroberts on DSKD5P82C1PROD with HEARING
319 

‘‘(i) IN GENERAL.—Each derivatives clearing organization shall have adequate financial, operational, 

and managerial resources, as determined by the Commission, to discharge each responsibility of the derivatives clearing organization. 

‘‘(ii) MINIMUM AMOUNT OF FINANCIAL RE- SOURCES.—Each derivatives clearing organization 

shall possess financial resources that, at a minimum, 

exceed the total amount that would— 

‘‘(I) enable the organization to meet its financial obligations to its members and participants 

notwithstanding a default by the member or participant creating the largest financial exposure for 

that organization in extreme but plausible market 

conditions; and 

‘‘(II) enable the derivatives clearing organization to cover the operating costs of the derivatives 

clearing organization for a period of 1 year (as calculated on a rolling basis). 

‘‘(C) PARTICIPANT AND PRODUCT ELIGIBILITY.— ‘‘(i) IN GENERAL.—Each derivatives clearing organization shall establish— 

‘‘(I) appropriate admission and continuing eligibility standards (including sufficient financial 

resources and operational capacity to meet obligations arising from participation in the derivatives 

clearing organization) for members of, and participants in, the derivatives clearing organization; 

and 

‘‘(II) appropriate standards for determining 

the eligibility of agreements, contracts, or transactions submitted to the derivatives clearing organization for clearing. 

‘‘(ii) REQUIRED PROCEDURES.—Each derivatives 

clearing organization shall establish and implement 

procedures to verify, on an ongoing basis, the compliance of each participation and membership requirement of the derivatives clearing organization. 

‘‘(iii) REQUIREMENTS.—The participation and 

membership requirements of each derivatives clearing 

organization shall— 

‘‘(I) be objective; 

‘‘(II) be publicly disclosed; and 

‘‘(III) permit fair and open access. 

‘‘(D) RISK MANAGEMENT.— 

‘‘(i) IN GENERAL.—Each derivatives clearing organization shall ensure that the derivatives clearing organization possesses the ability to manage the risks associated with discharging the responsibilities of the derivatives clearing organization through the use of appropriate tools and procedures. 

‘‘(ii) MEASUREMENT OF CREDIT EXPOSURE.—Each 

derivatives clearing organization shall— 

‘‘(I) not less than once during each business 

day of the derivatives clearing organization, measVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00323 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
320 

ure the credit exposures of the derivatives clearing 

organization to each member and participant of 

the derivatives clearing organization; and 

‘‘(II) monitor each exposure described in subclause (I) periodically during the business day of 

the derivatives clearing organization. 

‘‘(iii) LIMITATION OF EXPOSURE TO POTENTIAL

LOSSES FROM DEFAULTS.—Each derivatives clearing organization, through margin requirements and other 

risk control mechanisms, shall limit the exposure of the 

derivatives clearing organization to potential losses 

from defaults by members and participants of the derivatives clearing organization to ensure that— 

‘‘(I) the operations of the derivatives clearing 

organization would not be disrupted; and 

‘‘(II) nondefaulting members or participants 

would not be exposed to losses that nondefaulting 

members or participants cannot anticipate or control. 

‘‘(iv) MARGIN REQUIREMENTS.—The margin required from each member and participant of a derivatives clearing organization shall be sufficient to cover 

potential exposures in normal market conditions. 

‘‘(v) REQUIREMENTS REGARDING MODELS AND PARAMETERS.—Each model and parameter used in setting 

margin requirements under clause (iv) shall be— 

‘‘(I) risk-based; and 

‘‘(II) reviewed on a regular basis. 

‘‘(E) SETTLEMENT PROCEDURES.—Each derivatives 

clearing organization shall— 

‘‘(i) complete money settlements on a timely basis 

(but not less frequently than once each business day); 

‘‘(ii) employ money settlement arrangements to 

eliminate or strictly limit the exposure of the derivatives clearing organization to settlement bank risks (including credit and liquidity risks from the use of banks 

to effect money settlements); 

‘‘(iii) ensure that money settlements are final when 

effected; 

‘‘(iv) maintain an accurate record of the flow of 

funds associated with each money settlement; 

‘‘(v) possess the ability to comply with each term 

and condition of any permitted netting or offset arrangement with any other clearing organization; 

‘‘(vi) regarding physical settlements, establish rules 

that clearly state each obligation of the derivatives 

clearing organization with respect to physical deliveries; and 

‘‘(vii) ensure that each risk arising from an obligation described in clause (vi) is identified and managed. 

‘‘(F) TREATMENT OF FUNDS.— 

‘‘(i) REQUIRED STANDARDS AND PROCEDURES.— 

Each derivatives clearing organization shall establish 

standards and procedures that are designed to protect 


sroberts on DSKD5P82C1PROD with HEARING
321 

and ensure the safety of member and participant funds 

and assets. 

‘‘(ii) HOLDING OF FUNDS AND ASSETS.—Each derivatives clearing organization shall hold member and 

participant funds and assets in a manner by which to 

minimize the risk of loss or of delay in the access by 

the derivatives clearing organization to the assets and 

funds. 

‘‘(iii) PERMISSIBLE INVESTMENTS.—Funds and assets invested by a derivatives clearing organization 

shall be held in instruments with minimal credit, market, and liquidity risks. 

‘‘(G) DEFAULT RULES AND PROCEDURES.— ‘‘(i) IN GENERAL.—Each derivatives clearing organization shall have rules and procedures designed to 

allow for the efficient, fair, and safe management of 

events during which members or participants— 

‘‘(I) become insolvent; or 

‘‘(II) otherwise default on the obligations of the 

members or participants to the derivatives clearing 

organization. 

‘‘(ii) DEFAULT PROCEDURES.—Each derivatives 

clearing organization shall— 

‘‘(I) clearly state the default procedures of the 

derivatives clearing organization; 

‘‘(II) make publicly available the default rules 

of the derivatives clearing organization; and 

‘‘(III) ensure that the derivatives clearing organization may take timely action— 

‘‘(aa) to contain losses and liquidity pressures; and 

‘‘(bb) to continue meeting each obligation 

of the derivatives clearing organization. 

‘‘(H) RULE ENFORCEMENT.—Each derivatives clearing 

organization shall— 

‘‘(i) maintain adequate arrangements and resources for— 

‘‘(I) the effective monitoring and enforcement of 

compliance with the rules of the derivatives clearing organization; and 

‘‘(II) the resolution of disputes; 

‘‘(ii) have the authority and ability to discipline, 

limit, suspend, or terminate the activities of a member 

or participant due to a violation by the member or participant of any rule of the derivatives clearing organization; and 

‘‘(iii) report to the Commission regarding rule enforcement activities and sanctions imposed against 

members and participants as provided in clause (ii). 

‘‘(I) SYSTEM SAFEGUARDS.—Each derivatives clearing 

organization shall— 

‘‘(i) establish and maintain a program of risk analysis and oversight to identify and minimize sources of 

operational risk through the development of appropriate controls and procedures, and automated sysVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00325 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
322 

tems, that are reliable, secure, and have adequate scalable capacity; 

‘‘(ii) establish and maintain emergency procedures, 

backup facilities, and a plan for disaster recovery that 

allows for— 

‘‘(I) the timely recovery and resumption of operations of the derivatives clearing organization; 

and 

‘‘(II) the fulfillment of each obligation and responsibility of the derivatives clearing organization; and 

‘‘(iii) periodically conduct tests to verify that the 

backup resources of the derivatives clearing organization are sufficient to ensure daily processing, clearing, 

and settlement. 

‘‘(J) REPORTING.—Each derivatives clearing organization shall provide to the Commission all information that 

the Commission determines to be necessary to conduct oversight of the derivatives clearing organization. 

‘‘(K) RECORDKEEPING.—Each derivatives clearing organization shall maintain records of all activities related to 

the business of the derivatives clearing organization as a 

derivatives clearing organization— 

‘‘(i) in a form and manner that is acceptable to the 

Commission; and 

‘‘(ii) for a period of not less than 5 years. 

‘‘(L) PUBLIC INFORMATION.— ‘‘(i) IN GENERAL.—Each derivatives clearing organization shall provide to market participants sufficient 

information to enable the market participants to identify and evaluate accurately the risks and costs associated with using the services of the derivatives clearing 

organization. 

‘‘(ii) AVAILABILITY OF INFORMATION.—Each derivatives clearing organization shall make information concerning the rules and operating and default procedures 

governing the clearing and settlement systems of the 

derivatives clearing organization available to market 

participants. 

‘‘(iii) PUBLIC DISCLOSURE.—Each derivatives clearing organization shall disclose publicly and to the 

Commission information concerning— 

‘‘(I) the terms and conditions of each contract, 

agreement, and transaction cleared and settled by 

the derivatives clearing organization; 

‘‘(II) each clearing and other fee that the derivatives clearing organization charges the members and participants of the derivatives clearing 

organization; 

‘‘(III) the margin-setting methodology, and the 

size and composition, of the financial resource 

package of the derivatives clearing organization; 

‘‘(IV) daily settlement prices, volume, and open 

interest for each contract settled or cleared by the 

derivatives clearing organization; and 


sroberts on DSKD5P82C1PROD with HEARING
323 

‘‘(V) any other matter relevant to participation 

in the settlement and clearing activities of the derivatives clearing organization. 

‘‘(M) INFORMATION-SHARING.—Each derivatives clearing organization shall— 

‘‘(i) enter into, and abide by the terms of, each appropriate and applicable domestic and international 

information-sharing agreement; and 

‘‘(ii) use relevant information obtained from each 

agreement described in clause (i) in carrying out the 

risk management program of the derivatives clearing 

organization. 

‘‘(N) ANTITRUST CONSIDERATIONS.—Unless necessary or 

appropriate to achieve the purposes of this Act, a derivatives clearing organization shall not— 

‘‘(i) adopt any rule or take any action that results 

in any unreasonable restraint of trade; or 

‘‘(ii) impose any material anticompetitive burden. 

‘‘(O) GOVERNANCE FITNESS STANDARDS.— ‘‘(i) GOVERNANCE ARRANGEMENTS.—Each derivatives clearing organization shall establish governance 

arrangements that are transparent— 

‘‘(I) to fulfill public interest requirements; and 

‘‘(II) to permit the consideration of the views of 

owners and participants. 

‘‘(ii) FITNESS STANDARDS.—Each derivatives clearing organization shall establish and enforce appropriate fitness standards for— 

‘‘(I) directors; 

‘‘(II) members of any disciplinary committee; 

‘‘(III) members of the derivatives clearing organization; 

‘‘(IV) any other individual or entity with direct 

access to the settlement or clearing activities of the 

derivatives clearing organization; and 

‘‘(V) any party affiliated with any individual 

or entity described in this clause. 

‘‘(P) CONFLICTS OF INTEREST.—Each derivatives clearing organization shall— 

‘‘(i) establish and enforce rules to minimize conflicts of interest in the decision-making process of the 

derivatives clearing organization; and 

‘‘(ii) establish a process for resolving conflicts of interest described in clause (i). 

‘‘(Q) COMPOSITION OF GOVERNING BOARDS.—Each derivatives clearing organization shall ensure that the composition of the governing board or committee of the derivatives clearing organization includes market participants. 

‘‘(R) LEGAL RISK.—Each derivatives clearing organization shall have a well-founded, transparent, and enforceable legal framework for each aspect of the activities of the 

derivatives clearing organization.’’. 

(d) CONFLICTS OF INTEREST.—The Commodity Futures Trading 

Commission shall adopt rules mitigating conflicts of interest in connection with the conduct of business by a swap dealer or a major 


sroberts on DSKD5P82C1PROD with HEARING
324 

swap participant with a derivatives clearing organization, board of 

trade, or a swap execution facility that clears or trades swaps in 

which the swap dealer or major swap participant has a material 

debt or material equity investment. 

(e) REPORTING REQUIREMENTS.—Section 5b of the Commodity 

Exchange Act (7 U.S.C. 7a–1) (as amended by subsection (b)) is 

amended by adding at the end the following: 

‘‘(k) REPORTING REQUIREMENTS.— ‘‘(1) DUTY OF DERIVATIVES CLEARING ORGANIZATIONS.— Each derivatives clearing organization that clears swaps shall 

provide to the Commission all information that is determined 

by the Commission to be necessary to perform each responsibility of the Commission under this Act. 

‘‘(2) DATA COLLECTION AND MAINTENANCE REQUIRE- MENTS.—The Commission shall adopt data collection and 

maintenance requirements for swaps cleared by derivatives 

clearing organizations that are comparable to the corresponding 

requirements for— 

‘‘(A) swaps data reported to swap data repositories; 

and 

‘‘(B) swaps traded on swap execution facilities. 

‘‘(3) REPORTS ON SECURITY-BASED SWAP AGREEMENTS TO BE

SHARED WITH THE SECURITIES AND EXCHANGE COMMISSION.— ‘‘(A) IN GENERAL.—A derivatives clearing organization 

that clears security-based swap agreements (as defined in 

section 1a(47)(A)(v)) shall, upon request, open to inspection 

and examination to the Securities and Exchange Commission all books and records relating to such security-based 

swap agreements, consistent with the confidentiality and 

disclosure requirements of section 8. 

‘‘(B) JURISDICTION.—Nothing in this paragraph shall 

affect the exclusive jurisdiction of the Commission to prescribe recordkeeping and reporting requirements for a derivatives clearing organization that is registered with the 

Commission. 

‘‘(4) INFORMATION SHARING.—Subject to section 8, and upon 

request, the Commission shall share information collected 

under paragraph (2) with— 

‘‘(A) the Board; 

‘‘(B) the Securities and Exchange Commission; 

‘‘(C) each appropriate prudential regulator; 

‘‘(D) the Financial Stability Oversight Council; 

‘‘(E) the Department of Justice; and 

‘‘(F) any other person that the Commission determines 

to be appropriate, including— 

‘‘(i) foreign financial supervisors (including foreign 

futures authorities); 

‘‘(ii) foreign central banks; and 

‘‘(iii) foreign ministries. 

‘‘(5) CONFIDENTIALITY AND INDEMNIFICATION AGREEMENT.— Before the Commission may share information with any entity 

described in paragraph (4)— 

‘‘(A) the Commission shall receive a written agreement 

from each entity stating that the entity shall abide by the 

confidentiality requirements described in section 8 relating 


sroberts on DSKD5P82C1PROD with HEARING
325 

to the information on swap transactions that is provided; 

and 

‘‘(B) each entity shall agree to indemnify the Commission for any expenses arising from litigation relating to the 

information provided under section 8. 

‘‘(6) PUBLIC INFORMATION.—Each derivatives clearing organization that clears swaps shall provide to the Commission (including any designee of the Commission) information under 

paragraph (2) in such form and at such frequency as is required by the Commission to comply with the public reporting 

requirements contained in section 2(a)(13).’’. 

(f) PUBLIC DISCLOSURE.—Section 8(e) of the Commodity Exchange Act (7 U.S.C. 12(e)) is amended in the last sentence— 

(1) by inserting ‘‘, central bank and ministries,’’ after ‘‘department’’ each place it appears; and 

(2) by striking ‘‘. is a party.’’ and inserting ‘‘, is a party.’’. 

(g) LEGAL CERTAINTY FOR IDENTIFIED BANKING PRODUCTS.— (1) REPEALS.—The Legal Certainty for Bank Products Act 

of 2000 (7 U.S.C. 27 et seq.) is amended— 

(A) by striking sections 404 and 407 (7 U.S.C. 27b, 

27e); 

(B) in section 402 (7 U.S.C. 27), by striking subsection 

(d); and 

(C) in section 408 (7 U.S.C. 27f)— 

(i) in subsection (c)— 

(I) by striking ‘‘in the case’’ and all that follows through ‘‘a hybrid’’ and inserting ‘‘in the case 

of a hybrid’’; 

(II) by striking ‘‘; or’’ and inserting a period; 

and 

(III) by striking paragraph (2); 

(ii) by striking subsection (b); and 

(iii) by redesignating subsection (c) as subsection 

(b). 

(2) LEGAL CERTAINTY FOR BANK PRODUCTS ACT OF 2000.— Section 403 of the Legal Certainty for Bank Products Act of 

2000 (7 U.S.C. 27a) is amended to read as follows: 

‘‘SEC. 403. EXCLUSION OF IDENTIFIED BANKING PRODUCT. 

‘‘(a) EXCLUSION.—Except as provided in subsection (b) or (c)— 

‘‘(1) the Commodity Exchange Act (7 U.S.C. 1 et seq.) shall 

not apply to, and the Commodity Futures Trading Commission 

shall not exercise regulatory authority under the Commodity 

Exchange Act (7 U.S.C. 1 et seq.) with respect to, an identified 

banking product; and 

‘‘(2) the definitions of ‘security-based swap’ in section 

3(a)(68) of the Securities Exchange Act of 1934 and ‘securitybased swap agreement’ in section 1a(47)(A)(v) of the Commodity 

Exchange Act and section 3(a)(78) of the Securities Exchange 

Act of 1934 do not include any identified bank product. 

‘‘(b) EXCEPTION.—An appropriate Federal banking agency may 

except an identified banking product of a bank under its regulatory 

jurisdiction from the exclusion in subsection (a) if the agency determines, in consultation with the Commodity Futures Trading Commission and the Securities and Exchange Commission, that the 

product— 


sroberts on DSKD5P82C1PROD with HEARING
326 

‘‘(1) would meet the definition of a ‘swap’ under section 

1a(47) of the Commodity Exchange Act (7 U.S.C. 1a) or a ‘security-based swap’ under that section 3(a)(68) of the Securities Exchange Act of 1934; and 

‘‘(2) has become known to the trade as a swap or securitybased swap, or otherwise has been structured as an identified 

banking product for the purpose of evading the provisions of the 

Commodity Exchange Act (7 U.S.C. 1 et seq.), the Securities Act 

of 1933 (15 U.S.C. 77a et seq.), or the Securities Exchange Act 

of 1934 (15 U.S.C. 78a et seq.). 

‘‘(c) EXCEPTION.—The exclusions in subsection (a) shall not 

apply to an identified bank product that— 

‘‘(1) is a product of a bank that is not under the regulatory 

jurisdiction of an appropriate Federal banking agency; 

‘‘(2) meets the definition of swap in section 1a(47) of the 

Commodity Exchange Act or security-based swap in section 

3(a)(68) of the Securities Exchange Act of 1934; and 

‘‘(3) has become known to the trade as a swap or securitybased swap, or otherwise has been structured as an identified 

banking product for the purpose of evading the provisions of the 

Commodity Exchange Act (7 U.S.C. 1 et seq.), the Securities Act 

of 1933 (15 U.S.C. 77a et seq.), or the Securities Exchange Act 

of 1934 (15 U.S.C. 78a et seq.).’’. 

(h) REDUCING CLEARING SYSTEMIC RISK.—Section 5b(f)(1) of 

the Commodity Exchange Act (7 U.S.C. 7a–1(F)(i)) is amended by 

adding at the end the following: ‘‘In order to minimize systemic risk, 

under no circumstances shall a derivatives clearing organization be 

compelled to accept the counterparty credit risk of another clearing 

organization.’’. 

SEC. 726. RULEMAKING ON CONFLICT OF INTEREST. 

(a) IN GENERAL.—In order to mitigate conflicts of interest, not 

later than 180 days after the date of enactment of the Wall Street 

Transparency and Accountability Act of 2010, the Commodity Futures Trading Commission shall adopt rules which may include numerical limits on the control of, or the voting rights with respect to, 

any derivatives clearing organization that clears swaps, or swap 

execution facility or board of trade designated as a contract market 

that posts swaps or makes swaps available for trading, by a bank 

holding company (as defined in section 2 of the Bank Holding Company Act of 1956 (12 U.S.C. 1841)) with total consolidated assets of 

$50,000,000,000 or more, a nonbank financial company (as defined 

in section 102) supervised by the Board, an affiliate of such a bank 

holding company or nonbank financial company, a swap dealer, 

major swap participant, or associated person of a swap dealer or 

major swap participant. 

(b) PURPOSES.—The Commission shall adopt rules if it determines, after the review described in subsection (a), that such rules 

are necessary or appropriate to improve the governance of, or to 

mitigate systemic risk, promote competition, or mitigate conflicts of 

interest in connection with a swap dealer or major swap participant’s conduct of business with, a derivatives clearing organization, 

contract market, or swap execution facility that clears or posts 

swaps or makes swaps available for trading and in which such 

swap dealer or major swap participant has a material debt or equity investment. 


sroberts on DSKD5P82C1PROD with HEARING
327 

(c) CONSIDERATIONS.—In adopting rules pursuant to this section, the Commodity Futures Trading Commission shall consider 

any conflicts of interest arising from the amount of equity owned by 

a single investor, the ability to vote, cause the vote of, or withhold 

votes entitled to be cast on any matters by the holders of the ownership interest, and the governance arrangements of any derivatives 

clearing organization that clears swaps, or swap execution facility 

or board of trade designated as a contract market that posts swaps 

or makes swaps available for trading. 

SEC. 727. PUBLIC REPORTING OF SWAP TRANSACTION DATA. 

Section 2(a) of the Commodity Exchange Act (7 U.S.C. 2(a)) is 

amended by adding at the end the following: 

‘‘(13) PUBLIC AVAILABILITY OF SWAP TRANSACTION DATA.— ‘‘(A) DEFINITION OF REAL-TIME PUBLIC REPORTING.—In 

this paragraph, the term ‘real-time public reporting’ means 

to report data relating to a swap transaction, including 

price and volume, as soon as technologically practicable 

after the time at which the swap transaction has been executed. 

‘‘(B) PURPOSE.—The purpose of this section is to authorize the Commission to make swap transaction and pricing data available to the public in such form and at such 

times as the Commission determines appropriate to enhance price discovery. 

‘‘(C) GENERAL RULE.—The Commission is authorized 

and required to provide by rule for the public availability 

of swap transaction and pricing data as follows: 

‘‘(i) With respect to those swaps that are subject to 

the mandatory clearing requirement described in subsection (h)(1) (including those swaps that are excepted 

from the requirement pursuant to subsection (h)(7)), the 

Commission shall require real-time public reporting for 

such transactions. 

‘‘(ii) With respect to those swaps that are not subject to the mandatory clearing requirement described in 

subsection (h)(1), but are cleared at a registered derivatives clearing organization, the Commission shall require real-time public reporting for such transactions. 

‘‘(iii) With respect to swaps that are not cleared at 

a registered derivatives clearing organization and 

which are reported to a swap data repository or the 

Commission under subsection (h)(6), the Commission 

shall require real-time public reporting for such transactions, in a manner that does not disclose the business 

transactions and market positions of any person. 

‘‘(iv) With respect to swaps that are determined to 

be required to be cleared under subsection (h)(2) but 

are not cleared, the Commission shall require real-time 

public reporting for such transactions. 

‘‘(D) REGISTERED ENTITIES AND PUBLIC REPORTING.— 

The Commission may require registered entities to publicly 

disseminate the swap transaction and pricing data required to be reported under this paragraph. 

‘‘(E) RULEMAKING REQUIRED.—With respect to the rule 

providing for the public availability of transaction and 


sroberts on DSKD5P82C1PROD with HEARING
328 

pricing data for swaps described in clauses (i) and (ii) of 

subparagraph (C), the rule promulgated by the Commission 

shall contain provisions— 

‘‘(i) to ensure such information does not identify 

the participants; 

‘‘(ii) to specify the criteria for determining what 

constitutes a large notional swap transaction (block 

trade) for particular markets and contracts; 

‘‘(iii) to specify the appropriate time delay for reporting large notional swap transactions (block trades) 

to the public; and 

‘‘(iv) that take into account whether the public disclosure will materially reduce market liquidity. 

‘‘(F) TIMELINESS OF REPORTING.—Parties to a swap (including agents of the parties to a swap) shall be responsible 

for reporting swap transaction information to the appropriate registered entity in a timely manner as may be prescribed by the Commission. 

‘‘(G) REPORTING OF SWAPS TO REGISTERED SWAP DATA

REPOSITORIES.—Each swap (whether cleared or uncleared) 

shall be reported to a registered swap data repository. 

‘‘(14) SEMIANNUAL AND ANNUAL PUBLIC REPORTING OF AGGREGATE SWAP DATA.— 

‘‘(A) IN GENERAL.—In accordance with subparagraph 

(B), the Commission shall issue a written report on a semiannual and annual basis to make available to the public 

information relating to— 

‘‘(i) the trading and clearing in the major swap 

categories; and 

‘‘(ii) the market participants and developments in 

new products. 

‘‘(B) USE; CONSULTATION.—In preparing a report under 

subparagraph (A), the Commission shall— 

‘‘(i) use information from swap data repositories 

and derivatives clearing organizations; and 

‘‘(ii) consult with the Office of the Comptroller of 

the Currency, the Bank for International Settlements, 

and such other regulatory bodies as may be necessary. 

‘‘(C) AUTHORITY OF THE COMMISSION.—The Commission may, by rule, regulation, or order, delegate the public 

reporting responsibilities of the Commission under this 

paragraph in accordance with such terms and conditions 

as the Commission determines to be appropriate and in the 

public interest.’’. 

SEC. 728. SWAP DATA REPOSITORIES. 

The Commodity Exchange Act is amended by inserting after 

section 20 (7 U.S.C. 24) the following: 

‘‘SEC. 21. SWAP DATA REPOSITORIES. 

‘‘(a) REGISTRATION REQUIREMENT.— 

‘‘(1) REQUIREMENT; AUTHORITY OF DERIVATIVES CLEARING

ORGANIZATION.— 

‘‘(A) IN GENERAL.—It shall be unlawful for any person, 

unless registered with the Commission, directly or indirectly to make use of the mails or any means or instrumenVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00332 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
329 

tality of interstate commerce to perform the functions of a 

swap data repository. 

‘‘(B) REGISTRATION OF DERIVATIVES CLEARING ORGANI- ZATIONS.—A derivatives clearing organization may register 

as a swap data repository. 

‘‘(2) INSPECTION AND EXAMINATION.—Each registered swap 

data repository shall be subject to inspection and examination 

by any representative of the Commission. 

‘‘(3) COMPLIANCE WITH CORE PRINCIPLES.— ‘‘(A) IN GENERAL.—To be registered, and maintain registration, as a swap data repository, the swap data repository shall comply with— 

‘‘(i) the requirements and core principles described 

in this section; and 

‘‘(ii) any requirement that the Commission may impose by rule or regulation pursuant to section 8a(5). 

‘‘(B) REASONABLE DISCRETION OF SWAP DATA REPOSI- TORY.—Unless otherwise determined by the Commission by 

rule or regulation, a swap data repository described in subparagraph (A) shall have reasonable discretion in establishing the manner in which the swap data repository complies with the core principles described in this section. 

‘‘(b) STANDARD SETTING.— ‘‘(1) DATA IDENTIFICATION.— ‘‘(A) IN GENERAL.—In accordance with subparagraph 

(B), the Commission shall prescribe standards that specify 

the data elements for each swap that shall be collected and 

maintained by each registered swap data repository. 

‘‘(B) REQUIREMENT.—In carrying out subparagraph 

(A), the Commission shall prescribe consistent data element 

standards applicable to registered entities and reporting 

counterparties. 

‘‘(2) DATA COLLECTION AND MAINTENANCE.—The Commission shall prescribe data collection and data maintenance 

standards for swap data repositories. 

‘‘(3) COMPARABILITY.—The standards prescribed by the 

Commission under this subsection shall be comparable to the 

data standards imposed by the Commission on derivatives 

clearing organizations in connection with their clearing of 

swaps. 

‘‘(c) DUTIES.—A swap data repository shall— 

‘‘(1) accept data prescribed by the Commission for each 

swap under subsection (b); 

‘‘(2) confirm with both counterparties to the swap the accuracy of the data that was submitted; 

‘‘(3) maintain the data described in paragraph (1) in such 

form, in such manner, and for such period as may be required 

by the Commission; 

‘‘(4)(A) provide direct electronic access to the Commission 

(or any designee of the Commission, including another registered entity); and 

‘‘(B) provide the information described in paragraph (1) in 

such form and at such frequency as the Commission may require to comply with the public reporting requirements contained in section 2(a)(13); 


sroberts on DSKD5P82C1PROD with HEARING
330 

‘‘(5) at the direction of the Commission, establish automated systems for monitoring, screening, and analyzing swap 

data, including compliance and frequency of end user clearing 

exemption claims by individual and affiliated entities; 

‘‘(6) maintain the privacy of any and all swap transaction 

information that the swap data repository receives from a swap 

dealer, counterparty, or any other registered entity; and 

‘‘(7) on a confidential basis pursuant to section 8, upon request, and after notifying the Commission of the request, make 

available all data obtained by the swap data repository, including individual counterparty trade and position data, to— 

‘‘(A) each appropriate prudential regulator; 

‘‘(B) the Financial Stability Oversight Council; 

‘‘(C) the Securities and Exchange Commission; 

‘‘(D) the Department of Justice; and 

‘‘(E) any other person that the Commission determines 

to be appropriate, including— 

‘‘(i) foreign financial supervisors (including foreign 

futures authorities); 

‘‘(ii) foreign central banks; and 

‘‘(iii) foreign ministries; and 

‘‘(8) establish and maintain emergency procedures, backup 

facilities, and a plan for disaster recovery that allows for the 

timely recovery and resumption of operations and the fulfillment of the responsibilities and obligations of the organization. 

‘‘(d) CONFIDENTIALITY AND INDEMNIFICATION AGREEMENT.—Before the swap data repository may share information with any entity 

described in subsection (c)(7)— 

‘‘(1) the swap data repository shall receive a written agreement from each entity stating that the entity shall abide by the 

confidentiality requirements described in section 8 relating to 

the information on swap transactions that is provided; and 

‘‘(2) each entity shall agree to indemnify the swap data repository and the Commission for any expenses arising from litigation relating to the information provided under section 8. 

‘‘(e) DESIGNATION OF CHIEF COMPLIANCE OFFICER.— 

‘‘(1) IN GENERAL.—Each swap data repository shall designate an individual to serve as a chief compliance officer. 

‘‘(2) DUTIES.—The chief compliance officer shall— 

‘‘(A) report directly to the board or to the senior officer 

of the swap data repository; 

‘‘(B) review the compliance of the swap data repository 

with respect to the requirements and core principles described in this section; 

‘‘(C) in consultation with the board of the swap data 

repository, a body performing a function similar to the 

board of the swap data repository, or the senior officer of 

the swap data repository, resolve any conflicts of interest 

that may arise; 

‘‘(D) be responsible for administering each policy and 

procedure that is required to be established pursuant to 

this section; 

‘‘(E) ensure compliance with this Act (including regulations) relating to agreements, contracts, or transactions, inVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00334 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
331 

cluding each rule prescribed by the Commission under this 

section; 

‘‘(F) establish procedures for the remediation of noncompliance issues identified by the chief compliance officer 

through any— 

‘‘(i) compliance office review; 

‘‘(ii) look-back; 

‘‘(iii) internal or external audit finding; 

‘‘(iv) self-reported error; or 

‘‘(v) validated complaint; and 

‘‘(G) establish and follow appropriate procedures for 

the handling, management response, remediation, retesting, 

and closing of noncompliance issues. 

‘‘(3) ANNUAL REPORTS.— ‘‘(A) IN GENERAL.—In accordance with rules prescribed 

by the Commission, the chief compliance officer shall annually prepare and sign a report that contains a description 

of— 

‘‘(i) the compliance of the swap data repository of 

the chief compliance officer with respect to this Act (including regulations); and 

‘‘(ii) each policy and procedure of the swap data repository of the chief compliance officer (including the 

code of ethics and conflict of interest policies of the 

swap data repository). 

‘‘(B) REQUIREMENTS.—A compliance report under subparagraph (A) shall— 

‘‘(i) accompany each appropriate financial report of 

the swap data repository that is required to be furnished to the Commission pursuant to this section; and 

‘‘(ii) include a certification that, under penalty of 

law, the compliance report is accurate and complete. 

‘‘(f) CORE PRINCIPLES APPLICABLE TO SWAP DATA REPOSI- TORIES.— 

‘‘(1) ANTITRUST CONSIDERATIONS.—Unless necessary or appropriate to achieve the purposes of this Act, a swap data repository shall not— 

‘‘(A) adopt any rule or take any action that results in 

any unreasonable restraint of trade; or 

‘‘(B) impose any material anticompetitive burden on the 

trading, clearing, or reporting of transactions. 

‘‘(2) GOVERNANCE ARRANGEMENTS.—Each swap data repository shall establish governance arrangements that are transparent— 

‘‘(A) to fulfill public interest requirements; and 

‘‘(B) to support the objectives of the Federal Government, owners, and participants. 

‘‘(3) CONFLICTS OF INTEREST.—Each swap data repository 

shall— 

‘‘(A) establish and enforce rules to minimize conflicts of 

interest in the decision-making process of the swap data repository; and 

‘‘(B) establish a process for resolving conflicts of interest described in subparagraph (A). 

‘‘(4) ADDITIONAL DUTIES DEVELOPED BY COMMISSION.— 


sroberts on DSKD5P82C1PROD with HEARING
332 

‘‘(A) IN GENERAL.—The Commission may develop 1 or 

more additional duties applicable to swap data repositories. 

‘‘(B) CONSIDERATION OF EVOLVING STANDARDS.—In developing additional duties under subparagraph (A), the 

Commission may take into consideration any evolving 

standard of the United States or the international community. 

‘‘(C) ADDITIONAL DUTIES FOR COMMISSION DESIGNEES.—The Commission shall establish additional duties 

for any registrant described in section 1a(48) in order to 

minimize conflicts of interest, protect data, ensure compliance, and guarantee the safety and security of the swap 

data repository. 

‘‘(g) REQUIRED REGISTRATION FOR SWAP DATA REPOSITORIES.— 

Any person that is required to be registered as a swap data repository under this section shall register with the Commission regardless of whether that person is also licensed as a bank or registered 

with the Securities and Exchange Commission as a swap data repository. 

‘‘(h) RULES.—The Commission shall adopt rules governing persons that are registered under this section.’’. 

SEC. 729. REPORTING AND RECORDKEEPING. 

The Commodity Exchange Act is amended by inserting after 

section 4q (7 U.S.C. 6o–1) the following: 

‘‘SEC. 4r. REPORTING AND RECORDKEEPING FOR UNCLEARED SWAPS. 

‘‘(a) REQUIRED REPORTING OF SWAPS NOT ACCEPTED BY ANY

DERIVATIVES CLEARING ORGANIZATION.— 

‘‘(1) IN GENERAL.—Each swap that is not accepted for clearing by any derivatives clearing organization shall be reported 

to— 

‘‘(A) a swap data repository described in section 21; or 

‘‘(B) in the case in which there is no swap data repository that would accept the swap, to the Commission pursuant to this section within such time period as the Commission may by rule or regulation prescribe. 

‘‘(2) TRANSITION RULE FOR PREENACTMENT SWAPS.— 

‘‘(A) SWAPS ENTERED INTO BEFORE THE DATE OF ENACTMENT OF THE WALL STREET TRANSPARENCY AND ACCOUNTABILITY ACT OF 2010.—Each swap entered into before the 

date of enactment of the Wall Street Transparency and Accountability Act of 2010, the terms of which have not expired as of the date of enactment of that Act, shall be reported to a registered swap data repository or the Commission by a date that is not later than— 

‘‘(i) 30 days after issuance of the interim final rule; 

or 

‘‘(ii) such other period as the Commission determines to be appropriate. 

‘‘(B) COMMISSION RULEMAKING.—The Commission 

shall promulgate an interim final rule within 90 days of 

the date of enactment of this section providing for the reporting of each swap entered into before the date of enactment as referenced in subparagraph (A). 


sroberts on DSKD5P82C1PROD with HEARING
333 

‘‘(C) EFFECTIVE DATE.—The reporting provisions described in this section shall be effective upon the enactment 

of this section. 

‘‘(3) REPORTING OBLIGATIONS.— 

‘‘(A) SWAPS IN WHICH ONLY 1 COUNTERPARTY IS A SWAP

DEALER OR MAJOR SWAP PARTICIPANT.—With respect to a 

swap in which only 1 counterparty is a swap dealer or 

major swap participant, the swap dealer or major swap 

participant shall report the swap as required under paragraphs (1) and (2). 

‘‘(B) SWAPS IN WHICH 1 COUNTERPARTY IS A SWAP DEALER AND THE OTHER A MAJOR SWAP PARTICIPANT.—With respect to a swap in which 1 counterparty is a swap dealer 

and the other a major swap participant, the swap dealer 

shall report the swap as required under paragraphs (1) and 

(2). 

‘‘(C) OTHER SWAPS.—With respect to any other swap 

not described in subparagraph (A) or (B), the counterparties to the swap shall select a counterparty to report the 

swap as required under paragraphs (1) and (2). 

‘‘(b) DUTIES OF CERTAIN INDIVIDUALS.—Any individual or entity 

that enters into a swap shall meet each requirement described in 

subsection (c) if the individual or entity did not— 

‘‘(1) clear the swap in accordance with section 2(h)(1); or 

‘‘(2) have the data regarding the swap accepted by a swap 

data repository in accordance with rules (including timeframes) 

adopted by the Commission under section 21. 

‘‘(c) REQUIREMENTS.—An individual or entity described in subsection (b) shall— 

‘‘(1) upon written request from the Commission, provide reports regarding the swaps held by the individual or entity to 

the Commission in such form and in such manner as the Commission may request; and 

‘‘(2) maintain books and records pertaining to the swaps 

held by the individual or entity in such form, in such manner, 

and for such period as the Commission may require, which 

shall be open to inspection by— 

‘‘(A) any representative of the Commission; 

‘‘(B) an appropriate prudential regulator; 

‘‘(C) the Securities and Exchange Commission; 

‘‘(D) the Financial Stability Oversight Council; and 

‘‘(E) the Department of Justice. 

‘‘(d) IDENTICAL DATA.—In prescribing rules under this section, 

the Commission shall require individuals and entities described in 

subsection (b) to submit to the Commission a report that contains 

data that is not less comprehensive than the data required to be collected by swap data repositories under section 21.’’. 

SEC. 730. LARGE SWAP TRADER REPORTING. 

The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended 

by adding after section 4s (as added by section 731) the following: 

‘‘SEC. 4t. LARGE SWAP TRADER REPORTING. 

‘‘(a) PROHIBITION.— 

‘‘(1) IN GENERAL.—Except as provided in paragraph (2), it 

shall be unlawful for any person to enter into any swap that the 


sroberts on DSKD5P82C1PROD with HEARING
334 

Commission determines to perform a significant price discovery 

function with respect to registered entities if— 

‘‘(A) the person directly or indirectly enters into the 

swap during any 1 day in an amount equal to or in excess 

of such amount as shall be established periodically by the 

Commission; and 

‘‘(B) the person directly or indirectly has or obtains a 

position in the swap equal to or in excess of such amount 

as shall be established periodically by the Commission. 

‘‘(2) EXCEPTION.—Paragraph (1) shall not apply if— 

‘‘(A) the person files or causes to be filed with the properly designated officer of the Commission such reports regarding any transactions or positions described in subparagraphs (A) and (B) of paragraph (1) as the Commission 

may require by rule or regulation; and 

‘‘(B) in accordance with the rules and regulations of the 

Commission, the person keeps books and records of all such 

swaps and any transactions and positions in any related 

commodity traded on or subject to the rules of any designated contract market or swap execution facility, and of 

cash or spot transactions in, inventories of, and purchase 

and sale commitments of, such a commodity. 

‘‘(b) REQUIREMENTS.— 

‘‘(1) IN GENERAL.—Books and records described in subsection (a)(2)(B) shall— 

‘‘(A) show such complete details concerning all transactions and positions as the Commission may prescribe by 

rule or regulation; 

‘‘(B) be open at all times to inspection and examination 

by any representative of the Commission; and 

‘‘(C) be open at all times to inspection and examination 

by the Securities and Exchange Commission, to the extent 

such books and records relate to transactions in swaps (as 

that term is defined in section 1a(47)(A)(v)), and consistent 

with the confidentiality and disclosure requirements of section 8. 

‘‘(2) JURISDICTION.—Nothing in paragraph (1) shall affect 

the exclusive jurisdiction of the Commission to prescribe recordkeeping and reporting requirements for large swap traders 

under this section. 

‘‘(c) APPLICABILITY.—For purposes of this section, the swaps, futures, and cash or spot transactions and positions of any person 

shall include the swaps, futures, and cash or spot transactions and 

positions of any persons directly or indirectly controlled by the person. 

‘‘(d) SIGNIFICANT PRICE DISCOVERY FUNCTION.—In making a 

determination as to whether a swap performs or affects a significant 

price discovery function with respect to registered entities, the Commission shall consider the factors described in section 4a(a)(3).’’. 

SEC. 731. REGISTRATION AND REGULATION OF SWAP DEALERS AND 

MAJOR SWAP PARTICIPANTS. 

The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended 

by inserting after section 4r (as added by section 729) the following: 


sroberts on DSKD5P82C1PROD with HEARING
335 

‘‘SEC. 4s. REGISTRATION AND REGULATION OF SWAP DEALERS AND 

MAJOR SWAP PARTICIPANTS. 

‘‘(a) REGISTRATION.— 

‘‘(1) SWAP DEALERS.—It shall be unlawful for any person to 

act as a swap dealer unless the person is registered as a swap 

dealer with the Commission. 

‘‘(2) MAJOR SWAP PARTICIPANTS.—It shall be unlawful for 

any person to act as a major swap participant unless the person 

is registered as a major swap participant with the Commission. 

‘‘(b) REQUIREMENTS.— 

‘‘(1) IN GENERAL.—A person shall register as a swap dealer 

or major swap participant by filing a registration application 

with the Commission. 

‘‘(2) CONTENTS.— 

‘‘(A) IN GENERAL.—The application shall be made in 

such form and manner as prescribed by the Commission, 

and shall contain such information, as the Commission 

considers necessary concerning the business in which the 

applicant is or will be engaged. 

‘‘(B) CONTINUAL REPORTING.—A person that is registered as a swap dealer or major swap participant shall 

continue to submit to the Commission reports that contain 

such information pertaining to the business of the person as 

the Commission may require. 

‘‘(3) EXPIRATION.—Each registration under this section 

shall expire at such time as the Commission may prescribe by 

rule or regulation. 

‘‘(4) RULES.—Except as provided in subsections (d) and (e), 

the Commission may prescribe rules applicable to swap dealers 

and major swap participants, including rules that limit the activities of swap dealers and major swap participants. 

‘‘(5) TRANSITION.—Rules under this section shall provide 

for the registration of swap dealers and major swap participants not later than 1 year after the date of enactment of the 

Wall Street Transparency and Accountability Act of 2010. 

‘‘(6) STATUTORY DISQUALIFICATION.—Except to the extent 

otherwise specifically provided by rule, regulation, or order, it 

shall be unlawful for a swap dealer or a major swap participant to permit any person associated with a swap dealer or a 

major swap participant who is subject to a statutory disqualification to effect or be involved in effecting swaps on behalf of 

the swap dealer or major swap participant, if the swap dealer 

or major swap participant knew, or in the exercise of reasonable 

care should have known, of the statutory disqualification. 

‘‘(c) DUAL REGISTRATION.— 

‘‘(1) SWAP DEALER.—Any person that is required to be registered as a swap dealer under this section shall register with 

the Commission regardless of whether the person also is a depository institution or is registered with the Securities and Exchange Commission as a security-based swap dealer. 

‘‘(2) MAJOR SWAP PARTICIPANT.—Any person that is required to be registered as a major swap participant under this 

section shall register with the Commission regardless of whether the person also is a depository institution or is registered 


sroberts on DSKD5P82C1PROD with HEARING
336 

with the Securities and Exchange Commission as a major security-based swap participant. 

‘‘(d) RULEMAKINGS.— ‘‘(1) IN GENERAL.—The Commission shall adopt rules for 

persons that are registered as swap dealers or major swap participants under this section. 

‘‘(2) EXCEPTION FOR PRUDENTIAL REQUIREMENTS.— ‘‘(A) IN GENERAL.—The Commission may not prescribe 

rules imposing prudential requirements on swap dealers or 

major swap participants for which there is a prudential 

regulator. 

‘‘(B) APPLICABILITY.—Subparagraph (A) does not limit 

the authority of the Commission to prescribe rules as directed under this section. 

‘‘(e) CAPITAL AND MARGIN REQUIREMENTS.— ‘‘(1) IN GENERAL.— ‘‘(A) SWAP DEALERS AND MAJOR SWAP PARTICIPANTS

THAT ARE BANKS.—Each registered swap dealer and major 

swap participant for which there is a prudential regulator 

shall meet such minimum capital requirements and minimum initial and variation margin requirements as the 

prudential regulator shall by rule or regulation prescribe 

under paragraph (2)(A). 

‘‘(B) SWAP DEALERS AND MAJOR SWAP PARTICIPANTS

THAT ARE NOT BANKS.—Each registered swap dealer and 

major swap participant for which there is not a prudential 

regulator shall meet such minimum capital requirements 

and minimum initial and variation margin requirements 

as the Commission shall by rule or regulation prescribe 

under paragraph (2)(B). 

‘‘(2) RULES.— ‘‘(A) SWAP DEALERS AND MAJOR SWAP PARTICIPANTS

THAT ARE BANKS.—The prudential regulators, in consultation with the Commission and the Securities and Exchange 

Commission, shall jointly adopt rules for swap dealers and 

major swap participants, with respect to their activities as 

a swap dealer or major swap participant, for which there 

is a prudential regulator imposing— 

‘‘(i) capital requirements; and 

‘‘(ii) both initial and variation margin requirements on all swaps that are not cleared by a registered 

derivatives clearing organization. 

‘‘(B) SWAP DEALERS AND MAJOR SWAP PARTICIPANTS

THAT ARE NOT BANKS.—The Commission shall adopt rules 

for swap dealers and major swap participants, with respect 

to their activities as a swap dealer or major swap participant, for which there is not a prudential regulator imposing— 

‘‘(i) capital requirements; and 

‘‘(ii) both initial and variation margin requirements on all swaps that are not cleared by a registered 

derivatives clearing organization. 

‘‘(C) CAPITAL.—In setting capital requirements for a 

person that is designated as a swap dealer or a major swap 

participant for a single type or single class or category of 


sroberts on DSKD5P82C1PROD with HEARING
337 

swap or activities, the prudential regulator and the Commission shall take into account the risks associated with 

other types of swaps or classes of swaps or categories of 

swaps engaged in and the other activities conducted by that 

person that are not otherwise subject to regulation applicable to that person by virtue of the status of the person as 

a swap dealer or a major swap participant. 

‘‘(3) STANDARDS FOR CAPITAL AND MARGIN.— ‘‘(A) IN GENERAL.—To offset the greater risk to the 

swap dealer or major swap participant and the financial 

system arising from the use of swaps that are not cleared, 

the requirements imposed under paragraph (2) shall— 

‘‘(i) help ensure the safety and soundness of the 

swap dealer or major swap participant; and 

‘‘(ii) be appropriate for the risk associated with the 

non-cleared swaps held as a swap dealer or major 

swap participant. 

‘‘(B) RULE OF CONSTRUCTION.— ‘‘(i) IN GENERAL.—Nothing in this section shall 

limit, or be construed to limit, the authority— 

‘‘(I) of the Commission to set financial responsibility rules for a futures commission merchant or 

introducing broker registered pursuant to section 

4f(a) (except for section 4f(a)(3)) in accordance with 

section 4f(b); or 

‘‘(II) of the Securities and Exchange Commission to set financial responsibility rules for a 

broker or dealer registered pursuant to section 

15(b) of the Securities Exchange Act of 1934 (15 

U.S.C. 78o(b)) (except for section 15(b)(11) of that 

Act (15 U.S.C. 78o(b)(11)) in accordance with section 15(c)(3) of the Securities Exchange Act of 1934 

(15 U.S.C. 78o(c)(3)). 

‘‘(ii) FUTURES COMMISSION MERCHANTS AND OTHER

DEALERS.—A futures commission merchant, introducing broker, broker, or dealer shall maintain sufficient capital to comply with the stricter of any applicable capital requirements to which such futures commission merchant, introducing broker, broker, or dealer is 

subject to under this Act or the Securities Exchange Act 

of 1934 (15 U.S.C. 78a et seq.). 

‘‘(C) MARGIN REQUIREMENTS.—In prescribing margin 

requirements under this subsection, the prudential regulator with respect to swap dealers and major swap participants for which it is the prudential regulator and the Commission with respect to swap dealers and major swap participants for which there is no prudential regulator shall 

permit the use of noncash collateral, as the regulator or the 

Commission determines to be consistent with— 

‘‘(i) preserving the financial integrity of markets 

trading swaps; and 

‘‘(ii) preserving the stability of the United States financial system. 

‘‘(D) COMPARABILITY OF CAPITAL AND MARGIN REQUIREMENTS.— 


sroberts on DSKD5P82C1PROD with HEARING
338 

‘‘(i) IN GENERAL.—The prudential regulators, the 

Commission, and the Securities and Exchange Commission shall periodically (but not less frequently than 

annually) consult on minimum capital requirements 

and minimum initial and variation margin requirements. 

‘‘(ii) COMPARABILITY.—The entities described in 

clause (i) shall, to the maximum extent practicable, establish and maintain comparable minimum capital requirements and minimum initial and variation margin 

requirements, including the use of non cash collateral, 

for— 

‘‘(I) swap dealers; and 

‘‘(II) major swap participants. 

‘‘(f) REPORTING AND RECORDKEEPING.— ‘‘(1) IN GENERAL.—Each registered swap dealer and major 

swap participant— 

‘‘(A) shall make such reports as are required by the 

Commission by rule or regulation regarding the transactions and positions and financial condition of the registered swap dealer or major swap participant; 

‘‘(B)(i) for which there is a prudential regulator, shall 

keep books and records of all activities related to the business as a swap dealer or major swap participant in such 

form and manner and for such period as may be prescribed 

by the Commission by rule or regulation; and 

‘‘(ii) for which there is no prudential regulator, shall 

keep books and records in such form and manner and for 

such period as may be prescribed by the Commission by 

rule or regulation; 

‘‘(C) shall keep books and records described in subparagraph (B) open to inspection and examination by any 

representative of the Commission; and 

‘‘(D) shall keep any such books and records relating to 

swaps defined in section 1a(47)(A)(v) open to inspection and 

examination by the Securities and Exchange Commission. 

‘‘(2) RULES.—The Commission shall adopt rules governing 

reporting and recordkeeping for swap dealers and major swap 

participants. 

‘‘(g) DAILY TRADING RECORDS.— 

‘‘(1) IN GENERAL.—Each registered swap dealer and major 

swap participant shall maintain daily trading records of the 

swaps of the registered swap dealer and major swap participant 

and all related records (including related cash or forward 

transactions) and recorded communications, including electronic mail, instant messages, and recordings of telephone calls, 

for such period as may be required by the Commission by rule 

or regulation. 

‘‘(2) INFORMATION REQUIREMENTS.—The daily trading 

records shall include such information as the Commission shall 

require by rule or regulation. 

‘‘(3) COUNTERPARTY RECORDS.—Each registered swap dealer and major swap participant shall maintain daily trading 

records for each counterparty in a manner and form that is 

identifiable with each swap transaction. 


sroberts on DSKD5P82C1PROD with HEARING
339 

‘‘(4) AUDIT TRAIL.—Each registered swap dealer and major 

swap participant shall maintain a complete audit trail for conducting comprehensive and accurate trade reconstructions. 

‘‘(5) RULES.—The Commission shall adopt rules governing 

daily trading records for swap dealers and major swap participants. 

‘‘(h) BUSINESS CONDUCT STANDARDS.— 

‘‘(1) IN GENERAL.—Each registered swap dealer and major 

swap participant shall conform with such business conduct 

standards as prescribed in paragraph (3) and as may be prescribed by the Commission by rule or regulation that relate to— 

‘‘(A) fraud, manipulation, and other abusive practices 

involving swaps (including swaps that are offered but not 

entered into); 

‘‘(B) diligent supervision of the business of the registered swap dealer and major swap participant; 

‘‘(C) adherence to all applicable position limits; and 

‘‘(D) such other matters as the Commission determines 

to be appropriate. 

‘‘(2) RESPONSIBILITIES WITH RESPECT TO SPECIAL ENTITIES.— 

‘‘(A) ADVISING SPECIAL ENTITIES.—A swap dealer or 

major swap participant that acts as an advisor to a special 

entity regarding a swap shall comply with the requirements 

of subparagraph (4) with respect to such Special Entity. 

‘‘(B) ENTERING OF SWAPS WITH RESPECT TO SPECIAL ENTITIES.—A swap dealer that enters into or offers to enter 

into swap with a Special Entity shall comply with the requirements of subparagraph (5) with respect to such Special Entity. 

‘‘(C) SPECIAL ENTITY DEFINED.—For purposes of this 

subsection, the term ‘special entity’ means— 

‘‘(i) a Federal agency; 

‘‘(ii) a State, State agency, city, county, municipality, or other political subdivision of a State; 

‘‘(iii) any employee benefit plan, as defined in section 3 of the Employee Retirement Income Security Act 

of 1974 (29 U.S.C. 1002); 

‘‘(iv) any governmental plan, as defined in section 

3 of the Employee Retirement Income Security Act of 

1974 (29 U.S.C. 1002); or 

‘‘(v) any endowment, including an endowment that 

is an organization described in section 501(c)(3) of the 

Internal Revenue Code of 1986. 

‘‘(3) BUSINESS CONDUCT REQUIREMENTS.—Business conduct 

requirements adopted by the Commission shall— 

‘‘(A) establish a duty for a swap dealer or major swap 

participant to verify that any counterparty meets the eligibility standards for an eligible contract participant; 

‘‘(B) require disclosure by the swap dealer or major 

swap participant to any counterparty to the transaction 

(other than a swap dealer, major swap participant, security-based swap dealer, or major security-based swap participant) of— 


sroberts on DSKD5P82C1PROD with HEARING
340 

‘‘(i) information about the material risks and characteristics of the swap; 

‘‘(ii) any material incentives or conflicts of interest 

that the swap dealer or major swap participant may 

have in connection with the swap; and 

‘‘(iii)(I) for cleared swaps, upon the request of the 

counterparty, receipt of the daily mark of the transaction from the appropriate derivatives clearing organization; and 

‘‘(II) for uncleared swaps, receipt of the daily mark 

of the transaction from the swap dealer or the major 

swap participant; 

‘‘(C) establish a duty for a swap dealer or major swap 

participant to communicate in a fair and balanced manner 

based on principles of fair dealing and good faith; and 

‘‘(D) establish such other standards and requirements 

as the Commission may determine are appropriate in the 

public interest, for the protection of investors, or otherwise 

in furtherance of the purposes of this Act. 

‘‘(4) SPECIAL REQUIREMENTS FOR SWAP DEALERS ACTING AS

ADVISORS.— 

‘‘(A) IN GENERAL.—It shall be unlawful for a swap 

dealer or major swap participant— 

‘‘(i) to employ any device, scheme, or artifice to defraud any Special Entity or prospective customer who 

is a Special Entity; 

‘‘(ii) to engage in any transaction, practice, or 

course of business that operates as a fraud or deceit on 

any Special Entity or prospective customer who is a 

Special Entity; or 

‘‘(iii) to engage in any act, practice, or course of 

business that is fraudulent, deceptive or manipulative. 

‘‘(B) DUTY.—Any swap dealer that acts as an advisor 

to a Special Entity shall have a duty to act in the best interests of the Special Entity. 

‘‘(C) REASONABLE EFFORTS.—Any swap dealer that acts 

as an advisor to a Special Entity shall make reasonable efforts to obtain such information as is necessary to make a 

reasonable determination that any swap recommended by 

the swap dealer is in the best interests of the Special Entity, 

including information relating to— 

‘‘(i) the financial status of the Special Entity; 

‘‘(ii) the tax status of the Special Entity; 

‘‘(iii) the investment or financing objectives of the 

Special Entity; and 

‘‘(iv) any other information that the Commission 

may prescribe by rule or regulation. 

‘‘(5) SPECIAL REQUIREMENTS FOR SWAP DEALERS AS

COUNTERPARTIES TO SPECIAL ENTITIES.— ‘‘(A) Any swap dealer or major swap participant that 

offers to enter or enters into a swap with a Special Entity 

shall— 

‘‘(i) comply with any duty established by the Commission for a swap dealer or major swap participant, 

with respect to a counterparty that is an eligible conVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00344 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
341 

tract participant within the meaning of subclause (I) or 

(II) of clause (vii) of section 1a(18) of this Act, that requires the swap dealer or major swap participant to 

have a reasonable basis to believe that the counterparty 

that is a Special Entity has an independent representative that— 

‘‘(I) has sufficient knowledge to evaluate the 

transaction and risks; 

‘‘(II) is not subject to a statutory disqualification; 

‘‘(III) is independent of the swap dealer or 

major swap participant; 

‘‘(IV) undertakes a duty to act in the best interests of the counterparty it represents; 

‘‘(V) makes appropriate disclosures; 

‘‘(VI) will provide written representations to 

the Special Entity regarding fair pricing and the 

appropriateness of the transaction; and 

‘‘(VII) in the case of employee benefit plans 

subject to the Employee Retirement Income Security act of 1974, is a fiduciary as defined in section 

3 of that Act (29 U.S.C. 1002); and 

‘‘(ii) before the initiation of the transaction, disclose to the Special Entity in writing the capacity in 

which the swap dealer is acting; and 

‘‘(B) the Commission may establish such other standards and requirements as the Commission may determine 

are appropriate in the public interest, for the protection of 

investors, or otherwise in furtherance of the purposes of this 

Act. 

‘‘(6) RULES.—The Commission shall prescribe rules under 

this subsection governing business conduct standards for swap 

dealers and major swap participants. 

‘‘(7) APPLICABILITY.—This section shall not apply with respect to a transaction that is— 

‘‘(A) initiated by a Special Entity on an exchange or 

swap execution facility; and 

‘‘(B) one in which the swap dealer or major swap participant does not know the identity of the counterparty to 

the transaction. 

‘‘(i) DOCUMENTATION STANDARDS.— 

‘‘(1) IN GENERAL.—Each registered swap dealer and major 

swap participant shall conform with such standards as may be 

prescribed by the Commission by rule or regulation that relate 

to timely and accurate confirmation, processing, netting, documentation, and valuation of all swaps. 

‘‘(2) RULES.—The Commission shall adopt rules governing 

documentation standards for swap dealers and major swap 

participants. 

‘‘(j) DUTIES.—Each registered swap dealer and major swap participant at all times shall comply with the following requirements: 

‘‘(1) MONITORING OF TRADING.—The swap dealer or major 

swap participant shall monitor its trading in swaps to prevent 

violations of applicable position limits. 


sroberts on DSKD5P82C1PROD with HEARING
342 

‘‘(2) RISK MANAGEMENT PROCEDURES.—The swap dealer or 

major swap participant shall establish robust and professional 

risk management systems adequate for managing the day-today business of the swap dealer or major swap participant. 

‘‘(3) DISCLOSURE OF GENERAL INFORMATION.—The swap 

dealer or major swap participant shall disclose to the Commission and to the prudential regulator for the swap dealer or 

major swap participant, as applicable, information concerning— 

‘‘(A) terms and conditions of its swaps; 

‘‘(B) swap trading operations, mechanisms, and practices; 

‘‘(C) financial integrity protections relating to swaps; 

and 

‘‘(D) other information relevant to its trading in swaps. 

‘‘(4) ABILITY TO OBTAIN INFORMATION.—The swap dealer or 

major swap participant shall— 

‘‘(A) establish and enforce internal systems and procedures to obtain any necessary information to perform any 

of the functions described in this section; and 

‘‘(B) provide the information to the Commission and to 

the prudential regulator for the swap dealer or major swap 

participant, as applicable, on request. 

‘‘(5) CONFLICTS OF INTEREST.—The swap dealer and major 

swap participant shall implement conflict-of-interest systems 

and procedures that— 

‘‘(A) establish structural and institutional safeguards 

to ensure that the activities of any person within the firm 

relating to research or analysis of the price or market for 

any commodity or swap or acting in a role of providing 

clearing activities or making determinations as to accepting 

clearing customers are separated by appropriate informational partitions within the firm from the review, pressure, 

or oversight of persons whose involvement in pricing, trading, or clearing activities might potentially bias their judgment or supervision and contravene the core principles of 

open access and the business conduct standards described 

in this Act; and 

‘‘(B) address such other issues as the Commission determines to be appropriate. 

‘‘(6) ANTITRUST CONSIDERATIONS.—Unless necessary or appropriate to achieve the purposes of this Act, a swap dealer or 

major swap participant shall not— 

‘‘(A) adopt any process or take any action that results 

in any unreasonable restraint of trade; or 

‘‘(B) impose any material anticompetitive burden on 

trading or clearing. 

‘‘(7) RULES.—The Commission shall prescribe rules under 

this subsection governing duties of swap dealers and major 

swap participants. 

‘‘(k) DESIGNATION OF CHIEF COMPLIANCE OFFICER.— 

‘‘(1) IN GENERAL.—Each swap dealer and major swap participant shall designate an individual to serve as a chief compliance officer. 

‘‘(2) DUTIES.—The chief compliance officer shall— 


sroberts on DSKD5P82C1PROD with HEARING
343 

‘‘(A) report directly to the board or to the senior officer 

of the swap dealer or major swap participant; 

‘‘(B) review the compliance of the swap dealer or major 

swap participant with respect to the swap dealer and major 

swap participant requirements described in this section; 

‘‘(C) in consultation with the board of directors, a body 

performing a function similar to the board, or the senior officer of the organization, resolve any conflicts of interest 

that may arise; 

‘‘(D) be responsible for administering each policy and 

procedure that is required to be established pursuant to 

this section; 

‘‘(E) ensure compliance with this Act (including regulations) relating to swaps, including each rule prescribed by 

the Commission under this section; 

‘‘(F) establish procedures for the remediation of noncompliance issues identified by the chief compliance officer 

through any— 

‘‘(i) compliance office review; 

‘‘(ii) look-back; 

‘‘(iii) internal or external audit finding; 

‘‘(iv) self-reported error; or 

‘‘(v) validated complaint; and 

‘‘(G) establish and follow appropriate procedures for 

the handling, management response, remediation, retesting, 

and closing of noncompliance issues. 

‘‘(3) ANNUAL REPORTS.— 

‘‘(A) IN GENERAL.—In accordance with rules prescribed 

by the Commission, the chief compliance officer shall annually prepare and sign a report that contains a description 

of— 

‘‘(i) the compliance of the swap dealer or major 

swap participant with respect to this Act (including 

regulations); and 

‘‘(ii) each policy and procedure of the swap dealer 

or major swap participant of the chief compliance officer (including the code of ethics and conflict of interest 

policies). 

‘‘(B) REQUIREMENTS.—A compliance report under subparagraph (A) shall— 

‘‘(i) accompany each appropriate financial report of 

the swap dealer or major swap participant that is required to be furnished to the Commission pursuant to 

this section; and 

‘‘(ii) include a certification that, under penalty of 

law, the compliance report is accurate and complete.’’. 

SEC. 732. CONFLICTS OF INTEREST. 

Section 4d of the Commodity Exchange Act (7 U.S.C. 6d) is 

amended— 

(1) by redesignating subsection (c) as subsection (e); and 

(2) by inserting after subsection (b) the following: 

‘‘(c) CONFLICTS OF INTEREST.—The Commission shall require 

that futures commission merchants and introducing brokers implement conflict-of-interest systems and procedures that— 


sroberts on DSKD5P82C1PROD with HEARING
344 

‘‘(1) establish structural and institutional safeguards to ensure that the activities of any person within the firm relating 

to research or analysis of the price or market for any commodity 

are separated by appropriate informational partitions within 

the firm from the review, pressure, or oversight of persons 

whose involvement in trading or clearing activities might potentially bias the judgment or supervision of the persons; and 

‘‘(2) address such other issues as the Commission determines to be appropriate. 

‘‘(d) DESIGNATION OF CHIEF COMPLIANCE OFFICER.—Each futures commission merchant shall designate an individual to serve 

as its Chief Compliance Officer and perform such duties and responsibilities as shall be set forth in regulations to be adopted by 

the Commission or rules to be adopted by a futures association registered under section 17.’’. 

SEC. 733. SWAP EXECUTION FACILITIES. 

The Commodity Exchange Act is amended by inserting after 

section 5g (7 U.S.C. 7b–2) the following: 

‘‘SEC. 5h. SWAP EXECUTION FACILITIES. 

‘‘(a) REGISTRATION.— 

‘‘(1) IN GENERAL.—No person may operate a facility for the 

trading or processing of swaps unless the facility is registered 

as a swap execution facility or as a designated contract market 

under this section. 

‘‘(2) DUAL REGISTRATION.—Any person that is registered as 

a swap execution facility under this section shall register with 

the Commission regardless of whether the person also is registered with the Securities and Exchange Commission as a 

swap execution facility. 

‘‘(b) TRADING AND TRADE PROCESSING.— 

‘‘(1) IN GENERAL.—Except as specified in paragraph (2), a 

swap execution facility that is registered under subsection (a) 

may— 

‘‘(A) make available for trading any swap; and 

‘‘(B) facilitate trade processing of any swap. 

‘‘(2) AGRICULTURAL SWAPS.—A swap execution facility may 

not list for trading or confirm the execution of any swap in an 

agricultural commodity (as defined by the Commission) except 

pursuant to a rule or regulation of the Commission allowing the 

swap under such terms and conditions as the Commission shall 

prescribe. 

‘‘(c) IDENTIFICATION OF FACILITY USED TO TRADE SWAPS BY

CONTRACT MARKETS.—A board of trade that operates a contract 

market shall, to the extent that the board of trade also operates a 

swap execution facility and uses the same electronic trade execution 

system for listing and executing trades of swaps on or through the 

contract market and the swap execution facility, identify whether 

the electronic trading of such swaps is taking place on or through 

the contract market or the swap execution facility. 

‘‘(d) RULE-WRITING.— ‘‘(1) The Securities and Exchange Commission and Commodity Futures Trading Commission may promulgate rules defining the universe of swaps that can be executed on a swap execution facility. These rules shall take into account the price and 


sroberts on DSKD5P82C1PROD with HEARING
345 

nonprice requirements of the counterparties to a swap and the 

goal of this section as set forth in subsection (e). 

‘‘(2) For all swaps that are not required to be executed 

through a swap execution facility as defined in paragraph (1), 

such trades may be executed through any other available means 

of interstate commerce. 

‘‘(3) The Securities and Exchange Commission and Commodity Futures Trading Commission shall update these rules 

as necessary to account for technological and other innovation. 

‘‘(e) RULE OF CONSTRUCTION.—The goal of this section is to promote the trading of swaps on swap execution facilities and to promote pre-trade price transparency in the swaps market. 

‘‘(f) CORE PRINCIPLES FOR SWAP EXECUTION FACILITIES.— ‘‘(1) COMPLIANCE WITH CORE PRINCIPLES.— ‘‘(A) IN GENERAL.—To be registered, and maintain registration, as a swap execution facility, the swap execution 

facility shall comply with— 

‘‘(i) the core principles described in this subsection; 

and 

‘‘(ii) any requirement that the Commission may impose by rule or regulation pursuant to section 8a(5). 

‘‘(B) REASONABLE DISCRETION OF SWAP EXECUTION FA- CILITY.—Unless otherwise determined by the Commission 

by rule or regulation, a swap execution facility described in 

subparagraph (A) shall have reasonable discretion in establishing the manner in which the swap execution facility 

complies with the core principles described in this subsection. 

‘‘(2) COMPLIANCE WITH RULES.—A swap execution facility 

shall— 

‘‘(A) establish and enforce compliance with any rule of 

the swap execution facility, including— 

‘‘(i) the terms and conditions of the swaps traded 

or processed on or through the swap execution facility; 

and 

‘‘(ii) any limitation on access to the swap execution 

facility; 

‘‘(B) establish and enforce trading, trade processing, 

and participation rules that will deter abuses and have the 

capacity to detect, investigate, and enforce those rules, including means— 

‘‘(i) to provide market participants with impartial 

access to the market; and 

‘‘(ii) to capture information that may be used in establishing whether rule violations have occurred; 

‘‘(C) establish rules governing the operation of the facility, including rules specifying trading procedures to be used 

in entering and executing orders traded or posted on the facility, including block trades; and 

‘‘(D) provide by its rules that when a swap dealer or 

major swap participant enters into or facilitates a swap 

that is subject to the mandatory clearing requirement of 

section 2(h), the swap dealer or major swap participant 

shall be responsible for compliance with the mandatory 

trading requirement under section 2(h)(8). 


sroberts on DSKD5P82C1PROD with HEARING
346 

‘‘(3) SWAPS NOT READILY SUSCEPTIBLE TO MANIPULATION.— 

The swap execution facility shall permit trading only in swaps 

that are not readily susceptible to manipulation. 

‘‘(4) MONITORING OF TRADING AND TRADE PROCESSING.— 

The swap execution facility shall— 

‘‘(A) establish and enforce rules or terms and conditions defining, or specifications detailing— 

‘‘(i) trading procedures to be used in entering and 

executing orders traded on or through the facilities of 

the swap execution facility; and 

‘‘(ii) procedures for trade processing of swaps on or 

through the facilities of the swap execution facility; and 

‘‘(B) monitor trading in swaps to prevent manipulation, 

price distortion, and disruptions of the delivery or cash settlement process through surveillance, compliance, and disciplinary practices and procedures, including methods for 

conducting real-time monitoring of trading and comprehensive and accurate trade reconstructions. 

‘‘(5) ABILITY TO OBTAIN INFORMATION.—The swap execution 

facility shall— 

‘‘(A) establish and enforce rules that will allow the facility to obtain any necessary information to perform any of 

the functions described in this section; 

‘‘(B) provide the information to the Commission on request; and 

‘‘(C) have the capacity to carry out such international 

information-sharing agreements as the Commission may require. 

‘‘(6) POSITION LIMITS OR ACCOUNTABILITY.— 

‘‘(A) IN GENERAL.—To reduce the potential threat of 

market manipulation or congestion, especially during trading in the delivery month, a swap execution facility that is 

a trading facility shall adopt for each of the contracts of the 

facility, as is necessary and appropriate, position limitations or position accountability for speculators. 

‘‘(B) POSITION LIMITS.—For any contract that is subject 

to a position limitation established by the Commission pursuant to section 4a(a), the swap execution facility shall— 

‘‘(i) set its position limitation at a level no higher 

than the Commission limitation; and 

‘‘(ii) monitor positions established on or through 

the swap execution facility for compliance with the 

limit set by the Commission and the limit, if any, set 

by the swap execution facility. 

‘‘(7) FINANCIAL INTEGRITY OF TRANSACTIONS.—The swap 

execution facility shall establish and enforce rules and procedures for ensuring the financial integrity of swaps entered on 

or through the facilities of the swap execution facility, including 

the clearance and settlement of the swaps pursuant to section 

2(h)(1). 

‘‘(8) EMERGENCY AUTHORITY.—The swap execution facility 

shall adopt rules to provide for the exercise of emergency authority, in consultation or cooperation with the Commission, as 

is necessary and appropriate, including the authority to liqVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00350 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
347 

uidate or transfer open positions in any swap or to suspend or 

curtail trading in a swap. 

‘‘(9) TIMELY PUBLICATION OF TRADING INFORMATION.— 

‘‘(A) IN GENERAL.—The swap execution facility shall 

make public timely information on price, trading volume, 

and other trading data on swaps to the extent prescribed by 

the Commission. 

‘‘(B) CAPACITY OF SWAP EXECUTION FACILITY.—The 

swap execution facility shall be required to have the capacity to electronically capture and transmit trade information 

with respect to transactions executed on the facility. 

‘‘(10) RECORDKEEPING AND REPORTING.— 

‘‘(A) IN GENERAL.—A swap execution facility shall— 

‘‘(i) maintain records of all activities relating to the 

business of the facility, including a complete audit 

trail, in a form and manner acceptable to the Commission for a period of 5 years; 

‘‘(ii) report to the Commission, in a form and manner acceptable to the Commission, such information as 

the Commission determines to be necessary or appropriate for the Commission to perform the duties of the 

Commission under this Act; and 

‘‘(iii) shall keep any such records relating to swaps 

defined in section 1a(47)(A)(v) open to inspection and 

examination by the Securities and Exchange Commission.’’ 

‘‘(B) REQUIREMENTS.—The Commission shall adopt 

data collection and reporting requirements for swap execution facilities that are comparable to corresponding requirements for derivatives clearing organizations and swap data 

repositories. 

‘‘(11) ANTITRUST CONSIDERATIONS.—Unless necessary or 

appropriate to achieve the purposes of this Act, the swap execution facility shall not— 

‘‘(A) adopt any rules or take any actions that result in 

any unreasonable restraint of trade; or 

‘‘(B) impose any material anticompetitive burden on 

trading or clearing. 

‘‘(12) CONFLICTS OF INTEREST.—The swap execution facility 

shall— 

‘‘(A) establish and enforce rules to minimize conflicts of 

interest in its decision-making process; and 

‘‘(B) establish a process for resolving the conflicts of interest. 

‘‘(13) FINANCIAL RESOURCES.— 

‘‘(A) IN GENERAL.—The swap execution facility shall 

have adequate financial, operational, and managerial resources to discharge each responsibility of the swap execution facility. 

‘‘(B) DETERMINATION OF RESOURCE ADEQUACY.—The financial resources of a swap execution facility shall be considered to be adequate if the value of the financial resources exceeds the total amount that would enable the 

swap execution facility to cover the operating costs of the 


sroberts on DSKD5P82C1PROD with HEARING
348 

swap execution facility for a 1-year period, as calculated on 

a rolling basis. 

‘‘(14) SYSTEM SAFEGUARDS.—The swap execution facility 

shall— 

‘‘(A) establish and maintain a program of risk analysis 

and oversight to identify and minimize sources of operational risk, through the development of appropriate controls and procedures, and automated systems, that— 

‘‘(i) are reliable and secure; and 

‘‘(ii) have adequate scalable capacity; 

‘‘(B) establish and maintain emergency procedures, 

backup facilities, and a plan for disaster recovery that 

allow for— 

‘‘(i) the timely recovery and resumption of operations; and 

‘‘(ii) the fulfillment of the responsibilities and obligations of the swap execution facility; and 

‘‘(C) periodically conduct tests to verify that the backup 

resources of the swap execution facility are sufficient to ensure continued— 

‘‘(i) order processing and trade matching; 

‘‘(ii) price reporting; 

‘‘(iii) market surveillance and 

‘‘(iv) maintenance of a comprehensive and accurate 

audit trail. 

‘‘(15) DESIGNATION OF CHIEF COMPLIANCE OFFICER.— ‘‘(A) IN GENERAL.—Each swap execution facility shall 

designate an individual to serve as a chief compliance officer. 

‘‘(B) DUTIES.—The chief compliance officer shall— 

‘‘(i) report directly to the board or to the senior officer of the facility; 

‘‘(ii) review compliance with the core principles in 

this subsection; 

‘‘(iii) in consultation with the board of the facility, 

a body performing a function similar to that of a 

board, or the senior officer of the facility, resolve any 

conflicts of interest that may arise; 

‘‘(iv) be responsible for establishing and administering the policies and procedures required to be established pursuant to this section; 

‘‘(v) ensure compliance with this Act and the rules 

and regulations issued under this Act, including rules 

prescribed by the Commission pursuant to this section; 

and 

‘‘(vi) establish procedures for the remediation of 

noncompliance issues found during compliance office 

reviews, look backs, internal or external audit findings, 

self-reported errors, or through validated complaints. 

‘‘(C) REQUIREMENTS FOR PROCEDURES.—In establishing 

procedures under subparagraph (B)(vi), the chief compliance officer shall design the procedures to establish the 

handling, management response, remediation, retesting, 

and closing of noncompliance issues. 

‘‘(D) ANNUAL REPORTS.— 


sroberts on DSKD5P82C1PROD with HEARING
349 

‘‘(i) IN GENERAL.—In accordance with rules prescribed by the Commission, the chief compliance officer 

shall annually prepare and sign a report that contains 

a description of— 

‘‘(I) the compliance of the swap execution facility with this Act; and 

‘‘(II) the policies and procedures, including the 

code of ethics and conflict of interest policies, of the 

swap execution facility. 

‘‘(ii) REQUIREMENTS.—The chief compliance officer 

shall— 

‘‘(I) submit each report described in clause (i) 

with the appropriate financial report of the swap 

execution facility that is required to be submitted 

to the Commission pursuant to this section; and 

‘‘(II) include in the report a certification that, 

under penalty of law, the report is accurate and 

complete. 

‘‘(g) EXEMPTIONS.—The Commission may exempt, conditionally 

or unconditionally, a swap execution facility from registration under 

this section if the Commission finds that the facility is subject to 

comparable, comprehensive supervision and regulation on a consolidated basis by the Securities and Exchange Commission, a prudential regulator, or the appropriate governmental authorities in the 

home country of the facility. 

‘‘(h) RULES.—The Commission shall prescribe rules governing 

the regulation of alternative swap execution facilities under this section.’’. 

SEC. 734. DERIVATIVES TRANSACTION EXECUTION FACILITIES AND 

EXEMPT BOARDS OF TRADE. 

(a) IN GENERAL.—Sections 5a and 5d of the Commodity Exchange Act (7 U.S.C. 7a, 7a–3) are repealed. 

(b) CONFORMING AMENDMENTS.— 

(1) Section 2 of the Commodity Exchange Act (7 U.S.C. 2) 

is amended— 

(A) in subsection (a)(1)(A), in the first sentence, by 

striking ‘‘or 5a’’; and 

(B) in paragraph (2) of subsection (g) (as redesignated 

by section 723(a)(1)(B)), by striking ‘‘section 5a of this Act’’ 

and all that follows through ‘‘5d of this Act’’ and inserting 

‘‘section 5b of this Act’’. 

(2) Section 6(g)(1)(A) of the Securities Exchange Act of 1934 

(15 U.S.C. 78f(g)(1)(A)) is amended— 

(A) by striking ‘‘that—’’ and all that follows through 

‘‘(i) has been designated’’ and inserting ‘‘that has been designated’’; 

(B) by striking ‘‘; or’’ and inserting ‘‘; and’’ and 

(C) by striking clause (ii). 

(c) ABILITY TO PETITION COMMISSION.— 

(1) IN GENERAL.—Prior to the final effective dates in this 

title, a person may petition the Commodity Futures Trading 

Commission to remain subject to the provisions of section 5d of 

the Commodity Exchange Act, as such provisions existed prior 

to the effective date of this subtitle. 


sroberts on DSKD5P82C1PROD with HEARING
350 

(2) CONSIDERATION OF PETITION.—The Commodity Futures 

Trading Commission shall consider any petition submitted 

under paragraph (1) in a prompt manner and may allow a person to continue operating subject to the provisions of section 5d 

of the Commodity Exchange Act for up to 1 year after the effective date of this subtitle. 

SEC. 735. DESIGNATED CONTRACT MARKETS. 

(a) CRITERIA FOR DESIGNATION.—Section 5 of the Commodity 

Exchange Act (7 U.S.C. 7) is amended by striking subsection (b). 

(b) CORE PRINCIPLES FOR CONTRACT MARKETS.—Section 5 of 

the Commodity Exchange Act (7 U.S.C. 7) is amended by striking 

subsection (d) and inserting the following: 

‘‘(d) CORE PRINCIPLES FOR CONTRACT MARKETS.— 

‘‘(1) DESIGNATION AS CONTRACT MARKET.— 

‘‘(A) IN GENERAL.—To be designated, and maintain a 

designation, as a contract market, a board of trade shall 

comply with— 

‘‘(i) any core principle described in this subsection; 

and 

‘‘(ii) any requirement that the Commission may impose by rule or regulation pursuant to section 8a(5). 

‘‘(B) REASONABLE DISCRETION OF CONTRACT MARKET.— 

Unless otherwise determined by the Commission by rule or 

regulation, a board of trade described in subparagraph (A) 

shall have reasonable discretion in establishing the manner 

in which the board of trade complies with the core principles described in this subsection. 

‘‘(2) COMPLIANCE WITH RULES.— 

‘‘(A) IN GENERAL.—The board of trade shall establish, 

monitor, and enforce compliance with the rules of the contract market, including— 

‘‘(i) access requirements; 

‘‘(ii) the terms and conditions of any contracts to be 

traded on the contract market; and 

‘‘(iii) rules prohibiting abusive trade practices on 

the contract market. 

‘‘(B) CAPACITY OF CONTRACT MARKET.—The board of 

trade shall have the capacity to detect, investigate, and 

apply appropriate sanctions to any person that violates any 

rule of the contract market. 

‘‘(C) REQUIREMENT OF RULES.—The rules of the contract market shall provide the board of trade with the ability and authority to obtain any necessary information to 

perform any function described in this subsection, including the capacity to carry out such international information-sharing agreements as the Commission may require. 

‘‘(3) CONTRACTS NOT READILY SUBJECT TO MANIPULATION.— 

The board of trade shall list on the contract market only contracts that are not readily susceptible to manipulation. 

‘‘(4) PREVENTION OF MARKET DISRUPTION.—The board of 

trade shall have the capacity and responsibility to prevent manipulation, price distortion, and disruptions of the delivery or 

cash-settlement process through market surveillance, compliance, and enforcement practices and procedures, including— 


sroberts on DSKD5P82C1PROD with HEARING
351 

‘‘(A) methods for conducting real-time monitoring of 

trading; and 

‘‘(B) comprehensive and accurate trade reconstructions. 

‘‘(5) POSITION LIMITATIONS OR ACCOUNTABILITY.— ‘‘(A) IN GENERAL.—To reduce the potential threat of 

market manipulation or congestion (especially during trading in the delivery month), the board of trade shall adopt 

for each contract of the board of trade, as is necessary and 

appropriate, position limitations or position accountability 

for speculators. 

‘‘(B) MAXIMUM ALLOWABLE POSITION LIMITATION.—For 

any contract that is subject to a position limitation established by the Commission pursuant to section 4a(a), the 

board of trade shall set the position limitation of the board 

of trade at a level not higher than the position limitation 

established by the Commission. 

‘‘(6) EMERGENCY AUTHORITY.—The board of trade, in consultation or cooperation with the Commission, shall adopt rules 

to provide for the exercise of emergency authority, as is necessary and appropriate, including the authority— 

‘‘(A) to liquidate or transfer open positions in any contract; 

‘‘(B) to suspend or curtail trading in any contract; and 

‘‘(C) to require market participants in any contract to 

meet special margin requirements. 

‘‘(7) AVAILABILITY OF GENERAL INFORMATION.—The board of 

trade shall make available to market authorities, market participants, and the public accurate information concerning— 

‘‘(A) the terms and conditions of the contracts of the 

contract market; and 

‘‘(B)(i) the rules, regulations, and mechanisms for executing transactions on or through the facilities of the contract market; and 

‘‘(ii) the rules and specifications describing the operation of the contract market’s— 

‘‘(I) electronic matching platform; or 

‘‘(II) trade execution facility. 

‘‘(8) DAILY PUBLICATION OF TRADING INFORMATION.—The 

board of trade shall make public daily information on settlement prices, volume, open interest, and opening and closing 

ranges for actively traded contracts on the contract market. 

‘‘(9) EXECUTION OF TRANSACTIONS.— 

‘‘(A) IN GENERAL.—The board of trade shall provide a 

competitive, open, and efficient market and mechanism for 

executing transactions that protects the price discovery 

process of trading in the centralized market of the board of 

trade. 

‘‘(B) RULES.—The rules of the board of trade may authorize, for bona fide business purposes— 

‘‘(i) transfer trades or office trades; 

‘‘(ii) an exchange of— 

‘‘(I) futures in connection with a cash commodity transaction; 

‘‘(II) futures for cash commodities; or 

‘‘(III) futures for swaps; or 


sroberts on DSKD5P82C1PROD with HEARING
352 

‘‘(iii) a futures commission merchant, acting as 

principal or agent, to enter into or confirm the execution of a contract for the purchase or sale of a commodity for future delivery if the contract is reported, recorded, or cleared in accordance with the rules of the 

contract market or a derivatives clearing organization. 

‘‘(10) TRADE INFORMATION.—The board of trade shall maintain rules and procedures to provide for the recording and safe 

storage of all identifying trade information in a manner that 

enables the contract market to use the information— 

‘‘(A) to assist in the prevention of customer and market 

abuses; and 

‘‘(B) to provide evidence of any violations of the rules 

of the contract market. 

‘‘(11) FINANCIAL INTEGRITY OF TRANSACTIONS.—The board 

of trade shall establish and enforce— 

‘‘(A) rules and procedures for ensuring the financial integrity of transactions entered into on or through the facilities of the contract market (including the clearance and settlement of the transactions with a derivatives clearing organization); and 

‘‘(B) rules to ensure— 

‘‘(i) the financial integrity of any— 

‘‘(I) futures commission merchant; and 

‘‘(II) introducing broker; and 

‘‘(ii) the protection of customer funds. 

‘‘(12) PROTECTION OF MARKETS AND MARKET PARTICIPANTS.—The board of trade shall establish and enforce rules— 

‘‘(A) to protect markets and market participants from 

abusive practices committed by any party, including abusive practices committed by a party acting as an agent for 

a participant; and 

‘‘(B) to promote fair and equitable trading on the contract market. 

‘‘(13) DISCIPLINARY PROCEDURES.—The board of trade shall 

establish and enforce disciplinary procedures that authorize the 

board of trade to discipline, suspend, or expel members or market participants that violate the rules of the board of trade, or 

similar methods for performing the same functions, including 

delegation of the functions to third parties. 

‘‘(14) DISPUTE RESOLUTION.—The board of trade shall establish and enforce rules regarding, and provide facilities for 

alternative dispute resolution as appropriate for, market participants and any market intermediaries. 

‘‘(15) GOVERNANCE FITNESS STANDARDS.—The board of 

trade shall establish and enforce appropriate fitness standards 

for directors, members of any disciplinary committee, members 

of the contract market, and any other person with direct access 

to the facility (including any party affiliated with any person 

described in this paragraph). 

‘‘(16) CONFLICTS OF INTEREST.—The board of trade shall 

establish and enforce rules— 

‘‘(A) to minimize conflicts of interest in the decisionmaking process of the contract market; and 


sroberts on DSKD5P82C1PROD with HEARING
353 

‘‘(B) to establish a process for resolving conflicts of interest described in subparagraph (A). 

‘‘(17) COMPOSITION OF GOVERNING BOARDS OF CONTRACT

MARKETS.—The governance arrangements of the board of trade 

shall be designed to permit consideration of the views of market 

participants. 

‘‘(18) RECORDKEEPING.—The board of trade shall maintain 

records of all activities relating to the business of the contract 

market— 

‘‘(A) in a form and manner that is acceptable to the 

Commission; and 

‘‘(B) for a period of at least 5 years. 

‘‘(19) ANTITRUST CONSIDERATIONS.—Unless necessary or 

appropriate to achieve the purposes of this Act, the board of 

trade shall not— 

‘‘(A) adopt any rule or taking any action that results in 

any unreasonable restraint of trade; or 

‘‘(B) impose any material anticompetitive burden on 

trading on the contract market. 

‘‘(20) SYSTEM SAFEGUARDS.—The board of trade shall— 

‘‘(A) establish and maintain a program of risk analysis 

and oversight to identify and minimize sources of operational risk, through the development of appropriate controls and procedures, and the development of automated 

systems, that are reliable, secure, and have adequate scalable capacity; 

‘‘(B) establish and maintain emergency procedures, 

backup facilities, and a plan for disaster recovery that 

allow for the timely recovery and resumption of operations 

and the fulfillment of the responsibilities and obligations of 

the board of trade; and 

‘‘(C) periodically conduct tests to verify that backup resources are sufficient to ensure continued order processing 

and trade matching, price reporting, market surveillance, 

and maintenance of a comprehensive and accurate audit 

trail. 

‘‘(21) FINANCIAL RESOURCES.— ‘‘(A) IN GENERAL.—The board of trade shall have adequate financial, operational, and managerial resources to 

discharge each responsibility of the board of trade. 

‘‘(B) DETERMINATION OF ADEQUACY.—The financial resources of the board of trade shall be considered to be adequate if the value of the financial resources exceeds the 

total amount that would enable the contract market to 

cover the operating costs of the contract market for a 1-year 

period, as calculated on a rolling basis. 

‘‘(22) DIVERSITY OF BOARD OF DIRECTORS.—The board of 

trade, if a publicly traded company, shall endeavor to recruit 

individuals to serve on the board of directors and the other decision-making bodies (as determined by the Commission) of the 

board of trade from among, and to have the composition of the 

bodies reflect, a broad and culturally diverse pool of qualified 

candidates. 

‘‘(23) SECURITIES AND EXCHANGE COMMISSION.—The board 

of trade shall keep any such records relating to swaps defined 


sroberts on DSKD5P82C1PROD with HEARING
354 

in section 1a(47)(A)(v) open to inspection and examination by 

the Securities and Exchange Commission.’’. 

SEC. 736. MARGIN. 

Section 8a(7) of the Commodity Exchange Act (7 U.S.C. 12a(7)) 

is amended— 

(1) in subparagraph (C), by striking ‘‘, excepting the setting 

of levels of margin’’; 

(2) by redesignating subparagraphs (D) through (F) as subparagraphs (E) through (G), respectively; and 

(3) by inserting after subparagraph (C) the following: 

‘‘(D) margin requirements, provided that the rules, regulations, or orders shall— 

‘‘(i) be limited to protecting the financial integrity 

of the derivatives clearing organization; 

‘‘(ii) be designed for risk management purposes to 

protect the financial integrity of transactions; and 

‘‘(iii) not set specific margin amounts;’’. 

SEC. 737. POSITION LIMITS. 

(a) AGGREGATE POSITION LIMITS.—Section 4a(a) of the Commodity Exchange Act (7 U.S.C. 6a(a)) is amended— 

(1) by inserting after ‘‘(a)’’ the following: 

‘‘(1) IN GENERAL.—’’; 

(2) in the first sentence, by striking ‘‘on electronic trading 

facilities with respect to a significant price discovery contract’’ 

and inserting ‘‘swaps that perform or affect a significant price 

discovery function with respect to registered entities’’; 

(3) in the second sentence— 

(A) by inserting ‘‘, including any group or class of traders,’’ after ‘‘held by any person’’; and 

(B) by striking ‘‘on an electronic trading facility with 

respect to a significant price discovery contract,’’ and inserting ‘‘swaps traded on or subject to the rules of a designated 

contract market or a swap execution facility, or swaps not 

traded on or subject to the rules of a designated contract 

market or a swap execution facility that performs a significant price discovery function with respect to a registered entity,’’; and 

(4) by adding at the end the following: 

‘‘(2) ESTABLISHMENT OF LIMITATIONS.— 

‘‘(A) IN GENERAL.—In accordance with the standards 

set forth in paragraph (1) of this subsection and consistent 

with the good faith exception cited in subsection (b)(2), with 

respect to physical commodities other than excluded commodities as defined by the Commission, the Commission 

shall by rule, regulation, or order establish limits on the 

amount of positions, as appropriate, other than bona fide 

hedge positions, that may be held by any person with respect to contracts of sale for future delivery or with respect 

to options on the contracts or commodities traded on or 

subject to the rules of a designated contract market. 

‘‘(B) TIMING.— 

‘‘(i) EXEMPT COMMODITIES.—For exempt commodities, the limits required under subparagraph (A) shall 


sroberts on DSKD5P82C1PROD with HEARING
355 

be established within 180 days after the date of the enactment of this paragraph. 

‘‘(ii) AGRICULTURAL COMMODITIES.—For agricultural commodities, the limits required under subparagraph (A) shall be established within 270 days after 

the date of the enactment of this paragraph. 

‘‘(C) GOAL.—In establishing the limits required under 

subparagraph (A), the Commission shall strive to ensure 

that trading on foreign boards of trade in the same commodity will be subject to comparable limits and that any 

limits to be imposed by the Commission will not cause price 

discovery in the commodity to shift to trading on the foreign boards of trade. 

‘‘(3) SPECIFIC LIMITATIONS.—In establishing the limits required in paragraph (2), the Commission, as appropriate, shall 

set limits— 

‘‘(A) on the number of positions that may be held by 

any person for the spot month, each other month, and the 

aggregate number of positions that may be held by any person for all months; and 

‘‘(B) to the maximum extent practicable, in its discretion— 

‘‘(i) to diminish, eliminate, or prevent excessive 

speculation as described under this section; 

‘‘(ii) to deter and prevent market manipulation, 

squeezes, and corners; 

‘‘(iii) to ensure sufficient market liquidity for bona 

fide hedgers; and 

‘‘(iv) to ensure that the price discovery function of 

the underlying market is not disrupted. 

‘‘(4) SIGNIFICANT PRICE DISCOVERY FUNCTION.—In making 

a determination whether a swap performs or affects a significant price discovery function with respect to regulated markets, 

the Commission shall consider, as appropriate: 

‘‘(A) PRICE LINKAGE.—The extent to which the swap 

uses or otherwise relies on a daily or final settlement price, 

or other major price parameter, of another contract traded 

on a regulated market based upon the same underlying 

commodity, to value a position, transfer or convert a position, financially settle a position, or close out a position. 

‘‘(B) ARBITRAGE.—The extent to which the price for the 

swap is sufficiently related to the price of another contract 

traded on a regulated market based upon the same underlying commodity so as to permit market participants to effectively arbitrage between the markets by simultaneously 

maintaining positions or executing trades in the swaps on 

a frequent and recurring basis. 

‘‘(C) MATERIAL PRICE REFERENCE.—The extent to 

which, on a frequent and recurring basis, bids, offers, or 

transactions in a contract traded on a regulated market are 

directly based on, or are determined by referencing, the 

price generated by the swap. 

‘‘(D) MATERIAL LIQUIDITY.—The extent to which the volume of swaps being traded in the commodity is sufficient 


sroberts on DSKD5P82C1PROD with HEARING
356 

to have a material effect on another contract traded on a 

regulated market. 

‘‘(E) OTHER MATERIAL FACTORS.—Such other material 

factors as the Commission specifies by rule or regulation as 

relevant to determine whether a swap serves a significant 

price discovery function with respect to a regulated market. 

‘‘(5) ECONOMICALLY EQUIVALENT CONTRACTS.— 

‘‘(A) Notwithstanding any other provision of this section, the Commission shall establish limits on the amount 

of positions, including aggregate position limits, as appropriate, other than bona fide hedge positions, that may be 

held by any person with respect to swaps that are economically equivalent to contracts of sale for future delivery or to 

options on the contracts or commodities traded on or subject to the rules of a designated contract market subject to 

paragraph (2). 

‘‘(B) In establishing limits pursuant to subparagraph 

(A), the Commission shall— 

‘‘(i) develop the limits concurrently with limits established under paragraph (2), and the limits shall 

have similar requirements as under paragraph (3)(B); 

and 

‘‘(ii) establish the limits simultaneously with limits 

established under paragraph (2). 

‘‘(6) AGGREGATE POSITION LIMITS.—The Commission shall, 

by rule or regulation, establish limits (including related hedge 

exemption provisions) on the aggregate number or amount of 

positions in contracts based upon the same underlying commodity (as defined by the Commission) that may be held by any 

person, including any group or class of traders, for each month 

across— 

‘‘(A) contracts listed by designated contract markets; 

‘‘(B) with respect to an agreement contract, or transaction that settles against any price (including the daily or 

final settlement price) of 1 or more contracts listed for trading on a registered entity, contracts traded on a foreign 

board of trade that provides members or other participants 

located in the United States with direct access to its electronic trading and order matching system; and 

‘‘(C) swap contracts that perform or affect a significant 

price discovery function with respect to regulated entities. 

‘‘(7) EXEMPTIONS.—The Commission, by rule, regulation, or 

order, may exempt, conditionally or unconditionally, any person 

or class of persons, any swap or class of swaps, any contract of 

sale of a commodity for future delivery or class of such contracts, any option or class of options, or any transaction or class 

of transactions from any requirement it may establish under 

this section with respect to position limits.’’. 

(b) CONFORMING AMENDMENTS.—Section 4a(b) of the Commodity Exchange Act (7 U.S.C. 6a(b)) is amended— 

(1) in paragraph (1), by striking ‘‘or derivatives transaction 

execution facility or facilities or electronic trading facility’’ and 

inserting ‘‘or swap execution facility or facilities’’; and 


sroberts on DSKD5P82C1PROD with HEARING
357 

(2) in paragraph (2), by striking ‘‘or derivatives transaction 

execution facility or facilities or electronic trading facility’’ and 

inserting ‘‘or swap execution facility’’. 

(c) BONA FIDE HEDGING TRANSACTION.—Section 4a(c) of the 

Commodity Exchange Act is amended— 

(1) by inserting ‘‘(1)’’ after ‘‘(c)’’; and 

(2) by adding at the end the following: 

‘‘(2) For the purposes of implementation of subsection (a)(2) 

for contracts of sale for future delivery or options on the contracts or commodities, the Commission shall define what constitutes a bona fide hedging transaction or position as a transaction or position that— 

‘‘(A)(i) represents a substitute for transactions made or 

to be made or positions taken or to be taken at a later time 

in a physical marketing channel; 

‘‘(ii) is economically appropriate to the reduction of 

risks in the conduct and management of a commercial enterprise; and 

‘‘(iii) arises from the potential change in the value of— 

‘‘(I) assets that a person owns, produces, manufactures, processes, or merchandises or anticipates owning, producing, manufacturing, processing, or merchandising; 

‘‘(II) liabilities that a person owns or anticipates 

incurring; or 

‘‘(III) services that a person provides, purchases, or 

anticipates providing or purchasing; or 

‘‘(B) reduces risks attendant to a position resulting 

from a swap that— 

‘‘(i) was executed opposite a counterparty for which 

the transaction would qualify as a bona fide hedging 

transaction pursuant to subparagraph (A); or 

‘‘(ii) meets the requirements of subparagraph (A).’’. 

(d) EFFECTIVE DATE.—This section and the amendments made 

by this section shall become effective on the date of the enactment 

of this section. 

SEC. 738. FOREIGN BOARDS OF TRADE. 

(a) IN GENERAL.—Section 4(b) of the Commodity Exchange Act 

(7 U.S.C. 6(b)) is amended— 

(1) in the first sentence, by striking ‘‘The Commission’’ and 

inserting the following: 

‘‘(2) PERSONS LOCATED IN THE UNITED STATES.— 

‘‘(A) IN GENERAL.—The Commission’’; 

(2) in the second sentence, by striking ‘‘Such rules and regulations’’ and inserting the following: 

‘‘(B) DIFFERENT REQUIREMENTS.—Rules and regulations described in subparagraph (A)’’; 

(3) in the third sentence— 

(A) by striking ‘‘No rule or regulation’’ and inserting 

the following: 

‘‘(C) PROHIBITION.—Except as provided in paragraphs 

(1) and (2), no rule or regulation’’; 

(B) by striking ‘‘that (1) requires’’ and inserting the following: ‘‘that— 

‘‘(i) requires’’; and 


sroberts on DSKD5P82C1PROD with HEARING
358 

(C) by striking ‘‘market, or (2) governs’’ and inserting 

the following: ‘‘market; or 

‘‘(ii) governs’’; and 

(4) by inserting before paragraph (2) (as designated by 

paragraph (1)) the following: 

‘‘(1) FOREIGN BOARDS OF TRADE.— ‘‘(A) REGISTRATION.—The Commission may adopt rules 

and regulations requiring registration with the Commission 

for a foreign board of trade that provides the members of 

the foreign board of trade or other participants located in 

the United States with direct access to the electronic trading and order matching system of the foreign board of 

trade, including rules and regulations prescribing procedures and requirements applicable to the registration of 

such foreign boards of trade. For purposes of this paragraph, ‘direct access’ refers to an explicit grant of authority 

by a foreign board of trade to an identified member or 

other participant located in the United States to enter 

trades directly into the trade matching system of the foreign 

board of trade. In adopting such rules and regulations, the 

commission shall consider— 

‘‘(i) whether any such foreign board of trade is subject to comparable, comprehensive supervision and regulation by the appropriate governmental authorities in 

the foreign board of trade’s home country; and 

‘‘(ii) any previous commission findings that the foreign board of trade is subject to comparable comprehensive supervision and regulation by the appropriate government authorities in the foreign board of 

trade’s home country. 

‘‘(B) LINKED CONTRACTS.—The Commission may not 

permit a foreign board of trade to provide to the members 

of the foreign board of trade or other participants located 

in the United States direct access to the electronic trading 

and order-matching system of the foreign board of trade 

with respect to an agreement, contract, or transaction that 

settles against any price (including the daily or final settlement price) of 1 or more contracts listed for trading on a 

registered entity, unless the Commission determines that— 

‘‘(i) the foreign board of trade makes public daily 

trading information regarding the agreement, contract, 

or transaction that is comparable to the daily trading 

information published by the registered entity for the 1 

or more contracts against which the agreement, contract, or transaction traded on the foreign board of 

trade settles; and 

‘‘(ii) the foreign board of trade (or the foreign futures authority that oversees the foreign board of 

trade)— 

‘‘(I) adopts position limits (including related 

hedge exemption provisions) for the agreement, 

contract, or transaction that are comparable to the 

position limits (including related hedge exemption 

provisions) adopted by the registered entity for the 

1 or more contracts against which the agreement, 


sroberts on DSKD5P82C1PROD with HEARING
359 

contract, or transaction traded on the foreign 

board of trade settles; 

‘‘(II) has the authority to require or direct market participants to limit, reduce, or liquidate any 

position the foreign board of trade (or the foreign 

futures authority that oversees the foreign board of 

trade) determines to be necessary to prevent or reduce the threat of price manipulation, excessive 

speculation as described in section 4a, price distortion, or disruption of delivery or the cash settlement process; 

‘‘(III) agrees to promptly notify the Commission, with regard to the agreement, contract, or 

transaction that settles against any price (including the daily or final settlement price) of 1 or more 

contracts listed for trading on a registered entity, 

of any change regarding— 

‘‘(aa) the information that the foreign 

board of trade will make publicly available; 

‘‘(bb) the position limits that the foreign 

board of trade or foreign futures authority will 

adopt and enforce; 

‘‘(cc) the position reductions required to 

prevent manipulation, excessive speculation as 

described in section 4a, price distortion, or disruption of delivery or the cash settlement process; and 

‘‘(dd) any other area of interest expressed 

by the Commission to the foreign board of 

trade or foreign futures authority; 

‘‘(IV) provides information to the Commission 

regarding large trader positions in the agreement, 

contract, or transaction that is comparable to the 

large trader position information collected by the 

Commission for the 1 or more contracts against 

which the agreement, contract, or transaction traded on the foreign board of trade settles; and 

‘‘(V) provides the Commission such information as is necessary to publish reports on aggregate 

trader positions for the agreement, contract, or 

transaction traded on the foreign board of trade 

that are comparable to such reports on aggregate 

trader positions for the 1 or more contracts against 

which the agreement, contract, or transaction traded on the foreign board of trade settles. 

‘‘(C) EXISTING FOREIGN BOARDS OF TRADE.—Subparagraphs (A) and (B) shall not be effective with respect to any 

foreign board of trade to which, prior to the date of enactment of this paragraph, the Commission granted direct access permission until the date that is 180 days after that 

date of enactment.’’. 

(b) LIABILITY OF REGISTERED PERSONS TRADING ON A FOREIGN

BOARD OF TRADE.—Section 4 of the Commodity Exchange Act (7 

U.S.C. 6) is amended— 


sroberts on DSKD5P82C1PROD with HEARING
360 

(1) in subsection (a), in the matter preceding paragraph (1), 

by inserting ‘‘or by subsection (e)’’ after ‘‘Unless exempted by the 

Commission pursuant to subsection (c)’’; and 

(2) by adding at the end the following: 

‘‘(e) LIABILITY OF REGISTERED PERSONS TRADING ON A FOREIGN

BOARD OF TRADE.— ‘‘(1) IN GENERAL.—A person registered with the Commission, or exempt from registration by the Commission, under this 

Act may not be found to have violated subsection (a) with respect to a transaction in, or in connection with, a contract of 

sale of a commodity for future delivery if the person— 

‘‘(A) has reason to believe that the transaction and the 

contract is made on or subject to the rules of a foreign 

board of trade that is— 

‘‘(i) legally organized under the laws of a foreign 

country; 

‘‘(ii) authorized to act as a board of trade by a foreign futures authority; and 

‘‘(iii) subject to regulation by the foreign futures 

authority; and 

‘‘(B) has not been determined by the Commission to be 

operating in violation of subsection (a). 

‘‘(2) RULE OF CONSTRUCTION.—Nothing in this subsection 

shall be construed as implying or creating any presumption 

that a board of trade, exchange, or market is located outside the 

United States, or its territories or possessions, for purposes of 

subsection (a).’’. 

(c) CONTRACT ENFORCEMENT FOR FOREIGN FUTURES CON- TRACTS.—Section 22(a) of the Commodity Exchange Act (7 U.S.C. 

25(a)) (as amended by section 739) is amended by adding at the end 

the following: 

‘‘(6) CONTRACT ENFORCEMENT FOR FOREIGN FUTURES CON- TRACTS.—A contract of sale of a commodity for future delivery traded or executed on or through the facilities of a board of trade, exchange, or market located outside the United States for purposes of 

section 4(a) shall not be void, voidable, or unenforceable, and a 

party to such a contract shall not be entitled to rescind or recover 

any payment made with respect to the contract, based on the failure 

of the foreign board of trade to comply with any provision of this 

Act.’’. 

SEC. 739. LEGAL CERTAINTY FOR SWAPS. 

Section 22(a) of the Commodity Exchange Act (7 U.S.C. 25(a)) 

is amended by striking paragraph (4) and inserting the following: 

‘‘(4) CONTRACT ENFORCEMENT BETWEEN ELIGIBLE COUNTERPARTIES.— 

‘‘(A) IN GENERAL.—No hybrid instrument sold to any investor shall be void, voidable, or unenforceable, and no party to a 

hybrid instrument shall be entitled to rescind, or recover any 

payment made with respect to, the hybrid instrument under this 

section or any other provision of Federal or State law, based 

solely on the failure of the hybrid instrument to comply with the 

terms or conditions of section 2(f) or regulations of the Commission. 

‘‘(B) SWAPS.—No agreement, contract, or transaction between eligible contract participants or persons reasonably beVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00364 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
361 

lieved to be eligible contract participants shall be void, voidable, or unenforceable, and no party to such agreement, contract, or transaction shall be entitled to rescind, or recover any 

payment made with respect to, the agreement, contract, or 

transaction under this section or any other provision of Federal 

or State law, based solely on the failure of the agreement, contract, or transaction— 

‘‘(i) to meet the definition of a swap under section 1a; 

or 

‘‘(ii) to be cleared in accordance with section 2(h)(1). 

‘‘(5) LEGAL CERTAINTY FOR LONG-TERM SWAPS ENTERED INTO

BEFORE THE DATE OF ENACTMENT OF THE WALL STREET TRANS- PARENCY AND ACCOUNTABILITY ACT OF 2010.— 

‘‘(A) EFFECT ON SWAPS.—Unless specifically reserved in the 

applicable swap, neither the enactment of the Wall Street 

Transparency and Accountability Act of 2010, nor any requirement under that Act or an amendment made by that Act, shall 

constitute a termination event, force majeure, illegality, increased costs, regulatory change, or similar event under a swap 

(including any related credit support arrangement) that would 

permit a party to terminate, renegotiate, modify, amend, or supplement 1 or more transactions under the swap. 

‘‘(B) POSITION LIMITS.—Any position limit established 

under the Wall Street Transparency and Accountability Act of 

2010 shall not apply to a position acquired in good faith prior 

to the effective date of any rule, regulation, or order under the 

Act that establishes the position limit; provided, however, that 

such positions shall be attributed to the trader if the trader’s 

position is increased after the effective date of such position 

limit rule, regulation, or order.’’. 

SEC. 740. MULTILATERAL CLEARING ORGANIZATIONS. 

Sections 408 and 409 of the Federal Deposit Insurance Corporation Improvement Act of 1991 (12 U.S.C. 4421, 4422) are repealed. 

SEC. 741. ENFORCEMENT. 

(a) ENFORCEMENT AUTHORITY.—The Commodity Exchange Act 

is amended by inserting after section 4b (7 U.S.C. 6b) the following: 

‘‘SEC. 4b–1. ENFORCEMENT AUTHORITY. 

‘‘(a) COMMODITY FUTURES TRADING COMMISSION.—Except as 

provided in subsections (b), (c), and (d), the Commission shall have 

exclusive authority to enforce the provisions of subtitle A of the Wall 

Street Transparency and Accountability Act of 2010 with respect to 

any person. 

‘‘(b) PRUDENTIAL REGULATORS.—The prudential regulators 

shall have exclusive authority to enforce the provisions of section 

4s(e) with respect to swap dealers or major swap participants for 

which they are the prudential regulator. 

‘‘(c) REFERRALS.— 

‘‘(1) PRUDENTIAL REGULATORS.—If the prudential regulator 

for a swap dealer or major swap participant has cause to believe that the swap dealer or major swap participant, or any affiliate or division of the swap dealer or major swap participant, 

may have engaged in conduct that constitutes a violation of the 

nonprudential requirements of this Act (including section 4s or 

rules adopted by the Commission under that section), the pruVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00365 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
362 

dential regulator may promptly notify the Commission in a 

written report that includes— 

‘‘(A) a request that the Commission initiate an enforcement proceeding under this Act; and 

‘‘(B) an explanation of the facts and circumstances that 

led to the preparation of the written report. 

‘‘(2) COMMISSION.—If the Commission has cause to believe 

that a swap dealer or major swap participant that has a prudential regulator may have engaged in conduct that constitutes 

a violation of any prudential requirement of section 4s or rules 

adopted by the Commission under that section, the Commission 

may notify the prudential regulator of the conduct in a written 

report that includes— 

‘‘(A) a request that the prudential regulator initiate an 

enforcement proceeding under this Act or any other Federal 

law (including regulations); and 

‘‘(B) an explanation of the concerns of the Commission, 

and a description of the facts and circumstances, that led 

to the preparation of the written report. 

‘‘(d) BACKSTOP ENFORCEMENT AUTHORITY.— 

‘‘(1) INITIATION OF ENFORCEMENT PROCEEDING BY PRUDENTIAL REGULATOR.—If the Commission does not initiate an enforcement proceeding before the end of the 90-day period beginning on the date on which the Commission receives a written 

report under subsection (c)(1), the prudential regulator may initiate an enforcement proceeding. 

‘‘(2) INITIATION OF ENFORCEMENT PROCEEDING BY COMMISSION.—If the prudential regulator does not initiate an enforcement proceeding before the end of the 90-day period beginning 

on the date on which the prudential regulator receives a written 

report under subsection (c)(2), the Commission may initiate an 

enforcement proceeding.’’. 

(b) CONFORMING AMENDMENTS.— 

(1) Section 4b of the Commodity Exchange Act (7 U.S.C. 

6b) is amended— 

(A) in subsection (a)(2), by striking ‘‘or other agreement, contract, or transaction subject to paragraphs (1) and 

(2) of section 5a(g),’’ and inserting ‘‘or swap,’’; 

(B) in subsection (b), by striking ‘‘or other agreement, 

contract or transaction subject to paragraphs (1) and (2) of 

section 5a(g),’’ and inserting ‘‘or swap,’’; and 

(C) by adding at the end the following: 

‘‘(e) It shall be unlawful for any person, directly or indirectly, 

by the use of any means or instrumentality of interstate commerce, 

or of the mails, or of any facility of any registered entity, in or in 

connection with any order to make, or the making of, any contract 

of sale of any commodity for future delivery (or option on such a 

contract), or any swap, on a group or index of securities (or any interest therein or based on the value thereof)— 

‘‘(1) to employ any device, scheme, or artifice to defraud; 

‘‘(2) to make any untrue statement of a material fact or to 

omit to state a material fact necessary in order to make the 

statements made, in the light of the circumstances under which 

they were made, not misleading; or 


sroberts on DSKD5P82C1PROD with HEARING
363 

‘‘(3) to engage in any act, practice, or course of business 

which operates or would operate as a fraud or deceit upon any 

person.’’. 

(2) Section 4c(a)(1) of the Commodity Exchange Act (7 

U.S.C. 6c(a)(1)) is amended by inserting ‘‘or swap’’ before ‘‘if the 

transaction is used or may be used’’. 

(3) Section 6(c) of the Commodity Exchange Act (7 U.S.C. 

9) is amended in the first sentence by inserting ‘‘or of any 

swap,’’ before ‘‘or has willfully made’’. 

(4) Section 6(d) of the Commodity Exchange Act (7 U.S.C. 

13b) is amended in the first sentence, in the matter preceding 

the proviso, by inserting ‘‘or of any swap,’’ before ‘‘or otherwise 

is violating’’. 

(5) Section 6c(a) of the Commodity Exchange Act (7 U.S.C. 

13a–1(a)) is amended in the matter preceding the proviso by inserting ‘‘or any swap’’ after ‘‘commodity for future delivery’’. 

(6) Section 9 of the Commodity Exchange Act (7 U.S.C. 13) 

is amended— 

(A) in subsection (a)— 

(i) in paragraph (2), by inserting ‘‘or of any swap,’’ 

before ‘‘or to corner’’; and 

(ii) in paragraph (4), by inserting ‘‘swap data repository,’’ before ‘‘or futures association’’ and 

(B) in subsection (e)(1)— 

(i) by inserting ‘‘swap data repository,’’ before ‘‘or 

registered futures association’’; and 

(ii) by inserting ‘‘, or swaps,’’ before ‘‘on the basis’’. 

(7) Section 9(a) of the Commodity Exchange Act (7 U.S.C. 

13(a)) is amended by adding at the end the following: 

‘‘(6) Any person to abuse the end user clearing exemption 

under section 2(h)(4), as determined by the Commission.’’. 

(8) Section 2(c)(2)(B) of the Commodity Exchange Act (7 

U.S.C. 2(c)(2)(B)) is amended— 

(A) by striking ‘‘(dd),’’ each place it appears; 

(B) in clause (iii), by inserting ‘‘, and accounts or 

pooled investment vehicles described in clause (vi),’’ before 

‘‘shall be subject to’’; and 

(C) by adding at the end the following: 

‘‘(vi) This Act applies to, and the Commission shall 

have jurisdiction over, an account or pooled investment 

vehicle that is offered for the purpose of trading, or 

that trades, any agreement, contract, or transaction in 

foreign currency described in clause (i).’’. 

(9) Section 2(c)(2)(C) of the Commodity Exchange Act (7 

U.S.C. 2(c)(2)(C)) is amended— 

(A) by striking ‘‘(dd),’’ each place it appears; 

(B) in clause (ii)(I), by inserting ‘‘, and accounts or 

pooled investment vehicles described in clause (vii),’’ before 

‘‘shall be subject to’’; and 

(C) by adding at the end the following: 

‘‘(vii) This Act applies to, and the Commission 

shall have jurisdiction over, an account or pooled investment vehicle that is offered for the purpose of trading, or that trades, any agreement, contract, or transaction in foreign currency described in clause (i).’’. 


sroberts on DSKD5P82C1PROD with HEARING
364 

(10) Section 1a(19)(A)(iv)(II) of the Commodity Exchange 

Act (7 U.S.C. 1a(19)(A)(iv)(II)) (as redesignated by section 

721(a)(1)) is amended by inserting before the semicolon at the 

end the following: ‘‘provided, however, that for purposes of section 2(c)(2)(B)(vi) and section 2(c)(2)(C)(vii), the term ‘eligible 

contract participant’ shall not include a commodity pool in 

which any participant is not otherwise an eligible contract participant’’. 

(11) Section 6(e) of the Commodity Exchange Act (7 U.S.C. 

9a) is amended by adding at the end the following: 

‘‘(4) Any designated clearing organization that knowingly 

or recklessly evades or participates in or facilitates an evasion 

of the requirements of section 2(h) shall be liable for a civil 

money penalty in twice the amount otherwise available for a 

violation of section 2(h). 

‘‘(5) Any swap dealer or major swap participant that knowingly or recklessly evades or participates in or facilitates an 

evasion of the requirements of section 2(h) shall be liable for a 

civil money penalty in twice the amount otherwise available for 

a violation of section 2(h).’’. 

(c) SAVINGS CLAUSE.—Notwithstanding any other provision of 

this title, nothing in this subtitle shall be construed as divesting any 

appropriate Federal banking agency of any authority it may have 

to establish or enforce, with respect to a person for which such agency is the appropriate Federal banking agency, prudential or other 

standards pursuant to authority granted by Federal law other than 

this title. 

SEC. 742. RETAIL COMMODITY TRANSACTIONS. 

(a) IN GENERAL.—Section 2(c) of the Commodity Exchange Act 

(7 U.S.C. 2(c)) is amended— 

(1) in paragraph (1), by striking ‘‘5a (to the extent provided 

in section 5a(g)), 5b, 5d, or 12(e)(2)(B))’’ and inserting ‘‘, 5b, or 

12(e)(2)(B))’’; and 

(2) in paragraph (2), by adding at the end the following: 

‘‘(D) RETAIL COMMODITY TRANSACTIONS.— ‘‘(i) APPLICABILITY.—Except as provided in clause 

(ii), this subparagraph shall apply to any agreement, 

contract, or transaction in any commodity that is— 

‘‘(I) entered into with, or offered to (even if not 

entered into with), a person that is not an eligible 

contract participant or eligible commercial entity; 

and 

‘‘(II) entered into, or offered (even if not entered into), on a leveraged or margined basis, or financed by the offeror, the counterparty, or a person 

acting in concert with the offeror or counterparty 

on a similar basis. 

‘‘(ii) EXCEPTIONS.—This subparagraph shall not 

apply to— 

‘‘(I) an agreement, contract, or transaction described in paragraph (1) or subparagraphs (A), 

(B), or (C), including any agreement, contract, or 

transaction specifically excluded from subparagraph (A), (B), or (C); 

‘‘(II) any security; 


sroberts on DSKD5P82C1PROD with HEARING
365 

‘‘(III) a contract of sale that— 

‘‘(aa) results in actual delivery within 28 

days or such other longer period as the Commission may determine by rule or regulation 

based upon the typical commercial practice in 

cash or spot markets for the commodity involved; or 

‘‘(bb) creates an enforceable obligation to 

deliver between a seller and a buyer that have 

the ability to deliver and accept delivery, respectively, in connection with the line of business of the seller and buyer; or 

‘‘(IV) an agreement, contract, or transaction 

that is listed on a national securities exchange registered under section 6(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78f(a)); or 

‘‘(V) an identified banking product, as defined 

in section 402(b) of the Legal Certainty for Bank 

Products Act of 2000 (7 U.S.C. 27(b)). 

‘‘(iii) ENFORCEMENT.—Sections 4(a), 4(b), and 4b 

apply to any agreement, contract, or transaction described in clause (i), as if the agreement, contract, or 

transaction was a contract of sale of a commodity for 

future delivery. 

‘‘(iv) ELIGIBLE COMMERCIAL ENTITY.—For purposes 

of this subparagraph, an agricultural producer, packer, 

or handler shall be considered to be an eligible commercial entity for any agreement, contract, or transaction for a commodity in connection with the line of 

business of the agricultural producer, packer, or handler.’’. 

(b) GRAMM-LEACH-BLILEY ACT.—Section 206(a) of the GrammLeach-Bliley Act (Public Law 106–102; 15 U.S.C. 78c note) is 

amended, in the matter preceding paragraph (1), by striking ‘‘For 

purposes of’’ and inserting ‘‘Except as provided in subsection (e), for 

purposes of’’. 

(c) CONFORMING AMENDMENTS RELATING TO RETAIL FOREIGN

EXCHANGE TRANSACTIONS.— (1) Section 2(c)(2)(B)(i)(II) of the Commodity Exchange Act 

(7 U.S.C. 2(c)(2)(B)(i)(II)) is amended— 

(A) in item (aa), by inserting ‘‘United States’’ before ‘‘financial institution’’; 

(B) by striking items (dd) and (ff); 

(C) by redesignating items (ee) and (gg) as items (dd) 

and (ff), respectively; and 

(D) in item (dd) (as so redesignated), by striking the 

semicolon and inserting ‘‘; or’’. 

(2) Section 2(c)(2) of the Commodity Exchange Act (7 

U.S.C. 2(c)(2)) (as amended by subsection (a)(2)) is amended by 

adding at the end the following: 

‘‘(E) PROHIBITION.— 

‘‘(i) DEFINITION OF FEDERAL REGULATORY AGEN- CY.—In this subparagraph, the term ‘Federal regulatory agency’ means— 

‘‘(I) the Commission; 


sroberts on DSKD5P82C1PROD with HEARING
366 

‘‘(II) the Securities and Exchange Commission; 

‘‘(III) an appropriate Federal banking agency; 

‘‘(IV) the National Credit Union Association; 

and 

‘‘(V) the Farm Credit Administration. 

‘‘(ii) PROHIBITION.— 

‘‘(I) IN GENERAL.—Except as provided in subclause (II), a person described in subparagraph 

(B)(i)(II) for which there is a Federal regulatory 

agency shall not offer to, or enter into with, a person that is not an eligible contract participant, any 

agreement, contract, or transaction in foreign currency described in subparagraph (B)(i)(I) except 

pursuant to a rule or regulation of a Federal regulatory agency allowing the agreement, contract, or 

transaction under such terms and conditions as 

the Federal regulatory agency shall prescribe. 

‘‘(II) EFFECTIVE DATE.—With regard to persons 

described in subparagraph (B)(i)(II) for which a 

Federal regulatory agency has issued a proposed 

rule concerning agreements, contracts, or transactions in foreign currency described in subparagraph (B)(i)(I) prior to the date of enactment of 

this subclause, subclause (I) shall take effect 90 

days after the date of enactment of this subclause. 

‘‘(iii) REQUIREMENTS OF RULES AND REGULATIONS.— 

‘‘(I) IN GENERAL.—The rules and regulations 

described in clause (ii) shall prescribe appropriate 

requirements with respect to— 

‘‘(aa) disclosure; 

‘‘(bb) recordkeeping; 

‘‘(cc) capital and margin; 

‘‘(dd) reporting; 

‘‘(ee) business conduct; 

‘‘(ff) documentation; and 

‘‘(gg) such other standards or requirements as the Federal regulatory agency shall 

determine to be necessary. 

‘‘(II) TREATMENT.—The rules or regulations 

described in clause (ii) shall treat all agreements, 

contracts, and transactions in foreign currency described in subparagraph (B)(i)(I), and all agreements, contracts, and transactions in foreign currency that are functionally or economically similar 

to agreements, contracts, or transactions described 

in subparagraph (B)(i)(I), similarly.’’. 

SEC. 743. OTHER AUTHORITY. 

Unless otherwise provided by the amendments made by this 

subtitle, the amendments made by this subtitle do not divest any appropriate Federal banking agency, the Commodity Futures Trading 

Commission, the Securities and Exchange Commission, or other 

Federal or State agency of any authority derived from any other applicable law. 


sroberts on DSKD5P82C1PROD with HEARING
367 

SEC. 744. RESTITUTION REMEDIES. 

Section 6c(d) of the Commodity Exchange Act (7 U.S.C. 13a– 

1(d)) is amended by adding at the end the following: 

‘‘(3) EQUITABLE REMEDIES.—In any action brought under 

this section, the Commission may seek, and the court may impose, on a proper showing, on any person found in the action 

to have committed any violation, equitable remedies including— 

‘‘(A) restitution to persons who have sustained losses 

proximately caused by such violation (in the amount of 

such losses); and 

‘‘(B) disgorgement of gains received in connection with 

such violation.’’. 

SEC. 745. ENHANCED COMPLIANCE BY REGISTERED ENTITIES. 

(a) EFFECT OF INTERPRETATION.—Section 5c(a) of the Commodity Exchange Act (7 U.S.C. 7a–2(a)) is amended by striking 

paragraph (2) and inserting the following: 

‘‘(2) EFFECT OF INTERPRETATION.—An interpretation issued 

under paragraph (1) may provide the exclusive means for complying with each section described in paragraph (1).’’. 

(b) NEW CONTRACTS, NEW RULES, AND RULE AMENDMENTS.— Section 5c of the Commodity Exchange Act (7 U.S.C. 7a–2) is 

amended by striking subsection (c) and inserting the following: 

‘‘(c) NEW CONTRACTS, NEW RULES, AND RULE AMENDMENTS.— ‘‘(1) IN GENERAL.—A registered entity may elect to list for 

trading or accept for clearing any new contract, or other instrument, or may elect to approve and implement any new rule or 

rule amendment, by providing to the Commission (and the Secretary of the Treasury, in the case of a contract of sale of a government security for future delivery (or option on such a contract) or a rule or rule amendment specifically related to such 

a contract) a written certification that the new contract or instrument or clearing of the new contract or instrument, new 

rule, or rule amendment complies with this Act (including regulations under this Act). 

‘‘(2) RULE REVIEW.—The new rule or rule amendment described in paragraph (1) shall become effective, pursuant to the 

certification of the registered entity and notice of such certification to its members (in a manner to be determined by the 

Commission), on the date that is 10 business days after the date 

on which the Commission receives the certification (or such 

shorter period as determined by the Commission by rule or regulation) unless the Commission notifies the registered entity 

within such time that it is staying the certification because 

there exist novel or complex issues that require additional time 

to analyze, an inadequate explanation by the submitting registered entity, or a potential inconsistency with this Act (including regulations under this Act). 

‘‘(3) STAY OF CERTIFICATION FOR RULES.— 

‘‘(A) A notification by the Commission pursuant to 

paragraph (2) shall stay the certification of the new rule or 

rule amendment for up to an additional 90 days from the 

date of the notification. 

‘‘(B) A rule or rule amendment subject to a stay pursuant to subparagraph (A) shall become effective, pursuant to 


sroberts on DSKD5P82C1PROD with HEARING
368 

the certification of the registered entity, at the expiration of 

the period described in subparagraph (A) unless the Commission— 

‘‘(i) withdraws the stay prior to that time; or 

‘‘(ii) notifies the registered entity during such period that it objects to the proposed certification on the 

grounds that it is inconsistent with this Act (including 

regulations under this Act). 

‘‘(C) The Commission shall provide a not less than 30- 

day public comment period, within the 90-day period in 

which the stay is in effect as described in subparagraph 

(A), whenever the Commission reviews a rule or rule 

amendment pursuant to a notification by the Commission 

under this paragraph. 

‘‘(4) PRIOR APPROVAL.— 

‘‘(A) IN GENERAL.—A registered entity may request that 

the Commission grant prior approval to any new contract 

or other instrument, new rule, or rule amendment. 

‘‘(B) PRIOR APPROVAL REQUIRED.—Notwithstanding any 

other provision of this section, a designated contract market 

shall submit to the Commission for prior approval each 

rule amendment that materially changes the terms and 

conditions, as determined by the Commission, in any contract of sale for future delivery of a commodity specifically 

enumerated in section 1a(10) (or any option thereon) traded 

through its facilities if the rule amendment applies to contracts and delivery months which have already been listed 

for trading and have open interest. 

‘‘(C) DEADLINE.—If prior approval is requested under 

subparagraph (A), the Commission shall take final action 

on the request not later than 90 days after submission of 

the request, unless the person submitting the request agrees 

to an extension of the time limitation established under this 

subparagraph. 

‘‘(5) APPROVAL.— 

‘‘(A) RULES.—The Commission shall approve a new 

rule, or rule amendment, of a registered entity unless the 

Commission finds that the new rule, or rule amendment, is 

inconsistent with this subtitle (including regulations). 

‘‘(B) CONTRACTS AND INSTRUMENTS.—The Commission 

shall approve a new contract or other instrument unless the 

Commission finds that the new contract or other instrument would violate this Act (including regulations). 

‘‘(C) SPECIAL RULE FOR REVIEW AND APPROVAL OF

EVENT CONTRACTS AND SWAPS CONTRACTS.— 

‘‘(i) EVENT CONTRACTS.—In connection with the 

listing of agreements, contracts, transactions, or swaps 

in excluded commodities that are based upon the occurrence, extent of an occurrence, or contingency (other 

than a change in the price, rate, value, or levels of a 

commodity described in section 1a(2)(i)), by a designated contract market or swap execution facility, the 

Commission may determine that such agreements, contracts, or transactions are contrary to the public interVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00372 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
369 

est if the agreements, contracts, or transactions involve— 

‘‘(I) activity that is unlawful under any Federal or State law; 

‘‘(II) terrorism; 

‘‘(III) assassination; 

‘‘(IV) war; 

‘‘(V) gaming; or 

‘‘(VI) other similar activity determined by the 

Commission, by rule or regulation, to be contrary 

to the public interest. 

‘‘(ii) PROHIBITION.—No agreement, contract, or 

transaction determined by the Commission to be contrary to the public interest under clause (i) may be listed or made available for clearing or trading on or 

through a registered entity. 

‘‘(iii) SWAPS CONTRACTS.— 

‘‘(I) IN GENERAL.—In connection with the listing of a swap for clearing by a derivatives clearing 

organization, the Commission shall determine, 

upon request or on its own motion, the initial eligibility, or the continuing qualification, of a derivatives clearing organization to clear such a swap 

under those criteria, conditions, or rules that the 

Commission, in its discretion, determines. 

‘‘(II) REQUIREMENTS.—Any such criteria, conditions, or rules shall consider— 

‘‘(aa) the financial integrity of the derivatives clearing organization; and 

‘‘(bb) any other factors which the Commission determines may be appropriate. 

‘‘(iv) DEADLINE.—The Commission shall take final 

action under clauses (i) and (ii) in not later than 90 

days from the commencement of its review unless the 

party seeking to offer the contract or swap agrees to an 

extension of this time limitation.’’. 

(c) VIOLATION OF CORE PRINCIPLES.—Section 5c of the Commodity Exchange Act (7 U.S.C. 7a–2) is amended by striking subsection (d). 

SEC. 746. INSIDER TRADING. 

Section 4c(a) of the Commodity Exchange Act (7 U.S.C. 6c(a)) 

is amended by adding at the end the following: 

‘‘(3) CONTRACT OF SALE.—It shall be unlawful for any employee or agent of any department or agency of the Federal Government who, by virtue of the employment or position of the employee or agent, acquires information that may affect or tend to 

affect the price of any commodity in interstate commerce, or for 

future delivery, or any swap, and which information has not 

been disseminated by the department or agency of the Federal 

Government holding or creating the information in a manner 

which makes it generally available to the trading public, or disclosed in a criminal, civil, or administrative hearing, or in a 

congressional, administrative, or Government Accountability 

Office report, hearing, audit, or investigation, to use the inforVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00373 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
370 

mation in his personal capacity and for personal gain to enter 

into, or offer to enter into— 

‘‘(A) a contract of sale of a commodity for future delivery (or option on such a contract); 

‘‘(B) an option (other than an option executed or traded 

on a national securities exchange registered pursuant to 

section 6(a) of the Securities Exchange Act of 1934 (15 

U.S.C. 78f(a)); or 

‘‘(C) a swap.’’ 

‘‘(4) NONPUBLIC INFORMATION.— ‘‘(A) IMPARTING OF NONPUBLIC INFORMATION.—It shall 

be unlawful for any employee or agent of any department 

or agency of the Federal government who, by virtue of the 

employment or position of the employee or agent, acquires 

information that may affect or tend to affect the price of 

any commodity in interstate commerce, or for future delivery, or any swap, and which information has not been disseminated by the department or agency of the Federal Government holding or creating the information in a manner 

which makes it generally available to the trading public, or 

disclosed in a criminal, civil, or administrative hearing, or 

in a congressional, administrative, or Government Accountability Office report, hearing, audit, or investigation, to use 

the information in his personal capacity and for personal 

gain to enter into, or offer to enter into— 

‘‘(i) a contract of sale of a commodity for future delivery (or option on such a contract); 

‘‘(ii) an option (other than an option executed or 

traded on a national securities exchange registered 

pursuant to section 6(a) of the Securities Exchange Act 

of 1934 (15 U.S.C. 78f(a)); or 

‘‘(iii) a swap. 

‘‘(B) KNOWING USE.—It shall be unlawful for any person who receives information imparted by any employee or 

agent of any department or agency of the Federal Government as described in subparagraph (A) to knowingly use 

such information to enter into, or offer to enter into— 

‘‘(i) a contract of sale of a commodity for future delivery (or option on such a contract); 

‘‘(ii) an option (other than an option executed or 

traded on a national securities exchange registered 

pursuant to section 6(a) of the Securities Exchange Act 

of 1934 (15 U.S.C. 78f(a)); or 

‘‘(iii) a swap. 

‘‘(C) THEFT OF NONPUBLIC INFORMATION.—It shall be 

unlawful for any person to steal, convert, or misappropriate, by any means whatsoever, information held or created by any department or agency of the Federal Government that may affect or tend to affect the price of any commodity in interstate commerce, or for future delivery, or any 

swap, where such person knows, or acts in reckless disregard of the fact, that such information has not been disseminated by the department or agency of the Federal Government holding or creating the information in a manner 

which makes it generally available to the trading public, or 


sroberts on DSKD5P82C1PROD with HEARING
371 

disclosed in a criminal, civil, or administrative hearing, or 

in a congressional, administrative, or Government Accountability Office report, hearing, audit, or investigation, and to 

use such information, or to impart such information with 

the intent to assist another person, directly or indirectly, to 

use such information to enter into, or offer to enter into— 

‘‘(i) a contract of sale of a commodity for future delivery (or option on such a contract); 

‘‘(ii) an option (other than an option executed or 

traded on a national securities exchange registered 

pursuant to section 6(a) of the Securities Exchange Act 

of 1934 (15 U.S.C. 78f(a)); or 

‘‘(iii) a swap, provided, however, that nothing in 

this subparagraph shall preclude a person that has 

provided information concerning, or generated by, the 

person, its operations or activities, to any employee or 

agent of any department or agency of the Federal Government, voluntarily or as required by law, from using 

such information to enter into, or offer to enter into, a 

contract of sale, option, or swap described in clauses 

(i), (ii), or (iii).’’. 

SEC. 747. ANTIDISRUPTIVE PRACTICES AUTHORITY. 

Section 4c(a) of the Commodity Exchange Act (7 U.S.C. 6c(a)) 

(as amended by section 746) is amended by adding at the end the 

following: 

‘‘(5) DISRUPTIVE PRACTICES.—It shall be unlawful for any 

person to engage in any trading, practice, or conduct on or subject to the rules of a registered entity that— 

‘‘(A) violates bids or offers; 

‘‘(B) demonstrates intentional or reckless disregard for 

the orderly execution of transactions during the closing period; or 

‘‘(C) is, is of the character of, or is commonly known to 

the trade as, ‘spoofing’ (bidding or offering with the intent 

to cancel the bid or offer before execution). 

‘‘(6) RULEMAKING AUTHORITY.—The Commission may make 

and promulgate such rules and regulations as, in the judgment 

of the Commission, are reasonably necessary to prohibit the 

trading practices described in paragraph (5) and any other 

trading practice that is disruptive of fair and equitable trading. 

‘‘(7) USE OF SWAPS TO DEFRAUD.—It shall be unlawful for 

any person to enter into a swap knowing, or acting in reckless 

disregard of the fact, that its counterparty will use the swap as 

part of a device, scheme, or artifice to defraud any third party.’’. 

SEC. 748. COMMODITY WHISTLEBLOWER INCENTIVES AND PROTECTION. 

The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended 

by adding at the end the following: 

‘‘SEC. 23. COMMODITY WHISTLEBLOWER INCENTIVES AND PROTECTION. 

‘‘(a) DEFINITIONS.—In this section: 

‘‘(1) COVERED JUDICIAL OR ADMINISTRATIVE ACTION.—The 

term ‘covered judicial or administrative action’ means any judicial or administrative action brought by the Commission under 


sroberts on DSKD5P82C1PROD with HEARING
372 

this Act that results in monetary sanctions exceeding 

$1,000,000. 

‘‘(2) FUND.—The term ‘Fund’ means the Commodity Futures Trading Commission Customer Protection Fund established under subsection (g). 

‘‘(3) MONETARY SANCTIONS.—The term ‘monetary sanctions’, 

when used with respect to any judicial or administrative action 

means— 

‘‘(A) any monies, including penalties, disgorgement, 

restitution, and interest ordered to be paid; and 

‘‘(B) any monies deposited into a disgorgement fund or 

other fund pursuant to section 308(b) of the Sarbanes-Oxley 

Act of 2002 (15 U.S.C. 7246(b)), as a result of such action 

or any settlement of such action. 

‘‘(4) ORIGINAL INFORMATION.—The term ‘original information’ means information that— 

‘‘(A) is derived from the independent knowledge or 

analysis of a whistleblower; 

‘‘(B) is not known to the Commission from any other 

source, unless the whistleblower is the original source of the 

information; and 

‘‘(C) is not exclusively derived from an allegation made 

in a judicial or administrative hearing, in a governmental 

report, hearing, audit, or investigation, or from the news 

media, unless the whistleblower is a source of the information. 

‘‘(5) RELATED ACTION.—The term ‘related action’, when used 

with respect to any judicial or administrative action brought by 

the Commission under this Act, means any judicial or administrative action brought by an entity described in subclauses (I) 

through (VI) of subsection (h)(2)(C) that is based upon the original information provided by a whistleblower pursuant to subsection (a) that led to the successful enforcement of the Commission action. 

‘‘(6) SUCCESSFUL RESOLUTION.—The term ‘successful resolution’, when used with respect to any judicial or administrative 

action brought by the Commission under this Act, includes any 

settlement of such action. 

‘‘(7) WHISTLEBLOWER.—The term ‘whistleblower’ means any 

individual, or 2 or more individuals acting jointly, who provides information relating to a violation of this Act to the Commission, in a manner established by rule or regulation by the 

Commission. 

‘‘(b) AWARDS.— 

‘‘(1) IN GENERAL.—In any covered judicial or administrative action, or related action, the Commission, under regulations prescribed by the Commission and subject to subsection 

(c), shall pay an award or awards to 1 or more whistleblowers 

who voluntarily provided original information to the Commission that led to the successful enforcement of the covered judicial or administrative action, or related action, in an aggregate 

amount equal to— 

‘‘(A) not less than 10 percent, in total, of what has been 

collected of the monetary sanctions imposed in the action or 

related actions; and 


sroberts on DSKD5P82C1PROD with HEARING
373 

‘‘(B) not more than 30 percent, in total, of what has 

been collected of the monetary sanctions imposed in the action or related actions. 

‘‘(2) PAYMENT OF AWARDS.—Any amount paid under paragraph (1) shall be paid from the Fund. 

‘‘(c) DETERMINATION OF AMOUNT OF AWARD; DENIAL OF

AWARD.— 

‘‘(1) DETERMINATION OF AMOUNT OF AWARD.— 

‘‘(A) DISCRETION.—The determination of the amount of 

an award made under subsection (b) shall be in the discretion of the Commission. 

‘‘(B) CRITERIA.—In determining the amount of an 

award made under subsection (b), the Commission— 

‘‘(i) shall take into consideration— 

‘‘(I) the significance of the information provided by the whistleblower to the success of the 

covered judicial or administrative action; 

‘‘(II) the degree of assistance provided by the 

whistleblower and any legal representative of the 

whistleblower in a covered judicial or administrative action; 

‘‘(III) the programmatic interest of the Commission in deterring violations of the Act (including regulations under the Act) by making awards 

to whistleblowers who provide information that 

leads to the successful enforcement of such laws; 

and 

‘‘(IV) such additional relevant factors as the 

Commission may establish by rule or regulation; 

and 

‘‘(ii) shall not take into consideration the balance 

of the Fund. 

‘‘(2) DENIAL OF AWARD.—No award under subsection (b) 

shall be made— 

‘‘(A) to any whistleblower who is, or was at the time the 

whistleblower acquired the original information submitted 

to the Commission, a member, officer, or employee of— 

‘‘(i) an appropriate regulatory agency; 

‘‘(ii) the Department of Justice; 

‘‘(iii) a registered entity; 

‘‘(iv) a registered futures association; 

‘‘(v) a self-regulatory organization as defined in 

section 3(a) of the Securities Exchange Act of 1934 (15 

U.S.C. 78c(a)); or 

‘‘(vi) a law enforcement organization; 

‘‘(B) to any whistleblower who is convicted of a criminal violation related to the judicial or administrative action 

for which the whistleblower otherwise could receive an 

award under this section; 

‘‘(C) to any whistleblower who submits information to 

the Commission that is based on the facts underlying the 

covered action submitted previously by another whistleblower; 


sroberts on DSKD5P82C1PROD with HEARING
374 

‘‘(D) to any whistleblower who fails to submit information to the Commission in such form as the Commission 

may, by rule or regulation, require. 

‘‘(d) REPRESENTATION.— 

‘‘(1) PERMITTED REPRESENTATION.—Any whistleblower who 

makes a claim for an award under subsection (b) may be represented by counsel. 

‘‘(2) REQUIRED REPRESENTATION.— 

‘‘(A) IN GENERAL.—Any whistleblower who anonymously makes a claim for an award under subsection (b) 

shall be represented by counsel if the whistleblower submits 

the information upon which the claim is based. 

‘‘(B) DISCLOSURE OF IDENTITY.—Prior to the payment 

of an award, a whistleblower shall disclose the identity of 

the whistleblower and provide such other information as 

the Commission may require, directly or through counsel 

for the whistleblower. 

‘‘(e) NO CONTRACT NECESSARY.—No contract with the Commission is necessary for any whistleblower to receive an award under 

subsection (b), unless otherwise required by the Commission, by rule 

or regulation. 

‘‘(f) APPEALS.— 

‘‘(1) IN GENERAL.—Any determination made under this section, including whether, to whom, or in what amount to make 

awards, shall be in the discretion of the Commission. 

‘‘(2) APPEALS.—Any determination described in paragraph 

(1) may be appealed to the appropriate court of appeals of the 

United States not more than 30 days after the determination is 

issued by the Commission. 

‘‘(3) REVIEW.—The court shall review the determination 

made by the Commission in accordance with section 7064 of 

title 5, United States Code. 

‘‘(g) COMMODITY FUTURES TRADING COMMISSION CUSTOMER

PROTECTION FUND.— 

‘‘(1) ESTABLISHMENT.—There is established in the Treasury 

of the United States a revolving fund to be known as the ‘Commodity Futures Trading Commission Customer Protection 

Fund’. 

‘‘(2) USE OF FUND.—The Fund shall be available to the 

Commission, without further appropriation or fiscal year limitation, for— 

‘‘(A) the payment of awards to whistleblowers as provided in subsection (a); and 

‘‘(B) the funding of customer education initiatives designed to help customers protect themselves against fraud 

or other violations of this Act, or the rules and regulations 

thereunder. 

‘‘(3) DEPOSITS AND CREDITS.—There shall be deposited into 

or credited to the Fund: 

‘‘(A) MONETARY SANCTIONS.—Any monetary sanctions 

collected by the Commission in any covered judicial or administrative action that is not otherwise distributed to victims of a violation of this Act or the rules and regulations 

thereunder underlying such action, unless the balance of 


sroberts on DSKD5P82C1PROD with HEARING
375 

the Fund at the time the monetary judgment is collected exceeds $100,000,000. 

‘‘(B) ADDITIONAL AMOUNTS.—If the amounts deposited 

into or credited to the Fund under subparagraph (A) are 

not sufficient to satisfy an award made under subsection 

(b), there shall be deposited into or credited to the Fund an 

amount equal to the unsatisfied portion of the award from 

any monetary sanction collected by the Commission in any 

judicial or administrative action brought by the Commission under this Act that is based on information provided 

by a whistleblower. 

‘‘(C) INVESTMENT INCOME.—All income from investments made under paragraph (4). 

‘‘(4) INVESTMENTS.— 

‘‘(A) AMOUNTS IN FUND MAY BE INVESTED.—The Commission may request the Secretary of the Treasury to invest 

the portion of the Fund that is not, in the Commission’s 

judgment, required to meet the current needs of the Fund. 

‘‘(B) ELIGIBLE INVESTMENTS.—Investments shall be 

made by the Secretary of the Treasury in obligations of the 

United States or obligations that are guaranteed as to principal and interest by the United States, with maturities 

suitable to the needs of the Fund as determined by the 

Commission. 

‘‘(C) INTEREST AND PROCEEDS CREDITED.—The interest 

on, and the proceeds from the sale or redemption of, any 

obligations held in the Fund shall be credited to, and form 

a part of, the Fund. 

‘‘(5) REPORTS TO CONGRESS.—Not later than October 30 of 

each year, the Commission shall transmit to the Committee on 

Agriculture, Nutrition, and Forestry of the Senate, and the 

Committee on Agriculture of the House of Representatives a report on— 

‘‘(A) the Commission’s whistleblower award program 

under this section, including a description of the number of 

awards granted and the types of cases in which awards 

were granted during the preceding fiscal year; 

‘‘(B) customer education initiatives described in paragraph (2)(B) that were funded by the Fund during the preceding fiscal year; 

‘‘(C) the balance of the Fund at the beginning of the 

preceding fiscal year; 

‘‘(D) the amounts deposited into or credited to the Fund 

during the preceding fiscal year; 

‘‘(E) the amount of earnings on investments of amounts 

in the Fund during the preceding fiscal year; 

‘‘(F) the amount paid from the Fund during the preceding fiscal year to whistleblowers pursuant to subsection 

(b); 

‘‘(G) the amount paid from the Fund during the preceding fiscal year for customer education initiatives described in paragraph (2)(B); 

‘‘(H) the balance of the Fund at the end of the preceding fiscal year; and 


sroberts on DSKD5P82C1PROD with HEARING
376 

‘‘(I) a complete set of audited financial statements, including a balance sheet, income statement, and cash flow 

analysis. 

‘‘(h) PROTECTION OF WHISTLEBLOWERS.— ‘‘(1) PROHIBITION AGAINST RETALIATION.— ‘‘(A) IN GENERAL.—No employer may discharge, demote, suspend, threaten, harass, directly or indirectly, or in 

any other manner discriminate against, a whistleblower in 

the terms and conditions of employment because of any 

lawful act done by the whistleblower— 

‘‘(i) in providing information to the Commission in 

accordance with subsection (b); or 

‘‘(ii) in assisting in any investigation or judicial or 

administrative action of the Commission based upon or 

related to such information. 

‘‘(B) ENFORCEMENT.— ‘‘(i) CAUSE OF ACTION.—An individual who alleges 

discharge or other discrimination in violation of subparagraph (A) may bring an action under this subsection in the appropriate district court of the United 

States for the relief provided in subparagraph (C), unless the individual who is alleging discharge or other 

discrimination in violation of subparagraph (A) is an 

employee of the Federal Government, in which case the 

individual shall only bring an action under section 

1221 of title 5, United States Code. 

‘‘(ii) SUBPOENAS.—A subpoena requiring the attendance of a witness at a trial or hearing conducted 

under this subsection may be served at any place in the 

United States. 

‘‘(iii) STATUTE OF LIMITATIONS.—An action under 

this subsection may not be brought more than 2 years 

after the date on which the violation reported in subparagraph (A) is committed. 

‘‘(C) RELIEF.—Relief for an individual prevailing in an 

action brought under subparagraph (B) shall include— 

‘‘(i) reinstatement with the same seniority status 

that the individual would have had, but for the discrimination; 

‘‘(ii) the amount of back pay otherwise owed to the 

individual, with interest; and 

‘‘(iii) compensation for any special damages sustained as a result of the discharge or discrimination, 

including litigation costs, expert witness fees, and reasonable attorney’s fees. 

‘‘(2) CONFIDENTIALITY.— 

‘‘(A) IN GENERAL.—Except as provided in subparagraphs (B) and (C), the Commission, and any officer or employee of the Commission, shall not disclose any information, including information provided by a whistleblower to 

the Commission, which could reasonably be expected to reveal the identity of a whistleblower, except in accordance 

with the provisions of section 552a of title 5, United States 

Code, unless and until required to be disclosed to a defendant or respondent in connection with a public proceeding 


sroberts on DSKD5P82C1PROD with HEARING
377 

instituted by the Commission or any entity described in 

subparagraph (C). For purposes of section 552 of title 5, 

United States Code, this paragraph shall be considered a 

statute described in subsection (b)(3)(B) of such section 552. 

‘‘(B) EFFECT.—Nothing in this paragraph is intended 

to limit the ability of the Attorney General to present such 

evidence to a grand jury or to share such evidence with potential witnesses or defendants in the course of an ongoing 

criminal investigation. 

‘‘(C) AVAILABILITY TO GOVERNMENT AGENCIES.— 

‘‘(i) IN GENERAL.—Without the loss of its status as 

confidential in the hands of the Commission, all information referred to in subparagraph (A) may, in the 

discretion of the Commission, when determined by the 

Commission to be necessary or appropriate to accomplish the purposes of this Act and protect customers 

and in accordance with clause (ii), be made available 

to— 

‘‘(I) the Department of Justice; 

‘‘(II) an appropriate department or agency of 

the Federal Government, acting within the scope of 

its jurisdiction; 

‘‘(III) a registered entity, registered futures association, or self-regulatory organization as defined in section 3(a) of the Securities Exchange Act 

of 1934 (15 U.S.C. 78c(a)); 

‘‘(IV) a State attorney general in connection 

with any criminal investigation; 

‘‘(V) an appropriate department or agency of 

any State, acting within the scope of its jurisdiction; and 

‘‘(VI) a foreign futures authority. 

‘‘(ii) MAINTENANCE OF INFORMATION.—Each of the 

entities, agencies, or persons described in clause (i) 

shall maintain information described in that clause as 

confidential, in accordance with the requirements in 

subparagraph (A). 

‘‘(iii) STUDY ON IMPACT OF FOIA EXEMPTION ON

COMMODITY FUTURES TRADING COMMISSION.— 

‘‘(I) STUDY.—The Inspector General of the 

Commission shall conduct a study— 

‘‘(aa) on whether the exemption under section 552(b)(3) of title 5, United States Code 

(known as the Freedom of Information Act) established in paragraph (2)(A) aids whistleblowers in disclosing information to the Commission; 

‘‘(bb) on what impact the exemption has 

had on the public’s ability to access information about the Commission’s regulation of 

commodity futures and option markets; and 

‘‘(cc) to make any recommendations on 

whether the Commission should continue to 

use the exemption. 


sroberts on DSKD5P82C1PROD with HEARING
378 

‘‘(II) REPORT.—Not later than 30 months after 

the date of enactment of this clause, the Inspector 

General shall— 

‘‘(aa) submit a report on the findings of 

the study required under this clause to the 

Committee on Banking, Housing, and Urban 

Affairs of the Senate and the Committee on Financial Services of the House of Representatives; and 

‘‘(bb) make the report available to the public through publication of a report on the 

website of the Commission. 

‘‘(3) RIGHTS RETAINED.—Nothing in this section shall be 

deemed to diminish the rights, privileges, or remedies of any 

whistleblower under any Federal or State law, or under any 

collective bargaining agreement. 

‘‘(i) RULEMAKING AUTHORITY.—The Commission shall have the 

authority to issue such rules and regulations as may be necessary 

or appropriate to implement the provisions of this section consistent 

with the purposes of this section. 

‘‘(j) IMPLEMENTING RULES.—The Commission shall issue final 

rules or regulations implementing the provisions of this section not 

later than 270 days after the date of enactment of the Wall Street 

Transparency and Accountability Act of 2010. 

‘‘(k) ORIGINAL INFORMATION.—Information submitted to the 

Commission by a whistleblower in accordance with rules or regulations implementing this section shall not lose its status as original 

information solely because the whistleblower submitted such information prior to the effective date of such rules or regulations, provided such information was submitted after the date of enactment 

of the Wall Street Transparency and Accountability Act of 2010. 

‘‘(l) AWARDS.—A whistleblower may receive an award pursuant 

to this section regardless of whether any violation of a provision of 

this Act, or a rule or regulation thereunder, underlying the judicial 

or administrative action upon which the award is based occurred 

prior to the date of enactment of the Wall Street Transparency and 

Accountability Act of 2010. 

‘‘(m) PROVISION OF FALSE INFORMATION.—A whistleblower who 

knowingly and willfully makes any false, fictitious, or fraudulent 

statement or representation, or who makes or uses any false writing 

or document knowing the same to contain any false, fictitious, or 

fraudulent statement or entry, shall not be entitled to an award 

under this section and shall be subject to prosecution under section 

1001 of title 18, United States Code. 

‘‘(n) NONENFORCEABILITY OF CERTAIN PROVISIONS WAIVING

RIGHTS AND REMEDIES OR REQUIRING ARBITRATION OF DISPUTES.— 

‘‘(1) WAIVER OF RIGHTS AND REMEDIES.—The rights and 

remedies provided for in this section may not be waived by any 

agreement, policy form, or condition of employment including 

by a predispute arbitration agreement. 

‘‘(2) PREDISPUTE ARBITRATION AGREEMENTS.—No 

predispute arbitration agreement shall be valid or enforceable, 

if the agreement requires arbitration of a dispute arising under 

this section.’’. 


sroberts on DSKD5P82C1PROD with HEARING
379 

SEC. 749. CONFORMING AMENDMENTS. 

(a) Section 4d of the Commodity Exchange Act (7 U.S.C. 6d) (as 

amended by section 724) is amended— 

(1) in subsection (a)— 

(A) in the matter preceding paragraph (1)— 

(i) by striking ‘‘engage as’’ and inserting ‘‘be a’’; 

and 

(ii) by striking ‘‘or introducing broker’’ and all that 

follows through ‘‘or derivatives transaction execution 

facility’’; 

(B) in paragraph (1), by striking ‘‘or introducing 

broker’’; and 

(C) in paragraph (2), by striking ‘‘if a futures commission merchant,’’; and 

(2) by adding at the end the following: 

‘‘(g) It shall be unlawful for any person to be an introducing 

broker unless such person shall have registered under this Act with 

the Commission as an introducing broker and such registration 

shall not have expired nor been suspended nor revoked.’’. 

(b) Section 4m(3) of the Commodity Exchange Act (7 U.S.C. 

6m(3)) is amended— 

(1) by striking ‘‘(3) Subsection (1) of this section’’ and inserting the following: 

‘‘(3) EXCEPTION.— 

‘‘(A) IN GENERAL.—Paragraph (1)’’; and 

(2) by striking ‘‘to any investment trust’’ and all that follows through the period at the end and inserting the following: 

‘‘to any commodity pool that is engaged primarily in trading 

commodity interests. 

‘‘(B) ENGAGED PRIMARILY.—For purposes of subparagraph 

(A), a commodity trading advisor or a commodity pool shall be 

considered to be ‘engaged primarily’ in the business of being a 

commodity trading advisor or commodity pool if it is or holds 

itself out to the public as being engaged primarily, or proposes 

to engage primarily, in the business of advising on commodity 

interests or investing, reinvesting, owning, holding, or trading 

in commodity interests, respectively. 

‘‘(C) COMMODITY INTERESTS.—For purposes of this paragraph, commodity interests shall include contracts of sale of a 

commodity for future delivery, options on such contracts, security futures, swaps, leverage contracts, foreign exchange, spot 

and forward contracts on physical commodities, and any monies held in an account used for trading commodity interests.’’. 

(c) Section 5c of the Commodity Exchange Act (7 U.S.C. 7a–2) 

is amended— 

(1) in subsection (a)(1)— 

(A) by striking ‘‘, 5a(d),’’; and 

(B) by striking ‘‘and section (2)(h)(7) with respect to significant price discovery contracts,’’; and 

(2) in subsection (f)(1), by striking ‘‘section 4d(c) of this Act’’ 

and inserting ‘‘section 4d(e)’’. 

(d) Section 5e of the Commodity Exchange Act (7 U.S.C. 7b) is 

amended by striking ‘‘or revocation of the right of an electronic trading facility to rely on the exemption set forth in section 2(h)(3) with 

respect to a significant price discovery contract,’’. 


sroberts on DSKD5P82C1PROD with HEARING
380 

(e) Section 6(b) of the Commodity Exchange Act (7 U.S.C. 8(b)) 

is amended in the first sentence by striking ‘‘, or to revoke the right 

of an electronic trading facility to rely on the exemption set forth in 

section 2(h)(3) with respect to a significant price discovery contract,’’. 

(f) Section 12(e)(2)(B) of the Commodity Exchange Act (7 U.S.C. 

16(e)(2)(B)) is amended— 

(1) by striking ‘‘section 2(c), 2(d), 2(f), or 2(g) of this Act’’ 

and inserting ‘‘section 2(c) or 2(f) of this Act’’; and 

(2) by striking ‘‘2(h) or’’. 

(g) Section 17(r)(1) of the Commodity Exchange Act (7 U.S.C. 

21(r)(1)) is amended by striking ‘‘section 4d(c) of this Act’’ and inserting ‘‘section 4d(e)’’. 

(h) Section 22 of the Commodity Exchange Act is amended— 

(1) in subsection (a)(1)(B), by— 

(A) inserting ‘‘or any swap’’ after ‘‘commodity)’’; and 

(B) inserting ‘‘or any swap’’ after ‘‘such contract’’; 

(2) in subsection (a)(1)(C), by adding at the end the following: 

‘‘(iv) a swap; or’’; and 

(3) in subsection (b)(1)(A), by striking ‘‘section 2(h)(7) or 

sections 5 through 5c’’ and inserting ‘‘section 5, 5b, 5c, 5h, or 

21’’. 

(i) Section 408(2)(C) of the Federal Deposit Insurance Corporation Improvement Act of 1991 (12 U.S.C. 4421(2)(C)) is amended— 

(1) by striking ‘‘section 2(c), 2(d), 2(f), or (2)(g) of such Act’’ 

and inserting ‘‘section 2(c), 2(f), or 2(i) of that Act’’; and 

(2) by striking ‘‘2(h) or’’. 

SEC. 750. STUDY ON OVERSIGHT OF CARBON MARKETS. 

(a) INTERAGENCY WORKING GROUP.—There is established to 

carry out this section an interagency working group (referred to in 

this section as the ‘‘interagency group’’) composed of the following 

members or designees: 

(1) The Chairman of the Commodity Futures Trading Commission (referred to in this section as the ‘‘Commission’’), who 

shall serve as Chairman of the interagency group. 

(2) The Secretary of Agriculture. 

(3) The Secretary of the Treasury. 

(4) The Chairman of the Securities and Exchange Commission. 

(5) The Administrator of the Environmental Protection 

Agency. 

(6) The Chairman of the Federal Energy Regulatory Commission. 

(7) The Commissioner of the Federal Trade Commission. 

(8) The Administrator of the Energy Information Administration. 

(b) ADMINISTRATIVE SUPPORT.—The Commission shall provide 

the interagency group such administrative support services as are 

necessary to enable the interagency group to carry out the functions 

of the interagency group under this section. 

(c) CONSULTATION.—In carrying out this section, the interagency group shall consult with representatives of exchanges, clearinghouses, self-regulatory bodies, major carbon market participants, 


sroberts on DSKD5P82C1PROD with HEARING
381 

consumers, and the general public, as the interagency group determines to be appropriate. 

(d) STUDY.—The interagency group shall conduct a study on the 

oversight of existing and prospective carbon markets to ensure an efficient, secure, and transparent carbon market, including oversight 

of spot markets and derivative markets. 

(e) REPORT.—Not later than 180 days after the date of enactment of this Act, the interagency group shall submit to Congress a 

report on the results of the study conducted under subsection (b), including recommendations for the oversight of existing and prospective carbon markets to ensure an efficient, secure, and transparent 

carbon market, including oversight of spot markets and derivative 

markets. 

SEC. 751. ENERGY AND ENVIRONMENTAL MARKETS ADVISORY COMMITTEE. 

Section 2(a) of the Commodity Exchange Act (7 U.S.C. 2(a)) (as 

amended by section 727) is amended by adding at the end the following: 

‘‘(15) ENERGY AND ENVIRONMENTAL MARKETS ADVISORY

COMMITTEE.— 

‘‘(A) ESTABLISHMENT.— 

‘‘(i) IN GENERAL.—An Energy and Environmental 

Markets Advisory Committee is hereby established. 

‘‘(ii) MEMBERSHIP.—The Committee shall have 9 

members. 

‘‘(iii) ACTIVITIES.—The Committee’s objectives and 

scope of activities shall be— 

‘‘(I) to conduct public meetings; 

‘‘(II) to submit reports and recommendations 

to the Commission (including dissenting or minority views, if any); and 

‘‘(III) otherwise to serve as a vehicle for discussion and communication on matters of concern to 

exchanges, firms, end users, and regulators regarding energy and environmental markets and their 

regulation by the Commission. 

‘‘(B) REQUIREMENTS.— 

‘‘(i) IN GENERAL.—The Committee shall hold public 

meetings at such intervals as are necessary to carry out 

the functions of the Committee, but not less frequently 

than 2 times per year. 

‘‘(ii) MEMBERS.—Members shall be appointed to 3- 

year terms, but may be removed for cause by vote of the 

Commission. 

‘‘(C) APPOINTMENT.—The Commission shall appoint 

members with a wide diversity of opinion and who represent a broad spectrum of interests, including hedgers and 

consumers. 

‘‘(D) REIMBURSEMENT.—Members shall be entitled to 

per diem and travel expense reimbursement by the Commission. 

‘‘(E) FACA.—The Committee shall not be subject to the 

Federal Advisory Committee Act (5 U.S.C. App.).’’. 


sroberts on DSKD5P82C1PROD with HEARING
382 

SEC. 752. INTERNATIONAL HARMONIZATION. 

(a) In order to promote effective and consistent global regulation 

of swaps and security-based swaps, the Commodity Futures Trading 

Commission, the Securities and Exchange Commission, and the 

prudential regulators (as that term is defined in section 1a(39) of 

the Commodity Exchange Act), as appropriate, shall consult and coordinate with foreign regulatory authorities on the establishment of 

consistent international standards with respect to the regulation (including fees) of swaps, security-based swaps, swap entities, and security-based swap entities and may agree to such information-sharing arrangements as may be deemed to be necessary or appropriate 

in the public interest or for the protection of investors, swap counterparties, and security-based swap counterparties. 

(b) In order to promote effective and consistent global regulation 

of contracts of sale of a commodity for future delivery and options 

on such contracts, the Commodity Futures Trading Commission 

shall consult and coordinate with foreign regulatory authorities on 

the establishment of consistent international standards with respect 

to the regulation of contracts of sale of a commodity for future delivery and options on such contracts, and may agree to such information-sharing arrangements as may be deemed necessary or appropriate in the public interest for the protection of users of contracts 

of sale of a commodity for future delivery. 

SEC. 753. ANTI-MANIPULATION AUTHORITY. 

(a) PROHIBITION REGARDING MANIPULATION AND FALSE INFOR- MATION.—Subsection (c) of section 6 of the Commodity Exchange Act 

(7 U.S.C. 9, 15) is amended to read as follows: 

‘‘(c) PROHIBITION REGARDING MANIPULATION AND FALSE INFOR- MATION.— 

‘‘(1) PROHIBITION AGAINST MANIPULATION.—It shall be unlawful for any person, directly or indirectly, to use or employ, 

or attempt to use or employ, in connection with any swap, or 

a contract of sale of any commodity in interstate commerce, or 

for future delivery on or subject to the rules of any registered 

entity, any manipulative or deceptive device or contrivance, in 

contravention of such rules and regulations as the Commission 

shall promulgate by not later than 1 year after the date of enactment of the Dodd-Frank Wall Street Reform and Consumer 

Protection Act, provided no rule or regulation promulgated by 

the Commission shall require any person to disclose to another 

person nonpublic information that may be material to the market price, rate, or level of the commodity transaction, except as 

necessary to make any statement made to the other person in 

or in connection with the transaction not misleading in any material respect. 

‘‘(A) SPECIAL PROVISION FOR MANIPULATION BY FALSE

REPORTING.—Unlawful manipulation for purposes of this 

paragraph shall include, but not be limited to, delivering, 

or causing to be delivered for transmission through the 

mails or interstate commerce, by any means of communication whatsoever, a false or misleading or inaccurate report 

concerning crop or market information or conditions that 

affect or tend to affect the price of any commodity in interstate commerce, knowing, or acting in reckless disregard of 

the fact that such report is false, misleading or inaccurate. 


sroberts on DSKD5P82C1PROD with HEARING
383 

‘‘(B) EFFECT ON OTHER LAW.—Nothing in this paragraph shall affect, or be construed to affect, the applicability of section 9(a)(2). 

‘‘(C) GOOD FAITH MISTAKES.—Mistakenly transmitting, 

in good faith, false or misleading or inaccurate information 

to a price reporting service would not be sufficient to violate 

subsection (c)(1)(A). 

‘‘(2) PROHIBITION REGARDING FALSE INFORMATION.—It shall 

be unlawful for any person to make any false or misleading 

statement of a material fact to the Commission, including in 

any registration application or any report filed with the Commission under this Act, or any other information relating to a 

swap, or a contract of sale of a commodity, in interstate commerce, or for future delivery on or subject to the rules of any 

registered entity, or to omit to state in any such statement any 

material fact that is necessary to make any statement of a material fact made not misleading in any material respect, if the 

person knew, or reasonably should have known, the statement 

to be false or misleading. 

‘‘(3) OTHER MANIPULATION.—In addition to the prohibition 

in paragraph (1), it shall be unlawful for any person, directly 

or indirectly, to manipulate or attempt to manipulate the price 

of any swap, or of any commodity in interstate commerce, or for 

future delivery on or subject to the rules of any registered entity. 

‘‘(4) ENFORCEMENT.— 

‘‘(A) AUTHORITY OF COMMISSION.—If the Commission 

has reason to believe that any person (other than a registered entity) is violating or has violated this subsection, 

or any other provision of this Act (including any rule, regulation, or order of the Commission promulgated in accordance with this subsection or any other provision of this 

Act), the Commission may serve upon the person a complaint. 

‘‘(B) CONTENTS OF COMPLAINT.—A complaint under 

subparagraph (A) shall— 

‘‘(i) contain a description of the charges against the 

person that is the subject of the complaint; and 

‘‘(ii) have attached or contain a notice of hearing 

that specifies the date and location of the hearing regarding the complaint. 

‘‘(C) HEARING.—A hearing described in subparagraph 

(B)(ii)— 

‘‘(i) shall be held not later than 3 days after service 

of the complaint described in subparagraph (A); 

‘‘(ii) shall require the person to show cause regarding why— 

‘‘(I) an order should not be made— 

‘‘(aa) to prohibit the person from trading 

on, or subject to the rules of, any registered entity; and 

‘‘(bb) to direct all registered entities to 

refuse all privileges to the person until further 

notice of the Commission; and 


sroberts on DSKD5P82C1PROD with HEARING
384 

‘‘(II) the registration of the person, if registered 

with the Commission in any capacity, should not 

be suspended or revoked; and 

‘‘(iii) may be held before— 

‘‘(I) the Commission; or 

‘‘(II) an administrative law judge designated 

by the Commission, under which the administrative law judge shall ensure that all evidence is recorded in written form and submitted to the Commission. 

‘‘(5) SUBPOENA.—For the purpose of securing effective enforcement of the provisions of this Act, for the purpose of any 

investigation or proceeding under this Act, and for the purpose 

of any action taken under section 12(f), any member of the Commission or any Administrative Law Judge or other officer designated by the Commission (except as provided in paragraph 

(7)) may administer oaths and affirmations, subpoena witnesses, compel their attendance, take evidence, and require the 

production of any books, papers, correspondence, memoranda, 

or other records that the Commission deems relevant or material to the inquiry. 

‘‘(6) WITNESSES.—The attendance of witnesses and the production of any such records may be required from any place in 

the United States, any State, or any foreign country or jurisdiction at any designated place of hearing. 

‘‘(7) SERVICE.—A subpoena issued under this section may 

be served upon any person who is not to be found within the 

territorial jurisdiction of any court of the United States in such 

manner as the Federal Rules of Civil Procedure prescribe for 

service of process in a foreign country, except that a subpoena 

to be served on a person who is not to be found within the territorial jurisdiction of any court of the United States may be 

issued only on the prior approval of the Commission. 

‘‘(8) REFUSAL TO OBEY.—In case of contumacy by, or refusal 

to obey a subpoena issued to, any person, the Commission may 

invoke the aid of any court of the United States within the jurisdiction in which the investigation or proceeding is conducted, 

or where such person resides or transacts business, in requiring 

the attendance and testimony of witnesses and the production 

of books, papers, correspondence, memoranda, and other 

records. Such court may issue an order requiring such person 

to appear before the Commission or member or Administrative 

Law Judge or other officer designated by the Commission, there 

to produce records, if so ordered, or to give testimony touching 

the matter under investigation or in question. 

‘‘(9) FAILURE TO OBEY.—Any failure to obey such order of 

the court may be punished by the court as a contempt thereof. 

All process in any such case may be served in the judicial district wherein such person is an inhabitant or transacts business 

or wherever such person may be found. 

‘‘(10) EVIDENCE.—On the receipt of evidence under paragraph (4)(C)(iii), the Commission may— 

‘‘(A) prohibit the person that is the subject of the hearing from trading on, or subject to the rules of, any registered entity and require all registered entities to refuse the 


sroberts on DSKD5P82C1PROD with HEARING
385 

person all privileges on the registered entities for such period as the Commission may require in the order; 

‘‘(B) if the person is registered with the Commission in 

any capacity, suspend, for a period not to exceed 180 days, 

or revoke, the registration of the person; 

‘‘(C) assess such person— 

‘‘(i) a civil penalty of not more than an amount 

equal to the greater of— ‘‘(I) $140,000; or 

‘‘(II) triple the monetary gain to such person 

for each such violation; or 

‘‘(ii) in any case of manipulation or attempted manipulation in violation of this subsection or section 

9(a)(2), a civil penalty of not more than an amount 

equal to the greater of— ‘‘(I) $1,000,000; or 

‘‘(II) triple the monetary gain to the person for 

each such violation; and 

‘‘(D) require restitution to customers of damages proximately caused by violations of the person. 

‘‘(11) ORDERS.— ‘‘(A) NOTICE.—The Commission shall provide to a person described in paragraph (10) and the appropriate governing board of the registered entity notice of the order described in paragraph (10) by— 

‘‘(i) registered mail; 

‘‘(ii) certified mail; or 

‘‘(iii) personal delivery. 

‘‘(B) REVIEW.— ‘‘(i) IN GENERAL.—A person described in paragraph 

(10) may obtain a review of the order or such other equitable relief as determined to be appropriate by a 

court described in clause (ii). 

‘‘(ii) PETITION.—To obtain a review or other relief 

under clause (i), a person may, not later than 15 days 

after notice is given to the person under clause (i), file 

a written petition to set aside the order with the United 

States Court of Appeals— 

‘‘(I) for the circuit in which the petitioner carries out the business of the petitioner; or 

‘‘(II) in the case of an order denying registration, the circuit in which the principal place of 

business of the petitioner is located, as listed on 

the application for registration of the petitioner. 

‘‘(C) PROCEDURE.— 

‘‘(i) DUTY OF CLERK OF APPROPRIATE COURT.—The 

clerk of the appropriate court under subparagraph 

(B)(ii) shall transmit to the Commission a copy of a petition filed under subparagraph (B)(ii). 

‘‘(ii) DUTY OF COMMISSION.—In accordance with 

section 2112 of title 28, United States Code, the Commission shall file in the appropriate court described in 

subparagraph (B)(ii) the record theretofore made. 

‘‘(iii) JURISDICTION OF APPROPRIATE COURT.—Upon 

the filing of a petition under subparagraph (B)(ii), the 


sroberts on DSKD5P82C1PROD with HEARING
386 

appropriate court described in subparagraph (B)(ii) 

may affirm, set aside, or modify the order of the Commission.’’. 

(b) CEASE AND DESIST ORDERS, FINES.—Section 6(d) of the 

Commodity Exchange Act (7 U.S.C. 13b) is amended to read as follows: 

‘‘(d) If any person (other than a registered entity), is violating 

or has violated subsection (c) or any other provisions of this Act or 

of the rules, regulations, or orders of the Commission thereunder, 

the Commission may, upon notice and hearing, and subject to appeal as in other cases provided for in subsection (c), make and enter 

an order directing that such person shall cease and desist therefrom 

and, if such person thereafter and after the lapse of the period allowed for appeal of such order or after the affirmance of such order, 

shall knowingly fail or refuse to obey or comply with such order, 

such person, upon conviction thereof, shall be fined not more than 

the higher of $140,000 or triple the monetary gain to such person, 

or imprisoned for not more than 1 year, or both, except that if such 

knowing failure or refusal to obey or comply with such order involves any offense within subsection (a) or (b) of section 9, such person, upon conviction thereof, shall be subject to the penalties of said 

subsection (a) or (b): Provided, That any such cease and desist order 

under this subsection against any respondent in any case of manipulation shall be issued only in conjunction with an order issued 

against such respondent under subsection (c).’’. 

(c) MANIPULATIONS; PRIVATE RIGHTS OF ACTION.—Section 

22(a)(1) of the Commodity Exchange Act (7 U.S.C. 25(a)(1)) is 

amended by striking subparagraph (D) and inserting the following: 

‘‘(D) who purchased or sold a contract referred to in subparagraph (B) hereof or swap if the violation constitutes— 

‘‘(i) the use or employment of, or an attempt to use or 

employ, in connection with a swap, or a contract of sale of 

a commodity, in interstate commerce, or for future delivery 

on or subject to the rules of any registered entity, any manipulative device or contrivance in contravention of such 

rules and regulations as the Commission shall promulgate 

by not later than 1 year after the date of enactment of the 

Dodd-Frank Wall Street Reform and Consumer Protection 

Act; or 

‘‘(ii) a manipulation of the price of any such contract 

or swap or the price of the commodity underlying such contract or swap.’’. 

(d) EFFECTIVE DATE.— 

(1) The amendments made by this section shall take effect 

on the date on which the final rule promulgated by the Commodity Futures Trading Commission pursuant to this Act takes 

effect. 

(2) Paragraph (1) shall not preclude the Commission from 

undertaking prior to the effective date any rulemaking necessary to implement the amendments contained in this section. 

SEC. 754. EFFECTIVE DATE. 

Unless otherwise provided in this title, the provisions of this 

subtitle shall take effect on the later of 360 days after the date of 

the enactment of this subtitle or, to the extent a provision of this 

subtitle requires a rulemaking, not less than 60 days after publicaVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00390 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
387 

tion of the final rule or regulation implementing such provision of 

this subtitle. 

Subtitle B—Regulation of Security-Based Swap Markets 

SEC. 761. DEFINITIONS UNDER THE SECURITIES EXCHANGE ACT OF 

1934. 

(a) DEFINITIONS.—Section 3(a) of the Securities Exchange Act of 

1934 (15 U.S.C. 78c(a)) is amended— 

(1) in subparagraphs (A) and (B) of paragraph (5), by inserting ‘‘(not including security-based swaps, other than security-based swaps with or for persons that are not eligible contract participants)’’ after ‘‘securities’’ each place that term appears; 

(2) in paragraph (10), by inserting ‘‘security-based swap,’’ 

after ‘‘security future,’’; 

(3) in paragraph (13), by adding at the end the following: 

‘‘For security-based swaps, such terms include the execution, 

termination (prior to its scheduled maturity date), assignment, 

exchange, or similar transfer or conveyance of, or extinguishing 

of rights or obligations under, a security-based swap, as the 

context may require.’’; 

(4) in paragraph (14), by adding at the end the following: 

‘‘For security-based swaps, such terms include the execution, 

termination (prior to its scheduled maturity date), assignment, 

exchange, or similar transfer or conveyance of, or extinguishing 

of rights or obligations under, a security-based swap, as the 

context may require.’’; 

(5) in paragraph (39)— 

(A) in subparagraph (B)(i)— 

(i) in subclause (I), by striking ‘‘or government securities dealer’’ and inserting ‘‘government securities 

dealer, security-based swap dealer, or major securitybased swap participant’’; and 

(ii) in subclause (II), by inserting ‘‘security-based 

swap dealer, major security-based swap participant,’’ 

after ‘‘government securities dealer,’’; 

(B) in subparagraph (C), by striking ‘‘or government securities dealer’’ and inserting ‘‘government securities dealer, 

security-based swap dealer, or major security-based swap 

participant’’; and 

(C) in subparagraph (D), by inserting ‘‘security-based 

swap dealer, major security-based swap participant,’’ after 

‘‘government securities dealer,’’; and 

(6) by adding at the end the following: 

‘‘(65) ELIGIBLE CONTRACT PARTICIPANT.—The term ‘eligible 

contract participant’ has the same meaning as in section 1a of 

the Commodity Exchange Act (7 U.S.C. 1a). 

‘‘(66) MAJOR SWAP PARTICIPANT.—The term ‘major swap 

participant’ has the same meaning as in section 1a of the Commodity Exchange Act (7 U.S.C. 1a). 

‘‘(67) MAJOR SECURITY-BASED SWAP PARTICIPANT.— 

‘‘(A) IN GENERAL.—The term ‘major security-based 

swap participant’ means any person— 

‘‘(i) who is not a security-based swap dealer; and 


sroberts on DSKD5P82C1PROD with HEARING
388 

‘‘(ii)(I) who maintains a substantial position in security-based swaps for any of the major security-based 

swap categories, as such categories are determined by 

the Commission, excluding both positions held for 

hedging or mitigating commercial risk and positions 

maintained by any employee benefit plan (or any contract held by such a plan) as defined in paragraphs (3) 

and (32) of section 3 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1002) for the primary purpose of hedging or mitigating any risk directly associated with the operation of the plan; 

‘‘(II) whose outstanding security-based swaps create substantial counterparty exposure that could have 

serious adverse effects on the financial stability of the 

United States banking system or financial markets; or 

‘‘(III) that is a financial entity that— 

‘‘(aa) is highly leveraged relative to the 

amount of capital such entity holds and that is not 

subject to capital requirements established by an 

appropriate Federal banking agency; and 

‘‘(bb) maintains a substantial position in outstanding security-based swaps in any major security-based swap category, as such categories are 

determined by the Commission. 

‘‘(B) DEFINITION OF SUBSTANTIAL POSITION.—For purposes of subparagraph (A), the Commission shall define, by 

rule or regulation, the term ‘substantial position’ at the 

threshold that the Commission determines to be prudent for 

the effective monitoring, management, and oversight of entities that are systemically important or can significantly 

impact the financial system of the United States. In setting 

the definition under this subparagraph, the Commission 

shall consider the person’s relative position in uncleared as 

opposed to cleared security-based swaps and may take into 

consideration the value and quality of collateral held 

against counterparty exposures. 

‘‘(C) SCOPE OF DESIGNATION.—For purposes of subparagraph (A), a person may be designated as a major security-based swap participant for 1 or more categories of security-based swaps without being classified as a major security-based swap participant for all classes of securitybased swaps. 

‘‘(68) SECURITY-BASED SWAP.— 

‘‘(A) IN GENERAL.—Except as provided in subparagraph 

(B), the term ‘security-based swap’ means any agreement, 

contract, or transaction that— 

‘‘(i) is a swap, as that term is defined under section 

1a of the Commodity Exchange Act (without regard to 

paragraph (47)(B)(x) of such section); and 

‘‘(ii) is based on— 

‘‘(I) an index that is a narrow-based security 

index, including any interest therein or on the 

value thereof; 

‘‘(II) a single security or loan, including any 

interest therein or on the value thereof; or 


sroberts on DSKD5P82C1PROD with HEARING
389 

‘‘(III) the occurrence, nonoccurrence, or extent 

of the occurrence of an event relating to a single 

issuer of a security or the issuers of securities in a 

narrow-based security index, provided that such 

event directly affects the financial statements, financial condition, or financial obligations of the 

issuer. 

‘‘(B) RULE OF CONSTRUCTION REGARDING MASTER

AGREEMENTS.—The term ‘security-based swap’ shall be construed to include a master agreement that provides for an 

agreement, contract, or transaction that is a security-based 

swap pursuant to subparagraph (A), together with all supplements to any such master agreement, without regard to 

whether the master agreement contains an agreement, contract, or transaction that is not a security-based swap pursuant to subparagraph (A), except that the master agreement shall be considered to be a security-based swap only 

with respect to each agreement, contract, or transaction 

under the master agreement that is a security-based swap 

pursuant to subparagraph (A). 

‘‘(C) EXCLUSIONS.—The term ‘security-based swap’ does 

not include any agreement, contract, or transaction that 

meets the definition of a security-based swap only because 

such agreement, contract, or transaction references, is based 

upon, or settles through the transfer, delivery, or receipt of 

an exempted security under paragraph (12), as in effect on 

the date of enactment of the Futures Trading Act of 1982 

(other than any municipal security as defined in paragraph 

(29) as in effect on the date of enactment of the Futures 

Trading Act of 1982), unless such agreement, contract, or 

transaction is of the character of, or is commonly known in 

the trade as, a put, call, or other option. 

‘‘(D) MIXED SWAP.—The term ‘security-based swap’ includes any agreement, contract, or transaction that is as 

described in subparagraph (A) and also is based on the 

value of 1 or more interest or other rates, currencies, commodities, instruments of indebtedness, indices, quantitative 

measures, other financial or economic interest or property 

of any kind (other than a single security or a narrow-based 

security index), or the occurrence, non-occurrence, or the extent of the occurrence of an event or contingency associated 

with a potential financial, economic, or commercial consequence (other than an event described in subparagraph 

(A)(ii)(III)). 

‘‘(E) RULE OF CONSTRUCTION REGARDING USE OF THE

TERM INDEX.—The term ‘index’ means an index or group of 

securities, including any interest therein or based on the 

value thereof. 

‘‘(69) SWAP.—The term ‘swap’ has the same meaning as in 

section 1a of the Commodity Exchange Act (7 U.S.C. 1a). 

‘‘(70) PERSON ASSOCIATED WITH A SECURITY-BASED SWAP

DEALER OR MAJOR SECURITY-BASED SWAP PARTICIPANT.— 

‘‘(A) IN GENERAL.—The term ‘person associated with a 

security-based swap dealer or major security-based swap 


sroberts on DSKD5P82C1PROD with HEARING
390 

participant’ or ‘associated person of a security-based swap 

dealer or major security-based swap participant’ means— 

‘‘(i) any partner, officer, director, or branch manager of such security-based swap dealer or major security-based swap participant (or any person occupying a 

similar status or performing similar functions); 

‘‘(ii) any person directly or indirectly controlling, 

controlled by, or under common control with such security-based swap dealer or major security-based swap 

participant; or 

‘‘(iii) any employee of such security-based swap 

dealer or major security-based swap participant. 

‘‘(B) EXCLUSION.—Other than for purposes of section 

15F(l)(2), the term ‘person associated with a security-based 

swap dealer or major security-based swap participant’ or 

‘associated person of a security-based swap dealer or major 

security-based swap participant’ does not include any person associated with a security-based swap dealer or major 

security-based swap participant whose functions are solely 

clerical or ministerial. 

‘‘(71) SECURITY-BASED SWAP DEALER.— 

‘‘(A) IN GENERAL.—The term ‘security-based swap dealer’ means any person who— 

‘‘(i) holds themself out as a dealer in security-based 

swaps; 

‘‘(ii) makes a market in security-based swaps; 

‘‘(iii) regularly enters into security-based swaps 

with counterparties as an ordinary course of business 

for its own account; or 

‘‘(iv) engages in any activity causing it to be commonly known in the trade as a dealer or market maker 

in security-based swaps. 

‘‘(B) DESIGNATION BY TYPE OR CLASS.—A person may 

be designated as a security-based swap dealer for a single 

type or single class or category of security-based swap or 

activities and considered not to be a security-based swap 

dealer for other types, classes, or categories of securitybased swaps or activities. 

‘‘(C) EXCEPTION.—The term ‘security-based swap dealer’ does not include a person that enters into security-based 

swaps for such person’s own account, either individually or 

in a fiduciary capacity, but not as a part of regular business. 

‘‘(D) DE MINIMIS EXCEPTION.—The Commission shall 

exempt from designation as a security-based swap dealer 

an entity that engages in a de minimis quantity of securitybased swap dealing in connection with transactions with or 

on behalf of its customers. The Commission shall promulgate regulations to establish factors with respect to the 

making of any determination to exempt. 

‘‘(72) APPROPRIATE FEDERAL BANKING AGENCY.—The term 

‘appropriate Federal banking agency’ has the same meaning as 

in section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. 

1813(q)). 


sroberts on DSKD5P82C1PROD with HEARING
391 

‘‘(73) BOARD.—The term ‘Board’ means the Board of Governors of the Federal Reserve System. 

‘‘(74) PRUDENTIAL REGULATOR.—The term ‘prudential regulator’ has the same meaning as in section 1a of the Commodity 

Exchange Act (7 U.S.C. 1a). 

‘‘(75) SECURITY-BASED SWAP DATA REPOSITORY.—The term 

‘security-based swap data repository’ means any person that collects and maintains information or records with respect to 

transactions or positions in, or the terms and conditions of, security-based swaps entered into by third parties for the purpose 

of providing a centralized recordkeeping facility for securitybased swaps. 

‘‘(76) SWAP DEALER.—The term ‘swap dealer’ has the same 

meaning as in section 1a of the Commodity Exchange Act (7 

U.S.C. 1a). 

‘‘(77) SECURITY-BASED SWAP EXECUTION FACILITY.—The 

term ‘security-based swap execution facility’ means a trading 

system or platform in which multiple participants have the 

ability to execute or trade security-based swaps by accepting 

bids and offers made by multiple participants in the facility or 

system, through any means of interstate commerce, including 

any trading facility, that— 

‘‘(A) facilitates the execution of security-based swaps between persons; and 

‘‘(B) is not a national securities exchange. 

‘‘(78) SECURITY-BASED SWAP AGREEMENT.— 

‘‘(A) IN GENERAL.—For purposes of sections 9, 10, 16, 

20, and 21A of this Act, and section 17 of the Securities Act 

of 1933 (15 U.S.C. 77q), the term ‘security-based swap 

agreement’ means a swap agreement as defined in section 

206A of the Gramm-Leach-Bliley Act (15 U.S.C. 78c note) 

of which a material term is based on the price, yield, value, 

or volatility of any security or any group or index of securities, or any interest therein. 

‘‘(B) EXCLUSIONS.—The term ‘security-based swap 

agreement’ does not include any security-based swap.’’. 

(b) AUTHORITY TO FURTHER DEFINE TERMS.—The Securities 

and Exchange Commission may, by rule, further define— 

(1) the term ‘‘commercial risk’’; 

(2) any other term included in an amendment to the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)) made by this subtitle; and 

(3) the terms ‘‘security-based swap’’, ‘‘security-based swap 

dealer’’, ‘‘major security-based swap participant’’, and ‘‘eligible 

contract participant’’, with regard to security-based swaps (as 

such terms are defined in the amendments made by subsection 

(a)) for the purpose of including transactions and entities that 

have been structured to evade this subtitle or the amendments 

made by this subtitle. 

SEC. 762. REPEAL OF PROHIBITION ON REGULATION OF SECURITYBASED SWAP AGREEMENTS. 

(a) REPEAL.—Sections 206B and 206C of the Gramm-Leach-Bliley Act (Public Law 106–102; 15 U.S.C. 78c note) are repealed. 

(b) CONFORMING AMENDMENTS TO GRAMM-LEACH-BLILEY.—Section 206A(a) of the Gramm-Leach-Bliley Act (15 U.S.C. 78c note) is 


sroberts on DSKD5P82C1PROD with HEARING
392 

amended in the material preceding paragraph (1), by striking ‘‘Except as’’ and all that follows through ‘‘that—’’ and inserting the following: ‘‘Except as provided in subsection (b), as used in this section, the term ‘swap agreement’ means any agreement, contract, or 

transaction 

that—’’. 

(c) CONFORMING AMENDMENTS TO THE SECURITIES ACT OF

1933.— 

(1) Section 2A of the Securities Act of 1933 (15 U.S.C. 77b– 

1) is amended— 

(A) by striking subsection (a) and reserving that subsection; and 

(B) by striking ‘‘(as defined in section 206B of the 

Gramm-Leach-Bliley Act)’’ each place that such term appears and inserting ‘‘(as defined in section 3(a)(78) of the 

Securities Exchange Act of 1934)’’. 

(2) Section 17 of the Securities Act of 1933 (15 U.S.C. 77q) 

is amended— 

(A) in subsection (a)— 

(i) by inserting ‘‘(including security-based swaps)’’ 

after ‘‘securities’’; and 

(ii) by striking ‘‘(as defined in section 206B of the 

Gramm-Leach-Bliley Act)’’ and inserting ‘‘(as defined 

in section 3(a)(78) of the Securities Exchange Act)’’; and 

(B) in subsection (d), by striking ‘‘206B of the GrammLeach-Bliley Act’’ and inserting ‘‘3(a)(78) of the Securities 

Exchange Act of 1934’’. 

(d) CONFORMING AMENDMENTS TO THE SECURITIES EXCHANGE

ACT OF 1934.—The Securities Exchange Act of 1934 (15 U.S.C. 78a 

et seq.) is amended— 

(1) in section 3A (15 U.S.C. 78c–1)— 

(A) by striking subsection (a) and reserving that subsection; and 

(B) by striking ‘‘(as defined in section 206B of the 

Gramm-Leach-Bliley Act)’’ each place that the term appears; 

(2) in section 9 (15 U.S.C. 78i)— 

(A) in subsection (a), by striking paragraphs (2) 

through (5) and inserting the following: 

‘‘(2) To effect, alone or with 1 or more other persons, a series 

of transactions in any security registered on a national securities exchange, any security not so registered, or in connection with any security-based swap or security-based swap agreement with respect to 

such security creating actual or apparent active trading in such security, or raising or depressing the price of such security, for the 

purpose of inducing the purchase or sale of such security by others. 

‘‘(3) If a dealer, broker, security-based swap dealer, major security-based swap participant, or other person selling or offering for 

sale or purchasing or offering to purchase the security, a securitybased swap, or a security-based swap agreement with respect to 

such security, to induce the purchase or sale of any security registered on a national securities exchange, any security not so registered, any security-based swap, or any security-based swap agreement with respect to such security by the circulation or dissemination in the ordinary course of business of information to the effect 


sroberts on DSKD5P82C1PROD with HEARING
393 

that the price of any such security will or is likely to rise or fall because of market operations of any 1 or more persons conducted for 

the purpose of raising or depressing the price of such security. 

‘‘(4) If a dealer, broker, security-based swap dealer, major security-based swap participant, or other person selling or offering for 

sale or purchasing or offering to purchase the security, a securitybased swap, or security-based swap agreement with respect to such 

security, to make, regarding any security registered on a national 

securities exchange, any security not so registered, any securitybased swap, or any security-based swap agreement with respect to 

such security, for the purpose of inducing the purchase or sale of 

such security, such security-based swap, or such security-based 

swap agreement any statement which was at the time and in the 

light of the circumstances under which it was made, false or misleading with respect to any material fact, and which that person 

knew or had reasonable ground to believe was so false or misleading. 

‘‘(5) For a consideration, received directly or indirectly from a 

broker, dealer, security-based swap dealer, major security-based 

swap participant, or other person selling or offering for sale or purchasing or offering to purchase the security, a security-based swap, 

or security-based swap agreement with respect to such security, to 

induce the purchase of any security registered on a national securities exchange, any security not so registered, any security-based 

swap, or any security-based swap agreement with respect to such security by the circulation or dissemination of information to the effect 

that the price of any such security will or is likely to rise or fall because of the market operations of any 1 or more persons conducted 

for the purpose of raising or depressing the price of such security.’’; 

and 

(B) in subsection (i), by striking ‘‘(as defined in section 

206B of the Gramm-Leach-Bliley Act)’’; 

(3) in section 10 (15 U.S.C. 78j)— 

(A) in subsection (b), by striking ‘‘(as defined in section 

206B of the Gramm-Leach-Bliley Act),’’ each place that 

term appears; and 

(B) in the matter following subsection (b), by striking 

‘‘(as defined in section 206B of the Gramm-Leach-Bliley 

Act), in each place that such terms appear’’; 

(4) in section 15 (15 U.S.C. 78o)— 

(A) in subsection (c)(1)(A), by striking ‘‘(as defined in 

section 206B of the Gramm-Leach-Bliley Act),’’; 

(B) in subparagraphs (B) and (C) of subsection (c)(1), 

by striking ‘‘(as defined in section 206B of the GrammLeach-Bliley Act)’’ each place that term appears; 

(C) by redesignating subsection (i), as added by section 

303(f) of the Commodity Futures Modernization Act of 2000 

(Public Law 106–554; 114 Stat. 2763A–455), as subsection 

(j); and 

(D) in subsection (j), as redesignated by subparagraph 

(C), by striking ‘‘(as defined in section 206B of the GrammLeach-Bliley Act)’’; 

(5) in section 16 (15 U.S.C. 78p)— 


sroberts on DSKD5P82C1PROD with HEARING
394 

(A) in subsection (a)(2)(C), by striking ‘‘(as defined in 

section 206(b) of the Gramm-Leach-Bliley Act (15 U.S.C. 

78c note))’’; 

(B) in subsection (a)(3)(B), by inserting ‘‘or securitybased swaps’’ after ‘‘security-based swap agreement’’; 

(C) in the first sentence of subsection (b), by striking 

‘‘(as defined in section 206B of the Gramm-Leach-Bliley 

Act)’’; 

(D) in the third sentence of subsection (b), by striking 

‘‘(as defined in section 206B of the Gramm-Leach Bliley 

Act)’’ and inserting ‘‘or a security-based swap’’; and 

(E) in subsection (g), by striking ‘‘(as defined in section 

206B of the Gramm-Leach-Bliley Act)’’; 

(6) in section 20 (15 U.S.C. 78t), 

(A) in subsection (d), by striking ‘‘(as defined in section 

206B of the Gramm-Leach-Bliley Act)’’; and 

(B) in subsection (f), by striking ‘‘(as defined in section 

206B of the Gramm-Leach-Bliley Act)’’; and 

(7) in section 21A (15 U.S.C. 78u–1)— 

(A) in subsection (a)(1), by striking ‘‘(as defined in section 206B of the Gramm-Leach-Bliley Act)’’; and 

(B) in subsection (g), by striking ‘‘(as defined in section 

206B of the Gramm-Leach-Bliley Act)’’. 

SEC. 763. AMENDMENTS TO THE SECURITIES EXCHANGE ACT OF 1934. 

(a) CLEARING FOR SECURITY-BASED SWAPS.—The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended by inserting 

after section 3B (as added by section 717 of this Act): 

‘‘SEC. 3C. CLEARING FOR SECURITY-BASED SWAPS. 

‘‘(a) IN GENERAL.— 

‘‘(1) STANDARD FOR CLEARING.—It shall be unlawful for any 

person to engage in a security-based swap unless that person 

submits such security-based swap for clearing to a clearing 

agency that is registered under this Act or a clearing agency 

that is exempt from registration under this Act if the securitybased swap is required to be cleared. 

‘‘(2) OPEN ACCESS.—The rules of a clearing agency described in paragraph (1) shall— 

‘‘(A) prescribe that all security-based swaps submitted 

to the clearing agency with the same terms and conditions 

are economically equivalent within the clearing agency and 

may be offset with each other within the clearing agency; 

and 

‘‘(B) provide for non-discriminatory clearing of a security-based swap executed bilaterally or on or through the 

rules of an unaffiliated national securities exchange or security-based swap execution facility. 

‘‘(b) COMMISSION REVIEW.— 

‘‘(1) COMMISSION-INITIATED REVIEW.— 

‘‘(A) The Commission on an ongoing basis shall review 

each security-based swap, or any group, category, type, or 

class of security-based swaps to make a determination that 

such security-based swap, or group, category, type, or class 

of security-based swaps should be required to be cleared. 


sroberts on DSKD5P82C1PROD with HEARING
395 

‘‘(B) The Commission shall provide at least a 30-day 

public comment period regarding any determination under 

subparagraph (A). 

‘‘(2) SWAP SUBMISSIONS.— ‘‘(A) A clearing agency shall submit to the Commission 

each security-based swap, or any group, category, type, or 

class of security-based swaps that it plans to accept for 

clearing and provide notice to its members (in a manner to 

be determined by the Commission) of such submission. 

‘‘(B) Any security-based swap or group, category, type, 

or class of security-based swaps listed for clearing by a 

clearing agency as of the date of enactment of this subsection shall be considered submitted to the Commission. 

‘‘(C) The Commission shall— 

‘‘(i) make available to the public any submission 

received under subparagraphs (A) and (B); 

‘‘(ii) review each submission made under subparagraphs (A) and (B), and determine whether the security-based swap, or group, category, type, or class of security-based swaps, described in the submission is required to be cleared; and 

‘‘(iii) provide at least a 30-day public comment period regarding its determination whether the clearing 

requirement under subsection (a)(1) shall apply to the 

submission. 

‘‘(3) DEADLINE.—The Commission shall make its determination under paragraph (2)(C) not later than 90 days after 

receiving a submission made under paragraphs (2)(A) and 

(2)(B), unless the submitting clearing agency agrees to an extension for the time limitation established under this paragraph. 

‘‘(4) DETERMINATION.— ‘‘(A) In reviewing a submission made under paragraph 

(2), the Commission shall review whether the submission is 

consistent with section 17A. 

‘‘(B) In reviewing a security-based swap, group of security-based swaps or class of security-based swaps pursuant 

to paragraph (1) or a submission made under paragraph 

(2), the Commission shall take into account the following 

factors: 

‘‘(i) The existence of significant outstanding notional exposures, trading liquidity and adequate pricing data. 

‘‘(ii) The availability of rule framework, capacity, 

operational expertise and resources, and credit support 

infrastructure to clear the contract on terms that are 

consistent with the material terms and trading conventions on which the contract is then traded. 

‘‘(iii) The effect on the mitigation of systemic risk, 

taking into account the size of the market for such contract and the resources of the clearing agency available 

to clear the contract. 

‘‘(iv) The effect on competition, including appropriate fees and charges applied to clearing. 

‘‘(v) The existence of reasonable legal certainty in 

the event of the insolvency of the relevant clearing 


sroberts on DSKD5P82C1PROD with HEARING
396 

agency or 1 or more of its clearing members with regard to the treatment of customer and security-based 

swap counterparty positions, funds, and property. 

‘‘(C) In making a determination under subsection (b)(1) 

or paragraph (2)(C) that the clearing requirement shall 

apply, the Commission may require such terms and conditions to the requirement as the Commission determines to 

be appropriate. 

‘‘(5) RULES.—Not later than 1 year after the date of the enactment of this section, the Commission shall adopt rules for a 

clearing agency’s submission for review, pursuant to this subsection, of a security-based swap, or a group, category, type, or 

class of security-based swaps, that it seeks to accept for clearing. Nothing in this paragraph limits the Commission from 

making a determination under paragraph (2)(C) for securitybased swaps described in paragraph (2)(B). 

‘‘(c) STAY OF CLEARING REQUIREMENT.— ‘‘(1) IN GENERAL.—After making a determination pursuant 

to subsection (b)(2), the Commission, on application of a 

counterparty to a security-based swap or on its own initiative, 

may stay the clearing requirement of subsection (a)(1) until the 

Commission completes a review of the terms of the securitybased swap (or the group, category, type, or class of securitybased swaps) and the clearing arrangement. 

‘‘(2) DEADLINE.—The Commission shall complete a review 

undertaken pursuant to paragraph (1) not later than 90 days 

after issuance of the stay, unless the clearing agency that clears 

the security-based swap, or group, category, type, or class of security-based swaps, agrees to an extension of the time limitation 

established under this paragraph. 

‘‘(3) DETERMINATION.—Upon completion of the review undertaken pursuant to paragraph (1), the Commission may— 

‘‘(A) determine, unconditionally or subject to such 

terms and conditions as the Commission determines to be 

appropriate, that the security-based swap, or group, category, type, or class of security-based swaps, must be 

cleared pursuant to this subsection if it finds that such 

clearing is consistent with subsection (b)(4); or 

‘‘(B) determine that the clearing requirement of subsection (a)(1) shall not apply to the security-based swap, or 

group, category, type, or class of security-based swaps. 

‘‘(4) RULES.—Not later than 1 year after the date of the enactment of this section, the Commission shall adopt rules for reviewing, pursuant to this subsection, a clearing agency’s clearing of a security-based swap, or a group, category, type, or class 

of security-based swaps, that it has accepted for clearing. 

‘‘(d) PREVENTION OF EVASION.— 

‘‘(1) IN GENERAL.—The Commission shall prescribe rules 

under this section (and issue interpretations of rules prescribed 

under this section), as determined by the Commission to be necessary to prevent evasions of the mandatory clearing requirements under this Act. 

‘‘(2) DUTY OF COMMISSION TO INVESTIGATE AND TAKE CER- TAIN ACTIONS.—To the extent the Commission finds that a particular security-based swap or any group, category, type, or 


sroberts on DSKD5P82C1PROD with HEARING
397 

class of security-based swaps that would otherwise be subject to 

mandatory clearing but no clearing agency has listed the security-based swap or the group, category, type, or class of securitybased swaps for clearing, the Commission shall— 

‘‘(A) investigate the relevant facts and circumstances; 

‘‘(B) within 30 days issue a public report containing the 

results of the investigation; and 

‘‘(C) take such actions as the Commission determines to 

be necessary and in the public interest, which may include 

requiring the retaining of adequate margin or capital by 

parties to the security-based swap or the group, category, 

type, or class of security-based swaps. 

‘‘(3) EFFECT ON AUTHORITY.—Nothing in this subsection— 

‘‘(A) authorizes the Commission to adopt rules requiring a clearing agency to list for clearing a security-based 

swap or any group, category, type, or class of security-based 

swaps if the clearing of the security-based swap or the 

group, category, type, or class of security-based swaps 

would threaten the financial integrity of the clearing agency; and 

‘‘(B) affects the authority of the Commission to enforce 

the open access provisions of subsection (a)(2) with respect 

to a security-based swap or the group, category, type, or 

class of security-based swaps that is listed for clearing by 

a clearing agency. 

‘‘(e) REPORTING TRANSITION RULES.—Rules adopted by the 

Commission under this section shall provide for the reporting of 

data, as follows: 

‘‘(1) Security-based swaps entered into before the date of the 

enactment of this section shall be reported to a registered security-based swap data repository or the Commission no later 

than 180 days after the effective date of this section. 

‘‘(2) Security-based swaps entered into on or after such date 

of enactment shall be reported to a registered security-based 

swap data repository or the Commission no later than the later 

of— 

‘‘(A) 90 days after such effective date; or 

‘‘(B) such other time after entering into the securitybased swap as the Commission may prescribe by rule or 

regulation. 

‘‘(f) CLEARING TRANSITION RULES.— 

‘‘(1) Security-based swaps entered into before the date of the 

enactment of this section are exempt from the clearing requirements of this subsection if reported pursuant to subsection 

(e)(1). 

‘‘(2) Security-based swaps entered into before application of 

the clearing requirement pursuant to this section are exempt 

from the clearing requirements of this section if reported pursuant to subsection (e)(2). 

‘‘(g) EXCEPTIONS.— 

‘‘(1) IN GENERAL.—The requirements of subsection (a)(1) 

shall not apply to a security-based swap if 1 of the counterparties to the security-based swap— 

‘‘(A) is not a financial entity; 


sroberts on DSKD5P82C1PROD with HEARING
398 

‘‘(B) is using security-based swaps to hedge or mitigate 

commercial risk; and 

‘‘(C) notifies the Commission, in a manner set forth by 

the Commission, how it generally meets its financial obligations associated with entering into non-cleared securitybased swaps. 

‘‘(2) OPTION TO CLEAR.—The application of the clearing exception in paragraph (1) is solely at the discretion of the 

counterparty to the security-based swap that meets the conditions of subparagraphs (A) through (C) of paragraph (1). 

‘‘(3) FINANCIAL ENTITY DEFINITION.— ‘‘(A) IN GENERAL.—For the purposes of this subsection, 

the term ‘financial entity’ means— 

‘‘(i) a swap dealer; 

‘‘(ii) a security-based swap dealer; 

‘‘(iii) a major swap participant; 

‘‘(iv) a major security-based swap participant; 

‘‘(v) a commodity pool as defined in section 1a(10) 

of the Commodity Exchange Act; 

‘‘(vi) a private fund as defined in section 202(a) of 

the Investment Advisers Act of 1940 (15 U.S.C. 80–b– 

2(a)); 

‘‘(vii) an employee benefit plan as defined in paragraphs (3) and (32) of section 3 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1002); 

‘‘(viii) a person predominantly engaged in activities 

that are in the business of banking or financial in nature, as defined in section 4(k) of the Bank Holding 

Company Act of 1956. 

‘‘(B) EXCLUSION.—The Commission shall consider 

whether to exempt small banks, savings associations, farm 

credit system institutions, and credit unions, including— 

‘‘(i) depository institutions with total assets of $10,000,000,000 or less; 

‘‘(ii) farm credit system institutions with total assets of $10,000,000,000 or less; or 

‘‘(iii) credit unions with total assets of 

$10,000,000,000 or less. 

‘‘(4) TREATMENT OF AFFILIATES.— ‘‘(A) IN GENERAL.—An affiliate of a person that qualifies for an exception under this subsection (including affiliate entities predominantly engaged in providing financing 

for the purchase of the merchandise or manufactured goods 

of the person) may qualify for the exception only if the affiliate, acting on behalf of the person and as an agent, uses 

the security-based swap to hedge or mitigate the commercial risk of the person or other affiliate of the person that 

is not a financial entity. 

‘‘(B) PROHIBITION RELATING TO CERTAIN AFFILIATES.— The exception in subparagraph (A) shall not apply if the affiliate is— 

‘‘(i) a swap dealer; 

‘‘(ii) a security-based swap dealer; 

‘‘(iii) a major swap participant; 

‘‘(iv) a major security-based swap participant; 


sroberts on DSKD5P82C1PROD with HEARING
399 

‘‘(v) an issuer that would be an investment company, as defined in section 3 of the Investment Company Act of 1940 (15 U.S.C. 80a–3), but for paragraph 

(1) or (7) of subsection (c) of that Act (15 U.S.C. 80a– 

3(c)); 

‘‘(vi) a commodity pool; or 

‘‘(vii) a bank holding company with over $50,000,000,000 in consolidated assets. 

‘‘(C) TRANSITION RULE FOR AFFILIATES.—An affiliate, 

subsidiary, or a wholly owned entity of a person that qualifies for an exception under subparagraph (A) and is predominantly engaged in providing financing for the purchase or lease of merchandise or manufactured goods of the 

person shall be exempt from the margin requirement described in section 15F(e) and the clearing requirement described in subsection (a) with regard to security-based 

swaps entered into to mitigate the risk of the financing activities for not less than a 2-year period beginning on the 

date of enactment of this subparagraph. 

‘‘(5) ELECTION OF COUNTERPARTY.— ‘‘(A) SECURITY-BASED SWAPS REQUIRED TO BE

CLEARED.—With respect to any security-based swap that is 

subject to the mandatory clearing requirement under subsection (a) and entered into by a security-based swap dealer 

or a major security-based swap participant with a 

counterparty that is not a swap dealer, major swap participant, security-based swap dealer, or major security-based 

swap participant, the counterparty shall have the sole right 

to select the clearing agency at which the security-based 

swap will be cleared. 

‘‘(B) SECURITY-BASED SWAPS NOT REQUIRED TO BE

CLEARED.—With respect to any security-based swap that is 

not subject to the mandatory clearing requirement under 

subsection (a) and entered into by a security-based swap 

dealer or a major security-based swap participant with a 

counterparty that is not a swap dealer, major swap participant, security-based swap dealer, or major security-based 

swap participant, the counterparty— 

‘‘(i) may elect to require clearing of the securitybased swap; and 

‘‘(ii) shall have the sole right to select the clearing 

agency at which the security-based swap will be 

cleared. 

‘‘(6) ABUSE OF EXCEPTION.—The Commission may prescribe 

such rules or issue interpretations of the rules as the Commission determines to be necessary to prevent abuse of the exceptions described in this subsection. The Commission may also request information from those persons claiming the clearing exception as necessary to prevent abuse of the exceptions described 

in this subsection. 

‘‘(h) TRADE EXECUTION.— 

‘‘(1) IN GENERAL.—With respect to transactions involving 

security-based swaps subject to the clearing requirement of subsection (a)(1), counterparties shall— 

‘‘(A) execute the transaction on an exchange; or 


sroberts on DSKD5P82C1PROD with HEARING
400 

‘‘(B) execute the transaction on a security-based swap 

execution facility registered under section 3D or a securitybased swap execution facility that is exempt from registration under section 3D(e). 

‘‘(2) EXCEPTION.—The requirements of subparagraphs (A) 

and (B) of paragraph (1) shall not apply if no exchange or security-based swap execution facility makes the security-based 

swap available to trade or for security-based swap transactions 

subject to the clearing exception under subsection (g). 

‘‘(i) BOARD APPROVAL.—Exemptions from the requirements of 

this section to clear a security-based swap or execute a securitybased swap through a national securities exchange or security-based 

swap execution facility shall be available to a counterparty that is 

an issuer of securities that are registered under section 12 or that 

is required to file reports pursuant to section 15(d), only if an appropriate committee of the issuer’s board or governing body has reviewed and approved the issuer’s decision to enter into securitybased swaps that are subject to such exemptions. 

‘‘(j) DESIGNATION OF CHIEF COMPLIANCE OFFICER.— ‘‘(1) IN GENERAL.—Each registered clearing agency shall 

designate an individual to serve as a chief compliance officer. 

‘‘(2) DUTIES.—The chief compliance officer shall— 

‘‘(A) report directly to the board or to the senior officer 

of the clearing agency; 

‘‘(B) in consultation with its board, a body performing 

a function similar thereto, or the senior officer of the registered clearing agency, resolve any conflicts of interest that 

may arise; 

‘‘(C) be responsible for administering each policy and 

procedure that is required to be established pursuant to 

this section; 

‘‘(D) ensure compliance with this title (including regulations issued under this title) relating to agreements, contracts, or transactions, including each rule prescribed by 

the Commission under this section; 

‘‘(E) establish procedures for the remediation of noncompliance issues identified by the compliance officer 

through any— 

‘‘(i) compliance office review; 

‘‘(ii) look-back; 

‘‘(iii) internal or external audit finding; 

‘‘(iv) self-reported error; or 

‘‘(v) validated complaint; and 

‘‘(F) establish and follow appropriate procedures for the 

handling, management response, remediation, retesting, 

and closing of noncompliance issues. 

‘‘(3) ANNUAL REPORTS.— 

‘‘(A) IN GENERAL.—In accordance with rules prescribed 

by the Commission, the chief compliance officer shall annually prepare and sign a report that contains a description 

of— 

‘‘(i) the compliance of the registered clearing agency or security-based swap execution facility of the compliance officer with respect to this title (including regulations under this title); and 


sroberts on DSKD5P82C1PROD with HEARING
401 

‘‘(ii) each policy and procedure of the registered 

clearing agency of the compliance officer (including the 

code of ethics and conflict of interest policies of the registered clearing agency). 

‘‘(B) REQUIREMENTS.—A compliance report under subparagraph (A) shall— 

‘‘(i) accompany each appropriate financial report of 

the registered clearing agency that is required to be 

furnished to the Commission pursuant to this section; 

and 

‘‘(ii) include a certification that, under penalty of 

law, the compliance report is accurate and complete.’’. 

(b) CLEARING AGENCY REQUIREMENTS.—Section 17A of the Securities Exchange Act of 1934 (15 U.S.C. 78q–1) is amended by adding at the end the following: 

‘‘(g) REGISTRATION REQUIREMENT.—It shall be unlawful for a 

clearing agency, unless registered with the Commission, directly or 

indirectly to make use of the mails or any means or instrumentality 

of interstate commerce to perform the functions of a clearing agency 

with respect to a security-based swap. 

‘‘(h) VOLUNTARY REGISTRATION.—A person that clears agreements, contracts, or transactions that are not required to be cleared 

under this title may register with the Commission as a clearing 

agency. 

‘‘(i) STANDARDS FOR CLEARING AGENCIES CLEARING SECURITY- BASED SWAP TRANSACTIONS.—To be registered and to maintain registration as a clearing agency that clears security-based swap transactions, a clearing agency shall comply with such standards as the 

Commission may establish by rule. In establishing any such standards, and in the exercise of its oversight of such a clearing agency 

pursuant to this title, the Commission may conform such standards 

or oversight to reflect evolving United States and international 

standards. Except where the Commission determines otherwise by 

rule or regulation, a clearing agency shall have reasonable discretion in establishing the manner in which it complies with any such 

standards. 

‘‘(j) RULES.—The Commission shall adopt rules governing persons that are registered as clearing agencies for security-based 

swaps under this title. 

‘‘(k) EXEMPTIONS.—The Commission may exempt, conditionally 

or unconditionally, a clearing agency from registration under this 

section for the clearing of security-based swaps if the Commission 

determines that the clearing agency is subject to comparable, comprehensive supervision and regulation by the Commodity Futures 

Trading Commission or the appropriate government authorities in 

the home country of the agency. Such conditions may include, but 

are not limited to, requiring that the clearing agency be available 

for inspection by the Commission and make available all information requested by the Commission. 

‘‘(l) EXISTING DEPOSITORY INSTITUTIONS AND DERIVATIVE

CLEARING ORGANIZATIONS.— 

‘‘(1) IN GENERAL.—A depository institution or derivative 

clearing organization registered with the Commodity Futures 

Trading Commission under the Commodity Exchange Act that 

is required to be registered as a clearing agency under this secVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00405 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
402 

tion is deemed to be registered under this section solely for the 

purpose of clearing security-based swaps to the extent that, before the date of enactment of this subsection— 

‘‘(A) the depository institution cleared swaps as a multilateral clearing organization; or 

‘‘(B) the derivative clearing organization cleared swaps 

pursuant to an exemption from registration as a clearing 

agency. 

‘‘(2) CONVERSION OF DEPOSITORY INSTITUTIONS.—A depository institution to which this subsection applies may, by the 

vote of the shareholders owning not less than 51 percent of the 

voting interests of the depository institution, be converted into 

a State corporation, partnership, limited liability company, or 

similar legal form pursuant to a plan of conversion, if the conversion is not in contravention of applicable State law. 

‘‘(3) SHARING OF INFORMATION.—The Commodity Futures 

Trading Commission shall make available to the Commission, 

upon request, all information determined to be relevant by the 

Commodity Futures Trading Commission regarding a derivatives clearing organization deemed to be registered with the 

Commission under paragraph (1). 

‘‘(m) MODIFICATION OF CORE PRINCIPLES.—The Commission 

may conform the core principles established in this section to reflect 

evolving United States and international standards.’’. 

(c) SECURITY-BASED SWAP EXECUTION FACILITIES.—The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended by inserting after section 3C (as added by subsection (a) of this section) 

the following: 

‘‘SEC. 3D. SECURITY-BASED SWAP EXECUTION FACILITIES. 

‘‘(a) REGISTRATION.— ‘‘(1) IN GENERAL.—No person may operate a facility for the 

trading or processing of security-based swaps, unless the facility 

is registered as a security-based swap execution facility or as a 

national securities exchange under this section. 

‘‘(2) DUAL REGISTRATION.—Any person that is registered as 

a security-based swap execution facility under this section shall 

register with the Commission regardless of whether the person 

also is registered with the Commodity Futures Trading Commission as a swap execution facility. 

‘‘(b) TRADING AND TRADE PROCESSING.—A security-based swap 

execution facility that is registered under subsection (a) may— 

‘‘(1) make available for trading any security-based swap; 

and 

‘‘(2) facilitate trade processing of any security-based swap. 

‘‘(c) IDENTIFICATION OF FACILITY USED TO TRADE SECURITYBASED SWAPS BY NATIONAL SECURITIES EXCHANGES.—A national 

securities exchange shall, to the extent that the exchange also operates a security-based swap execution facility and uses the same electronic trade execution system for listing and executing trades of security-based swaps on or through the exchange and the facility, 

identify whether electronic trading of such security-based swaps is 

taking place on or through the national securities exchange or the 

security-based swap execution facility. 

‘‘(d) CORE PRINCIPLES FOR SECURITY-BASED SWAP EXECUTION

FACILITIES.— 


sroberts on DSKD5P82C1PROD with HEARING
403 

‘‘(1) COMPLIANCE WITH CORE PRINCIPLES.— 

‘‘(A) IN GENERAL.—To be registered, and maintain registration, as a security-based swap execution facility, the security-based swap execution facility shall comply with— 

‘‘(i) the core principles described in this subsection; 

and 

‘‘(ii) any requirement that the Commission may impose by rule or regulation. 

‘‘(B) REASONABLE DISCRETION OF SECURITY-BASED

SWAP EXECUTION FACILITY.—Unless otherwise determined 

by the Commission, by rule or regulation, a security-based 

swap execution facility described in subparagraph (A) shall 

have reasonable discretion in establishing the manner in 

which it complies with the core principles described in this 

subsection. 

‘‘(2) COMPLIANCE WITH RULES.—A security-based swap execution facility shall— 

‘‘(A) establish and enforce compliance with any rule established by such security-based swap execution facility, including— 

‘‘(i) the terms and conditions of the security-based 

swaps traded or processed on or through the facility; 

and 

‘‘(ii) any limitation on access to the facility; 

‘‘(B) establish and enforce trading, trade processing, 

and participation rules that will deter abuses and have the 

capacity to detect, investigate, and enforce those rules, including means— 

‘‘(i) to provide market participants with impartial 

access to the market; and 

‘‘(ii) to capture information that may be used in establishing whether rule violations have occurred; and 

‘‘(C) establish rules governing the operation of the facility, including rules specifying trading procedures to be used 

in entering and executing orders traded or posted on the facility, including block trades. 

‘‘(3) SECURITY-BASED SWAPS NOT READILY SUSCEPTIBLE TO

MANIPULATION.—The security-based swap execution facility 

shall permit trading only in security-based swaps that are not 

readily susceptible to manipulation. 

‘‘(4) MONITORING OF TRADING AND TRADE PROCESSING.— 

The security-based swap execution facility shall— 

‘‘(A) establish and enforce rules or terms and conditions defining, or specifications detailing— 

‘‘(i) trading procedures to be used in entering and 

executing orders traded on or through the facilities of 

the security-based swap execution facility; and 

‘‘(ii) procedures for trade processing of securitybased swaps on or through the facilities of the securitybased swap execution facility; and 

‘‘(B) monitor trading in security-based swaps to prevent 

manipulation, price distortion, and disruptions of the delivery or cash settlement process through surveillance, compliance, and disciplinary practices and procedures, including 


sroberts on DSKD5P82C1PROD with HEARING
404 

methods for conducting real-time monitoring of trading 

and comprehensive and accurate trade reconstructions. 

‘‘(5) ABILITY TO OBTAIN INFORMATION.—The security-based 

swap execution facility shall— 

‘‘(A) establish and enforce rules that will allow the facility to obtain any necessary information to perform any of 

the functions described in this subsection; 

‘‘(B) provide the information to the Commission on request; and 

‘‘(C) have the capacity to carry out such international 

information-sharing agreements as the Commission may require. 

‘‘(6) FINANCIAL INTEGRITY OF TRANSACTIONS.—The securitybased swap execution facility shall establish and enforce rules 

and procedures for ensuring the financial integrity of securitybased swaps entered on or through the facilities of the securitybased swap execution facility, including the clearance and settlement of security-based swaps pursuant to section 3C(a)(1). 

‘‘(7) EMERGENCY AUTHORITY.—The security-based swap execution facility shall adopt rules to provide for the exercise of 

emergency authority, in consultation or cooperation with the 

Commission, as is necessary and appropriate, including the authority to liquidate or transfer open positions in any securitybased swap or to suspend or curtail trading in a security-based 

swap. 

‘‘(8) TIMELY PUBLICATION OF TRADING INFORMATION.— ‘‘(A) IN GENERAL.—The security-based swap execution 

facility shall make public timely information on price, trading volume, and other trading data on security-based 

swaps to the extent prescribed by the Commission. 

‘‘(B) CAPACITY OF SECURITY-BASED SWAP EXECUTION FACILITY.—The security-based swap execution facility shall be 

required to have the capacity to electronically capture and 

transmit and disseminate trade information with respect to 

transactions executed on or through the facility. 

‘‘(9) RECORDKEEPING AND REPORTING.— ‘‘(A) IN GENERAL.—A security-based swap execution facility shall— 

‘‘(i) maintain records of all activities relating to the 

business of the facility, including a complete audit 

trail, in a form and manner acceptable to the Commission for a period of 5 years; and 

‘‘(ii) report to the Commission, in a form and manner acceptable to the Commission, such information as 

the Commission determines to be necessary or appropriate for the Commission to perform the duties of the 

Commission under this title. 

‘‘(B) REQUIREMENTS.—The Commission shall adopt 

data collection and reporting requirements for securitybased swap execution facilities that are comparable to corresponding requirements for clearing agencies and securitybased swap data repositories. 

‘‘(10) ANTITRUST CONSIDERATIONS.—Unless necessary or 

appropriate to achieve the purposes of this title, the securitybased swap execution facility shall not— 


sroberts on DSKD5P82C1PROD with HEARING
405 

‘‘(A) adopt any rules or taking any actions that result 

in any unreasonable restraint of trade; or 

‘‘(B) impose any material anticompetitive burden on 

trading or clearing. 

‘‘(11) CONFLICTS OF INTEREST.—The security-based swap 

execution facility shall— 

‘‘(A) establish and enforce rules to minimize conflicts of 

interest in its decision-making process; and 

‘‘(B) establish a process for resolving the conflicts of interest. 

‘‘(12) FINANCIAL RESOURCES.— ‘‘(A) IN GENERAL.—The security-based swap execution 

facility shall have adequate financial, operational, and 

managerial resources to discharge each responsibility of the 

security-based swap execution facility, as determined by the 

Commission. 

‘‘(B) DETERMINATION OF RESOURCE ADEQUACY.—The financial resources of a security-based swap execution facility 

shall be considered to be adequate if the value of the financial resources— 

‘‘(i) enables the organization to meet its financial 

obligations to its members and participants notwithstanding a default by the member or participant creating the largest financial exposure for that organization in extreme but plausible market conditions; and 

‘‘(ii) exceeds the total amount that would enable 

the security-based swap execution facility to cover the 

operating costs of the security-based swap execution facility for a 1-year period, as calculated on a rolling 

basis. 

‘‘(13) SYSTEM SAFEGUARDS.—The security-based swap execution facility shall— 

‘‘(A) establish and maintain a program of risk analysis 

and oversight to identify and minimize sources of operational risk, through the development of appropriate controls and procedures, and automated systems, that— 

‘‘(i) are reliable and secure; and 

‘‘(ii) have adequate scalable capacity; 

‘‘(B) establish and maintain emergency procedures, 

backup facilities, and a plan for disaster recovery that 

allow for— 

‘‘(i) the timely recovery and resumption of operations; and 

‘‘(ii) the fulfillment of the responsibilities and obligations of the security-based swap execution facility; 

and 

‘‘(C) periodically conduct tests to verify that the backup 

resources of the security-based swap execution facility are 

sufficient to ensure continued— 

‘‘(i) order processing and trade matching; 

‘‘(ii) price reporting; 

‘‘(iii) market surveillance; and 

‘‘(iv) maintenance of a comprehensive and accurate 

audit trail. 

‘‘(14) DESIGNATION OF CHIEF COMPLIANCE OFFICER.— 


sroberts on DSKD5P82C1PROD with HEARING
406 

‘‘(A) IN GENERAL.—Each security-based swap execution 

facility shall designate an individual to serve as a chief 

compliance officer. 

‘‘(B) DUTIES.—The chief compliance officer shall— 

‘‘(i) report directly to the board or to the senior officer of the facility; 

‘‘(ii) review compliance with the core principles in 

this subsection; 

‘‘(iii) in consultation with the board of the facility, 

a body performing a function similar to that of a 

board, or the senior officer of the facility, resolve any 

conflicts of interest that may arise; 

‘‘(iv) be responsible for establishing and administering the policies and procedures required to be established pursuant to this section; 

‘‘(v) ensure compliance with this title and the rules 

and regulations issued under this title, including rules 

prescribed by the Commission pursuant to this section; 

‘‘(vi) establish procedures for the remediation of 

noncompliance issues found during— 

‘‘(I) compliance office reviews; 

‘‘(II) look backs; 

‘‘(III) internal or external audit findings; 

‘‘(IV) self-reported errors; or 

‘‘(V) through validated complaints; and 

‘‘(vii) establish and follow appropriate procedures 

for the handling, management response, remediation, 

retesting, and closing of noncompliance issues. 

‘‘(C) ANNUAL REPORTS.— ‘‘(i) IN GENERAL.—In accordance with rules prescribed by the Commission, the chief compliance officer 

shall annually prepare and sign a report that contains 

a description of— 

‘‘(I) the compliance of the security-based swap 

execution facility with this title; and 

‘‘(II) the policies and procedures, including the 

code of ethics and conflict of interest policies, of the 

security-based security-based swap execution facility. 

‘‘(ii) REQUIREMENTS.—The chief compliance officer 

shall— 

‘‘(I) submit each report described in clause (i) 

with the appropriate financial report of the security-based swap execution facility that is required 

to be submitted to the Commission pursuant to 

this section; and 

‘‘(II) include in the report a certification that, 

under penalty of law, the report is accurate and 

complete. 

‘‘(e) EXEMPTIONS.—The Commission may exempt, conditionally 

or unconditionally, a security-based swap execution facility from 

registration under this section if the Commission finds that the facility is subject to comparable, comprehensive supervision and regulation on a consolidated basis by the Commodity Futures Trading 

Commission. 


sroberts on DSKD5P82C1PROD with HEARING
407 

‘‘(f) RULES.—The Commission shall prescribe rules governing 

the regulation of security-based swap execution facilities under this 

section.’’. 

(d) SEGREGATION OF ASSETS HELD AS COLLATERAL IN SECU- RITY-BASED SWAP TRANSACTIONS.—The Securities Exchange Act of 

1934 (15 U.S.C. 78a et seq.) is amended by inserting after section 

3D (as added by subsection (b)) the following: 

‘‘SEC. 3E. SEGREGATION OF ASSETS HELD AS COLLATERAL IN SECURITY-BASED SWAP TRANSACTIONS. 

‘‘(a) REGISTRATION REQUIREMENT.—It shall be unlawful for any 

person to accept any money, securities, or property (or to extend any 

credit in lieu of money, securities, or property) from, for, or on behalf of a security-based swaps customer to margin, guarantee, or secure a security-based swap cleared by or through a clearing agency 

(including money, securities, or property accruing to the customer as 

the result of such a security-based swap), unless the person shall 

have registered under this title with the Commission as a broker, 

dealer, or security-based swap dealer, and the registration shall not 

have expired nor been suspended nor revoked. 

‘‘(b) CLEARED SECURITY-BASED SWAPS.— ‘‘(1) SEGREGATION REQUIRED.—A broker, dealer, or securitybased swap dealer shall treat and deal with all money, securities, and property of any security-based swaps customer received 

to margin, guarantee, or secure a security-based swap cleared 

by or though a clearing agency (including money, securities, or 

property accruing to the security-based swaps customer as the 

result of such a security-based swap) as belonging to the security-based swaps customer. 

‘‘(2) COMMINGLING PROHIBITED.—Money, securities, and 

property of a security-based swaps customer described in paragraph (1) shall be separately accounted for and shall not be 

commingled with the funds of the broker, dealer, or securitybased swap dealer or be used to margin, secure, or guarantee 

any trades or contracts of any security-based swaps customer or 

person other than the person for whom the same are held. 

‘‘(c) EXCEPTIONS.— 

‘‘(1) USE OF FUNDS.— 

‘‘(A) IN GENERAL.—Notwithstanding subsection (b), 

money, securities, and property of a security-based swaps 

customer of a broker, dealer, or security-based swap dealer 

described in subsection (b) may, for convenience, be commingled and deposited in the same 1 or more accounts with 

any bank or trust company or with a clearing agency. 

‘‘(B) WITHDRAWAL.—Notwithstanding subsection (b), 

such share of the money, securities, and property described 

in subparagraph (A) as in the normal course of business 

shall be necessary to margin, guarantee, secure, transfer, 

adjust, or settle a cleared security-based swap with a clearing agency, or with any member of the clearing agency, 

may be withdrawn and applied to such purposes, including 

the payment of commissions, brokerage, interest, taxes, storage, and other charges, lawfully accruing in connection 

with the cleared security-based swap. 

‘‘(2) COMMISSION ACTION.—Notwithstanding subsection (b), 

in accordance with such terms and conditions as the CommisVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00411 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
408 

sion may prescribe by rule, regulation, or order, any money, securities, or property of the security-based swaps customer of a 

broker, dealer, or security-based swap dealer described in subsection (b) may be commingled and deposited as provided in 

this section with any other money, securities, or property received by the broker, dealer, or security-based swap dealer and 

required by the Commission to be separately accounted for and 

treated and dealt with as belonging to the security-based swaps 

customer of the broker, dealer, or security-based swap dealer. 

‘‘(d) PERMITTED INVESTMENTS.—Money described in subsection 

(b) may be invested in obligations of the United States, in general 

obligations of any State or of any political subdivision of a State, 

and in obligations fully guaranteed as to principal and interest by 

the United States, or in any other investment that the Commission 

may by rule or regulation prescribe, and such investments shall be 

made in accordance with such rules and regulations and subject to 

such conditions as the Commission may prescribe. 

‘‘(e) PROHIBITION.—It shall be unlawful for any person, including any clearing agency and any depository institution, that has received any money, securities, or property for deposit in a separate 

account or accounts as provided in subsection (b) to hold, dispose 

of, or use any such money, securities, or property as belonging to the 

depositing broker, dealer, or security-based swap dealer or any person other than the swaps customer of the broker, dealer, or securitybased swap dealer. 

‘‘(f) SEGREGATION REQUIREMENTS FOR UNCLEARED SECURITYBASED SWAPS.— 

‘‘(1) SEGREGATION OF ASSETS HELD AS COLLATERAL IN

UNCLEARED SECURITY-BASED SWAP TRANSACTIONS.— 

‘‘(A) NOTIFICATION.—A security-based swap dealer or 

major security-based swap participant shall be required to 

notify the counterparty of the security-based swap dealer or 

major security-based swap participant at the beginning of 

a security-based swap transaction that the counterparty has 

the right to require segregation of the funds of other property supplied to margin, guarantee, or secure the obligations of the counterparty. 

‘‘(B) SEGREGATION AND MAINTENANCE OF FUNDS.—At 

the request of a counterparty to a security-based swap that 

provides funds or other property to a security-based swap 

dealer or major security-based swap participant to margin, 

guarantee, or secure the obligations of the counterparty, the 

security-based swap dealer or major security-based swap 

participant shall— 

‘‘(i) segregate the funds or other property for the 

benefit of the counterparty; and 

‘‘(ii) in accordance with such rules and regulations 

as the Commission may promulgate, maintain the 

funds or other property in a segregated account separate from the assets and other interests of the securitybased swap dealer or major security-based swap participant. 

‘‘(2) APPLICABILITY.—The requirements described in paragraph (1) shall— 


sroberts on DSKD5P82C1PROD with HEARING
409 

‘‘(A) apply only to a security-based swap between a 

counterparty and a security-based swap dealer or major security-based swap participant that is not submitted for 

clearing to a clearing agency; and 

‘‘(B)(i) not apply to variation margin payments; or 

‘‘(ii) not preclude any commercial arrangement regarding— 

‘‘(I) the investment of segregated funds or other 

property that may only be invested in such investments 

as the Commission may permit by rule or regulation; 

and 

‘‘(II) the related allocation of gains and losses resulting from any investment of the segregated funds or 

other property. 

‘‘(3) USE OF INDEPENDENT THIRD-PARTY CUSTODIANS.—The 

segregated account described in paragraph (1) shall be— 

‘‘(A) carried by an independent third-party custodian; 

and 

‘‘(B) designated as a segregated account for and on behalf of the counterparty. 

‘‘(4) REPORTING REQUIREMENT.—If the counterparty does 

not choose to require segregation of the funds or other property 

supplied to margin, guarantee, or secure the obligations of the 

counterparty, the security-based swap dealer or major securitybased swap participant shall report to the counterparty of the 

security-based swap dealer or major security-based swap participant on a quarterly basis that the back office procedures of the 

security-based swap dealer or major security-based swap participant relating to margin and collateral requirements are in 

compliance with the agreement of the counterparties. 

‘‘(g) BANKRUPTCY.—A security-based swap, as defined in section 

3(a)(68) shall be considered to be a security as such term is used 

in section 101(53A)(B) and subchapter III of title 11, United States 

Code. An account that holds a security-based swap, other than a 

portfolio margining account referred to in section 15(c)(3)(C) shall 

be considered to be a securities account, as that term is defined in 

section 741 of title 11, United States Code. The definitions of the 

terms ‘purchase’ and ‘sale’ in section 3(a)(13) and (14) shall be applied to the terms ‘purchase’ and ‘sale’, as used in section 741 of title 

11, United States Code. The term ‘customer’, as defined in section 

741 of title 11, United States Code, excludes any person, to the extent that such person has a claim based on any open repurchase 

agreement, open reverse repurchase agreement, stock borrowed 

agreement, non-cleared option, or non-cleared security-based swap 

except to the extent of any margin delivered to or by the customer 

with respect to which there is a customer protection requirement 

under section 15(c)(3) or a segregation requirement.’’. 

(e) TRADING IN SECURITY-BASED SWAPS.—Section 6 of the Securities Exchange Act of 1934 (15 U.S.C. 78f) is amended by adding 

at the end the following: 

‘‘(l) SECURITY-BASED SWAPS.—It shall be unlawful for any person to effect a transaction in a security-based swap with or for a 

person that is not an eligible contract participant, unless such 

transaction is effected on a national securities exchange registered 

pursuant to subsection (b).’’. 


sroberts on DSKD5P82C1PROD with HEARING
410 

(f) ADDITIONS OF SECURITY-BASED SWAPS TO CERTAIN EN- FORCEMENT PROVISIONS.—Section 9(b) of the Securities Exchange 

Act of 1934 (15 U.S.C. 78i(b)) is amended by striking paragraphs 

(1) through (3) and inserting the following: 

‘‘(1) any transaction in connection with any security whereby any party to such transaction acquires— 

‘‘(A) any put, call, straddle, or other option or privilege 

of buying the security from or selling the security to another 

without being bound to do so; 

‘‘(B) any security futures product on the security; or 

‘‘(C) any security-based swap involving the security or 

the issuer of the security; 

‘‘(2) any transaction in connection with any security with 

relation to which such person has, directly or indirectly, any interest in any— 

‘‘(A) such put, call, straddle, option, or privilege; 

‘‘(B) such security futures product; or 

‘‘(C) such security-based swap; or 

‘‘(3) any transaction in any security for the account of any 

person who such person has reason to believe has, and who actually has, directly or indirectly, any interest in any— 

‘‘(A) such put, call, straddle, option, or privilege; 

‘‘(B) such security futures product with relation to such 

security; or 

‘‘(C) any security-based swap involving such security or 

the issuer of such security.’’. 

(g) RULEMAKING AUTHORITY TO PREVENT FRAUD, MANIPULATION AND DECEPTIVE CONDUCT IN SECURITY-BASED SWAPS.—Section 

9 of the Securities Exchange Act of 1934 (15 U.S.C. 78i) is amended 

by adding at the end the following: 

‘‘(j) It shall be unlawful for any person, directly or indirectly, 

by the use of any means or instrumentality of interstate commerce 

or of the mails, or of any facility of any national securities exchange, 

to effect any transaction in, or to induce or attempt to induce the 

purchase or sale of, any security-based swap, in connection with 

which such person engages in any fraudulent, deceptive, or manipulative act or practice, makes any fictitious quotation, or engages in 

any transaction, practice, or course of business which operates as a 

fraud or deceit upon any person. The Commission shall, for the purposes of this subsection, by rules and regulations define, and prescribe means reasonably designed to prevent, such transactions, 

acts, practices, and courses of business as are fraudulent, deceptive, 

or manipulative, and such quotations as are fictitious.’’. 

(h) POSITION LIMITS AND POSITION ACCOUNTABILITY FOR SECU- RITY-BASED SWAPS.—The Securities Exchange Act of 1934 is amended by inserting after section 10A (15 U.S.C. 78j–1) the following: 

‘‘SEC. 10B. POSITION LIMITS AND POSITION ACCOUNTABILITY FOR SECURITY-BASED SWAPS AND LARGE TRADER REPORTING. 

‘‘(a) POSITION LIMITS.—As a means reasonably designed to prevent fraud and manipulation, the Commission shall, by rule or regulation, as necessary or appropriate in the public interest or for the 

protection of investors, establish limits (including related hedge exemption provisions) on the size of positions in any security-based 

swap that may be held by any person. In establishing such limits, 

the Commission may require any person to aggregate positions in— 


sroberts on DSKD5P82C1PROD with HEARING
411 

‘‘(1) any security-based swap and any security or loan or 

group of securities or loans on which such security-based swap 

is based, which such security-based swap references, or to which 

such security-based swap is related as described in paragraph 

(68) of section 3(a), and any other instrument relating to such 

security or loan or group or index of securities or loans; or 

‘‘(2) any security-based swap and— 

‘‘(A) any security or group or index of securities, the 

price, yield, value, or volatility of which, or of which any 

interest therein, is the basis for a material term of such security-based swap as described in paragraph (68) of section 

3(a); and 

‘‘(B) any other instrument relating to the same security 

or group or index of securities described under subparagraph (A). 

‘‘(b) EXEMPTIONS.—The Commission, by rule, regulation, or 

order, may conditionally or unconditionally exempt any person or 

class of persons, any security-based swap or class of security-based 

swaps, or any transaction or class of transactions from any requirement the Commission may establish under this section with respect 

to position limits. 

‘‘(c) SRO RULES.— 

‘‘(1) IN GENERAL.—As a means reasonably designed to prevent fraud or manipulation, the Commission, by rule, regulation, or order, as necessary or appropriate in the public interest, 

for the protection of investors, or otherwise in furtherance of the 

purposes of this title, may direct a self-regulatory organization— 

‘‘(A) to adopt rules regarding the size of positions in 

any security-based swap that may be held by— 

‘‘(i) any member of such self-regulatory organization; or 

‘‘(ii) any person for whom a member of such selfregulatory organization effects transactions in such security-based swap; and 

‘‘(B) to adopt rules reasonably designed to ensure compliance with requirements prescribed by the Commission 

under this subsection. 

‘‘(2) REQUIREMENT TO AGGREGATE POSITIONS.—In establishing the limits under paragraph (1), the self-regulatory organization may require such member or person to aggregate positions in— 

‘‘(A) any security-based swap and any security or loan 

or group or narrow-based security index of securities or 

loans on which such security-based swap is based, which 

such security-based swap references, or to which such security-based swap is related as described in section 3(a)(68), 

and any other instrument relating to such security or loan 

or group or narrow-based security index of securities or 

loans; or 

‘‘(B)(i) any security-based swap; and 

‘‘(ii) any security-based swap and any other instrument 

relating to the same security or group or narrow-based security index of securities. 


sroberts on DSKD5P82C1PROD with HEARING
412 

‘‘(d) LARGE TRADER REPORTING.—The Commission, by rule or 

regulation, may require any person that effects transactions for such 

person’s own account or the account of others in any securities-based 

swap or uncleared security-based swap and any security or loan or 

group or narrow-based security index of securities or loans as set 

forth in paragraphs (1) and (2) of subsection (a) under this section 

to report such information as the Commission may prescribe regarding any position or positions in any security-based swap or 

uncleared security-based swap and any security or loan or group or 

narrow-based security index of securities or loans and any other instrument relating to such security or loan or group or narrow-based 

security index of securities or loans as set forth in paragraphs (1) 

and (2) of subsection (a) under this section.’’. 

(i) PUBLIC REPORTING AND REPOSITORIES FOR SECURITY-BASED

SWAPS.—Section 13 of the Securities Exchange Act of 1934 (15 

U.S.C. 78m) is amended by adding at the end the following: 

‘‘(m) PUBLIC AVAILABILITY OF SECURITY-BASED SWAP TRANSACTION DATA.— 

‘‘(1) IN GENERAL.— 

‘‘(A) DEFINITION OF REAL-TIME PUBLIC REPORTING.—In 

this paragraph, the term ‘real-time public reporting’ means 

to report data relating to a security-based swap transaction, including price and volume, as soon as technologically practicable after the time at which the securitybased swap transaction has been executed. 

‘‘(B) PURPOSE.—The purpose of this subsection is to authorize the Commission to make security-based swap transaction and pricing data available to the public in such 

form and at such times as the Commission determines appropriate to enhance price discovery. 

‘‘(C) GENERAL RULE.—The Commission is authorized to 

provide by rule for the public availability of security-based 

swap transaction, volume, and pricing data as follows: 

‘‘(i) With respect to those security-based swaps that 

are subject to the mandatory clearing requirement described in section 3C(a)(1) (including those securitybased swaps that are excepted from the requirement 

pursuant to section 3C(g)), the Commission shall require real-time public reporting for such transactions. 

‘‘(ii) With respect to those security-based swaps 

that are not subject to the mandatory clearing requirement described in section 3C(a)(1), but are cleared at 

a registered clearing agency, the Commission shall require real-time public reporting for such transactions. 

‘‘(iii) With respect to security-based swaps that are 

not cleared at a registered clearing agency and which 

are reported to a security-based swap data repository 

or the Commission under section 3C(a)(6), the Commission shall require real-time public reporting for such 

transactions, in a manner that does not disclose the 

business transactions and market positions of any person. 

‘‘(iv) With respect to security-based swaps that are 

determined to be required to be cleared under section 


sroberts on DSKD5P82C1PROD with HEARING
413 

3C(b) but are not cleared, the Commission shall require 

real-time public reporting for such transactions. 

‘‘(D) REGISTERED ENTITIES AND PUBLIC REPORTING.— The Commission may require registered entities to publicly 

disseminate the security-based swap transaction and pricing data required to be reported under this paragraph. 

‘‘(E) RULEMAKING REQUIRED.—With respect to the rule 

providing for the public availability of transaction and 

pricing data for security-based swaps described in clauses 

(i) and (ii) of subparagraph (C), the rule promulgated by 

the Commission shall contain provisions— 

‘‘(i) to ensure such information does not identify 

the participants; 

‘‘(ii) to specify the criteria for determining what 

constitutes a large notional security-based swap transaction (block trade) for particular markets and contracts; 

‘‘(iii) to specify the appropriate time delay for reporting large notional security-based swap transactions 

(block trades) to the public; and 

‘‘(iv) that take into account whether the public disclosure will materially reduce market liquidity. 

‘‘(F) TIMELINESS OF REPORTING.—Parties to a securitybased swap (including agents of the parties to a securitybased swap) shall be responsible for reporting securitybased swap transaction information to the appropriate registered entity in a timely manner as may be prescribed by 

the Commission. 

‘‘(G) REPORTING OF SWAPS TO REGISTERED SECURITY- BASED SWAP DATA REPOSITORIES.—Each security-based 

swap (whether cleared or uncleared) shall be reported to a 

registered security-based swap data repository. 

‘‘(H) REGISTRATION OF CLEARING AGENCIES.—A clearing agency may register as a security-based swap data repository. 

‘‘(2) SEMIANNUAL AND ANNUAL PUBLIC REPORTING OF AG- GREGATE SECURITY-BASED SWAP DATA.— ‘‘(A) IN GENERAL.—In accordance with subparagraph 

(B), the Commission shall issue a written report on a semiannual and annual basis to make available to the public 

information relating to— 

‘‘(i) the trading and clearing in the major securitybased swap categories; and 

‘‘(ii) the market participants and developments in 

new products. 

‘‘(B) USE; CONSULTATION.—In preparing a report under 

subparagraph (A), the Commission shall— 

‘‘(i) use information from security-based swap data 

repositories and clearing agencies; and 

‘‘(ii) consult with the Office of the Comptroller of 

the Currency, the Bank for International Settlements, 

and such other regulatory bodies as may be necessary. 

‘‘(C) AUTHORITY OF COMMISSION.—The Commission 

may, by rule, regulation, or order, delegate the public reporting responsibilities of the Commission under this paraVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00417 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
414 

graph in accordance with such terms and conditions as the 

Commission determines to be appropriate and in the public 

interest. 

‘‘(n) SECURITY-BASED SWAP DATA REPOSITORIES.— ‘‘(1) REGISTRATION REQUIREMENT.—It shall be unlawful for 

any person, unless registered with the Commission, directly or 

indirectly, to make use of the mails or any means or instrumentality of interstate commerce to perform the functions of a security-based swap data repository. 

‘‘(2) INSPECTION AND EXAMINATION.—Each registered security-based swap data repository shall be subject to inspection 

and examination by any representative of the Commission. 

‘‘(3) COMPLIANCE WITH CORE PRINCIPLES.— ‘‘(A) IN GENERAL.—To be registered, and maintain registration, as a security-based swap data repository, the security-based swap data repository shall comply with— 

‘‘(i) the requirements and core principles described 

in this subsection; and 

‘‘(ii) any requirement that the Commission may impose by rule or regulation. 

‘‘(B) REASONABLE DISCRETION OF SECURITY-BASED

SWAP DATA REPOSITORY.—Unless otherwise determined by 

the Commission, by rule or regulation, a security-based 

swap data repository described in subparagraph (A) shall 

have reasonable discretion in establishing the manner in 

which the security-based swap data repository complies 

with the core principles described in this subsection. 

‘‘(4) STANDARD SETTING.— ‘‘(A) DATA IDENTIFICATION.— ‘‘(i) IN GENERAL.—In accordance with clause (ii), 

the Commission shall prescribe standards that specify 

the data elements for each security-based swap that 

shall be collected and maintained by each registered 

security-based swap data repository. 

‘‘(ii) REQUIREMENT.—In carrying out clause (i), the 

Commission shall prescribe consistent data element 

standards applicable to registered entities and reporting counterparties. 

‘‘(B) DATA COLLECTION AND MAINTENANCE.—The Commission shall prescribe data collection and data maintenance standards for security-based swap data repositories. 

‘‘(C) COMPARABILITY.—The standards prescribed by the 

Commission under this subsection shall be comparable to 

the data standards imposed by the Commission on clearing 

agencies in connection with their clearing of security-based 

swaps. 

‘‘(5) DUTIES.—A security-based swap data repository 

shall— 

‘‘(A) accept data prescribed by the Commission for each 

security-based swap under subsection (b); 

‘‘(B) confirm with both counterparties to the securitybased swap the accuracy of the data that was submitted; 

‘‘(C) maintain the data described in subparagraph (A) 

in such form, in such manner, and for such period as may 

be required by the Commission; 


sroberts on DSKD5P82C1PROD with HEARING
415 

‘‘(D)(i) provide direct electronic access to the Commission (or any designee of the Commission, including another 

registered entity); and 

‘‘(ii) provide the information described in subparagraph (A) in such form and at such frequency as the Commission may require to comply with the public reporting requirements set forth in subsection (m); 

‘‘(E) at the direction of the Commission, establish automated systems for monitoring, screening, and analyzing security-based swap data; 

‘‘(F) maintain the privacy of any and all security-based 

swap transaction information that the security-based swap 

data repository receives from a security-based swap dealer, 

counterparty, or any other registered entity; and 

‘‘(G) on a confidential basis pursuant to section 24, 

upon request, and after notifying the Commission of the request, make available all data obtained by the securitybased swap data repository, including individual 

counterparty trade and position data, to— 

‘‘(i) each appropriate prudential regulator; 

‘‘(ii) the Financial Stability Oversight Council; 

‘‘(iii) the Commodity Futures Trading Commission; 

‘‘(iv) the Department of Justice; and 

‘‘(v) any other person that the Commission determines to be appropriate, including— 

‘‘(I) foreign financial supervisors (including 

foreign futures authorities); 

‘‘(II) foreign central banks; and 

‘‘(III) foreign ministries. 

‘‘(H) CONFIDENTIALITY AND INDEMNIFICATION AGREE- MENT.—Before the security-based swap data repository may 

share information with any entity described in subparagraph (G)— 

‘‘(i) the security-based swap data repository shall 

receive a written agreement from each entity stating 

that the entity shall abide by the confidentiality requirements described in section 24 relating to the information on security-based swap transactions that is provided; and 

‘‘(ii) each entity shall agree to indemnify the security-based swap data repository and the Commission 

for any expenses arising from litigation relating to the 

information provided under section 24. 

‘‘(6) DESIGNATION OF CHIEF COMPLIANCE OFFICER.— 

‘‘(A) IN GENERAL.—Each security-based swap data repository shall designate an individual to serve as a chief 

compliance officer. 

‘‘(B) DUTIES.—The chief compliance officer shall— 

‘‘(i) report directly to the board or to the senior officer of the security-based swap data repository; 

‘‘(ii) review the compliance of the security-based 

swap data repository with respect to the requirements 

and core principles described in this subsection; 

‘‘(iii) in consultation with the board of the securitybased swap data repository, a body performing a funcVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00419 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
416 

tion similar to the board of the security-based swap 

data repository, or the senior officer of the securitybased swap data repository, resolve any conflicts of interest that may arise; 

‘‘(iv) be responsible for administering each policy 

and procedure that is required to be established pursuant to this section; 

‘‘(v) ensure compliance with this title (including 

regulations) relating to agreements, contracts, or transactions, including each rule prescribed by the Commission under this section; 

‘‘(vi) establish procedures for the remediation of 

noncompliance issues identified by the chief compliance 

officer through any— 

‘‘(I) compliance office review; 

‘‘(II) look-back; 

‘‘(III) internal or external audit finding; 

‘‘(IV) self-reported error; or 

‘‘(V) validated complaint; and 

‘‘(vii) establish and follow appropriate procedures 

for the handling, management response, remediation, 

retesting, and closing of noncompliance issues. 

‘‘(C) ANNUAL REPORTS.— 

‘‘(i) IN GENERAL.—In accordance with rules prescribed by the Commission, the chief compliance officer 

shall annually prepare and sign a report that contains 

a description of— 

‘‘(I) the compliance of the security-based swap 

data repository of the chief compliance officer with 

respect to this title (including regulations); and 

‘‘(II) each policy and procedure of the securitybased swap data repository of the chief compliance 

officer (including the code of ethics and conflict of 

interest policies of the security-based swap data repository). 

‘‘(ii) REQUIREMENTS.—A compliance report under 

clause (i) shall— 

‘‘(I) accompany each appropriate financial report of the security-based swap data repository 

that is required to be furnished to the Commission 

pursuant to this section; and 

‘‘(II) include a certification that, under penalty 

of law, the compliance report is accurate and complete. 

‘‘(7) CORE PRINCIPLES APPLICABLE TO SECURITY-BASED SWAP

DATA REPOSITORIES.— 

‘‘(A) ANTITRUST CONSIDERATIONS.—Unless necessary or 

appropriate to achieve the purposes of this title, the swap 

data repository shall not— 

‘‘(i) adopt any rule or take any action that results 

in any unreasonable restraint of trade; or 

‘‘(ii) impose any material anticompetitive burden 

on the trading, clearing, or reporting of transactions. 


sroberts on DSKD5P82C1PROD with HEARING
417 

‘‘(B) GOVERNANCE ARRANGEMENTS.—Each securitybased swap data repository shall establish governance arrangements that are transparent— 

‘‘(i) to fulfill public interest requirements; and 

‘‘(ii) to support the objectives of the Federal Government, owners, and participants. 

‘‘(C) CONFLICTS OF INTEREST.—Each security-based 

swap data repository shall— 

‘‘(i) establish and enforce rules to minimize conflicts of interest in the decision-making process of the 

security-based swap data repository; and 

‘‘(ii) establish a process for resolving any conflicts 

of interest described in clause (i). 

‘‘(D) ADDITIONAL DUTIES DEVELOPED BY COMMISSION.— ‘‘(i) IN GENERAL.—The Commission may develop 1 

or more additional duties applicable to security-based 

swap data repositories. 

‘‘(ii) CONSIDERATION OF EVOLVING STANDARDS.—In 

developing additional duties under subparagraph (A), 

the Commission may take into consideration any evolving standard of the United States or the international 

community. 

‘‘(iii) ADDITIONAL DUTIES FOR COMMISSION DES- IGNEES.—The Commission shall establish additional 

duties for any registrant described in section 

13(m)(2)(C) in order to minimize conflicts of interest, 

protect data, ensure compliance, and guarantee the 

safety and security of the security-based swap data repository. 

‘‘(8) REQUIRED REGISTRATION FOR SECURITY-BASED SWAP

DATA REPOSITORIES.—Any person that is required to be registered as a security-based swap data repository under this subsection shall register with the Commission, regardless of whether that person is also licensed under the Commodity Exchange 

Act as a swap data repository. 

‘‘(9) RULES.—The Commission shall adopt rules governing 

persons that are registered under this subsection.’’. 

SEC. 764. REGISTRATION AND REGULATION OF SECURITY-BASED SWAP 

DEALERS AND MAJOR SECURITY-BASED SWAP PARTICIPANTS. 

(a) IN GENERAL.—The Securities Exchange Act of 1934 (15 

U.S.C. 78a et seq.) is amended by inserting after section 15E (15 

U.S.C. 78o–7) the following: 

‘‘SEC. 15F. REGISTRATION AND REGULATION OF SECURITY-BASED 

SWAP DEALERS AND MAJOR SECURITY-BASED SWAP PARTICIPANTS. 

‘‘(a) REGISTRATION.— 

‘‘(1) SECURITY-BASED SWAP DEALERS.—It shall be unlawful 

for any person to act as a security-based swap dealer unless the 

person is registered as a security-based swap dealer with the 

Commission. 

‘‘(2) MAJOR SECURITY-BASED SWAP PARTICIPANTS.—It shall 

be unlawful for any person to act as a major security-based 

swap participant unless the person is registered as a major security-based swap participant with the Commission. 


sroberts on DSKD5P82C1PROD with HEARING
418 

‘‘(b) REQUIREMENTS.— ‘‘(1) IN GENERAL.—A person shall register as a securitybased swap dealer or major security-based swap participant by 

filing a registration application with the Commission. 

‘‘(2) CONTENTS.— ‘‘(A) IN GENERAL.—The application shall be made in 

such form and manner as prescribed by the Commission, 

and shall contain such information, as the Commission 

considers necessary concerning the business in which the 

applicant is or will be engaged. 

‘‘(B) CONTINUAL REPORTING.—A person that is registered as a security-based swap dealer or major securitybased swap participant shall continue to submit to the 

Commission reports that contain such information pertaining to the business of the person as the Commission 

may require. 

‘‘(3) EXPIRATION.—Each registration under this section 

shall expire at such time as the Commission may prescribe by 

rule or regulation. 

‘‘(4) RULES.—Except as provided in subsections (d) and (e), 

the Commission may prescribe rules applicable to securitybased swap dealers and major security-based swap participants, including rules that limit the activities of non-bank security-based swap dealers and major security-based swap participants. 

‘‘(5) TRANSITION.—Not later than 1 year after the date of 

enactment of the Wall Street Transparency and Accountability 

Act of 2010, the Commission shall issue rules under this section 

to provide for the registration of security-based swap dealers 

and major security-based swap participants. 

‘‘(6) STATUTORY DISQUALIFICATION.—Except to the extent 

otherwise specifically provided by rule, regulation, or order of 

the Commission, it shall be unlawful for a security-based swap 

dealer or a major security-based swap participant to permit any 

person associated with a security-based swap dealer or a major 

security-based swap participant who is subject to a statutory 

disqualification to effect or be involved in effecting securitybased swaps on behalf of the security-based swap dealer or 

major security-based swap participant, if the security-based 

swap dealer or major security-based swap participant knew, or 

in the exercise of reasonable care should have known, of the 

statutory disqualification. 

‘‘(c) DUAL REGISTRATION.— 

‘‘(1) SECURITY-BASED SWAP DEALER.—Any person that is required to be registered as a security-based swap dealer under 

this section shall register with the Commission, regardless of 

whether the person also is registered with the Commodity Futures Trading Commission as a swap dealer. 

‘‘(2) MAJOR SECURITY-BASED SWAP PARTICIPANT.—Any person that is required to be registered as a major security-based 

swap participant under this section shall register with the Commission, regardless of whether the person also is registered with 

the Commodity Futures Trading Commission as a major swap 

participant. 

‘‘(d) RULEMAKING.— 


sroberts on DSKD5P82C1PROD with HEARING
419 

‘‘(1) IN GENERAL.—The Commission shall adopt rules for 

persons that are registered as security-based swap dealers or 

major security-based swap participants under this section. 

‘‘(2) EXCEPTION FOR PRUDENTIAL REQUIREMENTS.— ‘‘(A) IN GENERAL.—The Commission may not prescribe 

rules imposing prudential requirements on security-based 

swap dealers or major security-based swap participants for 

which there is a prudential regulator. 

‘‘(B) APPLICABILITY.—Subparagraph (A) does not limit 

the authority of the Commission to prescribe rules as directed under this section. 

‘‘(e) CAPITAL AND MARGIN REQUIREMENTS.— ‘‘(1) IN GENERAL.— ‘‘(A) SECURITY-BASED SWAP DEALERS AND MAJOR SECU- RITY-BASED SWAP PARTICIPANTS THAT ARE BANKS.—Each 

registered security-based swap dealer and major securitybased swap participant for which there is not a prudential 

regulator shall meet such minimum capital requirements 

and minimum initial and variation margin requirements 

as the prudential regulator shall by rule or regulation prescribe under paragraph (2)(A). 

‘‘(B) SECURITY-BASED SWAP DEALERS AND MAJOR SECU- RITY-BASED SWAP PARTICIPANTS THAT ARE NOT BANKS.— Each registered security-based swap dealer and major security-based swap participant for which there is not a prudential regulator shall meet such minimum capital requirements and minimum initial and variation margin requirements as the Commission shall by rule or regulation prescribe under paragraph (2)(B). 

‘‘(2) RULES.— ‘‘(A) SECURITY-BASED SWAP DEALERS AND MAJOR SECURITY-BASED SWAP PARTICIPANTS THAT ARE BANKS.—The 

prudential regulators, in consultation with the Commission 

and the Commodity Futures Trading Commission, shall 

adopt rules for security-based swap dealers and major security-based swap participants, with respect to their activities 

as a swap dealer or major swap participant, for which 

there is a prudential regulator imposing— 

‘‘(i) capital requirements; and 

‘‘(ii) both initial and variation margin requirements on all security-based swaps that are not cleared 

by a registered clearing agency. 

‘‘(B) SECURITY-BASED SWAP DEALERS AND MAJOR SECURITY-BASED SWAP PARTICIPANTS THAT ARE NOT BANKS.—The 

Commission shall adopt rules for security-based swap dealers and major security-based swap participants, with respect to their activities as a swap dealer or major swap 

participant, for which there is not a prudential regulator 

imposing— 

‘‘(i) capital requirements; and 

‘‘(ii) both initial and variation margin requirements on all swaps that are not cleared by a registered 

clearing agency. 

‘‘(C) CAPITAL.—In setting capital requirements for a 

person that is designated as a security-based swap dealer 


sroberts on DSKD5P82C1PROD with HEARING
420 

or a major security-based swap participant for a single type 

or single class or category of security-based swap or activities, the prudential regulator and the Commission shall 

take into account the risks associated with other types of security-based swaps or classes of security-based swaps or 

categories of security-based swaps engaged in and the other 

activities conducted by that person that are not otherwise 

subject to regulation applicable to that person by virtue of 

the status of the person. 

‘‘(3) STANDARDS FOR CAPITAL AND MARGIN.— ‘‘(A) IN GENERAL.—To offset the greater risk to the security-based swap dealer or major security-based swap participant and the financial system arising from the use of security-based swaps that are not cleared, the requirements imposed under paragraph (2) shall— 

‘‘(i) help ensure the safety and soundness of the security-based swap dealer or major security-based swap 

participant; and 

‘‘(ii) be appropriate for the risk associated with the 

non-cleared security-based swaps held as a securitybased swap dealer or major security-based swap participant. 

‘‘(B) RULE OF CONSTRUCTION.— ‘‘(i) IN GENERAL.—Nothing in this section shall 

limit, or be construed to limit, the authority— 

‘‘(I) of the Commission to set financial responsibility rules for a broker or dealer registered pursuant to section 15(b) (except for section 15(b)(11) 

thereof) in accordance with section 15(c)(3); or 

‘‘(II) of the Commodity Futures Trading Commission to set financial responsibility rules for a 

futures commission merchant or introducing 

broker registered pursuant to section 4f(a) of the 

Commodity Exchange Act (except for section 

4f(a)(3) thereof) in accordance with section 4f(b) of 

the Commodity Exchange Act. 

‘‘(ii) FUTURES COMMISSION MERCHANTS AND OTHER

DEALERS.—A futures commission merchant, introducing broker, broker, or dealer shall maintain sufficient capital to comply with the stricter of any applicable capital requirements to which such futures commission merchant, introducing broker, broker, or dealer is 

subject to under this title or the Commodity Exchange 

Act. 

‘‘(C) MARGIN REQUIREMENTS.—In prescribing margin 

requirements under this subsection, the prudential regulator with respect to security-based swap dealers and major 

security-based swap participants that are depository institutions, and the Commission with respect to security-based 

swap dealers and major security-based swap participants 

that are not depository institutions shall permit the use of 

noncash collateral, as the regulator or the Commission determines to be consistent with— 

‘‘(i) preserving the financial integrity of markets 

trading security-based swaps; and 


sroberts on DSKD5P82C1PROD with HEARING
421 

‘‘(ii) preserving the stability of the United States financial system. 

‘‘(D) COMPARABILITY OF CAPITAL AND MARGIN REQUIRE- MENTS.— 

‘‘(i) IN GENERAL.—The prudential regulators, the 

Commission, and the Securities and Exchange Commission shall periodically (but not less frequently than 

annually) consult on minimum capital requirements 

and minimum initial and variation margin requirements. 

‘‘(ii) COMPARABILITY.—The entities described in 

clause (i) shall, to the maximum extent practicable, establish and maintain comparable minimum capital requirements and minimum initial and variation margin 

requirements, including the use of noncash collateral, 

for— 

‘‘(I) security-based swap dealers; and 

‘‘(II) major security-based swap participants. 

‘‘(f) REPORTING AND RECORDKEEPING.— ‘‘(1) IN GENERAL.—Each registered security-based swap 

dealer and major security-based swap participant— 

‘‘(A) shall make such reports as are required by the 

Commission, by rule or regulation, regarding the transactions and positions and financial condition of the registered security-based swap dealer or major security-based 

swap participant; 

‘‘(B)(i) for which there is a prudential regulator, shall 

keep books and records of all activities related to the business as a security-based swap dealer or major securitybased swap participant in such form and manner and for 

such period as may be prescribed by the Commission by 

rule or regulation; and 

‘‘(ii) for which there is no prudential regulator, shall 

keep books and records in such form and manner and for 

such period as may be prescribed by the Commission by 

rule or regulation; and 

‘‘(C) shall keep books and records described in subparagraph (B) open to inspection and examination by any 

representative of the Commission. 

‘‘(2) RULES.—The Commission shall adopt rules governing 

reporting and recordkeeping for security-based swap dealers 

and major security-based swap participants. 

‘‘(g) DAILY TRADING RECORDS.— 

‘‘(1) IN GENERAL.—Each registered security-based swap 

dealer and major security-based swap participant shall maintain daily trading records of the security-based swaps of the 

registered security-based swap dealer and major security-based 

swap participant and all related records (including related cash 

or forward transactions) and recorded communications, including electronic mail, instant messages, and recordings of telephone calls, for such period as may be required by the Commission by rule or regulation. 

‘‘(2) INFORMATION REQUIREMENTS.—The daily trading 

records shall include such information as the Commission shall 

require by rule or regulation. 


sroberts on DSKD5P82C1PROD with HEARING
422 

‘‘(3) COUNTERPARTY RECORDS.—Each registered securitybased swap dealer and major security-based swap participant 

shall maintain daily trading records for each counterparty in 

a manner and form that is identifiable with each security-based 

swap transaction. 

‘‘(4) AUDIT TRAIL.—Each registered security-based swap 

dealer and major security-based swap participant shall maintain a complete audit trail for conducting comprehensive and 

accurate trade reconstructions. 

‘‘(5) RULES.—The Commission shall adopt rules governing 

daily trading records for security-based swap dealers and major 

security-based swap participants. 

‘‘(h) BUSINESS CONDUCT STANDARDS.— ‘‘(1) IN GENERAL.—Each registered security-based swap 

dealer and major security-based swap participant shall conform 

with such business conduct standards as prescribed in paragraph (3) and as may be prescribed by the Commission by rule 

or regulation that relate to— 

‘‘(A) fraud, manipulation, and other abusive practices 

involving security-based swaps (including security-based 

swaps that are offered but not entered into); 

‘‘(B) diligent supervision of the business of the registered security-based swap dealer and major securitybased swap participant; 

‘‘(C) adherence to all applicable position limits; and 

‘‘(D) such other matters as the Commission determines 

to be appropriate. 

‘‘(2) RESPONSIBILITIES WITH RESPECT TO SPECIAL ENTI- TIES.— ‘‘(A) ADVISING SPECIAL ENTITIES.—A security-based 

swap dealer or major security-based swap participant that 

acts as an advisor to special entity regarding a securitybased swap shall comply with the requirements of paragraph (4) with respect to such special entity. 

‘‘(B) ENTERING OF SECURITY-BASED SWAPS WITH RE- SPECT TO SPECIAL ENTITIES.—A security-based swap dealer 

that enters into or offers to enter into security-based swap 

with a special entity shall comply with the requirements of 

paragraph (5) with respect to such special entity. 

‘‘(C) SPECIAL ENTITY DEFINED.—For purposes of this 

subsection, the term ‘special entity’ means— 

‘‘(i) a Federal agency; 

‘‘(ii) a State, State agency, city, county, municipality, or other political subdivision of a State or; 

‘‘(iii) any employee benefit plan, as defined in section 3 of the Employee Retirement Income Security Act 

of 1974 (29 U.S.C. 1002); 

‘‘(iv) any governmental plan, as defined in section 

3 of the Employee Retirement Income Security Act of 

1974 (29 U.S.C. 1002); or 

‘‘(v) any endowment, including an endowment that 

is an organization described in section 501(c)(3) of the 

Internal Revenue Code of 1986. 

‘‘(3) BUSINESS CONDUCT REQUIREMENTS.—Business conduct 

requirements adopted by the Commission shall— 


sroberts on DSKD5P82C1PROD with HEARING
423 

‘‘(A) establish a duty for a security-based swap dealer 

or major security-based swap participant to verify that any 

counterparty meets the eligibility standards for an eligible 

contract participant; 

‘‘(B) require disclosure by the security-based swap dealer or major security-based swap participant to any 

counterparty to the transaction (other than a security-based 

swap dealer, major security-based swap participant, security-based swap dealer, or major security-based swap participant) of— 

‘‘(i) information about the material risks and characteristics of the security-based swap; 

‘‘(ii) any material incentives or conflicts of interest 

that the security-based swap dealer or major securitybased swap participant may have in connection with 

the security-based swap; and 

‘‘(iii)(I) for cleared security-based swaps, upon the 

request of the counterparty, receipt of the daily mark of 

the transaction from the appropriate derivatives clearing organization; and 

‘‘(II) for uncleared security-based swaps, receipt of 

the daily mark of the transaction from the securitybased swap dealer or the major security-based swap 

participant; 

‘‘(C) establish a duty for a security-based swap dealer 

or major security-based swap participant to communicate 

in a fair and balanced manner based on principles of fair 

dealing and good faith; and 

‘‘(D) establish such other standards and requirements 

as the Commission may determine are appropriate in the 

public interest, for the protection of investors, or otherwise 

in furtherance of the purposes of this Act. 

‘‘(4) SPECIAL REQUIREMENTS FOR SECURITY-BASED SWAP

DEALERS ACTING AS ADVISORS.— 

‘‘(A) IN GENERAL.—It shall be unlawful for a securitybased swap dealer or major security-based swap participant— 

‘‘(i) to employ any device, scheme, or artifice to defraud any special entity or prospective customer who is 

a special entity; 

‘‘(ii) to engage in any transaction, practice, or 

course of business that operates as a fraud or deceit on 

any special entity or prospective customer who is a special entity; or 

‘‘(iii) to engage in any act, practice, or course of 

business that is fraudulent, deceptive, or manipulative. 

‘‘(B) DUTY.—Any security-based swap dealer that acts 

as an advisor to a special entity shall have a duty to act 

in the best interests of the special entity. 

‘‘(C) REASONABLE EFFORTS.—Any security-based swap 

dealer that acts as an advisor to a special entity shall make 

reasonable efforts to obtain such information as is necessary to make a reasonable determination that any security-based swap recommended by the security-based swap 


sroberts on DSKD5P82C1PROD with HEARING
424 

dealer is in the best interests of the special entity, including 

information relating to— 

‘‘(i) the financial status of the special entity; 

‘‘(ii) the tax status of the special entity; 

‘‘(iii) the investment or financing objectives of the 

special entity; and 

‘‘(iv) any other information that the Commission 

may prescribe by rule or regulation. 

‘‘(5) SPECIAL REQUIREMENTS FOR SECURITY-BASED SWAP

DEALERS AS COUNTERPARTIES TO SPECIAL ENTITIES.— 

‘‘(A) IN GENERAL.—Any security-based swap dealer or 

major security-based swap participant that offers to or enters into a security-based swap with a special entity shall— 

‘‘(i) comply with any duty established by the Commission for a security-based swap dealer or major security-based swap participant, with respect to a 

counterparty that is an eligible contract participant 

within the meaning of subclause (I) or (II) of clause 

(vii) of section 1a(18) of the Commodity Exchange Act, 

that requires the security-based swap dealer or major 

security-based swap participant to have a reasonable 

basis to believe that the counterparty that is a special 

entity has an independent representative that— 

‘‘(I) has sufficient knowledge to evaluate the 

transaction and risks; 

‘‘(II) is not subject to a statutory disqualification; 

‘‘(III) is independent of the security-based 

swap dealer or major security-based swap participant; 

‘‘(IV) undertakes a duty to act in the best interests of the counterparty it represents; 

‘‘(V) makes appropriate disclosures; 

‘‘(VI) will provide written representations to 

the special entity regarding fair pricing and the 

appropriateness of the transaction; and 

‘‘(VII) in the case of employee benefit plans 

subject to the Employee Retirement Income Security Act of 1974, is a fiduciary as defined in section 

3 of that Act (29 U.S.C. 1002); and 

‘‘(ii) before the initiation of the transaction, disclose to the special entity in writing the capacity in 

which the security-based swap dealer is acting. 

‘‘(B) COMMISSION AUTHORITY.—The Commission may 

establish such other standards and requirements under this 

paragraph as the Commission may determine are appropriate in the public interest, for the protection of investors, 

or otherwise in furtherance of the purposes of this Act. 

‘‘(6) RULES.—The Commission shall prescribe rules under 

this subsection governing business conduct standards for security-based swap dealers and major security-based swap participants. 

‘‘(7) APPLICABILITY.—This subsection shall not apply with 

respect to a transaction that is— 


sroberts on DSKD5P82C1PROD with HEARING
425 

‘‘(A) initiated by a special entity on an exchange or security-based swaps execution facility; and 

‘‘(B) the security-based swap dealer or major securitybased swap participant does not know the identity of the 

counterparty to the transaction.’’ 

‘‘(i) DOCUMENTATION STANDARDS.— ‘‘(1) IN GENERAL.—Each registered security-based swap 

dealer and major security-based swap participant shall conform 

with such standards as may be prescribed by the Commission, 

by rule or regulation, that relate to timely and accurate confirmation, processing, netting, documentation, and valuation of 

all security-based swaps. 

‘‘(2) RULES.—The Commission shall adopt rules governing 

documentation standards for security-based swap dealers and 

major security-based swap participants. 

‘‘(j) DUTIES.—Each registered security-based swap dealer and 

major security-based swap participant shall, at all times, comply 

with the following requirements: 

‘‘(1) MONITORING OF TRADING.—The security-based swap 

dealer or major security-based swap participant shall monitor 

its trading in security-based swaps to prevent violations of applicable position limits. 

‘‘(2) RISK MANAGEMENT PROCEDURES.—The security-based 

swap dealer or major security-based swap participant shall establish robust and professional risk management systems adequate for managing the day-to-day business of the securitybased swap dealer or major security-based swap participant. 

‘‘(3) DISCLOSURE OF GENERAL INFORMATION.—The securitybased swap dealer or major security-based swap participant 

shall disclose to the Commission and to the prudential regulator for the security-based swap dealer or major security-based 

swap participant, as applicable, information concerning— 

‘‘(A) terms and conditions of its security-based swaps; 

‘‘(B) security-based swap trading operations, mechanisms, and practices; 

‘‘(C) financial integrity protections relating to securitybased swaps; and 

‘‘(D) other information relevant to its trading in security-based swaps. 

‘‘(4) ABILITY TO OBTAIN INFORMATION.—The security-based 

swap dealer or major security-based swap participant shall— 

‘‘(A) establish and enforce internal systems and procedures to obtain any necessary information to perform any 

of the functions described in this section; and 

‘‘(B) provide the information to the Commission and to 

the prudential regulator for the security-based swap dealer 

or major security-based swap participant, as applicable, on 

request. 

‘‘(5) CONFLICTS OF INTEREST.—The security-based swap 

dealer and major security-based swap participant shall implement conflict-of-interest systems and procedures that— 

‘‘(A) establish structural and institutional safeguards 

to ensure that the activities of any person within the firm 

relating to research or analysis of the price or market for 

any security-based swap or acting in a role of providing 


sroberts on DSKD5P82C1PROD with HEARING
426 

clearing activities or making determinations as to accepting 

clearing customers are separated by appropriate informational partitions within the firm from the review, pressure, 

or oversight of persons whose involvement in pricing, trading, or clearing activities might potentially bias their judgment or supervision and contravene the core principles of 

open access and the business conduct standards described 

in this title; and 

‘‘(B) address such other issues as the Commission determines to be appropriate. 

‘‘(6) ANTITRUST CONSIDERATIONS.—Unless necessary or appropriate to achieve the purposes of this title, the security-based 

swap dealer or major security-based swap participant shall 

not— 

‘‘(A) adopt any process or take any action that results 

in any unreasonable restraint of trade; or 

‘‘(B) impose any material anticompetitive burden on 

trading or clearing. 

‘‘(7) RULES.—The Commission shall prescribe rules under 

this subsection governing duties of security-based swap dealers 

and major security-based swap participants. 

‘‘(k) DESIGNATION OF CHIEF COMPLIANCE OFFICER.— ‘‘(1) IN GENERAL.—Each security-based swap dealer and 

major security-based swap participant shall designate an individual to serve as a chief compliance officer. 

‘‘(2) DUTIES.—The chief compliance officer shall— 

‘‘(A) report directly to the board or to the senior officer 

of the security-based swap dealer or major security-based 

swap participant; 

‘‘(B) review the compliance of the security-based swap 

dealer or major security-based swap participant with respect to the security-based swap dealer and major securitybased swap participant requirements described in this section; 

‘‘(C) in consultation with the board of directors, a body 

performing a function similar to the board, or the senior officer of the organization, resolve any conflicts of interest 

that may arise; 

‘‘(D) be responsible for administering each policy and 

procedure that is required to be established pursuant to 

this section; 

‘‘(E) ensure compliance with this title (including regulations) relating to security-based swaps, including each 

rule prescribed by the Commission under this section; 

‘‘(F) establish procedures for the remediation of noncompliance issues identified by the chief compliance officer 

through any— 

‘‘(i) compliance office review; 

‘‘(ii) look-back; 

‘‘(iii) internal or external audit finding; 

‘‘(iv) self-reported error; or 

‘‘(v) validated complaint; and 

‘‘(G) establish and follow appropriate procedures for 

the handling, management response, remediation, retesting, 

and closing of noncompliance issues. 


sroberts on DSKD5P82C1PROD with HEARING
427 

‘‘(3) ANNUAL REPORTS.— ‘‘(A) IN GENERAL.—In accordance with rules prescribed 

by the Commission, the chief compliance officer shall annually prepare and sign a report that contains a description 

of— 

‘‘(i) the compliance of the security-based swap dealer or major swap participant with respect to this title 

(including regulations); and 

‘‘(ii) each policy and procedure of the securitybased swap dealer or major security-based swap participant of the chief compliance officer (including the code 

of ethics and conflict of interest policies). 

‘‘(B) REQUIREMENTS.—A compliance report under subparagraph (A) shall— 

‘‘(i) accompany each appropriate financial report of 

the security-based swap dealer or major security-based 

swap participant that is required to be furnished to the 

Commission pursuant to this section; and 

‘‘(ii) include a certification that, under penalty of 

law, the compliance report is accurate and complete. 

‘‘(l) ENFORCEMENT AND ADMINISTRATIVE PROCEEDING AUTHOR- ITY.— ‘‘(1) PRIMARY ENFORCEMENT AUTHORITY.— ‘‘(A) SECURITIES AND EXCHANGE COMMISSION.—Except 

as provided in subparagraph (B), (C), or (D), the Commission shall have primary authority to enforce subtitle B, and 

the amendments made by subtitle B of the Wall Street 

Transparency and Accountability Act of 2010, with respect 

to any person. 

‘‘(B) PRUDENTIAL REGULATORS.—The prudential regulators shall have exclusive authority to enforce the provisions of subsection (e) and other prudential requirements of 

this title (including risk management standards), with respect to security-based swap dealers or major securitybased swap participants for which they are the prudential 

regulator. 

‘‘(C) REFERRAL.— ‘‘(i) VIOLATIONS OF NONPRUDENTIAL REQUIRE- MENTS.—If the appropriate Federal banking agency for 

security-based swap dealers or major security-based 

swap participants that are depository institutions has 

cause to believe that such security-based swap dealer or 

major security-based swap participant may have engaged in conduct that constitutes a violation of the 

nonprudential requirements of this section or rules 

adopted by the Commission thereunder, the agency 

may recommend in writing to the Commission that the 

Commission initiate an enforcement proceeding as authorized under this title. The recommendation shall be 

accompanied by a written explanation of the concerns 

giving rise to the recommendation. 

‘‘(ii) VIOLATIONS OF PRUDENTIAL REQUIREMENTS.— If the Commission has cause to believe that a securities-based swap dealer or major securities-based swap 

participant that has a prudential regulator may have 


sroberts on DSKD5P82C1PROD with HEARING
428 

engaged in conduct that constitute a violation of the 

prudential requirements of subsection (e) or rules 

adopted thereunder, the Commission may recommend 

in writing to the prudential regulator that the prudential regulator initiate an enforcement proceeding as authorized under this title. The recommendation shall be 

accompanied by a written explanation of the concerns 

giving rise to the recommendation. 

‘‘(D) BACKSTOP ENFORCEMENT AUTHORITY.— ‘‘(i) INITIATION OF ENFORCEMENT PROCEEDING BY

PRUDENTIAL REGULATOR.—If the Commission does not 

initiate an enforcement proceeding before the end of the 

90-day period beginning on the date on which the 

Commission receives a written report under subsection 

(C)(i), the prudential regulator may initiate an enforcement proceeding. 

‘‘(ii) INITIATION OF ENFORCEMENT PROCEEDING BY

COMMISSION.—If the prudential regulator does not initiate an enforcement proceeding before the end of the 

90-day period beginning on the date on which the prudential regulator receives a written report under subsection (C)(ii), the Commission may initiate an enforcement proceeding. 

‘‘(2) CENSURE, DENIAL, SUSPENSION; NOTICE AND HEAR- ING.—The Commission, by order, shall censure, place limitations on the activities, functions, or operations of, or revoke the 

registration of any security-based swap dealer or major security-based swap participant that has registered with the Commission pursuant to subsection (b) if the Commission finds, on 

the record after notice and opportunity for hearing, that such 

censure, placing of limitations, or revocation is in the public interest and that such security-based swap dealer or major security-based swap participant, or any person associated with such 

security-based swap dealer or major security-based swap participant effecting or involved in effecting transactions in securitybased swaps on behalf of such security-based swap dealer or 

major security-based swap participant, whether prior or subsequent to becoming so associated— 

‘‘(A) has committed or omitted any act, or is subject to 

an order or finding, enumerated in subparagraph (A), (D), 

or (E) of paragraph (4) of section 15(b); 

‘‘(B) has been convicted of any offense specified in subparagraph (B) of such paragraph (4) within 10 years of the 

commencement of the proceedings under this subsection; 

‘‘(C) is enjoined from any action, conduct, or practice 

specified in subparagraph (C) of such paragraph (4); 

‘‘(D) is subject to an order or a final order specified in 

subparagraph (F) or (H), respectively, of such paragraph 

(4); or 

‘‘(E) has been found by a foreign financial regulatory 

authority to have committed or omitted any act, or violated 

any foreign statute or regulation, enumerated in subparagraph (G) of such paragraph (4). 

‘‘(3) ASSOCIATED PERSONS.—With respect to any person who 

is associated, who is seeking to become associated, or, at the 


sroberts on DSKD5P82C1PROD with HEARING
429 

time of the alleged misconduct, who was associated or was seeking to become associated with a security-based swap dealer or 

major security-based swap participant for the purpose of effecting or being involved in effecting security-based swaps on behalf of such security-based swap dealer or major security-based 

swap participant, the Commission, by order, shall censure, 

place limitations on the activities or functions of such person, 

or suspend for a period not exceeding 12 months, or bar such 

person from being associated with a security-based swap dealer 

or major security-based swap participant, if the Commission 

finds, on the record after notice and opportunity for a hearing, 

that such censure, placing of limitations, suspension, or bar is 

in the public interest and that such person— 

‘‘(A) has committed or omitted any act, or is subject to 

an order or finding, enumerated in subparagraph (A), (D), 

or (E) of paragraph (4) of section 15(b); 

‘‘(B) has been convicted of any offense specified in subparagraph (B) of such paragraph (4) within 10 years of the 

commencement of the proceedings under this subsection; 

‘‘(C) is enjoined from any action, conduct, or practice 

specified in subparagraph (C) of such paragraph (4); 

‘‘(D) is subject to an order or a final order specified in 

subparagraph (F) or (H), respectively, of such paragraph 

(4); or 

‘‘(E) has been found by a foreign financial regulatory 

authority to have committed or omitted any act, or violated 

any foreign statute or regulation, enumerated in subparagraph (G) of such paragraph (4). 

‘‘(4) UNLAWFUL CONDUCT.—It shall be unlawful— 

‘‘(A) for any person as to whom an order under paragraph (3) is in effect, without the consent of the Commission, willfully to become, or to be, associated with a security-based swap dealer or major security-based swap participant in contravention of such order; or 

‘‘(B) for any security-based swap dealer or major security-based swap participant to permit such a person, without the consent of the Commission, to become or remain a 

person associated with the security-based swap dealer or 

major security-based swap participant in contravention of 

such order, if such security-based swap dealer or major security-based swap participant knew, or in the exercise of 

reasonable care should have known, of such order.’’. 

(b) SAVINGS CLAUSE.—Notwithstanding any other provision of 

this title, nothing in this subtitle shall be construed as divesting any 

appropriate Federal banking agency of any authority it may have 

to establish or enforce, with respect to a person for which such agency is the appropriate Federal banking agency, prudential or other 

standards pursuant to authority by Federal law other than this 

title. 

SEC. 765. RULEMAKING ON CONFLICT OF INTEREST. 

(a) IN GENERAL.—In order to mitigate conflicts of interest, not 

later than 180 days after the date of enactment of the Wall Street 

Transparency and Accountability Act of 2010, the Securities and 

Exchange Commission shall adopt rules which may include numerical limits on the control of, or the voting rights with respect to, any 


sroberts on DSKD5P82C1PROD with HEARING
430 

clearing agency that clears security-based swaps, or on the control 

of any security-based swap execution facility or national securities 

exchange that posts or makes available for trading security-based 

swaps, by a bank holding company (as defined in section 2 of the 

Bank Holding Company Act of 1956 (12 U.S.C. 1841)) with total 

consolidated assets of $50,000,000,000 or more, a nonbank financial 

company (as defined in section 102) supervised by the Board of Governors of the Federal Reserve System, affiliate of such a bank holding company or nonbank financial company, a security-based swap 

dealer, major security-based swap participant, or person associated 

with a security-based swap dealer or major security-based swap 

participant. 

(b) PURPOSES.—The Securities and Exchange Commission shall 

adopt rules if the Commission determines, after the review described 

in subsection (a), that such rules are necessary or appropriate to improve the governance of, or to mitigate systemic risk, promote competition, or mitigate conflicts of interest in connection with a security-based swap dealer or major security-based swap participant’s 

conduct of business with, a clearing agency, national securities exchange, or security-based swap execution facility that clears, posts, 

or makes available for trading security-based swaps and in which 

such security-based swap dealer or major security-based swap participant has a material debt or equity investment. 

(c) CONSIDERATIONS.—In adopting rules pursuant to this section, the Securities and Exchange Commission shall consider any 

conflicts of interest arising from the amount of equity owned by a 

single investor, the ability to vote, cause the vote of, or withhold 

votes entitled to be cast on any matters by the holders of the ownership interest, and the governance arrangements of any derivatives 

clearing organization that clears swaps, or swap execution facility 

or board of trade designated as a contract market that posts swaps 

or makes swaps available for trading. 

SEC. 766. REPORTING AND RECORDKEEPING. 

(a) IN GENERAL.—The Securities Exchange Act of 1934 (15 

U.S.C. 78a et seq.) is amended by inserting after section 13 the following: 

‘‘SEC. 13A. REPORTING AND RECORDKEEPING FOR CERTAIN SECURITY-BASED SWAPS. 

‘‘(a) REQUIRED REPORTING OF SECURITY-BASED SWAPS NOT ACCEPTED BY ANY CLEARING AGENCY OR DERIVATIVES CLEARING ORGANIZATION.— 

‘‘(1) IN GENERAL.—Each security-based swap that is not accepted for clearing by any clearing agency or derivatives clearing organization shall be reported to— 

‘‘(A) a security-based swap data repository described in 

section 13(n); or 

‘‘(B) in the case in which there is no security-based 

swap data repository that would accept the security-based 

swap, to the Commission pursuant to this section within 

such time period as the Commission may by rule or regulation prescribe. 

‘‘(2) TRANSITION RULE FOR PREENACTMENT SECURITY-BASED

SWAPS.— 


sroberts on DSKD5P82C1PROD with HEARING
431 

‘‘(A) SECURITY-BASED SWAPS ENTERED INTO BEFORE

THE DATE OF ENACTMENT OF THE WALL STREET TRANSPARENCY AND ACCOUNTABILITY ACT OF 2010.—Each securitybased swap entered into before the date of enactment of the 

Wall Street Transparency and Accountability Act of 2010, 

the terms of which have not expired as of the date of enactment of that Act, shall be reported to a registered securitybased swap data repository or the Commission by a date 

that is not later than— 

‘‘(i) 30 days after issuance of the interim final rule; 

or 

‘‘(ii) such other period as the Commission determines to be appropriate. 

‘‘(B) COMMISSION RULEMAKING.—The Commission 

shall promulgate an interim final rule within 90 days of 

the date of enactment of this section providing for the reporting of each security-based swap entered into before the 

date of enactment as referenced in subparagraph (A). 

‘‘(C) EFFECTIVE DATE.—The reporting provisions described in this section shall be effective upon the date of the 

enactment of this section. 

‘‘(3) REPORTING OBLIGATIONS.— 

‘‘(A) SECURITY-BASED SWAPS IN WHICH ONLY 1

COUNTERPARTY IS A SECURITY-BASED SWAP DEALER OR

MAJOR SECURITY-BASED SWAP PARTICIPANT.—With respect 

to a security-based swap in which only 1 counterparty is a 

security-based swap dealer or major security-based swap 

participant, the security-based swap dealer or major security-based swap participant shall report the security-based 

swap as required under paragraphs (1) and (2). 

‘‘(B) SECURITY-BASED SWAPS IN WHICH 1 COUNTERPARTY

IS A SECURITY-BASED SWAP DEALER AND THE OTHER A

MAJOR SECURITY-BASED SWAP PARTICIPANT.—With respect 

to a security-based swap in which 1 counterparty is a security-based swap dealer and the other a major securitybased swap participant, the security-based swap dealer 

shall report the security-based swap as required under 

paragraphs (1) and (2). 

‘‘(C) OTHER SECURITY-BASED SWAPS.—With respect to 

any other security-based swap not described in subparagraph (A) or (B), the counterparties to the security-based 

swap shall select a counterparty to report the security-based 

swap as required under paragraphs (1) and (2). 

‘‘(b) DUTIES OF CERTAIN INDIVIDUALS.—Any individual or entity 

that enters into a security-based swap shall meet each requirement 

described in subsection (c) if the individual or entity did not— 

‘‘(1) clear the security-based swap in accordance with section 3C(a)(1); or 

‘‘(2) have the data regarding the security-based swap accepted by a security-based swap data repository in accordance 

with rules (including timeframes) adopted by the Commission 

under this title. 

‘‘(c) REQUIREMENTS.—An individual or entity described in subsection (b) shall— 


sroberts on DSKD5P82C1PROD with HEARING
432 

‘‘(1) upon written request from the Commission, provide reports regarding the security-based swaps held by the individual 

or entity to the Commission in such form and in such manner 

as the Commission may request; and 

‘‘(2) maintain books and records pertaining to the securitybased swaps held by the individual or entity in such form, in 

such manner, and for such period as the Commission may require, which shall be open to inspection by— 

‘‘(A) any representative of the Commission; 

‘‘(B) an appropriate prudential regulator; 

‘‘(C) the Commodity Futures Trading Commission; 

‘‘(D) the Financial Stability Oversight Council; and 

‘‘(E) the Department of Justice. 

‘‘(d) IDENTICAL DATA.—In prescribing rules under this section, 

the Commission shall require individuals and entities described in 

subsection (b) to submit to the Commission a report that contains 

data that is not less comprehensive than the data required to be collected by security-based swap data repositories under this title.’’. 

(b) BENEFICIAL OWNERSHIP REPORTING.—Section 13 of the Securities Exchange Act of 1934 (15 U.S.C. 78m) is amended— 

(1) in subsection (d)(1), by inserting ‘‘or otherwise becomes 

or is deemed to become a beneficial owner of any of the foregoing upon the purchase or sale of a security-based swap that 

the Commission may define by rule, and’’ after ‘‘Alaska Native 

Claims Settlement Act,’’; and 

(2) in subsection (g)(1), by inserting ‘‘or otherwise becomes 

or is deemed to become a beneficial owner of any security of a 

class described in subsection (d)(1) upon the purchase or sale of 

a security-based swap that the Commission may define by rule’’ 

after ‘‘subsection (d)(1) of this section’’. 

(c) REPORTS BY INSTITUTIONAL INVESTMENT MANAGERS.—Section 13(f)(1) of the Securities Exchange Act of 1934 (15 U.S.C. 

78m(f)(1)) is amended by inserting ‘‘or otherwise becomes or is 

deemed to become a beneficial owner of any security of a class described in subsection (d)(1) upon the purchase or sale of a securitybased swap that the Commission may define by rule,’’ after ‘‘subsection (d)(1) of this section’’. 

(d) ADMINISTRATIVE PROCEEDING AUTHORITY.—Section 15(b)(4) 

of the Securities Exchange Act of 1934 (15 U.S.C. 78o(b)(4)) is 

amended— 

(1) in subparagraph (C), by inserting ‘‘security-based swap 

dealer, major security-based swap participant,’’ after ‘‘government securities dealer,’’; and 

(2) in subparagraph (F), by striking ‘‘broker or dealer’’ and 

inserting ‘‘broker, dealer, security-based swap dealer, or a major 

security-based swap participant’’. 

(e) SECURITY-BASED SWAP BENEFICIAL OWNERSHIP.—Section 13 

of the Securities Exchange Act of 1934 (15 U.S.C. 78m) is amended 

by adding at the end the following: 

‘‘(o) BENEFICIAL OWNERSHIP.—For purposes of this section and 

section 16, a person shall be deemed to acquire beneficial ownership 

of an equity security based on the purchase or sale of a securitybased swap, only to the extent that the Commission, by rule, determines after consultation with the prudential regulators and the Secretary of the Treasury, that the purchase or sale of the securityVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00436 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
433 

based swap, or class of security-based swap, provides incidents of 

ownership comparable to direct ownership of the equity security, 

and that it is necessary to achieve the purposes of this section that 

the purchase or sale of the security-based swaps, or class of securitybased swap, be deemed the acquisition of beneficial ownership of the 

equity security.’’. 

SEC. 767. STATE GAMING AND BUCKET SHOP LAWS. 

Section 28(a) of the Securities Exchange Act of 1934 (15 U.S.C. 

78bb(a)) is amended to read as follows: 

‘‘(a) LIMITATION ON JUDGMENTS.— 

‘‘(1) IN GENERAL.—No person permitted to maintain a suit 

for damages under the provisions of this title shall recover, 

through satisfaction of judgment in 1 or more actions, a total 

amount in excess of the actual damages to that person on account of the act complained of. Except as otherwise specifically 

provided in this title, nothing in this title shall affect the jurisdiction of the securities commission (or any agency or officer 

performing like functions) of any State over any security or any 

person insofar as it does not conflict with the provisions of this 

title or the rules and regulations under this title. 

‘‘(2) RULE OF CONSTRUCTION.—Except as provided in subsection (f), the rights and remedies provided by this title shall 

be in addition to any and all other rights and remedies that 

may exist at law or in equity. 

‘‘(3) STATE BUCKET SHOP LAWS.—No State law which prohibits or regulates the making or promoting of wagering or 

gaming contracts, or the operation of ‘bucket shops’ or other 

similar or related activities, shall invalidate— 

‘‘(A) any put, call, straddle, option, privilege, or other 

security subject to this title (except any security that has a 

pari-mutuel payout or otherwise is determined by the Commission, acting by rule, regulation, or order, to be appropriately subject to such laws), or apply to any activity 

which is incidental or related to the offer, purchase, sale, 

exercise, settlement, or closeout of any such security; 

‘‘(B) any security-based swap between eligible contract 

participants; or 

‘‘(C) any security-based swap effected on a national securities exchange registered pursuant to section 6(b). 

‘‘(4) OTHER STATE PROVISIONS.—No provision of State law 

regarding the offer, sale, or distribution of securities shall apply 

to any transaction in a security-based swap or a security futures product, except that this paragraph may not be construed 

as limiting any State antifraud law of general applicability. A 

security-based swap may not be regulated as an insurance contract under any provision of State law.’’. 

SEC. 768. AMENDMENTS TO THE SECURITIES ACT OF 1933; TREATMENT 

OF SECURITY-BASED SWAPS. 

(a) DEFINITIONS.—Section 2(a) of the Securities Act of 1933 (15 

U.S.C. 77b(a)) is amended— 

(1) in paragraph (1), by inserting ‘‘security-based swap,’’ 

after ‘‘security future,’’; 

(2) in paragraph (3), by adding at the end the following: 

‘‘Any offer or sale of a security-based swap by or on behalf of 


sroberts on DSKD5P82C1PROD with HEARING
434 

the issuer of the securities upon which such security-based swap 

is based or is referenced, an affiliate of the issuer, or an underwriter, shall constitute a contract for sale of, sale of, offer for 

sale, or offer to sell such securities.’’; and 

(3) by adding at the end the following: 

‘‘(17) The terms ‘swap’ and ‘security-based swap’ have the 

same meanings as in section 1a of the Commodity Exchange Act 

(7 U.S.C. 1a). 

‘‘(18) The terms ‘purchase’ or ‘sale’ of a security-based swap 

shall be deemed to mean the execution, termination (prior to its 

scheduled maturity date), assignment, exchange, or similar 

transfer or conveyance of, or extinguishing of rights or obligations under, a security-based swap, as the context may require.’’. 

(b) REGISTRATION OF SECURITY-BASED SWAPS.—Section 5 of the 

Securities Act of 1933 (15 U.S.C. 77e) is amended by adding at the 

end the following: 

‘‘(d) Notwithstanding the provisions of section 3 or 4, unless a 

registration statement meeting the requirements of section 10(a) is 

in effect as to a security-based swap, it shall be unlawful for any 

person, directly or indirectly, to make use of any means or instruments of transportation or communication in interstate commerce or 

of the mails to offer to sell, offer to buy or purchase or sell a security-based swap to any person who is not an eligible contract participant as defined in section 1a(18) of the Commodity Exchange Act 

(7 U.S.C. 1a(18)).’’. 

SEC. 769. DEFINITIONS UNDER THE INVESTMENT COMPANY ACT OF 

1940. 

Section 2(a) of the Investment Company Act of 1940 (15 U.S.C. 

80a–2) is amended by adding at the end the following: 

‘‘(54) The terms ‘commodity pool’, ‘commodity pool operator’, ‘commodity trading advisor’, ‘major swap participant’, 

‘swap’, ‘swap dealer’, and ‘swap execution facility’ have the 

same meanings as in section 1a of the Commodity Exchange Act 

(7 U.S.C. 1a).’’. 

SEC. 770. DEFINITIONS UNDER THE INVESTMENT ADVISERS ACT OF 

1940. 

Section 202(a) of the Investment Advisers Act of 1940 (15 

U.S.C. 80b–2) is amended by adding at the end the following: 

‘‘(29) The terms ‘commodity pool’, ‘commodity pool operator’, ‘commodity trading advisor’, ‘major swap participant’, 

‘swap’, ‘swap dealer’, and ‘swap execution facility’ have the 

same meanings as in section 1a of the Commodity Exchange Act 

(7 U.S.C. 1a).’’. 

SEC. 771. OTHER AUTHORITY. 

Unless otherwise provided by its terms, this subtitle does not divest any appropriate Federal banking agency, the Securities and Exchange Commission, the Commodity Futures Trading Commission, 

or any other Federal or State agency, of any authority derived from 

any other provision of applicable law. 

SEC. 772. JURISDICTION. 

(a) IN GENERAL.—Section 36 of the Securities Exchange Act of 

1934 (15 U.S.C. 78mm) is amended by adding at the end the following: 


sroberts on DSKD5P82C1PROD with HEARING
435 

‘‘(c) DERIVATIVES.—Unless the Commission is expressly authorized by any provision described in this subsection to grant exemptions, the Commission shall not grant exemptions, with respect to 

amendments made by subtitle B of the Wall Street Transparency 

and Accountability Act of 2010, with respect to paragraphs (65), 

(66), (68), (69), (70), (71), (72), (73), (74), (75), (76), and (79) of section 3(a), and sections 10B(a), 10B(b), 10B(c), 13A, 15F, 17A(g), 

17A(h), 17A(i), 17A(j), 17A(k), and 17A(l); provided that the Commission shall have exemptive authority under this title with respect 

to security-based swaps as to the same matters that the Commodity 

Futures Trading Commission has under the Wall Street Transparency and Accountability Act of 2010 with respect to swaps, including under section 4(c) of the Commodity Exchange Act.’’. 

(b) RULE OF CONSTRUCTION.—Section 30 of the Securities Exchange Act of 1934 (15 U.S.C. 78dd) is amended by adding at the 

end the following: 

‘‘(c) RULE OF CONSTRUCTION.—No provision of this title that 

was added by the Wall Street Transparency and Accountability Act 

of 2010, or any rule or regulation thereunder, shall apply to any 

person insofar as such person transacts a business in security-based 

swaps without the jurisdiction of the United States, unless such person transacts such business in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate to prevent the evasion of any provision of this title that was 

added by the Wall Street Transparency and Accountability Act of 

2010. This subsection shall not be construed to limit the jurisdiction 

of the Commission under any provision of this title, as in effect prior 

to the date of enactment of the Wall Street Transparency and Accountability Act of 2010.’’. 

SEC. 773. CIVIL PENALTIES. 

Section 21B of the Securities Exchange Act of 1934 (15 U.S.C. 

78p–2) is amended by adding at the end the following: 

‘‘(f) SECURITY-BASED SWAPS.— 

‘‘(1) CLEARING AGENCY.—Any clearing agency that knowingly or recklessly evades or participates in or facilitates an 

evasion of the requirements of section 3C shall be liable for a 

civil money penalty in twice the amount otherwise available for 

a violation of section 3C. 

‘‘(2) SECURITY-BASED SWAP DEALER OR MAJOR SECURITYBASED SWAP PARTICIPANT.—Any security-based swap dealer or 

major security-based swap participant that knowingly or recklessly evades or participates in or facilitates an evasion of the 

requirements of section 3C shall be liable for a civil money penalty in twice the amount otherwise available for a violation of 

section 3C.’’. 

SEC. 774. EFFECTIVE DATE. 

Unless otherwise provided, the provisions of this subtitle shall 

take effect on the later of 360 days after the date of the enactment 

of this subtitle or, to the extent a provision of this subtitle requires 

a rulemaking, not less than 60 days after publication of the final 

rule or regulation implementing such provision of this subtitle. 


sroberts on DSKD5P82C1PROD with HEARING
436 

TITLE VIII—PAYMENT, CLEARING, AND SETTLEMENT 

SUPERVISION 

SEC. 801. SHORT TITLE. 

This title may be cited as the ‘‘Payment, Clearing, and Settlement Supervision Act of 2010’’. 

SEC. 802. FINDINGS AND PURPOSES. 

(a) FINDINGS.—Congress finds the following: 

(1) The proper functioning of the financial markets is dependent upon safe and efficient arrangements for the clearing 

and settlement of payment, securities, and other financial transactions. 

(2) Financial market utilities that conduct or support multilateral payment, clearing, or settlement activities may reduce 

risks for their participants and the broader financial system, 

but such utilities may also concentrate and create new risks 

and thus must be well designed and operated in a safe and 

sound manner. 

(3) Payment, clearing, and settlement activities conducted 

by financial institutions also present important risks to the participating financial institutions and to the financial system. 

(4) Enhancements to the regulation and supervision of systemically important financial market utilities and the conduct 

of systemically important payment, clearing, and settlement activities by financial institutions are necessary— 

(A) to provide consistency; 

(B) to promote robust risk management and safety and 

soundness; 

(C) to reduce systemic risks; and 

(D) to support the stability of the broader financial system. 

(b) PURPOSE.—The purpose of this title is to mitigate systemic 

risk in the financial system and promote financial stability by— 

(1) authorizing the Board of Governors to promote uniform 

standards for the— 

(A) management of risks by systemically important financial market utilities; and 

(B) conduct of systemically important payment, clearing, and settlement activities by financial institutions; 

(2) providing the Board of Governors an enhanced role in 

the supervision of risk management standards for systemically 

important financial market utilities; 

(3) strengthening the liquidity of systemically important financial market utilities; and 

(4) providing the Board of Governors an enhanced role in 

the supervision of risk management standards for systemically 

important payment, clearing, and settlement activities by financial institutions. 

SEC. 803. DEFINITIONS. 

In this title, the following definitions shall apply: 

(1) APPROPRIATE FINANCIAL REGULATOR.—The term ‘‘appropriate financial regulator’’ means— 

(A) the primary financial regulatory agency, as defined 

in section 2 of this Act; 


sroberts on DSKD5P82C1PROD with HEARING
437 

(B) the National Credit Union Administration, with respect to any insured credit union under the Federal Credit 

Union Act (12 U.S.C. 1751 et seq.); and 

(C) the Board of Governors, with respect to organizations operating under section 25A of the Federal Reserve 

Act (12 U.S.C. 611), and any other financial institution engaged in a designated activity. 

(2) DESIGNATED ACTIVITY.—The term ‘‘designated activity’’ 

means a payment, clearing, or settlement activity that the 

Council has designated as systemically important under section 

804. 

(3) DESIGNATED CLEARING ENTITY.—The term ‘‘designated 

clearing entity’’ means a designated financial market utility 

that is a derivatives clearing organization registered under section 5b of the Commodity Exchange Act (7 U.S.C. 7a–1) or a 

clearing agency registered with the Securities and Exchange 

Commission under section 17A of the Securities Exchange Act 

of 1934 (15 U.S.C. 78q–1). 

(4) DESIGNATED FINANCIAL MARKET UTILITY.—The term 

‘‘designated financial market utility’’ means a financial market 

utility that the Council has designated as systemically important under section 804. 

(5) FINANCIAL INSTITUTION.— 

(A) IN GENERAL.—The term ‘‘financial institution’’ 

means— 

(i) a depository institution, as defined in section 3 

of the Federal Deposit Insurance Act (12 U.S.C. 1813); 

(ii) a branch or agency of a foreign bank, as defined in section 1(b) of the International Banking Act 

of 1978 (12 U.S.C. 3101); 

(iii) an organization operating under section 25 or 

25A of the Federal Reserve Act (12 U.S.C. 601–604a 

and 611 through 631); 

(iv) a credit union, as defined in section 101 of the 

Federal Credit Union Act (12 U.S.C. 1752); 

(v) a broker or dealer, as defined in section 3 of the 

Securities Exchange Act of 1934 (15 U.S.C. 78c); 

(vi) an investment company, as defined in section 

3 of the Investment Company Act of 1940 (15 U.S.C. 

80a–3); 

(vii) an insurance company, as defined in section 

2 of the Investment Company Act of 1940 (15 U.S.C. 

80a–2); 

(viii) an investment adviser, as defined in section 

202 of the Investment Advisers Act of 1940 (15 U.S.C. 

80b–2); 

(ix) a futures commission merchant, commodity 

trading advisor, or commodity pool operator, as defined in section 1a of the Commodity Exchange Act (7 

U.S.C. 1a); and 

(x) any company engaged in activities that are financial in nature or incidental to a financial activity, 

as described in section 4 of the Bank Holding Company 

Act of 1956 (12 U.S.C. 1843(k)). 


sroberts on DSKD5P82C1PROD with HEARING
438 

(B) EXCLUSIONS.—The term ‘‘financial institution’’ does 

not include designated contract markets, registered futures 

associations, swap data repositories, and swap execution facilities registered under the Commodity Exchange Act (7 

U.S.C. 1 et seq.), or national securities exchanges, national 

securities associations, alternative trading systems, securities information processors solely with respect to the activities of the entity as a securities information processor, security-based swap data repositories, and swap execution facilities registered under the Securities Exchange Act of 1934 

(15 U.S.C. 78a et seq.), or designated clearing entities, provided that the exclusions in this subparagraph apply only 

with respect to the activities that require the entity to be so 

registered. 

(6) FINANCIAL MARKET UTILITY.— (A) INCLUSION.—The term ‘‘financial market utility’’ 

means any person that manages or operates a multilateral 

system for the purpose of transferring, clearing, or settling 

payments, securities, or other financial transactions among 

financial institutions or between financial institutions and 

the person. 

(B) EXCLUSIONS.—The term ‘‘financial market utility’’ 

does not include— 

(i) designated contract markets, registered futures 

associations, swap data repositories, and swap execution facilities registered under the Commodity Exchange Act (7 U.S.C. 1 et seq.), or national securities 

exchanges, national securities associations, alternative 

trading systems, security-based swap data repositories, 

and swap execution facilities registered under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.), 

solely by reason of their providing facilities for comparison of data respecting the terms of settlement of securities or futures transactions effected on such exchange or by means of any electronic system operated 

or controlled by such entities, provided that the exclusions in this clause apply only with respect to the activities that require the entity to be so registered; and 

(ii) any broker, dealer, transfer agent, or investment company, or any futures commission merchant, 

introducing broker, commodity trading advisor, or 

commodity pool operator, solely by reason of functions 

performed by such institution as part of brokerage, 

dealing, transfer agency, or investment company activities, or solely by reason of acting on behalf of a financial market utility or a participant therein in connection with the furnishing by the financial market utility 

of services to its participants or the use of services of 

the financial market utility by its participants, provided that services performed by such institution do 

not constitute critical risk management or processing 

functions of the financial market utility. 

(7) PAYMENT, CLEARING, OR SETTLEMENT ACTIVITY.— 

(A) IN GENERAL.—The term ‘‘payment, clearing, or settlement activity’’ means an activity carried out by 1 or more 


sroberts on DSKD5P82C1PROD with HEARING
439 

financial institutions to facilitate the completion of financial transactions, but shall not include any offer or sale of 

a security under the Securities Act of 1933 (15 U.S.C. 77a 

et seq.), or any quotation, order entry, negotiation, or other 

pre-trade activity or execution activity. 

(B) FINANCIAL TRANSACTION.—For the purposes of subparagraph (A), the term ‘‘financial transaction’’ includes— 

(i) funds transfers; 

(ii) securities contracts; 

(iii) contracts of sale of a commodity for future delivery; 

(iv) forward contracts; 

(v) repurchase agreements; 

(vi) swaps; 

(vii) security-based swaps; 

(viii) swap agreements; 

(ix) security-based swap agreements; 

(x) foreign exchange contracts; 

(xi) financial derivatives contracts; and 

(xii) any similar transaction that the Council determines to be a financial transaction for purposes of 

this title. 

(C) INCLUDED ACTIVITIES.—When conducted with respect to a financial transaction, payment, clearing, and settlement activities may include— 

(i) the calculation and communication of unsettled 

financial transactions between counterparties; 

(ii) the netting of transactions; 

(iii) provision and maintenance of trade, contract, 

or instrument information; 

(iv) the management of risks and activities associated with continuing financial transactions; 

(v) transmittal and storage of payment instructions; 

(vi) the movement of funds; 

(vii) the final settlement of financial transactions; 

and 

(viii) other similar functions that the Council may 

determine. 

(D) EXCLUSION.—Payment, clearing, and settlement activities shall not include public reporting of swap transaction data under section 727 or 763(i) of the Wall Street 

Transparency and Accountability Act of 2010. 

(8) SUPERVISORY AGENCY.— 

(A) IN GENERAL.—The term ‘‘Supervisory Agency’’ 

means the Federal agency that has primary jurisdiction 

over a designated financial market utility under Federal 

banking, securities, or commodity futures laws, as follows: 

(i) The Securities and Exchange Commission, with 

respect to a designated financial market utility that is 

a clearing agency registered with the Securities and 

Exchange Commission. 

(ii) The Commodity Futures Trading Commission, 

with respect to a designated financial market utility 


sroberts on DSKD5P82C1PROD with HEARING
440 

that is a derivatives clearing organization registered 

with the Commodity Futures Trading Commission. 

(iii) The appropriate Federal banking agency, with 

respect to a designated financial market utility that is 

an institution described in section 3(q) of the Federal 

Deposit Insurance Act. 

(iv) The Board of Governors, with respect to a designated financial market utility that is otherwise not 

subject to the jurisdiction of any agency listed in 

clauses (i), (ii), and (iii). 

(B) MULTIPLE AGENCY JURISDICTION.—If a designated 

financial market utility is subject to the jurisdictional supervision of more than 1 agency listed in subparagraph (A), 

then such agencies should agree on 1 agency to act as the 

Supervisory Agency, and if such agencies cannot agree on 

which agency has primary jurisdiction, the Council shall 

decide which agency is the Supervisory Agency for purposes 

of this title. 

(9) SYSTEMICALLY IMPORTANT AND SYSTEMIC IMPORTANCE.—The terms ‘‘systemically important’’ and ‘‘systemic importance’’ mean a situation where the failure of or a disruption 

to the functioning of a financial market utility or the conduct 

of a payment, clearing, or settlement activity could create, or increase, the risk of significant liquidity or credit problems 

spreading among financial institutions or markets and thereby 

threaten the stability of the financial system of the United 

States. 

SEC. 804. DESIGNATION OF SYSTEMIC IMPORTANCE. 

(a) DESIGNATION.— 

(1) FINANCIAL STABILITY OVERSIGHT COUNCIL.—The Council, on a nondelegable basis and by a vote of not fewer than 2⁄3

of members then serving, including an affirmative vote by the 

Chairperson of the Council, shall designate those financial market utilities or payment, clearing, or settlement activities that 

the Council determines are, or are likely to become, systemically 

important. 

(2) CONSIDERATIONS.—In determining whether a financial 

market utility or payment, clearing, or settlement activity is, or 

is likely to become, systemically important, the Council shall 

take into consideration the following: 

(A) The aggregate monetary value of transactions processed by the financial market utility or carried out through 

the payment, clearing, or settlement activity. 

(B) The aggregate exposure of the financial market utility or a financial institution engaged in payment, clearing, 

or settlement activities to its counterparties. 

(C) The relationship, interdependencies, or other interactions of the financial market utility or payment, clearing, 

or settlement activity with other financial market utilities 

or payment, clearing, or settlement activities. 

(D) The effect that the failure of or a disruption to the 

financial market utility or payment, clearing, or settlement 

activity would have on critical markets, financial institutions, or the broader financial system. 


sroberts on DSKD5P82C1PROD with HEARING
441 

(E) Any other factors that the Council deems appropriate. 

(b) RESCISSION OF DESIGNATION.— (1) IN GENERAL.—The Council, on a nondelegable basis and 

by a vote of not fewer than 2⁄3 of members then serving, including an affirmative vote by the Chairperson of the Council, shall 

rescind a designation of systemic importance for a designated 

financial market utility or designated activity if the Council determines that the utility or activity no longer meets the standards for systemic importance. 

(2) EFFECT OF RESCISSION.—Upon rescission, the financial 

market utility or financial institutions conducting the activity 

will no longer be subject to the provisions of this title or any 

rules or orders prescribed under this title. 

(c) CONSULTATION AND NOTICE AND OPPORTUNITY FOR HEAR- ING.— (1) CONSULTATION.—Before making any determination 

under subsection (a) or (b), the Council shall consult with the 

relevant Supervisory Agency and the Board of Governors. 

(2) ADVANCE NOTICE AND OPPORTUNITY FOR HEARING.— (A) IN GENERAL.—Before making any determination 

under subsection (a) or (b), the Council shall provide the financial market utility or, in the case of a payment, clearing, or settlement activity, financial institutions with advance notice of the proposed determination of the Council. 

(B) NOTICE IN FEDERAL REGISTER.—The Council shall 

provide such advance notice to financial institutions by 

publishing a notice in the Federal Register. 

(C) REQUESTS FOR HEARING.—Within 30 days from the 

date of any notice of the proposed determination of the 

Council, the financial market utility or, in the case of a 

payment, clearing, or settlement activity, a financial institution engaged in the designated activity may request, in 

writing, an opportunity for a written or oral hearing before 

the Council to demonstrate that the proposed designation or 

rescission of designation is not supported by substantial 

evidence. 

(D) WRITTEN SUBMISSIONS.—Upon receipt of a timely 

request, the Council shall fix a time, not more than 30 days 

after receipt of the request, unless extended at the request 

of the financial market utility or financial institution, and 

place at which the financial market utility or financial institution may appear, personally or through counsel, to submit written materials, or, at the sole discretion of the Council, oral testimony or oral argument. 

(3) EMERGENCY EXCEPTION.— 

(A) WAIVER OR MODIFICATION BY VOTE OF THE COUN- CIL.—The Council may waive or modify the requirements of 

paragraph (2) if the Council determines, by an affirmative 

vote of not fewer than 2⁄3 of members then serving, including an affirmative vote by the Chairperson of the Council, 

that the waiver or modification is necessary to prevent or 

mitigate an immediate threat to the financial system posed 

by the financial market utility or the payment, clearing, or 

settlement activity. 


sroberts on DSKD5P82C1PROD with HEARING
442 

(B) NOTICE OF WAIVER OR MODIFICATION.—The Council 

shall provide notice of the waiver or modification to the financial market utility concerned or, in the case of a payment, clearing, or settlement activity, to financial institutions, as soon as practicable, which shall be no later than 

24 hours after the waiver or modification in the case of a 

financial market utility and 3 business days in the case of 

financial institutions. The Council shall provide the notice 

to financial institutions by posting a notice on the website 

of the Council and by publishing a notice in the Federal 

Register. 

(d) NOTIFICATION OF FINAL DETERMINATION.— 

(1) AFTER HEARING.—Within 60 days of any hearing under 

subsection (c)(2), the Council shall notify the financial market 

utility or financial institutions of the final determination of the 

Council in writing, which shall include findings of fact upon 

which the determination of the Council is based. 

(2) WHEN NO HEARING REQUESTED.—If the Council does not 

receive a timely request for a hearing under subsection (c)(2), 

the Council shall notify the financial market utility or financial 

institutions of the final determination of the Council in writing 

not later than 30 days after the expiration of the date by which 

a financial market utility or a financial institution could have 

requested a hearing. All notices to financial institutions under 

this subsection shall be published in the Federal Register. 

(e) EXTENSION OF TIME PERIODS.—The Council may extend the 

time periods established in subsections (c) and (d) as the Council 

determines to be necessary or appropriate. 

SEC. 805. STANDARDS FOR SYSTEMICALLY IMPORTANT FINANCIAL 

MARKET UTILITIES AND PAYMENT, CLEARING, OR SETTLEMENT ACTIVITIES. 

(a) AUTHORITY TO PRESCRIBE STANDARDS.— 

(1) BOARD OF GOVERNORS.—Except as provided in paragraph (2), the Board of Governors, by rule or order, and in consultation with the Council and the Supervisory Agencies, shall 

prescribe risk management standards, taking into consideration 

relevant international standards and existing prudential requirements, governing— 

(A) the operations related to the payment, clearing, and 

settlement activities of designated financial market utilities; 

and 

(B) the conduct of designated activities by financial institutions. 

(2) SPECIAL PROCEDURES FOR DESIGNATED CLEARING ENTITIES AND DESIGNATED ACTIVITIES OF CERTAIN FINANCIAL INSTITUTIONS.— 

(A) CFTC AND COMMISSION.—The Commodity Futures 

Trading Commission and the Commission may each prescribe regulations, in consultation with the Council and the 

Board of Governors, containing risk management standards, taking into consideration relevant international 

standards and existing prudential requirements, for those 

designated clearing entities and financial institutions engaged in designated activities for which each is the SuperVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00446 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
443 

visory Agency or the appropriate financial regulator, governing— 

(i) the operations related to payment, clearing, and 

settlement activities of such designated clearing entities; and 

(ii) the conduct of designated activities by such financial institutions. 

(B) REVIEW AND DETERMINATION.—The Board of Governors may determine that existing prudential requirements 

of the Commodity Futures Trading Commission, the Commission, or both (including requirements prescribed pursuant to subparagraph (A)) with respect to designated clearing entities and financial institutions engaged in designated activities for which the Commission or the Commodity Futures Trading Commission is the Supervisory 

Agency or the appropriate financial regulator are insufficient to prevent or mitigate significant liquidity, credit, 

operational, or other risks to the financial markets or to the 

financial stability of the United States. 

(C) WRITTEN DETERMINATION.—Any determination by 

the Board of Governors under subparagraph (B) shall be 

provided in writing to the Commodity Futures Trading 

Commission or the Commission, as applicable, and the 

Council, and shall explain why existing prudential requirements, considered as a whole, are insufficient to ensure that 

the operations and activities of the designated clearing entities or the activities of financial institutions described in 

subparagraph (B) will not pose significant liquidity, credit, 

operational, or other risks to the financial markets or to the 

financial stability of the United States. The Board of Governors’ determination shall contain a detailed analysis supporting its findings and identify the specific prudential requirements that are insufficient. 

(D) CFTC AND COMMISSION RESPONSE.—The Commodity Futures Trading Commission or the Commission, 

as applicable, shall within 60 days either object to the 

Board of Governors’ determination with a detailed analysis 

as to why existing prudential requirements are sufficient, or 

submit an explanation to the Council and the Board of 

Governors describing the actions to be taken in response to 

the Board of Governors’ determination. 

(E) AUTHORIZATION.—Upon an affirmative vote by not 

fewer than 2⁄3 of members then serving on the Council, the 

Council shall either find that the response submitted under 

subparagraph (D) is sufficient, or require the Commodity 

Futures Trading Commission, or the Commission, as applicable, to prescribe such risk management standards as the 

Council determines is necessary to address the specific prudential requirements that are determined to be insufficient.’’ 

(b) OBJECTIVES AND PRINCIPLES.—The objectives and principles 

for the risk management standards prescribed under subsection (a) 

shall be to— 

(1) promote robust risk management; 

(2) promote safety and soundness; 


sroberts on DSKD5P82C1PROD with HEARING
444 

(3) reduce systemic risks; and 

(4) support the stability of the broader financial system. 

(c) SCOPE.—The standards prescribed under subsection (a) may 

address areas such as— 

(1) risk management policies and procedures; 

(2) margin and collateral requirements; 

(3) participant or counterparty default policies and procedures; 

(4) the ability to complete timely clearing and settlement of 

financial transactions; 

(5) capital and financial resource requirements for designated financial market utilities; and 

(6) other areas that are necessary to achieve the objectives 

and principles in subsection (b). 

(d) LIMITATION ON SCOPE.—Except as provided in subsections 

(e) and (f) of section 807, nothing in this title shall be construed to 

permit the Council or the Board of Governors to take any action or 

exercise any authority granted to the Commodity Futures Trading 

Commission under section 2(h) of the Commodity Exchange Act or 

the Securities and Exchange Commission under section 3C(a) of the 

Securities Exchange Act of 1934, including— 

(1) the approval of, disapproval of, or stay of the clearing 

requirement for any group, category, type, or class of swaps that 

a designated clearing entity may accept for clearing; 

(2) the determination that any group, category, type, or 

class of swaps shall be subject to the mandatory clearing requirement of section 2(h)(1) of the Commodity Exchange Act or 

section 3C(a)(1) of the Securities Exchange Act of 1934; 

(3) the determination that any person is exempt from the 

mandatory clearing requirement of section 2(h)(1) of the Commodity Exchange Act or section 3C(a)(1) of the Securities Exchange Act of 1934; or 

(4) any authority granted to the Commodity Futures Trading Commission or the Securities and Exchange Commission 

with respect to transaction reporting or trade execution. 

(e) THRESHOLD LEVEL.—The standards prescribed under subsection (a) governing the conduct of designated activities by financial institutions shall, where appropriate, establish a threshold as 

to the level or significance of engagement in the activity at which 

a financial institution will become subject to the standards with respect to that activity. 

(f) COMPLIANCE REQUIRED.—Designated financial market utilities and financial institutions subject to the standards prescribed 

under subsection (a) for a designated activity shall conduct their operations in compliance with the applicable risk management standards. 

SEC. 806. OPERATIONS OF DESIGNATED FINANCIAL MARKET UTILITIES. 

(a) FEDERAL RESERVE ACCOUNT AND SERVICES.—The Board of 

Governors may authorize a Federal Reserve Bank to establish and 

maintain an account for a designated financial market utility and 

provide the services listed in section 11A(b) of the Federal Reserve 

Act (12 U.S.C. 248a(b)) and deposit accounts under the first undesignated paragraph of section 13 of the Federal Reserve Act (12 

U.S.C. 342) to the designated financial market utility that the FedVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00448 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
445 

eral Reserve Bank is authorized under the Federal Reserve Act to 

provide to a depository institution, subject to any applicable rules, 

orders, standards, or guidelines prescribed by the Board of Governors. 

(b) ADVANCES.—The Board of Governors may authorize a Federal Reserve bank under section 10B of the Federal Reserve Act (12 

U.S.C. 347b) to provide to a designated financial market utility discount and borrowing privileges only in unusual or exigent circumstances, upon the affirmative vote of a majority of the Board of 

Governors then serving (or such other number in accordance with 

the provisions of section 11(r)(2) of the Federal Reserve Act (12 

U.S.C. 248(r)(2)) after consultation with the Secretary, and upon a 

showing by the designated financial market utility that it is unable 

to secure adequate credit accommodations from other banking institutions. All such discounts and borrowing privileges shall be subject 

to such other limitations, restrictions, and regulations as the Board 

of Governors may prescribe. Access to discount and borrowing privileges under section 10B of the Federal Reserve Act as authorized in 

this section does not require a designated financial market utility 

to be or become a bank or bank holding company. 

(c) EARNINGS ON FEDERAL RESERVE BALANCES.—A Federal Reserve Bank may pay earnings on balances maintained by or on behalf of a designated financial market utility in the same manner 

and to the same extent as the Federal Reserve Bank may pay earnings to a depository institution under the Federal Reserve Act, subject to any applicable rules, orders, standards, or guidelines prescribed by the Board of Governors. 

(d) RESERVE REQUIREMENTS.—The Board of Governors may exempt a designated financial market utility from, or modify any, reserve requirements under section 19 of the Federal Reserve Act (12 

U.S.C. 461) applicable to a designated financial market utility. 

(e) CHANGES TO RULES, PROCEDURES, OR OPERATIONS.— 

(1) ADVANCE NOTICE.— (A) ADVANCE NOTICE OF PROPOSED CHANGES REQUIRED.—A designated financial market utility shall provide notice 60 days in advance notice to its Supervisory 

Agency of any proposed change to its rules, procedures, or 

operations that could, as defined in rules of each Supervisory Agency, materially affect, the nature or level of risks 

presented by the designated financial market utility. 

(B) TERMS AND STANDARDS PRESCRIBED BY THE SUPERVISORY AGENCIES.—Each Supervisory Agency, in consultation with the Board of Governors, shall prescribe regulations that define and describe the standards for determining when notice is required to be provided under subparagraph (A). 

(C) CONTENTS OF NOTICE.—The notice of a proposed 

change shall describe— 

(i) the nature of the change and expected effects on 

risks to the designated financial market utility, its participants, or the market; and 

(ii) how the designated financial market utility 

plans to manage any identified risks. 

(D) ADDITIONAL INFORMATION.—The Supervisory Agency may require a designated financial market utility to proVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00449 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
446 

vide any information necessary to assess the effect the proposed change would have on the nature or level of risks associated with the designated financial market utility’s payment, clearing, or settlement activities and the sufficiency 

of any proposed risk management techniques. 

(E) NOTICE OF OBJECTION.—The Supervisory Agency 

shall notify the designated financial market utility of any 

objection regarding the proposed change within 60 days 

from the later of— 

(i) the date that the notice of the proposed change 

is received; or 

(ii) the date any further information requested for 

consideration of the notice is received. 

(F) CHANGE NOT ALLOWED IF OBJECTION.—A designated financial market utility shall not implement a 

change to which the Supervisory Agency has an objection. 

(G) CHANGE ALLOWED IF NO OBJECTION WITHIN 60

DAYS.—A designated financial market utility may implement a change if it has not received an objection to the proposed change within 60 days of the later of— 

(i) the date that the Supervisory Agency receives 

the notice of proposed change; or 

(ii) the date the Supervisory Agency receives any 

further information it requests for consideration of the 

notice. 

(H) REVIEW EXTENSION FOR NOVEL OR COMPLEX

ISSUES.—The Supervisory Agency may, during the 60-day 

review period, extend the review period for an additional 60 

days for proposed changes that raise novel or complex 

issues, subject to the Supervisory Agency providing the designated financial market utility with prompt written notice 

of the extension. Any extension under this subparagraph 

will extend the time periods under subparagraphs (E) and 

(G). 

(I) CHANGE ALLOWED EARLIER IF NOTIFIED OF NO OBJECTION.—A designated financial market utility may implement a change in less than 60 days from the date of receipt 

of the notice of proposed change by the Supervisory Agency, 

or the date the Supervisory Agency receives any further information it requested, if the Supervisory Agency notifies 

the designated financial market utility in writing that it 

does not object to the proposed change and authorizes the 

designated financial market utility to implement the 

change on an earlier date, subject to any conditions imposed by the Supervisory Agency. 

(2) EMERGENCY CHANGES.— 

(A) IN GENERAL.—A designated financial market utility 

may implement a change that would otherwise require advance notice under this subsection if it determines that— 

(i) an emergency exists; and 

(ii) immediate implementation of the change is 

necessary for the designated financial market utility to 

continue to provide its services in a safe and sound 

manner. 


sroberts on DSKD5P82C1PROD with HEARING
447 

(B) NOTICE REQUIRED WITHIN 24 HOURS.—The designated financial market utility shall provide notice of any 

such emergency change to its Supervisory Agency, as soon 

as practicable, which shall be no later than 24 hours after 

implementation of the change. 

(C) CONTENTS OF EMERGENCY NOTICE.—In addition to 

the information required for changes requiring advance notice, the notice of an emergency change shall describe— 

(i) the nature of the emergency; and 

(ii) the reason the change was necessary for the 

designated financial market utility to continue to provide its services in a safe and sound manner. 

(D) MODIFICATION OR RESCISSION OF CHANGE MAY BE

REQUIRED.—The Supervisory Agency may require modification or rescission of the change if it finds that the change 

is not consistent with the purposes of this Act or any applicable rules, orders, or standards prescribed under section 

805(a). 

(3) COPYING THE BOARD OF GOVERNORS.—The Supervisory 

Agency shall provide the Board of Governors concurrently with 

a complete copy of any notice, request, or other information it 

issues, submits, or receives under this subsection. 

(4) CONSULTATION WITH BOARD OF GOVERNORS.—Before 

taking any action on, or completing its review of, a change proposed by a designated financial market utility, the Supervisory 

Agency shall consult with the Board of Governors. 

SEC. 807. EXAMINATION OF AND ENFORCEMENT ACTIONS AGAINST 

DESIGNATED FINANCIAL MARKET UTILITIES. 

(a) EXAMINATION.—Notwithstanding any other provision of law 

and subject to subsection (d), the Supervisory Agency shall conduct 

examinations of a designated financial market utility at least once 

annually in order to determine the following: 

(1) The nature of the operations of, and the risks borne by, 

the designated financial market utility. 

(2) The financial and operational risks presented by the 

designated financial market utility to financial institutions, 

critical markets, or the broader financial system. 

(3) The resources and capabilities of the designated financial market utility to monitor and control such risks. 

(4) The safety and soundness of the designated financial 

market utility. 

(5) The designated financial market utility’s compliance 

with— 

(A) this title; and 

(B) the rules and orders prescribed under this title. 

(b) SERVICE PROVIDERS.—Whenever a service integral to the operation of a designated financial market utility is performed for the 

designated financial market utility by another entity, whether an affiliate or non-affiliate and whether on or off the premises of the designated financial market utility, the Supervisory Agency may examine whether the provision of that service is in compliance with applicable law, rules, orders, and standards to the same extent as if 

the designated financial market utility were performing the service 

on its own premises. 


sroberts on DSKD5P82C1PROD with HEARING
448 

(c) ENFORCEMENT.—For purposes of enforcing the provisions of 

this title, a designated financial market utility shall be subject to, 

and the appropriate Supervisory Agency shall have authority under 

the provisions of subsections (b) through (n) of section 8 of the Federal Deposit Insurance Act (12 U.S.C. 1818) in the same manner 

and to the same extent as if the designated financial market utility 

was an insured depository institution and the Supervisory Agency 

was the appropriate Federal banking agency for such insured depository institution. 

(d) BOARD OF GOVERNORS INVOLVEMENT IN EXAMINATIONS.— (1) BOARD OF GOVERNORS CONSULTATION ON EXAMINATION

PLANNING.—The Supervisory Agency shall consult annually 

with the Board of Governors regarding the scope and methodology of any examination conducted under subsections (a) and 

(b). The Supervisory Agency shall lead all examinations conducted under subsections (a) and (b) 

(2) BOARD OF GOVERNORS PARTICIPATION IN EXAMINA- TION.—The Board of Governors may, in its discretion, participate in any examination led by a Supervisory Agency and conducted under subsections (a) and (b). 

(e) BOARD OF GOVERNORS ENFORCEMENT RECOMMENDATIONS.— (1) RECOMMENDATION.—The Board of Governors may, after 

consulting with the Council and the Supervisory Agency, at any 

time recommend to the Supervisory Agency that such agency 

take enforcement action against a designated financial market 

utility in order to prevent or mitigate significant liquidity, credit, operational, or other risks to the financial markets or to the 

financial stability of the United States. Any such recommendation for enforcement action shall provide a detailed analysis 

supporting the recommendation of the Board of Governors. 

(2) CONSIDERATION.—The Supervisory Agency shall consider the recommendation of the Board of Governors and submit a response to the Board of Governors within 60 days. 

(3) BINDING ARBITRATION.—If the Supervisory Agency rejects, in whole or in part, the recommendation of the Board of 

Governors, the Board of Governors may refer the recommendation to the Council for a binding decision on whether an enforcement action is warranted. 

(4) ENFORCEMENT ACTION.—Upon an affirmative vote by a 

majority of the Council in favor of the Board of Governors’ recommendation under paragraph (3), the Council may require the 

Supervisory Agency to— 

(A) exercise the enforcement authority referenced in 

subsection (c); and 

(B) take enforcement action against the designated financial market utility. 

(f) EMERGENCY ENFORCEMENT ACTIONS BY THE BOARD OF GOV- ERNORS.— 

(1) IMMINENT RISK OF SUBSTANTIAL HARM.—The Board of 

Governors may, after consulting with the Supervisory Agency 

and upon an affirmative vote by a majority the Council, take 

enforcement action against a designated financial market utility if the Board of Governors has reasonable cause to conclude 

that— 

(A) either— 


sroberts on DSKD5P82C1PROD with HEARING
449 

(i) an action engaged in, or contemplated by, a designated financial market utility (including any change 

proposed by the designated financial market utility to 

its rules, procedures, or operations that would otherwise be subject to section 806(e)) poses an imminent 

risk of substantial harm to financial institutions, critical markets, or the broader financial system of the 

United States; or 

(ii) the condition of a designated financial market 

utility poses an imminent risk of substantial harm to 

financial institutions, critical markets, or the broader 

financial system; and 

(B) the imminent risk of substantial harm precludes 

the Board of Governors’ use of the procedures in subsection 

(e). 

(2) ENFORCEMENT AUTHORITY.—For purposes of taking enforcement action under paragraph (1), a designated financial 

market utility shall be subject to, and the Board of Governors 

shall have authority under the provisions of subsections (b) 

through (n) of section 8 of the Federal Deposit Insurance Act (12 

U.S.C. 1818) in the same manner and to the same extent as if 

the designated financial market utility was an insured depository institution and the Board of Governors was the appropriate 

Federal banking agency for such insured depository institution. 

SEC. 808. EXAMINATION OF AND ENFORCEMENT ACTIONS AGAINST FINANCIAL INSTITUTIONS SUBJECT TO STANDARDS FOR 

DESIGNATED ACTIVITIES. 

(a) EXAMINATION.—The appropriate financial regulator is authorized to examine a financial institution subject to the standards 

prescribed under section 805(a) for a designated activity in order to 

determine the following: 

(1) The nature and scope of the designated activities engaged in by the financial institution. 

(2) The financial and operational risks the designated activities engaged in by the financial institution may pose to the 

safety and soundness of the financial institution. 

(3) The financial and operational risks the designated activities engaged in by the financial institution may pose to other 

financial institutions, critical markets, or the broader financial 

system. 

(4) The resources available to and the capabilities of the financial institution to monitor and control the risks described in 

paragraphs (2) and (3). 

(5) The financial institution’s compliance with this title and 

the rules and orders prescribed under section 805(a). 

(b) ENFORCEMENT.—For purposes of enforcing the provisions of 

this title, and the rules and orders prescribed under this section, a 

financial institution subject to the standards prescribed under section 805(a) for a designated activity shall be subject to, and the appropriate financial regulator shall have authority under the provisions of subsections (b) through (n) of section 8 of the Federal Deposit Insurance Act (12 U.S.C. 1818) in the same manner and to the 

same extent as if the financial institution was an insured depository 

institution and the appropriate financial regulator was the approVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00453 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
450 

priate Federal banking agency for such insured depository institution. 

(c) TECHNICAL ASSISTANCE.—The Board of Governors shall consult with and provide such technical assistance as may be required 

by the appropriate financial regulators to ensure that the rules and 

orders prescribed under this title are interpreted and applied in as 

consistent and uniform a manner as practicable. 

(d) DELEGATION.— 

(1) EXAMINATION.— 

(A) REQUEST TO BOARD OF GOVERNORS.—The appropriate financial regulator may request the Board of Governors to conduct or participate in an examination of a financial institution subject to the standards prescribed 

under section 805(a) for a designated activity in order to 

assess the compliance of such financial institution with— 

(i) this title; or 

(ii) the rules or orders prescribed under this title. 

(B) EXAMINATION BY BOARD OF GOVERNORS.—Upon receipt of an appropriate written request, the Board of Governors will conduct the examination under such terms and 

conditions to which the Board of Governors and the appropriate financial regulator mutually agree. 

(2) ENFORCEMENT.— 

(A) REQUEST TO BOARD OF GOVERNORS.—The appropriate financial regulator may request the Board of Governors to enforce this title or the rules or orders prescribed 

under this title against a financial institution that is subject to the standards prescribed under section 805(a) for a 

designated activity. 

(B) ENFORCEMENT BY BOARD OF GOVERNORS.—Upon 

receipt of an appropriate written request, the Board of Governors shall determine whether an enforcement action is 

warranted, and, if so, it shall enforce compliance with this 

title or the rules or orders prescribed under this title and, 

if so, the financial institution shall be subject to, and the 

Board of Governors shall have authority under the provisions of subsections (b) through (n) of section 8 of the Federal Deposit Insurance Act (12 U.S.C. 1818) in the same 

manner and to the same extent as if the financial institution was an insured depository institution and the Board 

of Governors was the appropriate Federal banking agency 

for such insured depository institution. 

(e) BACK-UP AUTHORITY OF THE BOARD OF GOVERNORS.— 

(1) EXAMINATION AND ENFORCEMENT.—Notwithstanding 

any other provision of law, the Board of Governors may— 

(A) conduct an examination of the type described in 

subsection (a) of any financial institution that is subject to 

the standards prescribed under section 805(a) for a designated activity; and 

(B) enforce the provisions of this title or any rules or 

orders prescribed under this title against any financial institution that is subject to the standards prescribed under 

section 805(a) for a designated activity. 

(2) LIMITATIONS.— 


sroberts on DSKD5P82C1PROD with HEARING
451 

(A) EXAMINATION.—The Board of Governors may exercise the authority described in paragraph (1)(A) only if the 

Board of Governors has— 

(i) reasonable cause to believe that a financial institution is not in compliance with this title or the rules 

or orders prescribed under this title with respect to a 

designated activity; 

(ii) notified, in writing, the appropriate financial 

regulator and the Council of its belief under clause (i) 

with supporting documentation included; 

(iii) requested the appropriate financial regulator 

to conduct a prompt examination of the financial institution; 

(iv) either— 

(I) not been afforded a reasonable opportunity 

to participate in an examination of the financial 

institution by the appropriate financial regulator 

within 30 days after the date of the Board’s notification under clause (ii); or 

(II) reasonable cause to believe that the financial institution’s noncompliance with this title or 

the rules or orders prescribed under this title poses 

a substantial risk to other financial institutions, 

critical markets, or the broader financial system, 

subject to the Board of Governors affording the appropriate financial regulator a reasonable opportunity to participate in the examination; and 

(v) obtained the approval of the Council upon an 

affirmative vote by a majority of the Council. 

(B) ENFORCEMENT.—The Board of Governors may exercise the authority described in paragraph (1)(B) only if the 

Board of Governors has— 

(i) reasonable cause to believe that a financial institution is not in compliance with this title or the rules 

or orders prescribed under this title with respect to a 

designated activity; 

(ii) notified, in writing, the appropriate financial 

regulator and the Council of its belief under clause (i) 

with supporting documentation included and with a 

recommendation that the appropriate financial regulator take 1 or more specific enforcement actions 

against the financial institution; 

(iii) either— 

(I) not been notified, in writing, by the appropriate financial regulator of the commencement of 

an enforcement action recommended by the Board 

of Governors against the financial institution within 60 days from the date of the notification under 

clause (ii); or 

(II) reasonable cause to believe that the financial institution’s noncompliance with this title or 

the rules or orders prescribed under this title poses 

significant liquidity, credit, operational, or other 

risks to the financial markets or to the financial 

stability of the United States, subject to the Board 


sroberts on DSKD5P82C1PROD with HEARING
452 

of Governors notifying the appropriate financial 

regulator of the Board’s enforcement action; and 

(iv) obtained the approval of the Council upon an 

affirmative vote by a majority of the Council. 

(3) ENFORCEMENT PROVISIONS.—For purposes of taking enforcement action under paragraph (1), the financial institution 

shall be subject to, and the Board of Governors shall have authority under the provisions of subsections (b) through (n) of 

section 8 of the Federal Deposit Insurance Act (12 U.S.C. 1818) 

in the same manner and to the same extent as if the financial 

institution was an insured depository institution and the Board 

of Governors was the appropriate Federal banking agency for 

such insured depository institution. 

SEC. 809. REQUESTS FOR INFORMATION, REPORTS, OR RECORDS. 

(a) INFORMATION TO ASSESS SYSTEMIC IMPORTANCE.— 

(1) FINANCIAL MARKET UTILITIES.—The Council is authorized to require any financial market utility to submit such information as the Council may require for the sole purpose of assessing whether that financial market utility is systemically important, but only if the Council has reasonable cause to believe 

that the financial market utility meets the standards for systemic importance set forth in section 804. 

(2) FINANCIAL INSTITUTIONS ENGAGED IN PAYMENT, CLEARING, OR SETTLEMENT ACTIVITIES.—The Council is authorized to 

require any financial institution to submit such information as 

the Council may require for the sole purpose of assessing whether any payment, clearing, or settlement activity engaged in or 

supported by a financial institution is systemically important, 

but only if the Council has reasonable cause to believe that the 

activity meets the standards for systemic importance set forth in 

section 804. 

(b) REPORTING AFTER DESIGNATION.— 

(1) DESIGNATED FINANCIAL MARKET UTILITIES.—The Board 

of Governors and the Council may each require a designated financial market utility to submit reports or data to the Board 

of Governors and the Council in such frequency and form as 

deemed necessary by the Board of Governors or the Council in 

order to assess the safety and soundness of the utility and the 

systemic risk that the utility’s operations pose to the financial 

system. 

(2) FINANCIAL INSTITUTIONS SUBJECT TO STANDARDS FOR

DESIGNATED ACTIVITIES.—The Board of Governors and the 

Council may each require 1 or more financial institutions subject to the standards prescribed under section 805(a) for a designated activity to submit, in such frequency and form as 

deemed necessary by the Board of Governors or the Council, reports and data to the Board of Governors and the Council solely 

with respect to the conduct of the designated activity and solely 

to assess whether— 

(A) the rules, orders, or standards prescribed under 

section 805(a) with respect to the designated activity appropriately address the risks to the financial system presented 

by such activity; and 


sroberts on DSKD5P82C1PROD with HEARING
453 

(B) the financial institutions are in compliance with 

this title and the rules and orders prescribed under section 

805(a) with respect to the designated activity. 

(3) LIMITATION.—The Board of Governors may, upon an affirmative vote by a majority of the Council, prescribe regulations under this section that impose a recordkeeping or reporting requirement on designated clearing entities or financial institutions engaged in designated activities that are subject to 

standards that have been prescribed under section 805(a)(2). 

(c) COORDINATION WITH APPROPRIATE FEDERAL SUPERVISORY

AGENCY.— 

(1) ADVANCE COORDINATION.—Before requesting any material information from, or imposing reporting or recordkeeping 

requirements on, any financial market utility or any financial 

institution engaged in a payment, clearing, or settlement activity, the Board of Governors or the Council shall coordinate with 

the Supervisory Agency for a financial market utility or the appropriate financial regulator for a financial institution to determine if the information is available from or may be obtained 

by the agency in the form, format, or detail required by the 

Board of Governors or the Council. 

(2) SUPERVISORY REPORTS.—Notwithstanding any other 

provision of law, the Supervisory Agency, the appropriate financial regulator, and the Board of Governors are authorized to 

disclose to each other and the Council copies of its examination 

reports or similar reports regarding any financial market utility 

or any financial institution engaged in payment, clearing, or 

settlement activities. 

(d) TIMING OF RESPONSE FROM APPROPRIATE FEDERAL SUPER- VISORY AGENCY.—If the information, report, records, or data requested by the Board of Governors or the Council under subsection 

(c)(1) are not provided in full by the Supervisory Agency or the appropriate financial regulator in less than 15 days after the date on 

which the material is requested, the Board of Governors or the 

Council may request the information or impose recordkeeping or reporting requirements directly on such persons as provided in subsections (a) and (b) with notice to the agency. 

(e) SHARING OF INFORMATION.— (1) MATERIAL CONCERNS.—Notwithstanding any other provision of law, the Board of Governors, the Council, the appropriate financial regulator, and any Supervisory Agency are authorized to— 

(A) promptly notify each other of material concerns 

about a designated financial market utility or any financial 

institution engaged in designated activities; and 

(B) share appropriate reports, information, or data relating to such concerns. 

(2) OTHER INFORMATION.—Notwithstanding any other provision of law, the Board of Governors, the Council, the appropriate financial regulator, or any Supervisory Agency may, 

under such terms and conditions as it deems appropriate, provide confidential supervisory information and other information 

obtained under this title to each other, and to the Secretary, 

Federal Reserve Banks, State financial institution supervisory 

agencies, foreign financial supervisors, foreign central banks, 


sroberts on DSKD5P82C1PROD with HEARING
454 

and foreign finance ministries, subject to reasonable assurances 

of confidentiality, provided, however, that no person or entity 

receiving information pursuant to this section may disseminate 

such information to entities or persons other than those listed 

in this paragraph without complying with applicable law, including section 8 of the Commodity Exchange Act (7 U.S.C. 12). 

(f) PRIVILEGE MAINTAINED.—The Board of Governors, the Council, the appropriate financial regulator, and any Supervisory Agency 

providing reports or data under this section shall not be deemed to 

have waived any privilege applicable to those reports or data, or any 

portion thereof, by providing the reports or data to the other party 

or by permitting the reports or data, or any copies thereof, to be 

used by the other party. 

(g) DISCLOSURE EXEMPTION.—Information obtained by the 

Board of Governors, the Supervisory Agencies, or the Council under 

this section and any materials prepared by the Board of Governors, 

the Supervisory Agencies, or the Council regarding their assessment 

of the systemic importance of financial market utilities or any payment, clearing, or settlement activities engaged in by financial institutions, and in connection with their supervision of designated financial market utilities and designated activities, shall be confidential supervisory information exempt from disclosure under section 

552 of title 5, United States Code. For purposes of such section 552, 

this subsection shall be considered a statute described in subsection 

(b)(3) of such section 552. 

SEC. 810. RULEMAKING. 

The Board of Governors, the Supervisory Agencies, and the 

Council are authorized to prescribe such rules and issue such orders 

as may be necessary to administer and carry out their respective authorities and duties granted under this title and prevent evasions 

thereof. 

SEC. 811. OTHER AUTHORITY. 

Unless otherwise provided by its terms, this title does not divest 

any appropriate financial regulator, any Supervisory Agency, or any 

other Federal or State agency, of any authority derived from any 

other applicable law, except that any standards prescribed by the 

Board of Governors under section 805 shall supersede any less stringent requirements established under other authority to the extent of 

any conflict. 

SEC. 812. CONSULTATION. 

(a) CFTC.—The Commodity Futures Trading Commission shall 

consult with the Board of Governors— 

(1) prior to exercising its authorities under sections 

2(h)(2)(C), 2(h)(3)(A), 2(h)(3)(C), 2(h)(4)(A), and 2(h)(4)(B) of the 

Commodity Exchange Act, as amended by the Wall Street 

Transparency and Accountability Act of 2010; 

(2) with respect to any rule or rule amendment of a derivatives clearing organization for which a stay of certification has 

been issued under section 745(b)(3) of the Wall Street Transparency and Accountability Act of 2010; and 

(3) prior to exercising its rulemaking authorities under section 728 of the Wall Street Transparency and Accountability 

Act of 2010. 


sroberts on DSKD5P82C1PROD with HEARING
455 

(b) SEC.—The Commission shall consult with the Board of 

Governors— 

(1) prior to exercising its authorities under sections 

3C(a)(2)(C), 3C(a)(3)(A), 3C(a)(3)(C), 3C(a)(4)(A), and 

3C(a)(4)(B) of the Securities Exchange Act of 1934, as amended 

by the Wall Street Transparency and Accountability Act of 

2010; 

(2) with respect to any proposed rule change of a clearing 

agency for which an extension of the time for review has been 

designated under section 19(b)(2) of the Securities Exchange Act 

of 1934; and 

(3) prior to exercising its rulemaking authorities under section 13(n) of the Securities Exchange Act of 1934, as added by 

section 763(i) of the Wall Street Transparency and Accountability Act of 2010. 

SEC. 813. COMMON FRAMEWORK FOR DESIGNATED CLEARING ENTITY 

RISK MANAGEMENT. 

The Commodity Futures Trading Commission and the Commission shall coordinate with the Board of Governors to jointly develop 

risk management supervision programs for designated clearing entities. Not later than 1 year after the date of enactment of this Act, 

the Commodity Futures Trading Commission, the Commission, and 

the Board of Governors shall submit a joint report to the Committee 

on Banking, Housing, and Urban Affairs and the Committee on Agriculture, Nutrition, and Forestry of the Senate, and the Committee 

on Financial Services and the Committee on Agriculture of the 

House of Representatives recommendations for— 

(1) improving consistency in the designated clearing entity 

oversight programs of the Commission and the Commodity Futures Trading Commission; 

(2) promoting robust risk management by designated clearing entities; 

(3) promoting robust risk management oversight by regulators of designated clearing entities; and 

(4) improving regulators’ ability to monitor the potential effects of designated clearing entity risk management on the stability of the financial system of the United States. 

SEC. 814. EFFECTIVE DATE. 

This title is effective as of the date of enactment of this Act. 

TITLE IX—INVESTOR PROTECTIONS AND 

IMPROVEMENTS TO THE REGULATION OF SECURITIES 

SEC. 901. SHORT TITLE. 

This title may be cited as the ‘‘Investor Protection and Securities Reform Act of 2010’’. 

Subtitle A—Increasing Investor Protection 

SEC. 911. INVESTOR ADVISORY COMMITTEE ESTABLISHED. 

Title I of the Securities Exchange Act of 1934 (15 U.S.C. 78a 

et seq.) is amended by adding at the end the following: 

‘‘SEC. 39. INVESTOR ADVISORY COMMITTEE. 

‘‘(a) ESTABLISHMENT AND PURPOSE.— 


sroberts on DSKD5P82C1PROD with HEARING
456 

‘‘(1) ESTABLISHMENT.—There is established within the 

Commission the Investor Advisory Committee (referred to in 

this section as the ‘Committee’). 

‘‘(2) PURPOSE.—The Committee shall— 

‘‘(A) advise and consult with the Commission on— 

‘‘(i) regulatory priorities of the Commission; 

‘‘(ii) issues relating to the regulation of securities 

products, trading strategies, and fee structures, and the 

effectiveness of disclosure; 

‘‘(iii) initiatives to protect investor interest; and 

‘‘(iv) initiatives to promote investor confidence and 

the integrity of the securities marketplace; and 

‘‘(B) submit to the Commission such findings and recommendations as the Committee determines are appropriate, including recommendations for proposed legislative 

changes. 

‘‘(b) MEMBERSHIP.— 

‘‘(1) IN GENERAL.—The members of the Committee shall 

be— 

‘‘(A) the Investor Advocate; 

‘‘(B) a representative of State securities commissions; 

‘‘(C) a representative of the interests of senior citizens; 

and 

‘‘(D) not fewer than 10, and not more than 20, members 

appointed by the Commission, from among individuals 

who— 

‘‘(i) represent the interests of individual equity and 

debt investors, including investors in mutual funds; 

‘‘(ii) represent the interests of institutional investors, including the interests of pension funds and registered investment companies; 

‘‘(iii) are knowledgeable about investment issues 

and decisions; and 

‘‘(iv) have reputations of integrity. 

‘‘(2) TERM.—Each member of the Committee appointed 

under paragraph (1)(B) shall serve for a term of 4 years. 

‘‘(3) MEMBERS NOT COMMISSION EMPLOYEES.—Members appointed under paragraph (1)(B) shall not be deemed to be employees or agents of the Commission solely because of membership on the Committee. 

‘‘(c) CHAIRMAN; VICE CHAIRMAN; SECRETARY; ASSISTANT SECRETARY.— 

‘‘(1) IN GENERAL.—The members of the Committee shall 

elect, from among the members of the Committee— 

‘‘(A) a chairman, who may not be employed by an 

issuer; 

‘‘(B) a vice chairman, who may not be employed by an 

issuer; 

‘‘(C) a secretary; and 

‘‘(D) an assistant secretary. 

‘‘(2) TERM.—Each member elected under paragraph (1) 

shall serve for a term of 3 years in the capacity for which the 

member was elected under paragraph (1). 

‘‘(d) MEETINGS.— 


sroberts on DSKD5P82C1PROD with HEARING
457 

‘‘(1) FREQUENCY OF MEETINGS.—The Committee shall 

meet— 

‘‘(A) not less frequently than twice annually, at the call 

of the chairman of the Committee; and 

‘‘(B) from time to time, at the call of the Commission. 

‘‘(2) NOTICE.—The chairman of the Committee shall give 

the members of the Committee written notice of each meeting, 

not later than 2 weeks before the date of the meeting. 

‘‘(e) COMPENSATION AND TRAVEL EXPENSES.—Each member of 

the Committee who is not a full-time employee of the United States 

shall— 

‘‘(1) be entitled to receive compensation at a rate not to exceed the daily equivalent of the annual rate of basic pay in effect for a position at level V of the Executive Schedule under 

section 5316 of title 5, United States Code, for each day during 

which the member is engaged in the actual performance of the 

duties of the Committee; and 

‘‘(2) while away from the home or regular place of business 

of the member in the performance of services for the Committee, 

be allowed travel expenses, including per diem in lieu of subsistence, in the same manner as persons employed intermittently in the Government service are allowed expenses under 

section 5703(b) of title 5, United States Code. 

‘‘(f) STAFF.—The Commission shall make available to the Committee such staff as the chairman of the Committee determines are 

necessary to carry out this section. 

‘‘(g) REVIEW BY COMMISSION.—The Commission shall— 

‘‘(1) review the findings and recommendations of the Committee; and 

‘‘(2) each time the Committee submits a finding or recommendation to the Commission, promptly issue a public statement— 

‘‘(A) assessing the finding or recommendation of the 

Committee; and 

‘‘(B) disclosing the action, if any, the Commission intends to take with respect to the finding or recommendation. 

‘‘(h) COMMITTEE FINDINGS.—Nothing in this section shall require the Commission to agree to or act upon any finding or recommendation of the Committee. 

‘‘(i) FEDERAL ADVISORY COMMITTEE ACT.—The Federal Advisory Committee Act (5 U.S.C. App.) shall not apply with respect to 

the Committee and its activities. 

‘‘(j) AUTHORIZATION OF APPROPRIATIONS.—There is authorized 

to be appropriated to the Commission such sums as are necessary 

to carry out this section.’’. 

SEC. 912. CLARIFICATION OF AUTHORITY OF THE COMMISSION TO ENGAGE IN INVESTOR TESTING. 

Section 19 of the Securities Act of 1933 (15 U.S.C. 77s) is 

amended by adding at the end the following: 

‘‘(e) EVALUATION OF RULES OR PROGRAMS.—For the purpose of 

evaluating any rule or program of the Commission issued or carried 

out under any provision of the securities laws, as defined in section 

3 of the Securities Exchange Act of 1934 (15 U.S.C. 78c), and the 

purposes of considering, proposing, adopting, or engaging in any 


sroberts on DSKD5P82C1PROD with HEARING
458 

such rule or program or developing new rules or programs, the 

Commission may— 

‘‘(1) gather information from and communicate with investors or other members of the public; 

‘‘(2) engage in such temporary investor testing programs as 

the Commission determines are in the public interest or would 

protect investors; and 

‘‘(3) consult with academics and consultants, as necessary 

to carry out this subsection. 

‘‘(f) RULE OF CONSTRUCTION.—For purposes of the Paperwork 

Reduction Act (44 U.S.C. 3501 et seq.), any action taken under subsection (e) shall not be construed to be a collection of information.’’. 

SEC. 913. STUDY AND RULEMAKING REGARDING OBLIGATIONS OF 

BROKERS, DEALERS, AND INVESTMENT ADVISERS. 

(a) DEFINITION.—For purposes of this section, the term ‘‘retail 

customer’’ means a natural person, or the legal representative of 

such natural person, who— 

(1) receives personalized investment advice about securities 

from a broker or dealer or investment adviser; and 

(2) uses such advice primarily for personal, family, or 

household purposes. 

(b) STUDY.—The Commission shall conduct a study to evaluate— 

(1) the effectiveness of existing legal or regulatory standards of care for brokers, dealers, investment advisers, persons 

associated with brokers or dealers, and persons associated with 

investment advisers for providing personalized investment advice and recommendations about securities to retail customers 

imposed by the Commission and a national securities association, and other Federal and State legal or regulatory standards; 

and 

(2) whether there are legal or regulatory gaps, shortcomings, or overlaps in legal or regulatory standards in the 

protection of retail customers relating to the standards of care 

for brokers, dealers, investment advisers, persons associated 

with brokers or dealers, and persons associated with investment 

advisers for providing personalized investment advice about securities to retail customers that should be addressed by rule or 

statute. 

(c) CONSIDERATIONS.—In conducting the study required under 

subsection (b), the Commission shall consider— 

(1) the effectiveness of existing legal or regulatory standards of care for brokers, dealers, investment advisers, persons 

associated with brokers or dealers, and persons associated with 

investment advisers for providing personalized investment advice and recommendations about securities to retail customers 

imposed by the Commission and a national securities association, and other Federal and State legal or regulatory standards; 

(2) whether there are legal or regulatory gaps, shortcomings, or overlaps in legal or regulatory standards in the 

protection of retail customers relating to the standards of care 

for brokers, dealers, investment advisers, persons associated 

with brokers or dealers, and persons associated with investment 

advisers for providing personalized investment advice about seVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00462 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
459 

curities to retail customers that should be addressed by rule or 

statute; 

(3) whether retail customers understand that there are different standards of care applicable to brokers, dealers, investment advisers, persons associated with brokers or dealers, and 

persons associated with investment advisers in the provision of 

personalized investment advice about securities to retail customers; 

(4) whether the existence of different standards of care applicable to brokers, dealers, investment advisers, persons associated with brokers or dealers, and persons associated with investment advisers is a source of confusion for retail customers 

regarding the quality of personalized investment advice that retail customers receive; 

(5) the regulatory, examination, and enforcement resources 

devoted to, and activities of, the Commission, the States, and a 

national securities association to enforce the standards of care 

for brokers, dealers, investment advisers, persons associated 

with brokers or dealers, and persons associated with investment 

advisers when providing personalized investment advice and 

recommendations about securities to retail customers, including— 

(A) the effectiveness of the examinations of brokers, 

dealers, and investment advisers in determining compliance with regulations; 

(B) the frequency of the examinations; and 

(C) the length of time of the examinations; 

(6) the substantive differences in the regulation of brokers, 

dealers, and investment advisers, when providing personalized 

investment advice and recommendations about securities to retail customers; 

(7) the specific instances related to the provision of personalized investment advice about securities in which— 

(A) the regulation and oversight of investment advisers 

provide greater protection to retail customers than the regulation and oversight of brokers and dealers; and 

(B) the regulation and oversight of brokers and dealers 

provide greater protection to retail customers than the regulation and oversight of investment advisers; 

(8) the existing legal or regulatory standards of State securities regulators and other regulators intended to protect retail 

customers; 

(9) the potential impact on retail customers, including the 

potential impact on access of retail customers to the range of 

products and services offered by brokers and dealers, of imposing upon brokers, dealers, and persons associated with brokers 

or dealers— 

(A) the standard of care applied under the Investment 

Advisers Act of 1940 (15 U.S.C. 80b–1 et seq.) for providing 

personalized investment advice about securities to retail 

customers of investment advisers, as interpreted by the 

Commission and the courts; and 

(B) other requirements of the Investment Advisers Act 

of 1940 (15 U.S.C. 80b–1 et seq.); 


sroberts on DSKD5P82C1PROD with HEARING
460 

(10) the potential impact of eliminating the broker and 

dealer exclusion from the definition of ‘‘investment adviser’’ 

under section 202(a)(11)(C) of the Investment Advisers Act of 

1940 (15 U.S.C. 80b–2(a)(11)(C)), in terms of— 

(A) the impact and potential benefits and harm to retail customers that could result from such a change, including any potential impact on access to personalized investment advice and recommendations about securities to retail 

customers or the availability of such advice and recommendations; 

(B) the number of additional entities and individuals 

that would be required to register under, or become subject 

to, the Investment Advisers Act of 1940 (15 U.S.C. 80b–1 et 

seq.), and the additional requirements to which brokers, 

dealers, and persons associated with brokers and dealers 

would become subject, including— 

(i) any potential additional associated person licensing, registration, and examination requirements; 

and 

(ii) the additional costs, if any, to the additional 

entities and individuals; and 

(C) the impact on Commission and State resources to— 

(i) conduct examinations of registered investment 

advisers and the representatives of registered investment advisers, including the impact on the examination cycle; and 

(ii) enforce the standard of care and other applicable requirements imposed under the Investment Advisers Act of 1940 (15 U.S.C. 80b–1 et seq.); 

(11) the varying level of services provided by brokers, dealers, investment advisers, persons associated with brokers or 

dealers, and persons associated with investment advisers to retail customers and the varying scope and terms of retail customer relationships of brokers, dealers, investment advisers, 

persons associated with brokers or dealers, and persons associated with investment advisers with such retail customers; 

(12) the potential impact upon retail customers that could 

result from potential changes in the regulatory requirements or 

legal standards of care affecting brokers, dealers, investment 

advisers, persons associated with brokers or dealers, and persons associated with investment advisers relating to their obligations to retail customers regarding the provision of investment advice, including any potential impact on— 

(A) protection from fraud; 

(B) access to personalized investment advice, and recommendations about securities to retail customers; or 

(C) the availability of such advice and recommendations; 

(13) the potential additional costs and expenses to— 

(A) retail customers regarding and the potential impact 

on the profitability of their investment decisions; and 

(B) brokers, dealers, and investment advisers resulting 

from potential changes in the regulatory requirements or 

legal standards affecting brokers, dealers, investment advisers, persons associated with brokers or dealers, and perVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00464 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
461 

sons associated with investment advisers relating to their 

obligations, including duty of care, to retail customers; and 

(14) any other consideration that the Commission considers 

necessary and appropriate in determining whether to conduct a 

rulemaking under subsection (f). 

(d) REPORT.— (1) IN GENERAL.—Not later than 6 months after the date of 

enactment of this Act, the Commission shall submit a report on 

the study required under subsection (b) to— 

(A) the Committee on Banking, Housing, and Urban 

Affairs of the Senate; and 

(B) the Committee on Financial Services of the House 

of Representatives. 

(2) CONTENT REQUIREMENTS.—The report required under 

paragraph (1) shall describe the findings, conclusions, and recommendations of the Commission from the study required 

under subsection (b), including— 

(A) a description of the considerations, analysis, and 

public and industry input that the Commission considered, 

as required under subsection (b), to make such findings, 

conclusions, and policy recommendations; and 

(B) an analysis of whether any identified legal or regulatory gaps, shortcomings, or overlap in legal or regulatory 

standards in the protection of retail customers relating to 

the standards of care for brokers, dealers, investment advisers, persons associated with brokers or dealers, and persons 

associated with investment advisers for providing personalized investment advice about securities to retail customers. 

(e) PUBLIC COMMENT.—The Commission shall seek and consider public input, comments, and data in order to prepare the report required under subsection (d). 

(f) RULEMAKING.—The Commission may commence a rulemaking, as necessary or appropriate in the public interest and for 

the protection of retail customers (and such other customers as the 

Commission may by rule provide), to address the legal or regulatory 

standards of care for brokers, dealers, investment advisers, persons 

associated with brokers or dealers, and persons associated with investment advisers for providing personalized investment advice 

about securities to such retail customers. The Commission shall consider the findings conclusions, and recommendations of the study 

required under subsection (b). 

(g) AUTHORITY TO ESTABLISH A FIDUCIARY DUTY FOR BROKERS

AND DEALERS.— 

(1) SECURITIES EXCHANGE ACT OF 1934.—Section 15 of the 

Securities Exchange Act of 1934 (15 U.S.C. 78o) is amended by 

adding at the end the following: 

‘‘(k) STANDARD OF CONDUCT.— 

‘‘(1) IN GENERAL.—Notwithstanding any other provision of 

this Act or the Investment Advisers Act of 1940, the Commission may promulgate rules to provide that, with respect to a 

broker or dealer, when providing personalized investment advice about securities to a retail customer (and such other customers as the Commission may by rule provide), the standard 

of conduct for such broker or dealer with respect to such customer shall be the same as the standard of conduct applicable 


sroberts on DSKD5P82C1PROD with HEARING
462 

to an investment adviser under section 211 of the Investment 

Advisers Act of 1940. The receipt of compensation based on 

commission or other standard compensation for the sale of securities shall not, in and of itself, be considered a violation of 

such standard applied to a broker or dealer. Nothing in this 

section shall require a broker or dealer or registered representative to have a continuing duty of care or loyalty to the customer 

after providing personalized investment advice about securities. 

‘‘(2) DISCLOSURE OF RANGE OF PRODUCTS OFFERED.—Where 

a broker or dealer sells only proprietary or other limited range 

of products, as determined by the Commission, the Commission 

may by rule require that such broker or dealer provide notice 

to each retail customer and obtain the consent or acknowledgment of the customer. The sale of only proprietary or other limited range of products by a broker or dealer shall not, in and 

of itself, be considered a violation of the standard set forth in 

paragraph (1). 

‘‘(l) OTHER MATTERS.—The Commission shall— 

‘‘(1) facilitate the provision of simple and clear disclosures 

to investors regarding the terms of their relationships with brokers, dealers, and investment advisers, including any material 

conflicts of interest; and 

‘‘(2) examine and, where appropriate, promulgate rules prohibiting or restricting certain sales practices, conflicts of interest, and compensation schemes for brokers, dealers, and investment advisers that the Commission deems contrary to the public interest and the protection of investors.’’. 

(2) INVESTMENT ADVISERS ACT OF 1940.—Section 211 of the 

Investment Advisers Act of 1940 is further amended by adding 

at the end the following new subsections: 

‘‘(g) STANDARD OF CONDUCT.— ‘‘(1) IN GENERAL.—The Commission may promulgate rules 

to provide that the standard of conduct for all brokers, dealers, 

and investment advisers, when providing personalized investment advice about securities to retail customers (and such other 

customers as the Commission may by rule provide), shall be to 

act in the best interest of the customer without regard to the financial or other interest of the broker, dealer, or investment adviser providing the advice. In accordance with such rules, any 

material conflicts of interest shall be disclosed and may be consented to by the customer. Such rules shall provide that such 

standard of conduct shall be no less stringent than the standard applicable to investment advisers under sections 206(1) and 

(2) of this Act when providing personalized investment advice 

about securities, except the Commission shall not ascribe a 

meaning to the term ‘customer’ that would include an investor 

in a private fund managed by an investment adviser, where 

such private fund has entered into an advisory contract with 

such adviser. The receipt of compensation based on commission 

or fees shall not, in and of itself, be considered a violation of 

such standard applied to a broker, dealer, or investment adviser. 

‘‘(2) RETAIL CUSTOMER DEFINED.—For purposes of this subsection, the term ‘retail customer’ means a natural person, or 

the legal representative of such natural person, who— 


sroberts on DSKD5P82C1PROD with HEARING
463 

‘‘(A) receives personalized investment advice about securities from a broker, dealer, or investment adviser; and 

‘‘(B) uses such advice primarily for personal, family, or 

household purposes. 

‘‘(h) OTHER MATTERS.—The Commission shall— 

‘‘(1) facilitate the provision of simple and clear disclosures 

to investors regarding the terms of their relationships with brokers, dealers, and investment advisers, including any material 

conflicts of interest; and 

‘‘(2) examine and, where appropriate, promulgate rules prohibiting or restricting certain sales practices, conflicts of interest, and compensation schemes for brokers, dealers, and investment advisers that the Commission deems contrary to the public interest and the protection of investors.’’. 

(h) HARMONIZATION OF ENFORCEMENT.— (1) SECURITIES EXCHANGE ACT OF 1934.—Section 15 of the 

Securities Exchange Act of 1934, as amended by subsection 

(g)(1), is further amended by adding at the end the following 

new subsection: 

‘‘(m) HARMONIZATION OF ENFORCEMENT.—The enforcement authority of the Commission with respect to violations of the standard 

of conduct applicable to a broker or dealer providing personalized 

investment advice about securities to a retail customer shall include— 

‘‘(1) the enforcement authority of the Commission with respect to such violations provided under this Act; and 

‘‘(2) the enforcement authority of the Commission with respect to violations of the standard of conduct applicable to an 

investment adviser under the Investment Advisers Act of 1940, 

including the authority to impose sanctions for such violations, 

and 

the Commission shall seek to prosecute and sanction violators of the 

standard of conduct applicable to a broker or dealer providing personalized investment advice about securities to a retail customer 

under this Act to same extent as the Commission prosecutes and 

sanctions violators of the standard of conduct applicable to an investment advisor under the Investment Advisers Act of 1940.’’. 

(2) INVESTMENT ADVISERS ACT OF 1940.—Section 211 of the 

Investment Advisers Act of 1940, as amended by subsection 

(g)(2), is further amended by adding at the end the following 

new subsection: 

‘‘(i) HARMONIZATION OF ENFORCEMENT.—The enforcement authority of the Commission with respect to violations of the standard 

of conduct applicable to an investment adviser shall include— 

‘‘(1) the enforcement authority of the Commission with respect to such violations provided under this Act; and 

‘‘(2) the enforcement authority of the Commission with respect to violations of the standard of conduct applicable to a 

broker or dealer providing personalized investment advice about 

securities to a retail customer under the Securities Exchange 

Act of 1934, including the authority to impose sanctions for 

such violations, and 

the Commission shall seek to prosecute and sanction violators of the 

standard of conduct applicable to an investment adviser under this 

Act to same extent as the Commission prosecutes and sanctions vioVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00467 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
464 

lators of the standard of conduct applicable to a broker or dealer 

providing personalized investment advice about securities to a retail 

customer under the Securities Exchange Act of 1934.’’. 

SEC. 914. STUDY ON ENHANCING INVESTMENT ADVISER EXAMINATIONS. 

(a) STUDY REQUIRED.— 

(1) IN GENERAL.—The Commission shall review and analyze the need for enhanced examination and enforcement resources for investment advisers. 

(2) AREAS OF CONSIDERATION.—The study required by this 

subsection shall examine— 

(A) the number and frequency of examinations of investment advisers by the Commission over the 5 years preceding the date of the enactment of this subtitle; 

(B) the extent to which having Congress authorize the 

Commission to designate one or more self-regulatory organizations to augment the Commission’s efforts in overseeing 

investment advisers would improve the frequency of examinations of investment advisers; and 

(C) current and potential approaches to examining the 

investment advisory activities of dually registered brokerdealers and investment advisers or affiliated broker-dealers 

and investment advisers. 

(b) REPORT REQUIRED.—The Commission shall report its findings to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban 

Affairs of the Senate, not later than 180 days after the date of enactment of this subtitle, and shall use such findings to revise its rules 

and regulations, as necessary. The report shall include a discussion 

of regulatory or legislative steps that are recommended or that may 

be necessary to address concerns identified in the study. 

SEC. 915. OFFICE OF THE INVESTOR ADVOCATE. 

Section 4 of the Securities Exchange Act of 1934 (15 U.S.C. 

78d) is amended by adding at the end the following: 

‘‘(g) OFFICE OF THE INVESTOR ADVOCATE.— 

‘‘(1) OFFICE ESTABLISHED.—There is established within the 

Commission the Office of the Investor Advocate (in this subsection referred to as the ‘Office’). 

‘‘(2) INVESTOR ADVOCATE.— 

‘‘(A) IN GENERAL.—The head of the Office shall be the 

Investor Advocate, who shall— 

‘‘(i) report directly to the Chairman; and 

‘‘(ii) be appointed by the Chairman, in consultation 

with the Commission, from among individuals having 

experience in advocating for the interests of investors in 

securities and investor protection issues, from the perspective of investors. 

‘‘(B) COMPENSATION.—The annual rate of pay for the 

Investor Advocate shall be equal to the highest rate of annual pay for other senior executives who report to the 

Chairman of the Commission. 

‘‘(C) LIMITATION ON SERVICE.—An individual who 

serves as the Investor Advocate may not be employed by the 

Commission— 


sroberts on DSKD5P82C1PROD with HEARING
465 

‘‘(i) during the 2-year period ending on the date of 

appointment as Investor Advocate; or 

‘‘(ii) during the 5-year period beginning on the date 

on which the person ceases to serve as the Investor Advocate. 

‘‘(3) STAFF OF OFFICE.—The Investor Advocate, after consultation with the Chairman of the Commission, may retain or 

employ independent counsel, research staff, and service staff, as 

the Investor Advocate deems necessary to carry out the functions, powers, and duties of the Office. 

‘‘(4) FUNCTIONS OF THE INVESTOR ADVOCATE.—The Investor 

Advocate shall— 

‘‘(A) assist retail investors in resolving significant problems such investors may have with the Commission or with 

self-regulatory organizations; 

‘‘(B) identify areas in which investors would benefit 

from changes in the regulations of the Commission or the 

rules of self-regulatory organizations; 

‘‘(C) identify problems that investors have with financial service providers and investment products; 

‘‘(D) analyze the potential impact on investors of— 

‘‘(i) proposed regulations of the Commission; and 

‘‘(ii) proposed rules of self-regulatory organizations 

registered under this title; and 

‘‘(E) to the extent practicable, propose to the Commission changes in the regulations or orders of the Commission 

and to Congress any legislative, administrative, or personnel changes that may be appropriate to mitigate problems identified under this paragraph and to promote the 

interests of investors. 

‘‘(5) ACCESS TO DOCUMENTS.—The Commission shall ensure 

that the Investor Advocate has full access to the documents of 

the Commission and any self-regulatory organization, as necessary to carry out the functions of the Office. 

‘‘(6) ANNUAL REPORTS.— 

‘‘(A) REPORT ON OBJECTIVES.— 

‘‘(i) IN GENERAL.—Not later than June 30 of each 

year after 2010, the Investor Advocate shall submit to 

the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial 

Services of the House of Representatives a report on the 

objectives of the Investor Advocate for the following fiscal year. 

‘‘(ii) CONTENTS.—Each report required under 

clause (i) shall contain full and substantive analysis 

and explanation. 

‘‘(B) REPORT ON ACTIVITIES.— 

‘‘(i) IN GENERAL.—Not later than December 31 of 

each year after 2010, the Investor Advocate shall submit to the Committee on Banking, Housing, and Urban 

Affairs of the Senate and the Committee on Financial 

Services of the House of Representatives a report on the 

activities of the Investor Advocate during the immediately preceding fiscal year. 


sroberts on DSKD5P82C1PROD with HEARING
466 

‘‘(ii) CONTENTS.—Each report required under 

clause (i) shall include— 

‘‘(I) appropriate statistical information and 

full and substantive analysis; 

‘‘(II) information on steps that the Investor Advocate has taken during the reporting period to improve investor services and the responsiveness of 

the Commission and self-regulatory organizations 

to investor concerns; 

‘‘(III) a summary of the most serious problems 

encountered by investors during the reporting period; 

‘‘(IV) an inventory of the items described in 

subclause (III) that includes— 

‘‘(aa) identification of any action taken by 

the Commission or the self-regulatory organization and the result of such action; 

‘‘(bb) the length of time that each item has 

remained on such inventory; and 

‘‘(cc) for items on which no action has 

been taken, the reasons for inaction, and an 

identification of any official who is responsible 

for such action; 

‘‘(V) recommendations for such administrative 

and legislative actions as may be appropriate to resolve problems encountered by investors; and 

‘‘(VI) any other information, as determined appropriate by the Investor Advocate. 

‘‘(iii) INDEPENDENCE.—Each report required under 

this paragraph shall be provided directly to the Committees listed in clause (i) without any prior review or 

comment from the Commission, any commissioner, any 

other officer or employee of the Commission, or the Office of Management and Budget. 

‘‘(iv) CONFIDENTIALITY.—No report required under 

clause (i) may contain confidential information. 

‘‘(7) REGULATIONS.—The Commission shall, by regulation, 

establish procedures requiring a formal response to all recommendations submitted to the Commission by the Investor Advocate, not later than 3 months after the date of such submission.’’. 

SEC. 916. STREAMLINING OF FILING PROCEDURES FOR SELF-REGULATORY ORGANIZATIONS. 

(a) FILING PROCEDURES.—Section 19(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78s(b)) is amended by striking paragraph (2) (including the undesignated matter immediately following 

subparagraph (B)) and inserting the following: 

‘‘(2) APPROVAL PROCESS.— 

‘‘(A) APPROVAL PROCESS ESTABLISHED.— 

‘‘(i) IN GENERAL.—Except as provided in clause (ii), 

not later than 45 days after the date of publication of 

a proposed rule change under paragraph (1), the Commission shall— 

‘‘(I) by order, approve or disapprove the proposed rule change; or 


sroberts on DSKD5P82C1PROD with HEARING
467 

‘‘(II) institute proceedings under subparagraph 

(B) to determine whether the proposed rule change 

should be disapproved. 

‘‘(ii) EXTENSION OF TIME PERIOD.—The Commission may extend the period established under clause (i) 

by not more than an additional 45 days, if— 

‘‘(I) the Commission determines that a longer 

period is appropriate and publishes the reasons for 

such determination; or 

‘‘(II) the self-regulatory organization that filed 

the proposed rule change consents to the longer period. 

‘‘(B) PROCEEDINGS.— ‘‘(i) NOTICE AND HEARING.—If the Commission does 

not approve or disapprove a proposed rule change 

under subparagraph (A), the Commission shall provide 

to the self-regulatory organization that filed the proposed rule change— 

‘‘(I) notice of the grounds for disapproval 

under consideration; and 

‘‘(II) opportunity for hearing, to be concluded 

not later than 180 days after the date of publication of notice of the filing of the proposed rule 

change. 

‘‘(ii) ORDER OF APPROVAL OR DISAPPROVAL.— ‘‘(I) IN GENERAL.—Except as provided in subclause (II), not later than 180 days after the date 

of publication under paragraph (1), the Commission shall issue an order approving or disapproving the proposed rule change. 

‘‘(II) EXTENSION OF TIME PERIOD.—The Commission may extend the period for issuance under 

clause (I) by not more than 60 days, if— 

‘‘(aa) the Commission determines that a 

longer period is appropriate and publishes the 

reasons for such determination; or 

‘‘(bb) the self-regulatory organization that 

filed the proposed rule change consents to the 

longer period. 

‘‘(C) STANDARDS FOR APPROVAL AND DISAPPROVAL.— 

‘‘(i) APPROVAL.—The Commission shall approve a 

proposed rule change of a self-regulatory organization 

if it finds that such proposed rule change is consistent 

with the requirements of this title and the rules and 

regulations issued under this title that are applicable 

to such organization. 

‘‘(ii) DISAPPROVAL.—The Commission shall disapprove a proposed rule change of a self-regulatory organization if it does not make a finding described in 

clause (i). 

‘‘(iii) TIME FOR APPROVAL.—The Commission may 

not approve a proposed rule change earlier than 30 

days after the date of publication under paragraph (1), 

unless the Commission finds good cause for so doing 

and publishes the reason for the finding. 


sroberts on DSKD5P82C1PROD with HEARING
468 

‘‘(D) RESULT OF FAILURE TO INSTITUTE OR CONCLUDE

PROCEEDINGS.—A proposed rule change shall be deemed to 

have been approved by the Commission, if— 

‘‘(i) the Commission does not approve or disapprove the proposed rule change or begin proceedings 

under subparagraph (B) within the period described in 

subparagraph (A); or 

‘‘(ii) the Commission does not issue an order approving or disapproving the proposed rule change 

under subparagraph (B) within the period described in 

subparagraph (B)(ii). 

‘‘(E) PUBLICATION DATE BASED ON FEDERAL REGISTER

PUBLISHING.—For purposes of this paragraph, if, after filing a proposed rule change with the Commission pursuant 

to paragraph (1), a self-regulatory organization publishes a 

notice of the filing of such proposed rule change, together 

with the substantive terms of such proposed rule change, on 

a publicly accessible website, the Commission shall thereafter send the notice to the Federal Register for publication 

thereof under paragraph (1) within 15 days of the date on 

which such website publication is made. If the Commission 

fails to send the notice for publication thereof within such 

15 day period, then the date of publication shall be deemed 

to be the date on which such website publication was made. 

‘‘(F) RULEMAKING.— ‘‘(i) IN GENERAL.—Not later than 180 days after 

the date of enactment of the Investor Protection and Securities Reform Act of 2010, after consultation with 

other regulatory agencies, the Commission shall promulgate rules setting forth the procedural requirements 

of the proceedings required under this paragraph. 

‘‘(ii) NOTICE AND COMMENT NOT REQUIRED.—The 

rules promulgated by the Commission under clause (i) 

are not required to include republication of proposed 

rule changes or solicitation of public comment.’’. 

(b) CLARIFICATION OF FILING DATE.— (1) RULE OF CONSTRUCTION.—Section 19(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78s(b)) is amended by 

adding at the end the following: 

‘‘(10) RULE OF CONSTRUCTION RELATING TO FILING DATE OF

PROPOSED RULE CHANGES.— 

‘‘(A) IN GENERAL.—For purposes of this subsection, the 

date of filing of a proposed rule change shall be deemed to 

be the date on which the Commission receives the proposed 

rule change. 

‘‘(B) EXCEPTION.—A proposed rule change has not been 

received by the Commission for purposes of subparagraph 

(A) if, not later than 7 business days after the date of receipt by the Commission, the Commission notifies the selfregulatory organization that such proposed rule change 

does not comply with the rules of the Commission relating 

to the required form of a proposed rule change, except that 

if the Commission determines that the proposed rule 

change is unusually lengthy and is complex or raises novel 

regulatory issues, the Commission shall inform the self-regVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00472 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
469 

ulatory organization of such determination not later than 

7 business days after the date of receipt by the Commission 

and, for the purposes of subparagraph (A), a proposed rule 

change has not been received by the Commission, if, not 

later than 21 days after the date of receipt by the Commission, the Commission notifies the self-regulatory organization that such proposed rule change does not comply with 

the rules of the Commission relating to the required form 

of a proposed rule change.’’. 

(2) PUBLICATION.—Section 19(b)(1) of the Securities Exchange Act of 1934 (15 U.S.C. 78s(b)(1)) is amended by striking 

‘‘upon’’ and inserting ‘‘as soon as practicable after the date of’’. 

(c) EFFECTIVE DATE OF PROPOSED RULES.—Section 19(b)(3) of 

the Securities Exchange Act of 1934 (15 U.S.C. 78s(b)(3)) is amended— 

(1) in subparagraph (A)— 

(A) by striking ‘‘may take effect’’ and inserting ‘‘shall 

take effect’’; and 

(B) by inserting ‘‘on any person, whether or not the person is a member of the self-regulatory organization’’ after 

‘‘charge imposed by the self-regulatory organization’’; and 

(2) in subparagraph (C)— 

(A) by amending the second sentence to read as follows: 

‘‘At any time within the 60-day period beginning on the 

date of filing of such a proposed rule change in accordance 

with the provisions of paragraph (1), the Commission summarily may temporarily suspend the change in the rules of 

the self-regulatory organization made thereby, if it appears 

to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, 

or otherwise in furtherance of the purposes of this title.’’; 

(B) by inserting after the second sentence the following: 

‘‘If the Commission takes such action, the Commission shall 

institute proceedings under paragraph (2)(B) to determine 

whether the proposed rule should be approved or disapproved.’’; and 

(C) in the third sentence, by striking ‘‘the preceding 

sentence’’ and inserting ‘‘this subparagraph’’. 

(d) CONFORMING CHANGE.—Section 19(b)(4)(D) of the Securities 

Exchange Act of 1934 (15 U.S.C. 78s(b)(4)(D)) is amended to read 

as follows: 

‘‘(D)(i) The Commission shall order the temporary suspension of any change in the rules of a clearing agency 

made by a proposed rule change that has taken effect under 

paragraph (3), if the appropriate regulatory agency for the 

clearing agency notifies the Commission not later than 30 

days after the date on which the proposed rule change was 

filed of— 

‘‘(I) the determination by the appropriate regulatory agency that the rules of such clearing agency, as 

so changed, may be inconsistent with the safeguarding 

of securities or funds in the custody or control of such 

clearing agency or for which it is responsible; and 

‘‘(II) the reasons for the determination described in 

subclause (I). 


sroberts on DSKD5P82C1PROD with HEARING
470 

‘‘(ii) If the Commission takes action under clause (i), 

the Commission shall institute proceedings under paragraph (2)(B) to determine if the proposed rule change 

should be approved or disapproved.’’. 

SEC. 917. STUDY REGARDING FINANCIAL LITERACY AMONG INVESTORS. 

(a) IN GENERAL.—The Commission shall conduct a study to 

identify— 

(1) the existing level of financial literacy among retail investors, including subgroups of investors identified by the Commission; 

(2) methods to improve the timing, content, and format of 

disclosures to investors with respect to financial intermediaries, 

investment products, and investment services; 

(3) the most useful and understandable relevant information that retail investors need to make informed financial decisions before engaging a financial intermediary or purchasing 

an investment product or service that is typically sold to retail 

investors, including shares of open-end companies, as that term 

is defined in section 5 of the Investment Company Act of 1940 

(15 U.S.C. 80a–5) that are registered under section 8 of that 

Act; 

(4) methods to increase the transparency of expenses and 

conflicts of interests in transactions involving investment services and products, including shares of open-end companies described in paragraph (3); 

(5) the most effective existing private and public efforts to 

educate investors; and 

(6) in consultation with the Financial Literacy and Education Commission, a strategy (including, to the extent practicable, measurable goals and objectives) to increase the financial literacy of investors in order to bring about a positive 

change in investor behavior. 

(b) REPORT.—Not later than 2 years after the date of enactment 

of this Act, the Commission shall submit a report on the study required under subsection (a) to— 

(1) the Committee on Banking, Housing, and Urban Affairs 

of the Senate; and 

(2) the Committee on Financial Services of the House of 

Representatives. 

SEC. 918. STUDY REGARDING MUTUAL FUND ADVERTISING. 

(a) IN GENERAL.—The Comptroller General of the United States 

shall conduct a study on mutual fund advertising to identify— 

(1) existing and proposed regulatory requirements for openend investment company advertisements; 

(2) current marketing practices for the sale of open-end investment company shares, including the use of past performance data, funds that have merged, and incubator funds; 

(3) the impact of such advertising on consumers; and 

(4) recommendations to improve investor protections in mutual fund advertising and additional information necessary to 

ensure that investors can make informed financial decisions 

when purchasing shares. 


sroberts on DSKD5P82C1PROD with HEARING
471 

(b) REPORT.—Not later than 18 months after the date of enactment of this Act, the Comptroller General of the United States shall 

submit a report on the results of the study conducted under subsection (a) to— 

(1) the Committee on Banking, Housing, and Urban Affairs 

of the United States Senate; and 

(2) the Committee on Financial Services of the House of 

Representatives. 

SEC. 919. CLARIFICATION OF COMMISSION AUTHORITY TO REQUIRE 

INVESTOR DISCLOSURES BEFORE PURCHASE OF INVESTMENT PRODUCTS AND SERVICES. 

Section 15 of the Securities Exchange Act of 1934 (15 U.S.C. 

78o) is amended by adding at the end the following: 

‘‘(n) DISCLOSURES TO RETAIL INVESTORS.— ‘‘(1) IN GENERAL.—Notwithstanding any other provision of 

the securities laws, the Commission may issue rules designating 

documents or information that shall be provided by a broker or 

dealer to a retail investor before the purchase of an investment 

product or service by the retail investor. 

‘‘(2) CONSIDERATIONS.—In developing any rules under 

paragraph (1), the Commission shall consider whether the rules 

will promote investor protection, efficiency, competition, and 

capital formation. 

‘‘(3) FORM AND CONTENTS OF DOCUMENTS AND INFORMA- TION.—Any documents or information designated under a rule 

promulgated under paragraph (1) shall— 

‘‘(A) be in a summary format; and 

‘‘(B) contain clear and concise information about— 

‘‘(i) investment objectives, strategies, costs, and 

risks; and 

‘‘(ii) any compensation or other financial incentive 

received by a broker, dealer, or other intermediary in 

connection with the purchase of retail investment products.’’. 

SEC. 919A. STUDY ON CONFLICTS OF INTEREST. 

(a) IN GENERAL.—The Comptroller General of the United States 

shall conduct a study— 

(1) to identify and examine potential conflicts of interest 

that exist between the staffs of the investment banking and equity and fixed income securities analyst functions within the 

same firm; and 

(2) to make recommendations to Congress designed to protect investors in light of such conflicts. 

(b) CONSIDERATIONS.—In conducting the study under subsection (a), the Comptroller General shall— 

(1) consider— 

(A) the potential for investor harm resulting from conflicts, including consideration of the forms of misconduct 

engaged in by the several securities firms and individuals 

that entered into the Global Analyst Research Settlements 

in 2003 (also known as the ‘‘Global Settlement’’); 

(B) the nature and benefits of the undertakings to 

which those firms agreed in enforcement proceedings, including firewalls between research and investment banking, separate reporting lines, dedicated legal and compliVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00475 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
472 

ance staffs, allocation of budget, physical separation, compensation, employee performance evaluations, coverage decisions, limitations on soliciting investment banking business, disclosures, transparency, and other measures; 

(C) whether any such undertakings should be codified 

and applied permanently to securities firms, or whether the 

Commission should adopt rules applying any such undertakings to securities firms; and 

(D) whether to recommend regulatory or legislative 

measures designed to mitigate possible adverse consequences to investors arising from the conflicts of interest 

or to enhance investor protection or confidence in the integrity of the securities markets; and 

(2) consult with State attorneys general, State securities officials, the Commission, the Financial Industry Regulatory Authority (‘‘FINRA’’), NYSE Regulation, investor advocates, brokers, dealers, retail investors, institutional investors, and academics. 

(c) REPORT.—The Comptroller General shall submit a report on 

the results of the study required by this section to the Committee on 

Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives, not 

later than 18 months after the date of enactment of this Act. 

SEC. 919B. STUDY ON IMPROVED INVESTOR ACCESS TO INFORMATION 

ON INVESTMENT ADVISERS AND BROKER-DEALERS. 

(a) STUDY.— (1) IN GENERAL.—Not later than 6 months after the date of 

enactment of this Act, the Commission shall complete a study, 

including recommendations of ways to improve the access of investors to registration information (including disciplinary actions, regulatory, judicial, and arbitration proceedings, and 

other information) about registered and previously registered 

investment advisers, associated persons of investment advisers, 

brokers and dealers and their associated persons on the existing 

Central Registration Depository and Investment Adviser Registration Depository systems, as well as identify additional information that should be made publicly available. 

(2) CONTENTS.—The study required by subsection (a) shall 

include an analysis of the advantages and disadvantages of 

further centralizing access to the information contained in the 

2 systems, including— 

(A) identification of those data pertinent to investors; 

and 

(B) the identification of the method and format for displaying and publishing such data to enhance accessibility 

by and utility to investors. 

(b) IMPLEMENTATION.—Not later than 18 months after the date 

of completion of the study required by subsection (a), the Commission shall implement any recommendations of the study. 

SEC. 919C. STUDY ON FINANCIAL PLANNERS AND THE USE OF FINANCIAL DESIGNATIONS. 

(a) IN GENERAL.—The Comptroller General of the United States 

shall conduct a study to evaluate— 

(1) the effectiveness of State and Federal regulations to protect investors and other consumers from individuals who hold 


sroberts on DSKD5P82C1PROD with HEARING
473 

themselves out as financial planners through the use of misleading titles, designations, or marketing materials; 

(2) current State and Federal oversight structure and regulations for financial planners; and 

(3) legal or regulatory gaps in the regulation of financial 

planners and other individuals who provide or offer to provide 

financial planning services to consumers. 

(b) CONSIDERATIONS.—In conducting the study required under 

subsection (a), the Comptroller General shall consider— 

(1) the role of financial planners in providing advice regarding the management of financial resources, including investment planning, income tax planning, education planning, 

retirement planning, estate planning, and risk management; 

(2) whether current regulations at the State and Federal 

level provide adequate ethical and professional standards for financial planners; 

(3) the possible risk posed to investors and other consumers 

by individuals who hold themselves out as financial planners 

or as otherwise providing financial planning services in connection with the sale of financial products, including insurance 

and securities; 

(4) the possible risk posed to investors and other consumers 

by individuals who otherwise use titles, designations, or marketing materials in a misleading way in connection with the delivery of financial advice; 

(6) the ability of investors and other consumers to understand licensing requirements and standards of care that apply 

to individuals who hold themselves out as financial planners or 

as otherwise providing financial planning services; 

(7) the possible benefits to investors and other consumers of 

regulation and professional oversight of financial planners; and 

(8) any other consideration that the Comptroller General 

deems necessary or appropriate to effectively execute the study 

required under subsection (a). 

(c) RECOMMENDATIONS.—In providing recommendations for the 

appropriate regulation of financial planners and other individuals 

who provide or offer to provide financial planning services, in order 

to protect investors and other consumers of financial planning services, the Comptroller General shall consider— 

(1) the appropriate structure for regulation of financial 

planners and individuals providing financial planning services; 

and 

(2) the appropriate scope of the regulations needed to protect investors and other consumers, including but not limited to 

the need to establish competency standards, practice standards, 

ethical guidelines, disciplinary authority, and transparency to 

investors and other consumers. 

(d) REPORT.— 

(1) IN GENERAL.—Not later than 180 days after the date of 

enactment of this Act, the Comptroller General shall submit a 

report on the study required under subsection (a) to— 

(A) the Committee on Banking, Housing, and Urban 

Affairs of the Senate; 

(B) the Special Committee on Aging of the Senate; and 


sroberts on DSKD5P82C1PROD with HEARING
474 

(C) the Committee on Financial Services of the House 

of Representatives. 

(2) CONTENT REQUIREMENTS.—The report required under 

paragraph (1) shall describe the findings and determinations 

made by the Comptroller General in carrying out the study required under subsection (a), including a description of the considerations, analysis, and government, public, industry, nonprofit and consumer input that the Comptroller General considered to make such findings, conclusions, and legislative, regulatory, or other recommendations. 

SEC. 919D. OMBUDSMAN. 

Section 4(g) of the Securities Exchange Act of 1934, as added 

by section 914, is amended by adding at the end the following: 

‘‘(8) OMBUDSMAN.— 

‘‘(A) APPOINTMENT.—Not later than 180 days after the 

date on which the first Investor Advocate is appointed 

under paragraph (2)(A)(i), the Investor Advocate shall appoint an Ombudsman, who shall report directly to the Investor Advocate. 

‘‘(B) DUTIES.—The Ombudsman appointed under subparagraph (A) shall— 

‘‘(i) act as a liaison between the Commission and 

any retail investor in resolving problems that retail investors may have with the Commission or with self-regulatory organizations; 

‘‘(ii) review and make recommendations regarding 

policies and procedures to encourage persons to present 

questions to the Investor Advocate regarding compliance with the securities laws; and 

‘‘(iii) establish safeguards to maintain the confidentiality of communications between the persons described in clause (ii) and the Ombudsman. 

‘‘(C) LIMITATION.—In carrying out the duties of the 

Ombudsman under subparagraph (B), the Ombudsman 

shall utilize personnel of the Commission to the extent practicable. Nothing in this paragraph shall be construed as replacing, altering, or diminishing the activities of any ombudsman or similar office of any other agency. 

‘‘(D) REPORT.—The Ombudsman shall submit a semiannual report to the Investor Advocate that describes the 

activities and evaluates the effectiveness of the Ombudsman 

during the preceding year. The Investor Advocate shall include the reports required under this section in the reports 

required to be submitted by the Inspector Advocate under 

paragraph (6).’’. 

Subtitle B—Increasing Regulatory Enforcement and 

Remedies 

SEC. 921. AUTHORITY TO RESTRICT MANDATORY PRE-DISPUTE ARBITRATION. 

(a) AMENDMENT TO SECURITIES EXCHANGE ACT OF 1934.—Section 15 of the Securities Exchange Act of 1934 (15 U.S.C. 78o), as 

amended by this title, is further amended by adding at the end the 

following new subsection: 


sroberts on DSKD5P82C1PROD with HEARING
475 

‘‘(o) AUTHORITY TO RESTRICT MANDATORY PRE-DISPUTE ARBITRATION.—The Commission, by rule, may prohibit, or impose conditions or limitations on the use of, agreements that require customers 

or clients of any broker, dealer, or municipal securities dealer to arbitrate any future dispute between them arising under the Federal 

securities laws, the rules and regulations thereunder, or the rules of 

a self-regulatory organization if it finds that such prohibition, imposition of conditions, or limitations are in the public interest and for 

the protection of investors.’’. 

(b) AMENDMENT TO INVESTMENT ADVISERS ACT OF 1940.—Section 205 of the Investment Advisers Act of 1940 (15 U.S.C. 80b–5) 

is amended by adding at the end the following new subsection: 

‘‘(f) AUTHORITY TO RESTRICT MANDATORY PRE-DISPUTE ARBITRATION.—The Commission, by rule, may prohibit, or impose conditions or limitations on the use of, agreements that require customers 

or clients of any investment adviser to arbitrate any future dispute 

between them arising under the Federal securities laws, the rules 

and regulations thereunder, or the rules of a self-regulatory organization if it finds that such prohibition, imposition of conditions, or 

limitations are in the public interest and for the protection of investors.’’. 

SEC. 922. WHISTLEBLOWER PROTECTION. 

(a) IN GENERAL.—The Securities Exchange Act of 1934 (15 

U.S.C. 78a et seq.) is amended by inserting after section 21E the following: 

‘‘SEC. 21F. SECURITIES WHISTLEBLOWER INCENTIVES AND PROTECTION. 

‘‘(a) DEFINITIONS.—In this section the following definitions 

shall apply: 

‘‘(1) COVERED JUDICIAL OR ADMINISTRATIVE ACTION.—The 

term ‘covered judicial or administrative action’ means any judicial or administrative action brought by the Commission under 

the securities laws that results in monetary sanctions exceeding 

$1,000,000. 

‘‘(2) FUND.—The term ‘Fund’ means the Securities and Exchange Commission Investor Protection Fund. 

‘‘(3) ORIGINAL INFORMATION.—The term ‘original information’ means information that— 

‘‘(A) is derived from the independent knowledge or 

analysis of a whistleblower; 

‘‘(B) is not known to the Commission from any other 

source, unless the whistleblower is the original source of the 

information; and 

‘‘(C) is not exclusively derived from an allegation made 

in a judicial or administrative hearing, in a governmental 

report, hearing, audit, or investigation, or from the news 

media, unless the whistleblower is a source of the information. 

‘‘(4) MONETARY SANCTIONS.—The term ‘monetary sanctions’, 

when used with respect to any judicial or administrative action, 

means— 

‘‘(A) any monies, including penalties, disgorgement, 

and interest, ordered to be paid; and 


sroberts on DSKD5P82C1PROD with HEARING
476 

‘‘(B) any monies deposited into a disgorgement fund or 

other fund pursuant to section 308(b) of the Sarbanes-Oxley 

Act of 2002 (15 U.S.C. 7246(b)), as a result of such action 

or any settlement of such action. 

‘‘(5) RELATED ACTION.—The term ‘related action’, when used 

with respect to any judicial or administrative action brought by 

the Commission under the securities laws, means any judicial 

or administrative action brought by an entity described in subclauses (I) through (IV) of subsection (h)(2)(D)(i) that is based 

upon the original information provided by a whistleblower pursuant to subsection (a) that led to the successful enforcement of 

the Commission action. 

‘‘(6) WHISTLEBLOWER.—The term ‘whistleblower’ means any 

individual who provides, or 2 or more individuals acting jointly 

who provide, information relating to a violation of the securities 

laws to the Commission, in a manner established, by rule or 

regulation, by the Commission. 

‘‘(b) AWARDS.— ‘‘(1) IN GENERAL.—In any covered judicial or administrative action, or related action, the Commission, under regulations prescribed by the Commission and subject to subsection 

(c), shall pay an award or awards to 1 or more whistleblowers 

who voluntarily provided original information to the Commission that led to the successful enforcement of the covered judicial or administrative action, or related action, in an aggregate 

amount equal to— 

‘‘(A) not less than 10 percent, in total, of what has been 

collected of the monetary sanctions imposed in the action or 

related actions; and 

‘‘(B) not more than 30 percent, in total, of what has 

been collected of the monetary sanctions imposed in the action or related actions. 

‘‘(2) PAYMENT OF AWARDS.—Any amount paid under paragraph (1) shall be paid from the Fund. 

‘‘(c) DETERMINATION OF AMOUNT OF AWARD; DENIAL OF

AWARD.— 

‘‘(1) DETERMINATION OF AMOUNT OF AWARD.— ‘‘(A) DISCRETION.—The determination of the amount of 

an award made under subsection (b) shall be in the discretion of the Commission. 

‘‘(B) CRITERIA.—In determining the amount of an 

award made under subsection (b), the Commission— 

‘‘(i) shall take into consideration— 

‘‘(I) the significance of the information provided by the whistleblower to the success of the 

covered judicial or administrative action; 

‘‘(II) the degree of assistance provided by the 

whistleblower and any legal representative of the 

whistleblower in a covered judicial or administrative action; 

‘‘(III) the programmatic interest of the Commission in deterring violations of the securities 

laws by making awards to whistleblowers who 

provide information that lead to the successful enforcement of such laws; and 


sroberts on DSKD5P82C1PROD with HEARING
477 

‘‘(IV) such additional relevant factors as the 

Commission may establish by rule or regulation; 

and 

‘‘(ii) shall not take into consideration the balance 

of the Fund. 

‘‘(2) DENIAL OF AWARD.—No award under subsection (b) 

shall be made— 

‘‘(A) to any whistleblower who is, or was at the time the 

whistleblower acquired the original information submitted 

to the Commission, a member, officer, or employee of— 

‘‘(i) an appropriate regulatory agency; 

‘‘(ii) the Department of Justice; 

‘‘(iii) a self-regulatory organization; 

‘‘(iv) the Public Company Accounting Oversight 

Board; or 

‘‘(v) a law enforcement organization; 

‘‘(B) to any whistleblower who is convicted of a criminal violation related to the judicial or administrative action 

for which the whistleblower otherwise could receive an 

award under this section; 

‘‘(C) to any whistleblower who gains the information 

through the performance of an audit of financial statements 

required under the securities laws and for whom such submission would be contrary to the requirements of section 

10A of the Securities Exchange Act of 1934 (15 U.S.C. 78j– 

1); or 

‘‘(D) to any whistleblower who fails to submit information to the Commission in such form as the Commission 

may, by rule, require. 

‘‘(d) REPRESENTATION.— ‘‘(1) PERMITTED REPRESENTATION.—Any whistleblower who 

makes a claim for an award under subsection (b) may be represented by counsel. 

‘‘(2) REQUIRED REPRESENTATION.— 

‘‘(A) IN GENERAL.—Any whistleblower who anonymously makes a claim for an award under subsection (b) 

shall be represented by counsel if the whistleblower anonymously submits the information upon which the claim is 

based. 

‘‘(B) DISCLOSURE OF IDENTITY.—Prior to the payment 

of an award, a whistleblower shall disclose the identity of 

the whistleblower and provide such other information as 

the Commission may require, directly or through counsel 

for the whistleblower. 

‘‘(e) NO CONTRACT NECESSARY.—No contract with the Commission is necessary for any whistleblower to receive an award under 

subsection (b), unless otherwise required by the Commission by rule 

or regulation. 

‘‘(f) APPEALS.—Any determination made under this section, including whether, to whom, or in what amount to make awards, 

shall be in the discretion of the Commission. Any such determination, except the determination of the amount of an award if the 

award was made in accordance with subsection (b), may be appealed to the appropriate court of appeals of the United States not 

more than 30 days after the determination is issued by the CommisVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00481 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
478 

sion. The court shall review the determination made by the Commission in accordance with section 706 of title 5, United States 

Code. 

‘‘(g) INVESTOR PROTECTION FUND.— ‘‘(1) FUND ESTABLISHED.—There is established in the Treasury of the United States a fund to be known as the ‘Securities 

and Exchange Commission Investor Protection Fund’. 

‘‘(2) USE OF FUND.—The Fund shall be available to the 

Commission, without further appropriation or fiscal year limitation, for— 

‘‘(A) paying awards to whistleblowers as provided in 

subsection (b); and 

‘‘(B) funding the activities of the Inspector General of 

the Commission under section 4(i). 

‘‘(3) DEPOSITS AND CREDITS.— ‘‘(A) IN GENERAL.—There shall be deposited into or 

credited to the Fund an amount equal to— 

‘‘(i) any monetary sanction collected by the Commission in any judicial or administrative action 

brought by the Commission under the securities laws 

that is not added to a disgorgement fund or other fund 

under section 308 of the Sarbanes-Oxley Act of 2002 

(15 U.S.C. 7246) or otherwise distributed to victims of 

a violation of the securities laws, or the rules and regulations thereunder, underlying such action, unless the 

balance of the Fund at the time the monetary sanction 

is collected exceeds $300,000,000; 

‘‘(ii) any monetary sanction added to a 

disgorgement fund or other fund under section 308 of 

the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7246) that 

is not distributed to the victims for whom the Fund 

was established, unless the balance of the disgorgement 

fund at the time the determination is made not to distribute the monetary sanction to such victims exceeds 

$200,000,000; and 

‘‘(iii) all income from investments made under 

paragraph (4). 

‘‘(B) ADDITIONAL AMOUNTS.—If the amounts deposited 

into or credited to the Fund under subparagraph (A) are 

not sufficient to satisfy an award made under subsection 

(b), there shall be deposited into or credited to the Fund an 

amount equal to the unsatisfied portion of the award from 

any monetary sanction collected by the Commission in the 

covered judicial or administrative action on which the 

award is based. 

‘‘(4) INVESTMENTS.— 

‘‘(A) AMOUNTS IN FUND MAY BE INVESTED.—The Commission may request the Secretary of the Treasury to invest 

the portion of the Fund that is not, in the discretion of the 

Commission, required to meet the current needs of the 

Fund. 

‘‘(B) ELIGIBLE INVESTMENTS.—Investments shall be 

made by the Secretary of the Treasury in obligations of the 

United States or obligations that are guaranteed as to principal and interest by the United States, with maturities 


sroberts on DSKD5P82C1PROD with HEARING
479 

suitable to the needs of the Fund as determined by the 

Commission on the record. 

‘‘(C) INTEREST AND PROCEEDS CREDITED.—The interest 

on, and the proceeds from the sale or redemption of, any 

obligations held in the Fund shall be credited to the Fund. 

‘‘(5) REPORTS TO CONGRESS.—Not later than October 30 of 

each fiscal year beginning after the date of enactment of this 

subsection, the Commission shall submit to the Committee on 

Banking, Housing, and Urban Affairs of the Senate, and the 

Committee on Financial Services of the House of Representatives a report on— 

‘‘(A) the whistleblower award program, established 

under this section, including— 

‘‘(i) a description of the number of awards granted; 

and 

‘‘(ii) the types of cases in which awards were granted during the preceding fiscal year; 

‘‘(B) the balance of the Fund at the beginning of the 

preceding fiscal year; 

‘‘(C) the amounts deposited into or credited to the Fund 

during the preceding fiscal year; 

‘‘(D) the amount of earnings on investments made 

under paragraph (4) during the preceding fiscal year; 

‘‘(E) the amount paid from the Fund during the preceding fiscal year to whistleblowers pursuant to subsection 

(b); 

‘‘(F) the balance of the Fund at the end of the preceding 

fiscal year; and 

‘‘(G) a complete set of audited financial statements, including— 

‘‘(i) a balance sheet; 

‘‘(ii) income statement; and 

‘‘(iii) cash flow analysis. 

‘‘(h) PROTECTION OF WHISTLEBLOWERS.— 

‘‘(1) PROHIBITION AGAINST RETALIATION.— ‘‘(A) IN GENERAL.—No employer may discharge, demote, suspend, threaten, harass, directly or indirectly, or in 

any other manner discriminate against, a whistleblower in 

the terms and conditions of employment because of any 

lawful act done by the whistleblower— 

‘‘(i) in providing information to the Commission in 

accordance with this section; 

‘‘(ii) in initiating, testifying in, or assisting in any 

investigation or judicial or administrative action of the 

Commission based upon or related to such information; 

or 

‘‘(iii) in making disclosures that are required or 

protected under the Sarbanes-Oxley Act of 2002 (15 

U.S.C. 7201 et seq.), the Securities Exchange Act of 

1934 (15 U.S.C. 78a et seq.), including section 10A(m) 

of such Act (15 U.S.C. 78f(m)), section 1513(e) of title 

18, United States Code, and any other law, rule, or 

regulation subject to the jurisdiction of the Commission. 

‘‘(B) ENFORCEMENT.— 


sroberts on DSKD5P82C1PROD with HEARING
480 

‘‘(i) CAUSE OF ACTION.—An individual who alleges 

discharge or other discrimination in violation of subparagraph (A) may bring an action under this subsection in the appropriate district court of the United 

States for the relief provided in subparagraph (C). 

‘‘(ii) SUBPOENAS.—A subpoena requiring the attendance of a witness at a trial or hearing conducted 

under this section may be served at any place in the 

United States. 

‘‘(iii) STATUTE OF LIMITATIONS.— ‘‘(I) IN GENERAL.—An action under this subsection may not be brought— 

‘‘(aa) more than 6 years after the date on 

which the violation of subparagraph (A) occurred; or 

‘‘(bb) more than 3 years after the date 

when facts material to the right of action are 

known or reasonably should have been known 

by the employee alleging a violation of subparagraph (A). 

‘‘(II) REQUIRED ACTION WITHIN 10 YEARS.—Notwithstanding subclause (I), an action under this 

subsection may not in any circumstance be brought 

more than 10 years after the date on which the violation occurs. 

‘‘(C) RELIEF.—Relief for an individual prevailing in an 

action brought under subparagraph (B) shall include— 

‘‘(i) reinstatement with the same seniority status 

that the individual would have had, but for the discrimination; 

‘‘(ii) 2 times the amount of back pay otherwise 

owed to the individual, with interest; and 

‘‘(iii) compensation for litigation costs, expert witness fees, and reasonable attorneys’ fees. 

‘‘(2) CONFIDENTIALITY.— ‘‘(A) IN GENERAL.—Except as provided in subparagraphs (B) and (C), the Commission and any officer or employee of the Commission shall not disclose any information, including information provided by a whistleblower to 

the Commission, which could reasonably be expected to reveal the identity of a whistleblower, except in accordance 

with the provisions of section 552a of title 5, United States 

Code, unless and until required to be disclosed to a defendant or respondent in connection with a public proceeding 

instituted by the Commission or any entity described in 

subparagraph (C). For purposes of section 552 of title 5, 

United States Code, this paragraph shall be considered a 

statute described in subsection (b)(3)(B) of such section. 

‘‘(B) EXEMPTED STATUTE.—For purposes of section 552 

of title 5, United States Code, this paragraph shall be considered a statute described in subsection (b)(3)(B) of such 

section 552. 

‘‘(C) RULE OF CONSTRUCTION.—Nothing in this section 

is intended to limit, or shall be construed to limit, the ability of the Attorney General to present such evidence to a 


sroberts on DSKD5P82C1PROD with HEARING
481 

grand jury or to share such evidence with potential witnesses or defendants in the course of an ongoing criminal 

investigation. 

‘‘(D) AVAILABILITY TO GOVERNMENT AGENCIES.— 

‘‘(i) IN GENERAL.—Without the loss of its status as 

confidential in the hands of the Commission, all information referred to in subparagraph (A) may, in the 

discretion of the Commission, when determined by the 

Commission to be necessary to accomplish the purposes 

of this Act and to protect investors, be made available 

to— 

‘‘(I) the Attorney General of the United States; 

‘‘(II) an appropriate regulatory authority; 

‘‘(III) a self-regulatory organization; 

‘‘(IV) a State attorney general in connection 

with any criminal investigation; 

‘‘(V) any appropriate State regulatory authority; 

‘‘(VI) the Public Company Accounting Oversight Board; 

‘‘(VII) a foreign securities authority; and 

‘‘(VIII) a foreign law enforcement authority. 

‘‘(ii) CONFIDENTIALITY.— 

‘‘(I) IN GENERAL.—Each of the entities described in subclauses (I) through (VI) of clause (i) 

shall maintain such information as confidential in 

accordance with the requirements established 

under subparagraph (A). 

‘‘(II) FOREIGN AUTHORITIES.—Each of the entities described in subclauses (VII) and (VIII) of 

clause (i) shall maintain such information in accordance with such assurances of confidentiality as 

the Commission determines appropriate. 

‘‘(3) RIGHTS RETAINED.—Nothing in this section shall be 

deemed to diminish the rights, privileges, or remedies of any 

whistleblower under any Federal or State law, or under any 

collective bargaining agreement. 

‘‘(i) PROVISION OF FALSE INFORMATION.—A whistleblower shall 

not be entitled to an award under this section if the whistleblower— 

‘‘(1) knowingly and willfully makes any false, fictitious, or 

fraudulent statement or representation; or 

‘‘(2) uses any false writing or document knowing the writing or document contains any false, fictitious, or fraudulent 

statement or entry. 

‘‘(j) RULEMAKING AUTHORITY.—The Commission shall have the 

authority to issue such rules and regulations as may be necessary 

or appropriate to implement the provisions of this section consistent 

with the purposes of this section.’’. 

(b) PROTECTION FOR EMPLOYEES OF NATIONALLY RECOGNIZED

STATISTICAL RATING ORGANIZATIONS.—Section 1514A(a) of title 18, 

United States Code, is amended— 

(1) by inserting ‘‘or nationally recognized statistical rating 

organization (as defined in section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c),’’ after ‘‘78o(d)),’’; and 


sroberts on DSKD5P82C1PROD with HEARING
482 

(2) by inserting ‘‘or nationally recognized statistical rating 

organization’’ after ‘‘such company’’. 

(c) SECTION 1514A OF TITLE 18, UNITED STATES CODE.— (1) STATUTE OF LIMITATIONS; JURY TRIAL.—Section 

1514A(b)(2) of title 18, United States Code, is amended— 

(A) in subparagraph (D)— 

(i) by striking ‘‘90’’ and inserting ‘‘180’’; and 

(ii) by striking the period at the end and inserting 

‘‘, or after the date on which the employee became 

aware of the violation.’’; and 

(B) by adding at the end the following: 

‘‘(E) JURY TRIAL.—A party to an action brought under 

paragraph (1)(B) shall be entitled to trial by jury.’’. 

(2) PRIVATE SECURITIES LITIGATION WITNESSES; NON- ENFORCEABILITY; INFORMATION.—Section 1514A of title 18, 

United States Code, is amended by adding at the end the following: 

‘‘(e) NONENFORCEABILITY OF CERTAIN PROVISIONS WAIVING

RIGHTS AND REMEDIES OR REQUIRING ARBITRATION OF DISPUTES.— ‘‘(1) WAIVER OF RIGHTS AND REMEDIES.—The rights and 

remedies provided for in this section may not be waived by any 

agreement, policy form, or condition of employment, including 

by a predispute arbitration agreement. 

‘‘(2) PREDISPUTE ARBITRATION AGREEMENTS.—No 

predispute arbitration agreement shall be valid or enforceable, 

if the agreement requires arbitration of a dispute arising under 

this section.’’. 

(d) STUDY OF WHISTLEBLOWER PROTECTION PROGRAM.— (1) STUDY.—The Inspector General of the Commission shall 

conduct a study of the whistleblower protections established 

under the amendments made by this section, including— 

(A) whether the final rules and regulation issued under 

the amendments made by this section have made the whistleblower protection program (referred to in this subsection 

as the ‘‘program’’) clearly defined and user-friendly; 

(B) whether the program is promoted on the website of 

the Commission and has been widely publicized; 

(C) whether the Commission is prompt in— 

(i) responding to— 

(I) information provided by whistleblowers; 

and 

(II) applications for awards filed by whistleblowers; 

(ii) updating whistleblowers about the status of 

their applications; and 

(iii) otherwise communicating with the interested 

parties; 

(D) whether the minimum and maximum reward levels 

are adequate to entice whistleblowers to come forward with 

information and whether the reward levels are so high as 

to encourage illegitimate whistleblower claims; 

(E) whether the appeals process has been unduly burdensome for the Commission; 

(F) whether the funding mechanism for the Investor 

Protection Fund is adequate; 


sroberts on DSKD5P82C1PROD with HEARING
483 

(G) whether, in the interest of protecting investors and 

identifying and preventing fraud, it would be useful for 

Congress to consider empowering whistleblowers or other 

individuals, who have already attempted to pursue the case 

through the Commission, to have a private right of action 

to bring suit based on the facts of the same case, on behalf 

of the Government and themselves, against persons who 

have committee securities fraud; 

(H)(i) whether the exemption under section 552(b)(3) of 

title 5 (known as the Freedom of Information Act) established in section 21F(h)(2)(A) of the Securities Exchange 

Act of 1934, as added by this Act, aids whistleblowers in 

disclosing information to the Commission; 

(ii) what impact the exemption described in clause (i) 

has had on the ability of the public to access information 

about the regulation and enforcement by the Commission of 

securities; and 

(iii) any recommendations on whether the exemption 

described in clause (i) should remain in effect; and 

(I) such other matters as the Inspector General deems 

appropriate. 

(2) REPORT.—Not later than 30 months after the date of enactment of this Act, the Inspector General shall— 

(A) submit a report on the findings of the study required under paragraph (1) to the Committee on Banking, 

Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House; and 

(B) make the report described in subparagraph (A) 

available to the public through publication of the report on 

the website of the Commission. 

SEC. 923. CONFORMING AMENDMENTS FOR WHISTLEBLOWER PROTECTION. 

(a) IN GENERAL.— (1) SECURITIES ACT OF 1933.—Section 20(d)(3)(A) of the Securities Act of 1933 (15 U.S.C. 77t(d)(3)(A)) is amended by inserting ‘‘and section 21F of the Securities Exchange Act of 1934’’ 

after ‘‘the Sarbanes-Oxley Act of 2002’’. 

(2) INVESTMENT COMPANY ACT OF 1940.—Section 42(e)(3)(A) 

of the Investment Company Act of 1940 (15 U.S.C. 80a– 

41(e)(3)(A)) is amended by inserting ‘‘and section 21F of the Securities Exchange Act of 1934’’ after ‘‘the Sarbanes-Oxley Act of 

2002’’. 

(3) INVESTMENT ADVISERS ACT OF 1940.—Section 

209(e)(3)(A) of the Investment Advisers Act of 1940 (15 U.S.C. 

80b–9(e)(3)(A)) is amended by inserting ‘‘and section 21F of the 

Securities Exchange Act of 1934’’ after ‘‘the Sarbanes-Oxley Act 

of 2002’’. 

(b) SECURITIES EXCHANGE ACT.— 

(1) SECTION 21.—Section 21(d)(3)(C)(i) of the Securities Exchange Act of 1934 (15 U.S.C. 78u(d)(3)(C)(i)) is amended by inserting ‘‘and section 21F of this title’’ after ‘‘the Sarbanes-Oxley 

Act of 2002’’. 

(2) SECTION 21A.—Section 21A of the Securities Exchange 

Act of 1934 (15 U.S.C. 78u–1) is amended— 

(A) in subsection (d)(1) by— 


sroberts on DSKD5P82C1PROD with HEARING
484 

(i) striking ‘‘(subject to subsection (e))’’; and 

(ii) inserting ‘‘and section 21F of this title’’ after 

‘‘the Sarbanes-Oxley Act of 2002’’; 

(B) by striking subsection (e); and 

(C) by redesignating subsections (f) and (g) as subsections (e) and (f), respectively. 

SEC. 924. IMPLEMENTATION AND TRANSITION PROVISIONS FOR WHISTLEBLOWER PROTECTION. 

(a) IMPLEMENTING RULES.—The Commission shall issue final 

regulations implementing the provisions of section 21F of the Securities Exchange Act of 1934, as added by this subtitle, not later than 

270 days after the date of enactment of this Act. 

(b) ORIGINAL INFORMATION.—Information provided to the Commission in writing by a whistleblower shall not lose the status of 

original information (as defined in section 21F(a)(3) of the Securities Exchange Act of 1934, as added by this subtitle) solely because 

the whistleblower provided the information prior to the effective 

date of the regulations, if the information is provided by the whistleblower after the date of enactment of this subtitle. 

(c) AWARDS.—A whistleblower may receive an award pursuant 

to section 21F of the Securities Exchange Act of 1934, as added by 

this subtitle, regardless of whether any violation of a provision of 

the securities laws, or a rule or regulation thereunder, underlying 

the judicial or administrative action upon which the award is 

based, occurred prior to the date of enactment of this subtitle. 

(d) ADMINISTRATION AND ENFORCEMENT.—The Securities and 

Exchange Commission shall establish a separate office within the 

Commission to administer and enforce the provisions of section 21F 

of the Securities Exchange Act of 1934 (as added by section 922(a)). 

Such office shall report annually to the Committee on Banking, 

Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives on its activities, 

whistleblower complaints, and the response of the Commission to 

such complaints. 

SEC. 925. COLLATERAL BARS. 

(a) SECURITIES EXCHANGE ACT OF 1934.— 

(1) SECTION 15.—Section 15(b)(6)(A) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(b)(6)(A)) is amended by striking ‘‘12 months, or bar such person from being associated with 

a broker or dealer,’’ and inserting ‘‘12 months, or bar any such 

person from being associated with a broker, dealer, investment 

adviser, municipal securities dealer, municipal advisor, transfer 

agent, or nationally recognized statistical rating organization,’’. 

(2) SECTION 15B.—Section 15B(c)(4) of the Securities Exchange Act of 1934 (15 U.S.C. 78o–4(c)(4)) is amended by striking ‘‘twelve months or bar any such person from being associated with a municipal securities dealer,’’ and inserting ‘‘12 

months or bar any such person from being associated with a 

broker, dealer, investment adviser, municipal securities dealer, 

municipal advisor, transfer agent, or nationally recognized statistical rating organization,’’. 

(3) SECTION 17A.—Section 17A(c)(4)(C) of the Securities Exchange Act of 1934 (15 U.S.C. 78q–1(c)(4)(C)) is amended by 

striking ‘‘twelve months or bar any such person from being asVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00488 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
485 

sociated with the transfer agent,’’ and inserting ‘‘12 months or 

bar any such person from being associated with any transfer 

agent, broker, dealer, investment adviser, municipal securities 

dealer, municipal advisor, or nationally recognized statistical 

rating organization,’’. 

(b) INVESTMENT ADVISERS ACT OF 1940.—Section 203(f) of the 

Investment Advisers Act of 1940 (15 U.S.C. 80b–3(f)) is amended by 

striking ‘‘twelve months or bar any such person from being associated with an investment adviser,’’ and inserting ‘‘12 months or bar 

any such person from being associated with an investment adviser, 

broker, dealer, municipal securities dealer, municipal advisor, 

transfer agent, or nationally recognized statistical rating organization,’’. 

SEC. 926. DISQUALIFYING FELONS AND OTHER ‘‘BAD ACTORS’’ FROM 

REGULATION D OFFERINGS. 

Not later than 1 year after the date of enactment of this Act, 

the Commission shall issue rules for the disqualification of offerings 

and sales of securities made under section 230.506 of title 17, Code 

of Federal Regulations, that— 

(1) are substantially similar to the provisions of section 

230.262 of title 17, Code of Federal Regulations, or any successor thereto; and 

(2) disqualify any offering or sale of securities by a person 

that— 

(A) is subject to a final order of a State securities commission (or an agency or officer of a State performing like 

functions), a State authority that supervises or examines 

banks, savings associations, or credit unions, a State insurance commission (or an agency or officer of a State performing like functions), an appropriate Federal banking 

agency, or the National Credit Union Administration, 

that— 

(i) bars the person from— 

(I) association with an entity regulated by 

such commission, authority, agency, or officer; 

(II) engaging in the business of securities, insurance, or banking; or 

(III) engaging in savings association or credit 

union activities; or 

(ii) constitutes a final order based on a violation of 

any law or regulation that prohibits fraudulent, manipulative, or deceptive conduct within the 10-year period ending on the date of the filing of the offer or sale; 

or 

(B) has been convicted of any felony or misdemeanor in 

connection with the purchase or sale of any security or involving the making of any false filing with the Commission. 

SEC. 927. EQUAL TREATMENT OF SELF-REGULATORY ORGANIZATION 

RULES. 

Section 29(a) of the Securities Exchange Act of 1934 (15 U.S.C. 

78cc(a)) is amended by striking ‘‘an exchange required thereby’’ and 

inserting ‘‘a self-regulatory organization,’’. 


sroberts on DSKD5P82C1PROD with HEARING
486 

SEC. 928. CLARIFICATION THAT SECTION 205 OF THE INVESTMENT ADVISERS ACT OF 1940 DOES NOT APPLY TO STATE-REGISTERED ADVISERS. 

Section 205(a) of the Investment Advisers Act of 1940 (15 

U.S.C. 80b–5(a)) is amended, in the matter preceding paragraph 

(1)— 

(1) by striking ‘‘, unless exempt from registration pursuant 

to section 203(b),’’ and inserting ‘‘registered or required to be 

registered with the Commission’’; 

(2) by striking ‘‘make use of the mails or any means or instrumentality of interstate commerce, directly or indirectly, to’’; 

and 

(3) by striking ‘‘to’’ after ‘‘in any way’’. 

SEC. 929. UNLAWFUL MARGIN LENDING. 

Section 7(c)(1)(A) of the Securities Exchange Act of 1934 (15 

U.S.C. 78g(c)(1)(A)) is amended by striking ‘‘; and’’ and inserting ‘‘; 

or’’. 

SEC. 929A. PROTECTION FOR EMPLOYEES OF SUBSIDIARIES AND AFFILIATES OF PUBLICLY TRADED COMPANIES. 

Section 1514A of title 18, United States Code, is amended by 

inserting ‘‘including any subsidiary or affiliate whose financial information is included in the consolidated financial statements of 

such company’’ after ‘‘the Securities Exchange Act of 1934 (15 

U.S.C. 78o(d))’’. 

SEC. 929B. FAIR FUND AMENDMENTS. 

Section 308 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 

7246(a)) is amended— 

(1) by striking subsection (a) and inserting the following: 

‘‘(a) CIVIL PENALTIES TO BE USED FOR THE RELIEF OF VIC- TIMS.—If, in any judicial or administrative action brought by the 

Commission under the securities laws, the Commission obtains a 

civil penalty against any person for a violation of such laws, or such 

person agrees, in settlement of any such action, to such civil penalty, 

the amount of such civil penalty shall, on the motion or at the direction of the Commission, be added to and become part of a 

disgorgement fund or other fund established for the benefit of the 

victims of such violation.’’; 

(2) in subsection (b)— 

(A) by striking ‘‘for a disgorgement fund described in 

subsection (a)’’ and inserting ‘‘for a disgorgement fund or 

other fund described in subsection (a)’’; and 

(B) by striking ‘‘in the disgorgement fund’’ and inserting ‘‘in such fund’’; and 

(3) by striking subsection (e). 

SEC. 929C. INCREASING THE BORROWING LIMIT ON TREASURY LOANS. 

Section 4(h) of the Securities Investor Protection Act of 1970 (15 

U.S.C. 78ddd(h)) is amended in the first sentence, by striking 

‘‘$1,000,000,000’’ and inserting ‘‘$2,500,000,000’’. 

SEC. 929D. LOST AND STOLEN SECURITIES. 

Section 17(f)(1) of the Securities Exchange Act of 1934 (15 

U.S.C. 78q(f)(1)) is amended— 

(1) in subparagraph (A), by striking ‘‘missing, lost, counterfeit, or stolen securities’’ and inserting ‘‘securities that are missing, lost, counterfeit, stolen, or cancelled’’; and 


sroberts on DSKD5P82C1PROD with HEARING
487 

(2) in subparagraph (B), by striking ‘‘or stolen’’ and inserting ‘‘stolen, cancelled, or reported in such other manner as the 

Commission, by rule, may prescribe’’. 

SEC. 929E. NATIONWIDE SERVICE OF SUBPOENAS. 

(a) SECURITIES ACT OF 1933.—Section 22(a) of the Securities 

Act of 1933 (15 U.S.C. 77v(a)) is amended by inserting after the second sentence the following: ‘‘In any action or proceeding instituted 

by the Commission under this title in a United States district court 

for any judicial district, a subpoena issued to compel the attendance 

of a witness or the production of documents or tangible things (or 

both) at a hearing or trial may be served at any place within the 

United States. Rule 45(c)(3)(A)(ii) of the Federal Rules of Civil Procedure shall not apply to a subpoena issued under the preceding 

sentence.’’. 

(b) SECURITIES EXCHANGE ACT OF 1934.—Section 27 of the Securities Exchange Act of 1934 (15 U.S.C. 78aa) is amended by inserting after the third sentence the following: ‘‘In any action or proceeding instituted by the Commission under this title in a United 

States district court for any judicial district, a subpoena issued to 

compel the attendance of a witness or the production of documents 

or tangible things (or both) at a hearing or trial may be served at 

any place within the United States. Rule 45(c)(3)(A)(ii) of the Federal Rules of Civil Procedure shall not apply to a subpoena issued 

under the preceding sentence.’’. 

(c) INVESTMENT COMPANY ACT OF 1940.—Section 44 of the Investment Company Act of 1940 (15 U.S.C. 80a–43) is amended by 

inserting after the fourth sentence the following: ‘‘In any action or 

proceeding instituted by the Commission under this title in a United 

States district court for any judicial district, a subpoena issued to 

compel the attendance of a witness or the production of documents 

or tangible things (or both) at a hearing or trial may be served at 

any place within the United States. Rule 45(c)(3)(A)(ii) of the Federal Rules of Civil Procedure shall not apply to a subpoena issued 

under the preceding sentence.’’. 

(d) INVESTMENT ADVISERS ACT OF 1940.—Section 214 of the Investment Advisers Act of 1940 (15 U.S.C. 80b–14) is amended by inserting after the third sentence the following: ‘‘In any action or proceeding instituted by the Commission under this title in a United 

States district court for any judicial district, a subpoena issued to 

compel the attendance of a witness or the production of documents 

or tangible things (or both) at a hearing or trial may be served at 

any place within the United States. Rule 45(c)(3)(A)(ii) of the Federal Rules of Civil Procedure shall not apply to a subpoena issued 

under the preceding sentence.’’. 

SEC. 929F. FORMERLY ASSOCIATED PERSONS. 

(a) MEMBER OR EMPLOYEE OF THE MUNICIPAL SECURITIES

RULEMAKING BOARD.—Section 15B(c)(8) of the Securities Exchange 

Act of 1934 (15 U.S.C. 78o–4(c)(8)) is amended by striking ‘‘any 

member or employee’’ and inserting ‘‘any person who is, or at the 

time of the alleged violation or abuse was, a member or employee’’. 

(b) PERSON ASSOCIATED WITH A GOVERNMENT SECURITIES

BROKER OR DEALER.—Section 15C(c) of the Securities Exchange Act 

of 1934 (15 U.S.C. 78o–5(c)) is amended— 


sroberts on DSKD5P82C1PROD with HEARING
488 

(1) in paragraph (1)(C), by striking ‘‘any person associated, 

or seeking to become associated,’’ and inserting ‘‘any person who 

is, or at the time of the alleged misconduct was, associated or 

seeking to become associated’’; and 

(2) in paragraph (2)— 

(A) in subparagraph (A), by inserting ‘‘, seeking to become associated, or, at the time of the alleged misconduct, 

associated or seeking to become associated’’ after ‘‘any person associated’’; and 

(B) in subparagraph (B), by inserting ‘‘, seeking to become associated, or, at the time of the alleged misconduct, 

associated or seeking to become associated’’ after ‘‘any person associated’’. 

(c) PERSON ASSOCIATED WITH A MEMBER OF A NATIONAL SECU- RITIES EXCHANGE OR REGISTERED SECURITIES ASSOCIATION.—Section 21(a)(1) of the Securities Exchange Act of 1934 (15 U.S.C. 

78u(a)(1)) is amended, in the first sentence, by inserting ‘‘, or, as to 

any act or practice, or omission to act, while associated with a member, formerly associated’’ after ‘‘member or a person associated’’. 

(d) PARTICIPANT OF A REGISTERED CLEARING AGENCY.—Section 

21(a)(1) of the Securities Exchange Act of 1934 (15 U.S.C. 78u(a)(1)) 

is amended, in the first sentence, by inserting ‘‘or, as to any act or 

practice, or omission to act, while a participant, was a participant,’’ 

after ‘‘in which such person is a participant,’’. 

(e) OFFICER OR DIRECTOR OF A SELF-REGULATORY ORGANIZA- TION.—Section 19(h)(4) of the Securities Exchange Act of 1934 (15 

U.S.C. 78s(h)(4)) is amended— 

(1) by striking ‘‘any officer or director’’ and inserting ‘‘any 

person who is, or at the time of the alleged misconduct was, an 

officer or director’’; and 

(2) by striking ‘‘such officer or director’’ and inserting ‘‘such 

person’’. 

(f) OFFICER OR DIRECTOR OF AN INVESTMENT COMPANY.—Section 36(a) of the Investment Company Act of 1940 (15 U.S.C. 80a– 

35(a)) is amended— 

(1) by striking ‘‘a person serving or acting’’ and inserting ‘‘a 

person who is, or at the time of the alleged misconduct was, 

serving or acting’’; and 

(2) by striking ‘‘such person so serves or acts’’ and inserting 

‘‘such person so serves or acts, or at the time of the alleged misconduct, so served or acted’’. 

(g) PERSON ASSOCIATED WITH A PUBLIC ACCOUNTING FIRM.— 

(1) SARBANES-OXLEY ACT OF 2002 AMENDMENT.—Section 

2(a)(9) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7201(9)) is 

amended by adding at the end the following: 

‘‘(C) INVESTIGATIVE AND ENFORCEMENT AUTHORITY.— 

For purposes of sections 3(c), 101(c), 105, and 107(c) and 

the rules of the Board and Commission issued thereunder, 

except to the extent specifically excepted by such rules, the 

terms defined in subparagraph (A) shall include any person associated, seeking to become associated, or formerly 

associated with a public accounting firm, except that— 

‘‘(i) the authority to conduct an investigation of 

such person under section 105(b) shall apply only with 

respect to any act or practice, or omission to act, by the 


sroberts on DSKD5P82C1PROD with HEARING
489 

person while such person was associated or seeking to 

become associated with a registered public accounting 

firm; and 

‘‘(ii) the authority to commence a disciplinary proceeding under section 105(c)(1), or impose sanctions 

under section 105(c)(4), against such person shall 

apply only with respect to— 

‘‘(I) conduct occurring while such person was 

associated or seeking to become associated with a 

registered public accounting firm; or 

‘‘(II) non-cooperation, as described in section 

105(b)(3), with respect to a demand in a Board investigation for testimony, documents, or other information relating to a period when such person 

was associated or seeking to become associated 

with a registered public accounting firm.’’. 

(2) SECURITIES EXCHANGE ACT OF 1934 AMENDMENT.—Section 21(a)(1) of the Securities Exchange Act of 1934 (15 U.S.C. 

78u(a)(1)) is amended by striking ‘‘or a person associated with 

such a firm’’ and inserting ‘‘, a person associated with such a 

firm, or, as to any act, practice, or omission to act, while associated with such firm, a person formerly associated with such a 

firm’’. 

(h) SUPERVISORY PERSONNEL OF AN AUDIT FIRM.—Section 

105(c)(6) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7215(c)(6)) 

is amended— 

(1) in subparagraph (A), by striking ‘‘the supervisory personnel’’ and inserting ‘‘any person who is, or at the time of the 

alleged failure reasonably to supervise was, a supervisory person’’; and 

(2) in subparagraph (B)— 

(A) by striking ‘‘No associated person’’ and inserting 

‘‘No current or former supervisory person’’; and 

(B) by striking ‘‘any other person’’ and inserting ‘‘any 

associated person’’. 

(i) MEMBER OF THE PUBLIC COMPANY ACCOUNTING OVERSIGHT

BOARD.—Section 107(d)(3) of the Sarbanes-Oxley Act of 2002 (15 

U.S.C. 7217(d)(3)) is amended by striking ‘‘any member’’ and inserting ‘‘any person who is, or at the time of the alleged misconduct 

was, a member’’. 

SEC. 929G. STREAMLINED HIRING AUTHORITY FOR MARKET SPECIALISTS. 

(a) APPOINTMENT AUTHORITY.—Section 3114 of title 5, United 

States Code, is amended by striking the section heading and all 

that follows through the end of subsection (a) and inserting the following: 

‘‘§ 3114. Appointment of candidates to certain positions in the 

competitive service by the Securities and Exchange 

Commission 

‘‘(a) APPLICABILITY.—This section applies with respect to any 

position of accountant, economist, and securities compliance examiner at the Commission that is in the competitive service, and any 

position at the Commission in the competitive service that requires 

specialized knowledge of financial and capital market formation or 


sroberts on DSKD5P82C1PROD with HEARING
490 

regulation, financial market structures or surveillance, or information technology.’’. 

(b) CLERICAL AMENDMENT.—The table of sections for chapter 31 

of title 5, United States Code, is amended by striking the item relating to section 3114 and inserting the following: 

‘‘3114. Appointment of candidates to positions in the competitive service by the Securities and Exchange Commission.’’. 

(c) PAY AUTHORITY.—The Commission may set the rate of pay 

for experts and consultants appointed under the authority of section 

3109 of title 5, United States Code, in the same manner in which 

it sets the rate of pay for employees of the Commission. 

SEC. 929H. SIPC REFORMS. 

(a) INCREASING THE CASH LIMIT OF PROTECTION.—Section 9 of 

the Securities Investor Protection Act of 1970 (15 U.S.C. 78fff–3) is 

amended— 

(1) in subsection (a)(1), by striking ‘‘$100,000 for each such 

customer’’ and inserting ‘‘the standard maximum cash advance 

amount for each such customer, as determined in accordance 

with subsection (d)’’; and 

(2) by adding the following new subsections: 

‘‘(d) STANDARD MAXIMUM CASH ADVANCE AMOUNT DEFINED.— 

For purposes of this section, the term ‘standard maximum cash advance amount’ means $250,000, as such amount may be adjusted 

after December 31, 2010, as provided under subsection (e). 

‘‘(e) INFLATION ADJUSTMENT.— 

‘‘(1) IN GENERAL.—Not later than January 1, 2011, and 

every 5 years thereafter, and subject to the approval of the Commission as provided under section 3(e)(2), the Board of Directors of SIPC shall determine whether an inflation adjustment 

to the standard maximum cash advance amount is appropriate. 

If the Board of Directors of SIPC determines such an adjustment is appropriate, then the standard maximum cash advance 

amount shall be an amount equal to— 

‘‘(A) $250,000 multiplied by— 

‘‘(B) the ratio of the annual value of the Personal Consumption Expenditures Chain-Type Price Index (or any successor index thereto), published by the Department of Commerce, for the calendar year preceding the year in which 

such determination is made, to the published annual value 

of such index for the calendar year preceding the year in 

which this subsection was enacted. 

The index values used in calculations under this paragraph 

shall be, as of the date of the calculation, the values most recently published by the Department of Commerce. 

‘‘(2) ROUNDING.—If the standard maximum cash advance 

amount determined under paragraph (1) for any period is not 

a multiple of $10,000, the amount so determined shall be 

rounded down to the nearest $10,000. 

‘‘(3) PUBLICATION AND REPORT TO THE CONGRESS.—Not 

later than April 5 of any calendar year in which a determination is required to be made under paragraph (1)— 

‘‘(A) the Commission shall publish in the Federal Register the standard maximum cash advance amount; and 


sroberts on DSKD5P82C1PROD with HEARING
491 

‘‘(B) the Board of Directors of SIPC shall submit a report to the Congress stating the standard maximum cash 

advance amount. 

‘‘(4) IMPLEMENTATION PERIOD.—Any adjustment to the 

standard maximum cash advance amount shall take effect on 

January 1 of the year immediately succeeding the calendar year 

in which such adjustment is made. 

‘‘(5) INFLATION ADJUSTMENT CONSIDERATIONS.—In making 

any determination under paragraph (1) to increase the standard maximum cash advance amount, the Board of Directors of 

SIPC shall consider— 

‘‘(A) the overall state of the fund and the economic conditions affecting members of SIPC; 

‘‘(B) the potential problems affecting members of SIPC; 

and 

‘‘(C) such other factors as the Board of Directors of 

SIPC may determine appropriate.’’. 

(b) LIQUIDATION OF A CARRYING BROKER-DEALER.—Section 

5(a)(3) of the Securities Investor Protection Act of 1970 (15 U.S.C. 

78eee(a)(3)) is amended— 

(1) by striking the undesignated matter immediately following subparagraph (B); 

(2) in subparagraph (A), by striking ‘‘any member of SIPC’’ 

and inserting ‘‘the member’’; 

(3) in subparagraph (B), by striking the comma at the end 

and inserting a period; 

(4) by striking ‘‘If SIPC’’ and inserting the following: 

‘‘(A) IN GENERAL.—SIPC may, upon notice to a member 

of SIPC, file an application for a protective decree with any 

court of competent jurisdiction specified in section 21(e) or 

27 of the Securities Exchange Act of 1934, except that no 

such application shall be filed with respect to a member, 

the only customers of which are persons whose claims could 

not be satisfied by SIPC advances pursuant to section 9, if 

SIPC’’; and 

(5) by adding at the end the following: 

‘‘(B) CONSENT REQUIRED.—No member of SIPC that 

has a customer may enter into an insolvency, receivership, 

or bankruptcy proceeding, under Federal or State law, 

without the specific consent of SIPC, except as provided in 

title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act.’’. 

SEC. 929I. PROTECTING CONFIDENTIALITY OF MATERIALS SUBMITTED 

TO THE COMMISSION. 

(a) SECURITIES EXCHANGE ACT OF 1934.—Section 24 of the Securities Exchange Act of 1934 (15 U.S.C. 78x) is amended— 

(1) in subsection (d), by striking ‘‘subsection (e)’’ and inserting ‘‘subsection (f)’’; 

(2) by redesignating subsection (e) as subsection (f); and 

(3) by inserting after subsection (d) the following: 

‘‘(e) RECORDS OBTAINED FROM REGISTERED PERSONS.— 

‘‘(1) IN GENERAL.—Except as provided in subsection (f), the 

Commission shall not be compelled to disclose records or information obtained pursuant to section 17(b), or records or information based upon or derived from such records or informaVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00495 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
492 

tion, if such records or information have been obtained by the 

Commission for use in furtherance of the purposes of this title, 

including surveillance, risk assessments, or other regulatory 

and oversight activities. 

‘‘(2) TREATMENT OF INFORMATION.—For purposes of section 

552 of title 5, United States Code, this subsection shall be considered a statute described in subsection (b)(3)(B) of such section 552. Collection of information pursuant to section 17 shall 

be an administrative action involving an agency against specific individuals or agencies pursuant to section 3518(c)(1) of 

title 44, United States Code.’’. 

(b) INVESTMENT COMPANY ACT OF 1940.—Section 31 of the Investment Company Act of 1940 (15 U.S.C. 80a–30) is amended— 

(1) by striking subsection (c) and inserting the following: 

‘‘(c) LIMITATIONS ON DISCLOSURE BY COMMISSION.—Notwithstanding any other provision of law, the Commission shall not be 

compelled to disclose any records or information provided to the 

Commission under this section, or records or information based 

upon or derived from such records or information, if such records 

or information have been obtained by the Commission for use in furtherance of the purposes of this title, including surveillance, risk assessments, or other regulatory and oversight activities. Nothing in 

this subsection authorizes the Commission to withhold information 

from the Congress or prevent the Commission from complying with 

a request for information from any other Federal department or 

agency requesting the information for purposes within the scope of 

jurisdiction of that department or agency, or complying with an 

order of a court of the United States in an action brought by the 

United States or the Commission. For purposes of section 552 of 

title 5, United States Code, this section shall be considered a statute 

described in subsection (b)(3)(B) of such section 552. Collection of 

information pursuant to section 31 shall be an administrative action involving an agency against specific individuals or agencies 

pursuant to section 3518(c)(1) of title 44, United States Code.’’; 

(2) by striking subsection (d); and 

(3) by redesignating subsections (e) and (f) as subsections 

(d) and (e), respectively. 

(c) INVESTMENT ADVISERS ACT OF 1940.—Section 210 of the Investment Advisers Act of 1940 (15 U.S.C. 80b–10) is amended by 

adding at the end the following: 

‘‘(d) LIMITATIONS ON DISCLOSURE BY THE COMMISSION.—Notwithstanding any other provision of law, the Commission shall not 

be compelled to disclose any records or information provided to the 

Commission under section 204, or records or information based 

upon or derived from such records or information, if such records 

or information have been obtained by the Commission for use in furtherance of the purposes of this title, including surveillance, risk assessments, or other regulatory and oversight activities. Nothing in 

this subsection authorizes the Commission to withhold information 

from the Congress or prevent the Commission from complying with 

a request for information from any other Federal department or 

agency requesting the information for purposes within the scope of 

jurisdiction of that department or agency, or complying with an 

order of a court of the United States in an action brought by the 

United States or the Commission. For purposes of section 552 of 


sroberts on DSKD5P82C1PROD with HEARING
493 

title 5, United States Code, this subsection shall be considered a 

statute described in subsection (b)(3)(B) of such section 552. Collection of information pursuant to section 204 shall be an administrative action involving an agency against specific individuals or agencies pursuant to section 3518(c)(1) of title 44, United States Code.’’. 

SEC. 929J. EXPANSION OF AUDIT INFORMATION TO BE PRODUCED 

AND EXCHANGED. 

Section 106 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7216) 

is amended— 

(1) by striking subsection (b) and inserting the following: 

‘‘(b) PRODUCTION OF DOCUMENTS.— ‘‘(1) PRODUCTION BY FOREIGN FIRMS.—If a foreign public 

accounting firm performs material services upon which a registered public accounting firm relies in the conduct of an audit 

or interim review, issues an audit report, performs audit work, 

or conducts interim reviews, the foreign public accounting firm 

shall— 

‘‘(A) produce the audit work papers of the foreign public accounting firm and all other documents of the firm related to any such audit work or interim review to the Commission or the Board, upon request of the Commission or 

the Board; and 

‘‘(B) be subject to the jurisdiction of the courts of the 

United States for purposes of enforcement of any request for 

such documents. 

‘‘(2) OTHER PRODUCTION.—Any registered public accounting 

firm that relies, in whole or in part, on the work of a foreign 

public accounting firm in issuing an audit report, performing 

audit work, or conducting an interim review, shall— 

‘‘(A) produce the audit work papers of the foreign public accounting firm and all other documents related to any 

such work in response to a request for production by the 

Commission or the Board; and 

‘‘(B) secure the agreement of any foreign public accounting firm to such production, as a condition of the reliance by the registered public accounting firm on the work 

of that foreign public accounting firm.’’; 

(2) by redesignating subsection (d) as subsection (g); and 

(3) by inserting after subsection (c) the following: 

‘‘(d) SERVICE OF REQUESTS OR PROCESS.— 

‘‘(1) IN GENERAL.—Any foreign public accounting firm that 

performs work for a domestic registered public accounting firm 

shall furnish to the domestic registered public accounting firm 

a written irrevocable consent and power of attorney that designates the domestic registered public accounting firm as an 

agent upon whom may be served any request by the Commission or the Board under this section or upon whom may be 

served any process, pleadings, or other papers in any action 

brought to enforce this section. 

‘‘(2) SPECIFIC AUDIT WORK.—Any foreign public accounting 

firm that performs material services upon which a registered 

public accounting firm relies in the conduct of an audit or interim review, issues an audit report, performs audit work, or, 

performs interim reviews, shall designate to the Commission or 

the Board an agent in the United States upon whom may be 


sroberts on DSKD5P82C1PROD with HEARING
494 

served any request by the Commission or the Board under this 

section or upon whom may be served any process, pleading, or 

other papers in any action brought to enforce this section. 

‘‘(e) SANCTIONS.—A willful refusal to comply, in whole in or in 

part, with any request by the Commission or the Board under this 

section, shall be deemed a violation of this Act. 

‘‘(f) OTHER MEANS OF SATISFYING PRODUCTION OBLIGATIONS.— Notwithstanding any other provisions of this section, the staff of the 

Commission or the Board may allow a foreign public accounting 

firm that is subject to this section to meet production obligations 

under this section through alternate means, such as through foreign 

counterparts of the Commission or the Board.’’. 

SEC. 929K. SHARING PRIVILEGED INFORMATION WITH OTHER AUTHORITIES. 

Section 24 of the Securities Exchange Act of 1934 (15 U.S.C. 

78x) is amended— 

(1) in subsection (d), as amended by subsection (d)(1)(A), by 

striking ‘‘subsection (f)’’ and inserting ‘‘subsection (g)’’; 

(2) in subsection (e), as added by subsection (d)(1)(C), by 

striking ‘‘subsection (f)’’ and inserting ‘‘subsection (g)’’; 

(3) by redesignating subsection (f) as subsection (g); and 

(4) by inserting after subsection (e) the following: 

‘‘(f) SHARING PRIVILEGED INFORMATION WITH OTHER AUTHORI- TIES.— ‘‘(1) PRIVILEGED INFORMATION PROVIDED BY THE COMMIS- SION.—The Commission shall not be deemed to have waived 

any privilege applicable to any information by transferring that 

information to or permitting that information to be used by— 

‘‘(A) any agency (as defined in section 6 of title 18, 

United States Code); 

‘‘(B) the Public Company Accounting Oversight Board; 

‘‘(C) any self-regulatory organization; 

‘‘(D) any foreign securities authority; 

‘‘(E) any foreign law enforcement authority; or 

‘‘(F) any State securities or law enforcement authority. 

‘‘(2) NONDISCLOSURE OF PRIVILEGED INFORMATION PROVIDED TO THE COMMISSION.—The Commission shall not be compelled to disclose privileged information obtained from any foreign securities authority, or foreign law enforcement authority, 

if the authority has in good faith determined and represented 

to the Commission that the information is privileged. 

‘‘(3) NONWAIVER OF PRIVILEGED INFORMATION PROVIDED TO

THE COMMISSION.— 

‘‘(A) IN GENERAL.—Federal agencies, State securities 

and law enforcement authorities, self-regulatory organizations, and the Public Company Accounting Oversight 

Board shall not be deemed to have waived any privilege applicable to any information by transferring that information to or permitting that information to be used by the 

Commission. 

‘‘(B) EXCEPTION.—The provisions of subparagraph (A) 

shall not apply to a self-regulatory organization or the Public Company Accounting Oversight Board with respect to 

information used by the Commission in an action against 

such organization. 


sroberts on DSKD5P82C1PROD with HEARING
495 

‘‘(4) DEFINITIONS.—For purposes of this subsection— 

‘‘(A) the term ‘privilege’ includes any work-product 

privilege, attorney-client privilege, governmental privilege, 

or other privilege recognized under Federal, State, or foreign law; 

‘‘(B) the term ‘foreign law enforcement authority’ means 

any foreign authority that is empowered under foreign law 

to detect, investigate or prosecute potential violations of 

law; and 

‘‘(C) the term ‘State securities or law enforcement authority’ means the authority of any State or territory that 

is empowered under State or territory law to detect, investigate, or prosecute potential violations of law.’’. 

SEC. 929L. ENHANCED APPLICATION OF ANTIFRAUD PROVISIONS. 

The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is 

amended— 

(1) in section 9— 

(A) by striking ‘‘registered on a national securities exchange’’ each place that term appears and inserting ‘‘other 

than a government security’’; 

(B) in subsection (b), by striking ‘‘by use of any facility 

of a national securities exchange,’’; and 

(C) in subsection (c), by inserting after ‘‘unlawful for 

any’’ the following: ‘‘broker, dealer, or’’; 

(2) in section 10(a)(1), by striking ‘‘registered on a national 

securities exchange’’ and inserting ‘‘other than a government security’’; and 

(3) in section 15(c)(1)(A), by striking ‘‘otherwise than on a 

national securities exchange of which it is a member’’. 

SEC. 929M. AIDING AND ABETTING AUTHORITY UNDER THE SECURITIES ACT AND THE INVESTMENT COMPANY ACT. 

(a) UNDER THE SECURITIES ACT OF 1933.—Section 15 of the Securities Act of 1933 (15 U.S.C. 77o) is amended— 

(1) by striking ‘‘Every person who’’ and inserting ‘‘(a) CONTROLLING PERSONS.—Every person who’’; and 

(2) by adding at the end the following: 

‘‘(b) PROSECUTION OF PERSONS WHO AID AND ABET VIOLATIONS.—For purposes of any action brought by the Commission 

under subparagraph (b) or (d) of section 20, any person that knowingly or recklessly provides substantial assistance to another person 

in violation of a provision of this Act, or of any rule or regulation 

issued under this Act, shall be deemed to be in violation of such provision to the same extent as the person to whom such assistance is 

provided.’’. 

(b) UNDER THE INVESTMENT COMPANY ACT OF 1940.—Section 

48 of the Investment Company Act of 1940 (15 U.S.C. 80a–48) is 

amended by redesignating subsection (b) as subsection (c) and inserting after subsection (a) the following: 

‘‘(b) For purposes of any action brought by the Commission 

under subsection (d) or (e) of section 42, any person that knowingly 

or recklessly provides substantial assistance to another person in 

violation of a provision of this Act, or of any rule or regulation 

issued under this Act, shall be deemed to be in violation of such proVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00499 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
496 

vision to the same extent as the person to whom such assistance is 

provided.’’. 

SEC. 929N. AUTHORITY TO IMPOSE PENALTIES FOR AIDING AND ABETTING VIOLATIONS OF THE INVESTMENT ADVISERS ACT. 

Section 209 of the Investment Advisers Act of 1940 (15 U.S.C. 

80b–9) is amended by inserting at the end the following new subsection: 

‘‘(f) AIDING AND ABETTING.—For purposes of any action brought 

by the Commission under subsection (e), any person that knowingly 

or recklessly has aided, abetted, counseled, commanded, induced, or 

procured a violation of any provision of this Act, or of any rule, regulation, or order hereunder, shall be deemed to be in violation of 

such provision, rule, regulation, or order to the same extent as the 

person that committed such violation.’’. 

SEC. 929O. AIDING AND ABETTING STANDARD OF KNOWLEDGE SATISFIED BY RECKLESSNESS. 

Section 20(e) of the Securities Exchange Act of 1934 (15 U.S.C. 

78t(e)) is amended by inserting ‘‘or recklessly’’ after ‘‘knowingly’’. 

SEC. 929P. STRENGTHENING ENFORCEMENT BY THE COMMISSION. 

(a) AUTHORITY TO IMPOSE CIVIL PENALTIES IN CEASE AND DESIST PROCEEDINGS.— 

(1) UNDER THE SECURITIES ACT OF 1933.—Section 8A of the 

Securities Act of 1933 (15 U.S.C. 77h–1) is amended by adding 

at the end the following new subsection: 

‘‘(g) AUTHORITY TO IMPOSE MONEY PENALTIES.— 

‘‘(1) GROUNDS.—In any cease-and-desist proceeding under 

subsection (a), the Commission may impose a civil penalty on 

a person if the Commission finds, on the record, after notice 

and opportunity for hearing, that— 

‘‘(A) such person— 

‘‘(i) is violating or has violated any provision of 

this title, or any rule or regulation issued under this 

title; or 

‘‘(ii) is or was a cause of the violation of any provision of this title, or any rule or regulation thereunder; 

and 

‘‘(B) such penalty is in the public interest. 

‘‘(2) MAXIMUM AMOUNT OF PENALTY.— 

‘‘(A) FIRST TIER.—The maximum amount of a penalty 

for each act or omission described in paragraph (1) shall 

be $7,500 for a natural person or $75,000 for any other person. 

‘‘(B) SECOND TIER.—Notwithstanding subparagraph 

(A), the maximum amount of penalty for each such act or 

omission shall be $75,000 for a natural person or $375,000 

for any other person, if the act or omission described in 

paragraph (1) involved fraud, deceit, manipulation, or deliberate or reckless disregard of a regulatory requirement. 

‘‘(C) THIRD TIER.—Notwithstanding subparagraphs (A) 

and (B), the maximum amount of penalty for each such act 

or omission shall be $150,000 for a natural person or 

$725,000 for any other person, if— 


sroberts on DSKD5P82C1PROD with HEARING
497 

‘‘(i) the act or omission described in paragraph (1) 

involved fraud, deceit, manipulation, or deliberate or 

reckless disregard of a regulatory requirement; and 

‘‘(ii) such act or omission directly or indirectly resulted in— 

‘‘(I) substantial losses or created a significant 

risk of substantial losses to other persons; or 

‘‘(II) substantial pecuniary gain to the person 

who committed the act or omission. 

‘‘(3) EVIDENCE CONCERNING ABILITY TO PAY.—In any proceeding in which the Commission may impose a penalty under 

this section, a respondent may present evidence of the ability of 

the respondent to pay such penalty. The Commission may, in its 

discretion, consider such evidence in determining whether such 

penalty is in the public interest. Such evidence may relate to the 

extent of the ability of the respondent to continue in business 

and the collectability of a penalty, taking into account any other 

claims of the United States or third parties upon the assets of 

the respondent and the amount of the assets of the respondent.’’. 

(2) UNDER THE SECURITIES EXCHANGE ACT OF 1934.—Section 21B(a) of the Securities Exchange Act of 1934 (15 U.S.C. 

78u–2(a)) is amended— 

(A) by striking the matter following paragraph (4); 

(B) in the matter preceding paragraph (1), by inserting 

after ‘‘opportunity for hearing,’’ the following: ‘‘that such 

penalty is in the public interest and’’; 

(C) by redesignating paragraphs (1) through (4) as subparagraphs (A) through (D), respectively, and adjusting the 

margins accordingly; 

(D) by striking ‘‘In any proceeding’’ and inserting the 

following: 

‘‘(1) IN GENERAL.—In any proceeding’’; and 

(E) by adding at the end the following: 

‘‘(2) CEASE-AND-DESIST PROCEEDINGS.—In any proceeding 

instituted under section 21C against any person, the Commission may impose a civil penalty, if the Commission finds, on the 

record after notice and opportunity for hearing, that such person— 

‘‘(A) is violating or has violated any provision of this 

title, or any rule or regulation issued under this title; or 

‘‘(B) is or was a cause of the violation of any provision 

of this title, or any rule or regulation issued under this 

title.’’. 

(3) UNDER THE INVESTMENT COMPANY ACT OF 1940.—Section 9(d)(1) of the Investment Company Act of 1940 (15 U.S.C. 

80a–9(d)(1)) is amended— 

(A) by striking the matter following subparagraph (C); 

(B) in the matter preceding subparagraph (A), by inserting after ‘‘opportunity for hearing,’’ the following: ‘‘that 

such penalty is in the public interest, and’’; 

(C) by redesignating subparagraphs (A) through (C) as 

clauses (i) through (iii), respectively, and adjusting the 

margins accordingly; 

(D) by striking ‘‘In any proceeding’’ and inserting the 

following: 


sroberts on DSKD5P82C1PROD with HEARING
498 

‘‘(A) IN GENERAL.—In any proceeding’’; and 

(E) by adding at the end the following: 

‘‘(B) CEASE-AND-DESIST PROCEEDINGS.—In any proceeding instituted pursuant to subsection (f) against any 

person, the Commission may impose a civil penalty if the 

Commission finds, on the record, after notice and opportunity for hearing, that such person— 

‘‘(i) is violating or has violated any provision of 

this title, or any rule or regulation issued under this 

title; or 

‘‘(ii) is or was a cause of the violation of any provision of this title, or any rule or regulation issued under 

this title.’’. 

(4) UNDER THE INVESTMENT ADVISERS ACT OF 1940.—Section 203(i)(1) of the Investment Advisers Act of 1940 (15 U.S.C. 

80b–3(i)(1)) is amended— 

(A) by striking the matter following subparagraph (D); 

(B) in the matter preceding subparagraph (A), by inserting after ‘‘opportunity for hearing,’’ the following: ‘‘that 

such penalty is in the public interest and’’; 

(C) by redesignating subparagraphs (A) through (D) as 

clauses (i) through (iv), respectively, and adjusting the margins accordingly; 

(D) by striking ‘‘In any proceeding’’ and inserting the 

following: 

‘‘(A) IN GENERAL.—In any proceeding’’; and 

(E) by adding at the end the following new subparagraph: 

‘‘(B) CEASE-AND-DESIST PROCEEDINGS.—In any proceeding instituted pursuant to subsection (k) against any 

person, the Commission may impose a civil penalty if the 

Commission finds, on the record, after notice and opportunity for hearing, that such person— 

‘‘(i) is violating or has violated any provision of 

this title, or any rule or regulation issued under this 

title; or 

‘‘(ii) is or was a cause of the violation of any provision of this title, or any rule or regulation issued under 

this title.’’. 

(b) EXTRATERRITORIAL JURISDICTION OF THE ANTIFRAUD PROVISIONS OF THE FEDERAL SECURITIES LAWS.— 

(1) UNDER THE SECURITIES ACT OF 1933.—Section 22 of the 

Securities Act of 1933 (15 U.S.C. 77v(a)) is amended by adding 

at the end the following new subsection: 

‘‘(c) EXTRATERRITORIAL JURISDICTION.—The district courts of 

the United States and the United States courts of any Territory 

shall have jurisdiction of an action or proceeding brought or instituted by the Commission or the United States alleging a violation 

of section 17(a) involving— 

‘‘(1) conduct within the United States that constitutes significant steps in furtherance of the violation, even if the securities transaction occurs outside the United States and involves 

only foreign investors; or 

‘‘(2) conduct occurring outside the United States that has a 

foreseeable substantial effect within the United States.’’. 


sroberts on DSKD5P82C1PROD with HEARING
499 

(2) UNDER THE SECURITIES EXCHANGE ACT OF 1934.—Section 27 of the Securities Exchange Act of 1934 (15 U.S.C. 78aa) 

is amended— 

(A) by striking ‘‘The district’’ and inserting the following: 

‘‘(a) IN GENERAL.—The district’’; and 

(B) by adding at the end the following new subsection: 

‘‘(b) EXTRATERRITORIAL JURISDICTION.—The district courts of 

the United States and the United States courts of any Territory 

shall have jurisdiction of an action or proceeding brought or instituted by the Commission or the United States alleging a violation 

of the antifraud provisions of this title involving— 

‘‘(1) conduct within the United States that constitutes significant steps in furtherance of the violation, even if the securities transaction occurs outside the United States and involves 

only foreign investors; or 

‘‘(2) conduct occurring outside the United States that has a 

foreseeable substantial effect within the United States.’’. 

(3) UNDER THE INVESTMENT ADVISERS ACT OF 1940.—Section 214 of the Investment Advisers Act of 1940 (15 U.S.C. 80b– 

14) is amended— 

(A) by striking ‘‘The district’’ and inserting the following: 

‘‘(a) IN GENERAL.—The district’’; and 

(B) by adding at the end the following new subsection: 

‘‘(b) EXTRATERRITORIAL JURISDICTION.—The district courts of 

the United States and the United States courts of any Territory 

shall have jurisdiction of an action or proceeding brought or instituted by the Commission or the United States alleging a violation 

of section 206 involving— 

‘‘(1) conduct within the United States that constitutes significant steps in furtherance of the violation, even if the violation is committed by a foreign adviser and involves only foreign 

investors; or 

‘‘(2) conduct occurring outside the United States that has a 

foreseeable substantial effect within the United States.’’. 

(c) CONTROL PERSON LIABILITY UNDER THE SECURITIES EX- CHANGE ACT OF 1934.—Section 20(a) of the Securities Exchange Act 

of 1934 (15 U.S.C. 78t(a)) is amended by inserting after ‘‘controlled 

person is liable’’ the following: ‘‘(including to the Commission in any 

action brought under paragraph (1) or (3) of section 21(d))’’. 

SEC. 929Q. REVISION TO RECORDKEEPING RULE. 

(a) INVESTMENT COMPANY ACT OF 1940 AMENDMENTS.—Section 

31 of the Investment Company Act of 1940 (15 U.S.C. 80a–30) is 

amended— 

(1) in subsection (a)(1), by adding at the end the following: 

‘‘Each person having custody or use of the securities, deposits, 

or credits of a registered investment company shall maintain 

and preserve all records that relate to the custody or use by 

such person of the securities, deposits, or credits of the registered investment company for such period or periods as the 

Commission, by rule or regulation, may prescribe, as necessary 

or appropriate in the public interest or for the protection of investors.’’; and 

(2) in subsection (b), by adding at the end the following: 


sroberts on DSKD5P82C1PROD with HEARING
500 

‘‘(4) RECORDS OF PERSONS WITH CUSTODY OR USE.— ‘‘(A) IN GENERAL.—Records of persons having custody 

or use of the securities, deposits, or credits of a registered 

investment company that relate to such custody or use, are 

subject at any time, or from time to time, to such reasonable periodic, special, or other examinations and other information and document requests by representatives of the 

Commission, as the Commission deems necessary or appropriate in the public interest or for the protection of investors. 

‘‘(B) CERTAIN PERSONS SUBJECT TO OTHER REGULA- TION.—Any person that is subject to regulation and examination by a Federal financial institution regulatory agency 

(as such term is defined under section 212(c)(2) of title 18, 

United States Code) may satisfy any examination request, 

information request, or document request described under 

subparagraph (A), by providing to the Commission a detailed listing, in writing, of the securities, deposits, or credits of the registered investment company within the custody 

or use of such person.’’. 

(b) INVESTMENT ADVISERS ACT OF 1940 AMENDMENT.—Section 

204 of the Investment Advisers Act of 1940 (15 U.S.C. 80b–4) is 

amended by adding at the end the following new subsection: 

‘‘(d) RECORDS OF PERSONS WITH CUSTODY OR USE.— 

‘‘(1) IN GENERAL.—Records of persons having custody or use 

of the securities, deposits, or credits of a client, that relate to 

such custody or use, are subject at any time, or from time to 

time, to such reasonable periodic, special, or other examinations 

and other information and document requests by representatives of the Commission, as the Commission deems necessary or 

appropriate in the public interest or for the protection of investors. 

‘‘(2) CERTAIN PERSONS SUBJECT TO OTHER REGULATION.— Any person that is subject to regulation and examination by a 

Federal financial institution regulatory agency (as such term is 

defined under section 212(c)(2) of title 18, United States Code) 

may satisfy any examination request, information request, or 

document request described under paragraph (1), by providing 

the Commission with a detailed listing, in writing, of the securities, deposits, or credits of the client within the custody or use 

of such person.’’. 

SEC. 929R. BENEFICIAL OWNERSHIP AND SHORT-SWING PROFIT REPORTING. 

(a) BENEFICIAL OWNERSHIP REPORTING.—Section 13 of the Securities Exchange Act of 1934 (15 U.S.C. 78m) is amended— 

(1) in subsection (d)(1)— 

(A) by inserting after ‘‘within ten days after such acquisition’’ the following: ‘‘or within such shorter time as the 

Commission may establish by rule’’; and 

(B) by striking ‘‘send to the issuer of the security at its 

principal executive office, by registered or certified mail, 

send to each exchange where the security is traded, and’’; 

(2) in subsection (d)(2)— 

(A) by striking ‘‘in the statements to the issuer and the 

exchange, and’’; and 


sroberts on DSKD5P82C1PROD with HEARING
501 

(B) by striking ‘‘shall be transmitted to the issuer and 

the exchange and’’; 

(3) in subsection (g)(1), by striking ‘‘shall send to the issuer 

of the security and’’; and 

(4) in subsection (g)(2)— 

(A) by striking ‘‘sent to the issuer and’’; and 

(B) by striking ‘‘shall be transmitted to the issuer and’’. 

(b) SHORT-SWING PROFIT REPORTING.—Section 16(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78p(a)) is amended— 

(1) in paragraph (1), by striking ‘‘(and, if such security is 

registered on a national securities exchange, also with the exchange)’’; and 

(2) in paragraph (2)(B), by inserting after ‘‘officer’’ the following: ‘‘, or within such shorter time as the Commission may 

establish by rule’’. 

SEC. 929S. FINGERPRINTING. 

Section 17(f)(2) of the Securities Exchange Act of 1934 (15 

U.S.C. 78q(f)(2)) is amended— 

(1) in the first sentence, by striking ‘‘and registered clearing 

agency,’’ and inserting ‘‘registered clearing agency, registered securities information processor, national securities exchange, and 

national securities association’’; and 

(2) in the second sentence, by striking ‘‘or clearing agency,’’ 

and inserting ‘‘clearing agency, securities information processor, 

national securities exchange, or national securities association,’’. 

SEC. 929T. EQUAL TREATMENT OF SELF-REGULATORY ORGANIZATION 

RULES. 

Section 29(a) of the Securities Exchange Act of 1934 (15 U.S.C. 

78cc(a)) is amended by striking ‘‘an exchange required thereby’’ and 

inserting ‘‘a self-regulatory organization,’’. 

SEC. 929U. DEADLINE FOR COMPLETING EXAMINATIONS, INSPECTIONS AND ENFORCEMENT ACTIONS. 

The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is 

amended by inserting after section 4D the following new section: 

‘‘SEC. 4E. DEADLINE FOR COMPLETING ENFORCEMENT INVESTIGATIONS AND COMPLIANCE EXAMINATIONS AND INSPECTIONS. 

‘‘(a) ENFORCEMENT INVESTIGATIONS.— 

‘‘(1) IN GENERAL.—Not later than 180 days after the date 

on which Commission staff provide a written Wells notification 

to any person, the Commission staff shall either file an action 

against such person or provide notice to the Director of the Division of Enforcement of its intent to not file an action. 

‘‘(2) EXCEPTIONS FOR CERTAIN COMPLEX ACTIONS.—Notwithstanding paragraph (1), if the Director of the Division of 

Enforcement of the Commission or the Director’s designee determines that a particular enforcement investigation is sufficiently 

complex such that a determination regarding the filing of an 

action against a person cannot be completed within the deadline specified in paragraph (1), the Director of the Division of 

Enforcement of the Commission or the Director’s designee may, 

after providing notice to the Chairman of the Commission, extend such deadline as needed for one additional 180-day period. 

If after the additional 180-day period the Director of the DiviVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00505 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
502 

sion of Enforcement of the Commission or the Director’s designee determines that a particular enforcement investigation is 

sufficiently complex such that a determination regarding the filing of an action against a person cannot be completed within 

the additional 180-day period, the Director of the Division of 

Enforcement of the Commission or the Director’s designee may, 

after providing notice to and receiving approval of the Commission, extend such deadline as needed for one or more additional 

successive 180-day periods. 

‘‘(b) COMPLIANCE EXAMINATIONS AND INSPECTIONS.— ‘‘(1) IN GENERAL.—Not later than 180 days after the date 

on which Commission staff completes the on-site portion of its 

compliance examination or inspection or receives all records requested from the entity being examined or inspected, whichever 

is later, Commission staff shall provide the entity being examined or inspected with written notification indicating either that 

the examination or inspection has concluded, has concluded 

without findings, or that the staff requests the entity undertake 

corrective action. 

‘‘(2) EXCEPTION FOR CERTAIN COMPLEX ACTIONS.—Notwithstanding paragraph (1), if the head of any division or office 

within the Commission responsible for compliance examinations 

and inspections or his designee determines that a particular 

compliance examination or inspection is sufficiently complex 

such that a determination regarding concluding the examination or inspection, or regarding the staff requests the entity undertake corrective action, cannot be completed within the deadline specified in paragraph (1), the head of any division or office within the Commission responsible for compliance examinations and inspections or his designee may, after providing notice to the Chairman of the Commission, extend such deadline 

as needed for one additional 180-day period.’’. 

SEC. 929V. SECURITY INVESTOR PROTECTION ACT AMENDMENTS. 

(a) INCREASING THE MINIMUM ASSESSMENT PAID BY SIPC 

MEMBERS.—Section 4(d)(1)(C) of the Securities Investor Protection Act of 1970 (15 U.S.C. 78ddd(d)(1)(C)) is amended by striking ‘‘$150 

per annum’’ and inserting the following: ‘‘0.02 percent of the gross 

revenues from the securities business of such member of SIPC’’. 

(b) INCREASING THE FINE FOR PROHIBITED ACTS UNDER

SIPA.—Section 14(c) of the Securities Investor Protection Act of 

1970 (15 U.S.C. 78jjj(c)) is amended— 

(1) in paragraph (1), by striking ‘‘$50,000’’ and inserting 

‘‘$250,000’’; and 

(2) in paragraph (2), by striking ‘‘$50,000’’ and inserting 

‘‘$250,000’’. 

(c) PENALTY FOR MISREPRESENTATION OF SIPC MEMBERSHIP

OR PROTECTION.—Section 14 of the Securities Investor Protection 

Act of 1970 (15 U.S.C. 78jjj) is amended by adding at the end the 

following new subsection: 

‘‘(d) MISREPRESENTATION OF SIPC MEMBERSHIP OR PROTECTION.— 

‘‘(1) IN GENERAL.—Any person who falsely represents by any 

means (including, without limitation, through the Internet or 

any other medium of mass communication), with actual knowledge of the falsity of the representation and with an intent to 


sroberts on DSKD5P82C1PROD with HEARING
503 

deceive or cause injury to another, that such person, or another 

person, is a member of SIPC or that any person or account is 

protected or is eligible for protection under this Act or by SIPC, 

shall be liable for any damages caused thereby and shall be 

fined not more than $250,000 or imprisoned for not more than 

5 years. 

‘‘(2) INJUNCTIONS.—Any court having jurisdiction of a civil 

action arising under this Act may grant temporary injunctions 

and final injunctions on such terms as the court deems reasonable to prevent or restrain any violation of paragraph (1). Any 

such injunction may be served anywhere in the United States 

on the person enjoined, shall be operative throughout the 

United States, and shall be enforceable, by proceedings in contempt or otherwise, by any United States court having jurisdiction over that person. The clerk of the court granting the injunction shall, when requested by any other court in which enforcement of the injunction is sought, transmit promptly to the other 

court a certified copy of all papers in the case on file in such 

clerk’s office.’’. 

SEC. 929W. NOTICE TO MISSING SECURITY HOLDERS. 

Section 17A of the Securities Exchange Act of 1934 (15 U.S.C. 

78q–1) is amended by adding at the end the following new subsection: 

‘‘(g) DUE DILIGENCE FOR THE DELIVERY OF DIVIDENDS, INTEREST, AND OTHER VALUABLE PROPERTY RIGHTS.— 

‘‘(1) REVISION OF RULES REQUIRED.—The Commission shall 

revise its regulations in section 240.17Ad–17 of title 17, Code of 

Federal Regulations, as in effect on December 8, 1997, to extend 

the application of such section to brokers and dealers and to 

provide for the following: 

‘‘(A) A requirement that the paying agent provide a single written notification to each missing security holder that 

the missing security holder has been sent a check that has 

not yet been negotiated. The written notification may be 

sent along with a check or other mailing subsequently sent 

to the missing security holder but must be provided no later 

than 7 months after the sending of the not yet negotiated 

check. 

‘‘(B) An exclusion for paying agents from the notification requirements when the value of the not yet negotiated 

check is less than $25. 

‘‘(C) A provision clarifying that the requirements described in subparagraph (A) shall have no effect on State 

escheatment laws. 

‘‘(D) For purposes of such revised regulations— 

‘‘(i) a security holder shall be considered a ‘missing 

security holder’ if a check is sent to the security holder 

and the check is not negotiated before the earlier of the 

paying agent sending the next regularly scheduled 

check or the elapsing of 6 months after the sending of 

the not yet negotiated check; and 

‘‘(ii) the term ‘paying agent’ includes any issuer, 

transfer agent, broker, dealer, investment adviser, indenture trustee, custodian, or any other person that acVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00507 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
504 

cepts payments from the issuer of a security and distributes the payments to the holders of the security. 

‘‘(2) RULEMAKING.—The Commission shall adopt such 

rules, regulations, and orders necessary to implement this subsection no later than 1 year after the date of enactment of this 

subsection. In proposing such rules, the Commission shall seek 

to minimize disruptions to current systems used by or on behalf 

of paying agents to process payment to account holders and 

avoid requiring multiple paying agents to send written notification to a missing security holder regarding the same not yet negotiated check.’’. 

SEC. 929X. SHORT SALE REFORMS. 

(a) SHORT SALE DISCLOSURE.—Section 13(f) of the Securities 

Exchange Act of 1934 (15 U.S.C. 78m(f)) is amended by redesignating paragraphs (2), (3), (4), and (5) as paragraphs (3), (4), (5), 

and (6), respectively, and inserting after paragraph (1) the following: 

‘‘(2) The Commission shall prescribe rules providing for the 

public disclosure of the name of the issuer and the title, class, 

CUSIP number, aggregate amount of the number of short sales 

of each security, and any additional information determined by 

the Commission following the end of the reporting period. At a 

minimum, such public disclosure shall occur every month.’’. 

(b) SHORT SELLING ENFORCEMENT.—Section 9 of the Securities 

Exchange Act of 1934 (15 U.S.C. 78i) is amended— 

(1) by redesignating subsections (d), (e), (f), (g), (h), and (i) 

as subsections (e), (f), (g), (h), (i), and (j), respectively; and 

(2) inserting after subsection (c), the following new subsection: 

‘‘(d) TRANSACTIONS RELATING TO SHORT SALES OF SECURITIES.—It shall be unlawful for any person, directly or indirectly, by 

the use of the mails or any means or instrumentality of interstate 

commerce, or of any facility of any national securities exchange, or 

for any member of a national securities exchange to effect, alone or 

with one or more other persons, a manipulative short sale of any security. The Commission shall issue such other rules as are necessary 

or appropriate to ensure that the appropriate enforcement options 

and remedies are available for violations of this subsection in the 

public interest or for the protection of investors.’’. 

(c) INVESTOR NOTIFICATION.—Section 15 of the Securities Exchange Act of 1934 (15 U.S.C. 78o) is amended— 

(1) by redesignating subsections (e), (f), (g), (h), and (i) as 

subsections (f), (g), (h), (i), and (j), respectively; and 

(2) inserting after subsection (d) the following new subsection: 

‘‘(e) NOTICES TO CUSTOMERS REGARDING SECURITIES LENDING.—Every registered broker or dealer shall provide notice to its 

customers that they may elect not to allow their fully paid securities 

to be used in connection with short sales. If a broker or dealer uses 

a customer’s securities in connection with short sales, the broker or 

dealer shall provide notice to its customer that the broker or dealer 

may receive compensation in connection with lending the customer’s 

securities. The Commission, by rule, as it deems necessary or appropriate in the public interest and for the protection of investors, may 


sroberts on DSKD5P82C1PROD with HEARING
505 

prescribe the form, content, time, and manner of delivery of any notice required under this paragraph.’’. 

SEC. 929Y. STUDY ON EXTRATERRITORIAL PRIVATE RIGHTS OF ACTION. 

(a) IN GENERAL.—The Securities and Exchange Commission of 

the United States shall solicit public comment and thereafter conduct a study to determine the extent to which private rights of action under the antifraud provisions of the Securities and Exchange 

Act of 1934 (15 U.S.C. 78u–4) should be extended to cover— 

(1) conduct within the United States that constitutes a significant step in the furtherance of the violation, even if the securities transaction occurs outside the United States and involves 

only foreign investors; and 

(2) conduct occurring outside the United States that has a 

foreseeable substantial effect within the United States. 

(b) CONTENTS.—The study shall consider and analyze, among 

other things— 

(1) the scope of such a private right of action, including 

whether it should extend to all private actors or whether it 

should be more limited to extend just to institutional investors 

or otherwise; 

(2) what implications such a private right of action would 

have on international comity; 

(3) the economic costs and benefits of extending a private 

right of action for transnational securities frauds; and 

(4) whether a narrower extraterritorial standard should be 

adopted. 

(c) REPORT.—A report of the study shall be submitted and recommendations made to the Committee on Banking, Housing, and 

Urban Affairs of the Senate and the Committee on Financial Services of the House not later than 18 months after the date of enactment of this Act. 

SEC. 929Z. GAO STUDY ON SECURITIES LITIGATION. 

(a) STUDY.—The Comptroller General of the United States shall 

conduct a study on the impact of authorizing a private right of action against any person who aids or abets another person in violation of the securities laws. To the extent feasible, this study shall include— 

(1) a review of the role of secondary actors in companies 

issuance of securities; 

(2) the courts interpretation of the scope of liability for secondary actors under Federal securities laws after January 14, 

2008; and 

(3) the types of lawsuits decided under the Private Securities Litigation Act of 1995. 

(b) REPORT.—Not later than 1 year after the date of enactment 

of this Act, the Comptroller General shall submit a report to Congress on the findings of the study required under subsection (a). 

Subtitle C—Improvements to the Regulation of Credit Rating 

Agencies 

SEC. 931. FINDINGS. 

Congress finds the following: 


sroberts on DSKD5P82C1PROD with HEARING
506 

(1) Because of the systemic importance of credit ratings and 

the reliance placed on credit ratings by individual and institutional investors and financial regulators, the activities and performances of credit rating agencies, including nationally recognized statistical rating organizations, are matters of national 

public interest, as credit rating agencies are central to capital 

formation, investor confidence, and the efficient performance of 

the United States economy. 

(2) Credit rating agencies, including nationally recognized 

statistical rating organizations, play a critical ‘‘gatekeeper’’ role 

in the debt market that is functionally similar to that of securities analysts, who evaluate the quality of securities in the equity 

market, and auditors, who review the financial statements of 

firms. Such role justifies a similar level of public oversight and 

accountability. 

(3) Because credit rating agencies perform evaluative and 

analytical services on behalf of clients, much as other financial 

‘‘gatekeepers’’ do, the activities of credit rating agencies are fundamentally commercial in character and should be subject to 

the same standards of liability and oversight as apply to auditors, securities analysts, and investment bankers. 

(4) In certain activities, particularly in advising arrangers 

of structured financial products on potential ratings of such 

products, credit rating agencies face conflicts of interest that 

need to be carefully monitored and that therefore should be addressed explicitly in legislation in order to give clearer authority 

to the Securities and Exchange Commission. 

(5) In the recent financial crisis, the ratings on structured 

financial products have proven to be inaccurate. This inaccuracy contributed significantly to the mismanagement of risks by 

financial institutions and investors, which in turn adversely 

impacted the health of the economy in the United States and 

around the world. Such inaccuracy necessitates increased accountability on the part of credit rating agencies. 

SEC. 932. ENHANCED REGULATION, ACCOUNTABILITY, AND TRANSPARENCY OF NATIONALLY RECOGNIZED STATISTICAL 

RATING ORGANIZATIONS. 

(a) IN GENERAL.—Section 15E of the Securities Exchange Act of 

1934 (15 U.S.C. 78o–7) is amended— 

(1) in subsection (b)— 

(A) in paragraph (1)(A), by striking ‘‘furnished’’ and inserting ‘‘filed’’ and by striking ‘‘furnishing’’ and inserting 

‘‘filing’’; 

(B) in paragraph (1)(B), by striking ‘‘furnishing’’ and 

inserting ‘‘filing’’; and 

(C) in the first sentence of paragraph (2), by striking 

‘‘furnish to’’ and inserting ‘‘file with’’; 

(2) in subsection (c)— 

(A) in paragraph (2)— 

(i) in the second sentence, by inserting ‘‘any other 

provision of this section, or’’ after ‘‘Notwithstanding’’; 

and 

(ii) by inserting after the period at the end the following: ‘‘Nothing in this paragraph may be construed 

to afford a defense against any action or proceeding 


sroberts on DSKD5P82C1PROD with HEARING
507 

brought by the Commission to enforce the antifraud 

provisions of the securities laws.’’; and 

(B) by adding at the end the following: 

‘‘(3) INTERNAL CONTROLS OVER PROCESSES FOR DETER- MINING CREDIT RATINGS.— ‘‘(A) IN GENERAL.—Each nationally recognized statistical rating organization shall establish, maintain, enforce, 

and document an effective internal control structure governing the implementation of and adherence to policies, 

procedures, and methodologies for determining credit ratings, taking into consideration such factors as the Commission may prescribe, by rule. 

‘‘(B) ATTESTATION REQUIREMENT.—The Commission 

shall prescribe rules requiring each nationally recognized 

statistical rating organization to submit to the Commission 

an annual internal controls report, which shall contain— 

‘‘(i) a description of the responsibility of the management of the nationally recognized statistical rating 

organization in establishing and maintaining an effective internal control structure under subparagraph (A); 

‘‘(ii) an assessment of the effectiveness of the internal control structure of the nationally recognized statistical rating organization; and 

‘‘(iii) the attestation of the chief executive officer, or 

equivalent individual, of the nationally recognized statistical rating organization.’’; 

(3) in subsection (d)— 

(A) by inserting after ‘‘or revoke the registration of any 

nationally recognized statistical rating organization’’ the 

following: ‘‘, or with respect to any person who is associated 

with, who is seeking to become associated with, or, at the 

time of the alleged misconduct, who was associated or was 

seeking to become associated with a nationally recognized 

statistical rating organization, the Commission, by order, 

shall censure, place limitations on the activities or functions of such person, suspend for a period not exceeding 1 

year, or bar such person from being associated with a nationally recognized statistical rating organization,’’; 

(B) by inserting ‘‘bar’’ after ‘‘placing of limitations, suspension,’’; 

(C) in paragraph (2), by striking ‘‘furnished to’’ and inserting ‘‘filed with’’; 

(D) in paragraph (2), by redesignating subparagraphs 

(A) and (B) as clauses (i) and (ii), respectively, and adjusting the clause margins accordingly; 

(E) by redesignating paragraphs (1) through (5) as subparagraphs (A) through (E), respectively, and adjusting the 

subparagraph margins accordingly; 

(F) in the matter preceding subparagraph (A), as so redesignated, by striking ‘‘The Commission’’ and inserting the 

following: 

‘‘(1) IN GENERAL.—The Commission’’; 

(G) in subparagraph (D), as so redesignated— 

(i) by striking ‘‘furnish’’ and inserting ‘‘file’’; and 

(ii) by striking ‘‘or’’ at the end. 


sroberts on DSKD5P82C1PROD with HEARING
508 

(H) in subparagraph (E), as so redesignated, by striking the period at the end and inserting a semicolon; and 

(I) by adding at the end the following: 

‘‘(F) has failed reasonably to supervise, with a view to 

preventing a violation of the securities laws, an individual 

who commits such a violation, if the individual is subject 

to the supervision of that person. 

‘‘(2) SUSPENSION OR REVOCATION FOR PARTICULAR CLASS OF

SECURITIES.— ‘‘(A) IN GENERAL.—The Commission may temporarily 

suspend or permanently revoke the registration of a nationally recognized statistical rating organization with respect 

to a particular class or subclass of securities, if the Commission finds, on the record after notice and opportunity for 

hearing, that the nationally recognized statistical rating organization does not have adequate financial and managerial resources to consistently produce credit ratings with integrity. 

‘‘(B) CONSIDERATIONS.—In making any determination 

under subparagraph (A), the Commission shall consider— 

‘‘(i) whether the nationally recognized statistical 

rating organization has failed over a sustained period 

of time, as determined by the Commission, to produce 

ratings that are accurate for that class or subclass of 

securities; and 

‘‘(ii) such other factors as the Commission may determine.’’; 

(4) in subsection (h), by adding at the end the following: 

‘‘(3) SEPARATION OF RATINGS FROM SALES AND MAR- KETING.— 

‘‘(A) RULES REQUIRED.—The Commission shall issue 

rules to prevent the sales and marketing considerations of 

a nationally recognized statistical rating organization from 

influencing the production of ratings by the nationally recognized statistical rating organization. 

‘‘(B) CONTENTS OF RULES.—The rules issued under 

subparagraph (A) shall provide for— 

‘‘(i) exceptions for small nationally recognized statistical rating organizations with respect to which the 

Commission determines that the separation of the production of ratings and sales and marketing activities is 

not appropriate; and 

‘‘(ii) suspension or revocation of the registration of 

a nationally recognized statistical rating organization, 

if the Commission finds, on the record, after notice and 

opportunity for a hearing, that— 

‘‘(I) the nationally recognized statistical rating 

organization has committed a violation of a rule 

issued under this subsection; and 

‘‘(II) the violation of a rule issued under this 

subsection affected a rating. 

‘‘(4) LOOK-BACK REQUIREMENT.— ‘‘(A) REVIEW BY THE NATIONALLY RECOGNIZED STATIS- TICAL RATING ORGANIZATION.—Each nationally recognized 

statistical rating organization shall establish, maintain, 


sroberts on DSKD5P82C1PROD with HEARING
509 

and enforce policies and procedures reasonably designed to 

ensure that, in any case in which an employee of a person 

subject to a credit rating of the nationally recognized statistical rating organization or the issuer, underwriter, or 

sponsor of a security or money market instrument subject 

to a credit rating of the nationally recognized statistical 

rating organization was employed by the nationally recognized statistical rating organization and participated in 

any capacity in determining credit ratings for the person or 

the securities or money market instruments during the 1- 

year period preceding the date an action was taken with respect to the credit rating, the nationally recognized statistical rating organization shall— 

‘‘(i) conduct a review to determine whether any 

conflicts of interest of the employee influenced the credit rating; and 

‘‘(ii) take action to revise the rating if appropriate, 

in accordance with such rules as the Commission shall 

prescribe. 

‘‘(B) REVIEW BY COMMISSION.— ‘‘(i) IN GENERAL.—The Commission shall conduct 

periodic reviews of the policies described in subparagraph (A) and the implementation of the policies at 

each nationally recognized statistical rating organization to ensure they are reasonably designed and implemented to most effectively eliminate conflicts of interest. 

‘‘(ii) TIMING OF REVIEWS.—The Commission shall 

review the code of ethics and conflict of interest policy 

of each nationally recognized statistical rating organization— 

‘‘(I) not less frequently than annually; and 

‘‘(II) whenever such policies are materially 

modified or amended. 

‘‘(5) REPORT TO COMMISSION ON CERTAIN EMPLOYMENT

TRANSITIONS.— ‘‘(A) REPORT REQUIRED.—Each nationally recognized 

statistical rating organization shall report to the Commission any case such organization knows or can reasonably 

be expected to know where a person associated with such 

organization within the previous 5 years obtains employment with any obligor, issuer, underwriter, or sponsor of a 

security or money market instrument for which the organization issued a credit rating during the 12-month period 

prior to such employment, if such employee— 

‘‘(i) was a senior officer of such organization; 

‘‘(ii) participated in any capacity in determining 

credit ratings for such obligor, issuer, underwriter, or 

sponsor; or 

‘‘(iii) supervised an employee described in clause 

(ii). 

‘‘(B) PUBLIC DISCLOSURE.—Upon receiving such a report, the Commission shall make such information publicly 

available.’’; 

(5) in subsection (j)— 


sroberts on DSKD5P82C1PROD with HEARING
510 

(A) by striking ‘‘Each’’ and inserting the following: 

‘‘(1) IN GENERAL.—Each’’; and 

(B) by adding at the end the following: 

‘‘(2) LIMITATIONS.— ‘‘(A) IN GENERAL.—Except as provided in subparagraph 

(B), an individual designated under paragraph (1) may 

not, while serving in the designated capacity— 

‘‘(i) perform credit ratings; 

‘‘(ii) participate in the development of ratings 

methodologies or models; 

‘‘(iii) perform marketing or sales functions; or 

‘‘(iv) participate in establishing compensation levels, other than for employees working for that individual. 

‘‘(B) EXCEPTION.—The Commission may exempt a 

small nationally recognized statistical rating organization 

from the limitations under this paragraph, if the Commission finds that compliance with such limitations would impose an unreasonable burden on the nationally recognized 

statistical rating organization. 

‘‘(3) OTHER DUTIES.—Each individual designated under 

paragraph (1) shall establish procedures for the receipt, retention, and treatment of— 

‘‘(A) complaints regarding credit ratings, models, methodologies, and compliance with the securities laws and the 

policies and procedures developed under this section; and 

‘‘(B) confidential, anonymous complaints by employees 

or users of credit ratings. 

‘‘(4) COMPENSATION.—The compensation of each compliance 

officer appointed under paragraph (1) shall not be linked to the 

financial performance of the nationally recognized statistical 

rating organization and shall be arranged so as to ensure the 

independence of the officer’s judgment. 

‘‘(5) ANNUAL REPORTS REQUIRED.— 

‘‘(A) ANNUAL REPORTS REQUIRED.—Each individual 

designated under paragraph (1) shall submit to the nationally recognized statistical rating organization an annual 

report on the compliance of the nationally recognized statistical rating organization with the securities laws and the 

policies and procedures of the nationally recognized statistical rating organization that includes— 

‘‘(i) a description of any material changes to the 

code of ethics and conflict of interest policies of the nationally recognized statistical rating organization; and 

‘‘(ii) a certification that the report is accurate and 

complete. 

‘‘(B) SUBMISSION OF REPORTS TO THE COMMISSION.— 

Each nationally recognized statistical rating organization 

shall file the reports required under subparagraph (A) together with the financial report that is required to be submitted to the Commission under this section.’’; 

(6) in subsection (k), by striking ‘‘furnish to’’ and inserting 

‘‘file with’’; 

(7) in subsection (l)(2)(A)(i), by striking ‘‘furnished’’ and inserting ‘‘filed’’; and 


sroberts on DSKD5P82C1PROD with HEARING
511 

(8) by striking subsection (p) and inserting the following: 

‘‘(p) REGULATION OF NATIONALLY RECOGNIZED STATISTICAL

RATING ORGANIZATIONS.— ‘‘(1) ESTABLISHMENT OF OFFICE OF CREDIT RATINGS.— ‘‘(A) OFFICE ESTABLISHED.—The Commission shall establish within the Commission an Office of Credit Ratings 

(referred to in this subsection as the ‘Office’) to administer 

the rules of the Commission— 

‘‘(i) with respect to the practices of nationally recognized statistical rating organizations in determining 

ratings, for the protection of users of credit ratings and 

in the public interest; 

‘‘(ii) to promote accuracy in credit ratings issued by 

nationally recognized statistical rating organizations; 

and 

‘‘(iii) to ensure that such ratings are not unduly influenced by conflicts of interest. 

‘‘(B) DIRECTOR OF THE OFFICE.—The head of the Office 

shall be the Director, who shall report to the Chairman. 

‘‘(2) STAFFING.—The Office established under this subsection shall be staffed sufficiently to carry out fully the requirements of this section. The staff shall include persons with 

knowledge of and expertise in corporate, municipal, and structured debt finance. 

‘‘(3) COMMISSION EXAMINATIONS.— ‘‘(A) ANNUAL EXAMINATIONS REQUIRED.—The Office 

shall conduct an examination of each nationally recognized 

statistical rating organization at least annually. 

‘‘(B) CONDUCT OF EXAMINATIONS.—Each examination 

under subparagraph (A) shall include a review of— 

‘‘(i) whether the nationally recognized statistical 

rating organization conducts business in accordance 

with the policies, procedures, and rating methodologies 

of the nationally recognized statistical rating organization; 

‘‘(ii) the management of conflicts of interest by the 

nationally recognized statistical rating organization; 

‘‘(iii) implementation of ethics policies by the nationally recognized statistical rating organization; 

‘‘(iv) the internal supervisory controls of the nationally recognized statistical rating organization; 

‘‘(v) the governance of the nationally recognized 

statistical rating organization; 

‘‘(vi) the activities of the individual designated by 

the nationally recognized statistical rating organization under subsection (j)(1); 

‘‘(vii) the processing of complaints by the nationally recognized statistical rating organization; and 

‘‘(viii) the policies of the nationally recognized statistical rating organization governing the post-employment activities of former staff of the nationally recognized statistical rating organization. 

‘‘(C) INSPECTION REPORTS.—The Commission shall 

make available to the public, in an easily understandable 

format, an annual report summarizing— 


sroberts on DSKD5P82C1PROD with HEARING
512 

‘‘(i) the essential findings of all examinations conducted under subparagraph (A), as deemed appropriate 

by the Commission; 

‘‘(ii) the responses by the nationally recognized statistical rating organizations to any material regulatory 

deficiencies identified by the Commission under clause 

(i); and 

‘‘(iii) whether the nationally recognized statistical 

rating organizations have appropriately addressed the 

recommendations of the Commission contained in previous reports under this subparagraph. 

‘‘(4) RULEMAKING AUTHORITY.—The Commission shall— 

‘‘(A) establish, by rule, fines, and other penalties applicable to any nationally recognized statistical rating organization that violates the requirements of this section and the 

rules thereunder; and 

‘‘(B) issue such rules as may be necessary to carry out 

this section. 

‘‘(q) TRANSPARENCY OF RATINGS PERFORMANCE.— ‘‘(1) RULEMAKING REQUIRED.—The Commission shall, by 

rule, require that each nationally recognized statistical rating 

organization publicly disclose information on the initial credit 

ratings determined by the nationally recognized statistical rating organization for each type of obligor, security, and money 

market instrument, and any subsequent changes to such credit 

ratings, for the purpose of allowing users of credit ratings to 

evaluate the accuracy of ratings and compare the performance 

of ratings by different nationally recognized statistical rating 

organizations. 

‘‘(2) CONTENT.—The rules of the Commission under this 

subsection shall require, at a minimum, disclosures that— 

‘‘(A) are comparable among nationally recognized statistical rating organizations, to allow users of credit ratings 

to compare the performance of credit ratings across nationally recognized statistical rating organizations; 

‘‘(B) are clear and informative for investors having a 

wide range of sophistication who use or might use credit 

ratings; 

‘‘(C) include performance information over a range of 

years and for a variety of types of credit ratings, including 

for credit ratings withdrawn by the nationally recognized 

statistical rating organization; 

‘‘(D) are published and made freely available by the 

nationally recognized statistical rating organization, on an 

easily accessible portion of its website, and in writing, 

when requested; 

‘‘(E) are appropriate to the business model of a nationally recognized statistical rating organization; and 

‘‘(F) each nationally recognized statistical rating organization include an attestation with any credit rating it 

issues affirming that no part of the rating was influenced 

by any other business activities, that the rating was based 

solely on the merits of the instruments being rated, and 

that such rating was an independent evaluation of the risks 

and merits of the instrument. 


sroberts on DSKD5P82C1PROD with HEARING
513 

‘‘(r) CREDIT RATINGS METHODOLOGIES.—The Commission shall 

prescribe rules, for the protection of investors and in the public interest, with respect to the procedures and methodologies, including 

qualitative and quantitative data and models, used by nationally 

recognized statistical rating organizations that require each nationally recognized statistical rating organization— 

‘‘(1) to ensure that credit ratings are determined using procedures and methodologies, including qualitative and quantitative data and models, that are— 

‘‘(A) approved by the board of the nationally recognized 

statistical rating organization, a body performing a function similar to that of a board; and 

‘‘(B) in accordance with the policies and procedures of 

the nationally recognized statistical rating organization for 

the development and modification of credit rating procedures and methodologies; 

‘‘(2) to ensure that when material changes to credit rating 

procedures and methodologies (including changes to qualitative 

and quantitative data and models) are made, that— 

‘‘(A) the changes are applied consistently to all credit 

ratings to which the changed procedures and methodologies 

apply; 

‘‘(B) to the extent that changes are made to credit rating surveillance procedures and methodologies, the changes 

are applied to then-current credit ratings by the nationally 

recognized statistical rating organization within a reasonable time period determined by the Commission, by rule; 

and 

‘‘(C) the nationally recognized statistical rating organization publicly discloses the reason for the change; and 

‘‘(3) to notify users of credit ratings— 

‘‘(A) of the version of a procedure or methodology, including the qualitative methodology or quantitative inputs, 

used with respect to a particular credit rating; 

‘‘(B) when a material change is made to a procedure or 

methodology, including to a qualitative model or quantitative inputs; 

‘‘(C) when a significant error is identified in a procedure or methodology, including a qualitative or quantitative model, that may result in credit rating actions; and 

‘‘(D) of the likelihood of a material change described in 

subparagraph (B) resulting in a change in current credit 

ratings. 

‘‘(s) TRANSPARENCY OF CREDIT RATING METHODOLOGIES AND

INFORMATION REVIEWED.— 

‘‘(1) FORM FOR DISCLOSURES.—The Commission shall require, by rule, each nationally recognized statistical rating organization to prescribe a form to accompany the publication of 

each credit rating that discloses— 

‘‘(A) information relating to— 

‘‘(i) the assumptions underlying the credit rating 

procedures and methodologies; 

‘‘(ii) the data that was relied on to determine the 

credit rating; and 


sroberts on DSKD5P82C1PROD with HEARING
514 

‘‘(iii) if applicable, how the nationally recognized 

statistical rating organization used servicer or remittance reports, and with what frequency, to conduct surveillance of the credit rating; and 

‘‘(B) information that can be used by investors and 

other users of credit ratings to better understand credit ratings in each class of credit rating issued by the nationally 

recognized statistical rating organization. 

‘‘(2) FORMAT.—The form developed under paragraph (1) 

shall— 

‘‘(A) be easy to use and helpful for users of credit ratings to understand the information contained in the report; 

‘‘(B) require the nationally recognized statistical rating 

organization to provide the content described in paragraph 

(3)(B) in a manner that is directly comparable across types 

of securities; and 

‘‘(C) be made readily available to users of credit ratings, in electronic or paper form, as the Commission may, 

by rule, determine. 

‘‘(3) CONTENT OF FORM.— 

‘‘(A) QUALITATIVE CONTENT.—Each nationally recognized statistical rating organization shall disclose on the 

form developed under paragraph (1)— 

‘‘(i) the credit ratings produced by the nationally 

recognized statistical rating organization; 

‘‘(ii) the main assumptions and principles used in 

constructing procedures and methodologies, including 

qualitative methodologies and quantitative inputs and 

assumptions about the correlation of defaults across 

underlying assets used in rating structured products; 

‘‘(iii) the potential limitations of the credit ratings, 

and the types of risks excluded from the credit ratings 

that the nationally recognized statistical rating organization does not comment on, including liquidity, market, and other risks; 

‘‘(iv) information on the uncertainty of the credit 

rating, including— 

‘‘(I) information on the reliability, accuracy, 

and quality of the data relied on in determining 

the credit rating; and 

‘‘(II) a statement relating to the extent to which 

data essential to the determination of the credit 

rating were reliable or limited, including— 

‘‘(aa) any limits on the scope of historical 

data; and 

‘‘(bb) any limits in accessibility to certain 

documents or other types of information that 

would have better informed the credit rating; 

‘‘(v) whether and to what extent third party due 

diligence services have been used by the nationally recognized statistical rating organization, a description of 

the information that such third party reviewed in conducting due diligence services, and a description of the 

findings or conclusions of such third party; 


sroberts on DSKD5P82C1PROD with HEARING
515 

‘‘(vi) a description of the data about any obligor, 

issuer, security, or money market instrument that were 

relied upon for the purpose of determining the credit 

rating; 

‘‘(vii) a statement containing an overall assessment 

of the quality of information available and considered 

in producing a rating for an obligor, security, or money 

market instrument, in relation to the quality of information available to the nationally recognized statistical rating organization in rating similar issuances; 

‘‘(viii) information relating to conflicts of interest of 

the nationally recognized statistical rating organization; and 

‘‘(ix) such additional information as the Commission may require. 

‘‘(B) QUANTITATIVE CONTENT.—Each nationally recognized statistical rating organization shall disclose on the 

form developed under this subsection— 

‘‘(i) an explanation or measure of the potential volatility of the credit rating, including— 

‘‘(I) any factors that might lead to a change in 

the credit ratings; and 

‘‘(II) the magnitude of the change that a user 

can expect under different market conditions; 

‘‘(ii) information on the content of the rating, including— 

‘‘(I) the historical performance of the rating; 

and 

‘‘(II) the expected probability of default and the 

expected loss in the event of default; 

‘‘(iii) information on the sensitivity of the rating to 

assumptions made by the nationally recognized statistical rating organization, including— 

‘‘(I) 5 assumptions made in the ratings process 

that, without accounting for any other factor, 

would have the greatest impact on a rating if the 

assumptions were proven false or inaccurate; and 

‘‘(II) an analysis, using specific examples, of 

how each of the 5 assumptions identified under 

subclause (I) impacts a rating; 

‘‘(iv) such additional information as may be required by the Commission. 

‘‘(4) DUE DILIGENCE SERVICES FOR ASSET-BACKED SECURITIES.— 

‘‘(A) FINDINGS.—The issuer or underwriter of any assetbacked security shall make publicly available the findings 

and conclusions of any third-party due diligence report obtained by the issuer or underwriter. 

‘‘(B) CERTIFICATION REQUIRED.—In any case in which 

third-party due diligence services are employed by a nationally recognized statistical rating organization, an issuer, or 

an underwriter, the person providing the due diligence 

services shall provide to any nationally recognized statistical rating organization that produces a rating to which 


sroberts on DSKD5P82C1PROD with HEARING
516 

such services relate, written certification, as provided in 

subparagraph (C). 

‘‘(C) FORMAT AND CONTENT.—The Commission shall establish the appropriate format and content for the written 

certifications required under subparagraph (B), to ensure 

that providers of due diligence services have conducted a 

thorough review of data, documentation, and other relevant 

information necessary for a nationally recognized statistical 

rating organization to provide an accurate rating. 

‘‘(D) DISCLOSURE OF CERTIFICATION.—The Commission 

shall adopt rules requiring a nationally recognized statistical rating organization, at the time at which the nationally recognized statistical rating organization produces a 

rating, to disclose the certification described in subparagraph (B) to the public in a manner that allows the public 

to determine the adequacy and level of due diligence services provided by a third party. 

‘‘(t) CORPORATE GOVERNANCE, ORGANIZATION, AND MANAGEMENT OF CONFLICTS OF INTEREST.— 

‘‘(1) BOARD OF DIRECTORS.—Each nationally recognized statistical rating organization shall have a board of directors. 

‘‘(2) INDEPENDENT DIRECTORS.— 

‘‘(A) IN GENERAL.—At least 1⁄2 of the board of directors, 

but not fewer than 2 of the members thereof, shall be independent of the nationally recognized statistical rating agency. A portion of the independent directors shall include 

users of ratings from a nationally recognized statistical rating organization. 

‘‘(B) INDEPENDENCE DETERMINATION.—In order to be 

considered independent for purposes of this subsection, a 

member of the board of directors of a nationally recognized 

statistical rating organization— 

‘‘(i) may not, other than in his or her capacity as 

a member of the board of directors or any committee 

thereof— 

‘‘(I) accept any consulting, advisory, or other 

compensatory fee from the nationally recognized 

statistical rating organization; or 

‘‘(II) be a person associated with the nationally 

recognized statistical rating organization or with 

any affiliated company thereof; and 

‘‘(ii) shall be disqualified from any deliberation involving a specific rating in which the independent 

board member has a financial interest in the outcome 

of the rating. 

‘‘(C) COMPENSATION AND TERM.—The compensation of 

the independent members of the board of directors of a nationally recognized statistical rating organization shall not 

be linked to the business performance of the nationally recognized statistical rating organization, and shall be arranged so as to ensure the independence of their judgment. 

The term of office of the independent directors shall be for 

a pre-agreed fixed period, not to exceed 5 years, and shall 

not be renewable. 


sroberts on DSKD5P82C1PROD with HEARING
517 

‘‘(3) DUTIES OF BOARD OF DIRECTORS.—In addition to the 

overall responsibilities of the board of directors, the board shall 

oversee— 

‘‘(A) the establishment, maintenance, and enforcement 

of policies and procedures for determining credit ratings; 

‘‘(B) the establishment, maintenance, and enforcement 

of policies and procedures to address, manage, and disclose 

any conflicts of interest; 

‘‘(C) the effectiveness of the internal control system with 

respect to policies and procedures for determining credit 

ratings; and 

‘‘(D) the compensation and promotion policies and 

practices of the nationally recognized statistical rating organization. 

‘‘(4) TREATMENT OF NRSRO SUBSIDIARIES.—If a nationally 

recognized statistical rating organization is a subsidiary of a 

parent entity, the board of the directors of the parent entity may 

satisfy the requirements of this subsection by assigning to a 

committee of such board of directors the duties under paragraph (3), if— 

‘‘(A) at least 1⁄2 of the members of the committee (including the chairperson of the committee) are independent, 

as defined in this section; and 

‘‘(B) at least 1 member of the committee is a user of ratings from a nationally recognized statistical rating organization. 

‘‘(5) EXCEPTION AUTHORITY.—If the Commission finds that 

compliance with the provisions of this subsection present an unreasonable burden on a small nationally recognized statistical 

rating organization, the Commission may permit the nationally 

recognized statistical rating organization to delegate such responsibilities to a committee that includes at least one individual who is a user of ratings of a nationally recognized statistical rating organization.’’. 

(b) CONFORMING AMENDMENT.—Section 3(a)(62) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(62)) is amended by 

striking subparagraph (A) and redesignating subparagraphs (B) 

and (C) as subparagraphs (A) and (B), respectively. 

SEC. 933. STATE OF MIND IN PRIVATE ACTIONS. 

(a) ACCOUNTABILITY.—Section 15E(m) of the Securities Exchange Act of 1934 (15 U.S.C. 78o–7(m)) is amended to read as follows: 

‘‘(m) ACCOUNTABILITY.— 

‘‘(1) IN GENERAL.—The enforcement and penalty provisions 

of this title shall apply to statements made by a credit rating 

agency in the same manner and to the same extent as such provisions apply to statements made by a registered public accounting firm or a securities analyst under the securities laws, 

and such statements shall not be deemed forward-looking statements for the purposes of section 21E. 

‘‘(2) RULEMAKING.—The Commission shall issue such rules 

as may be necessary to carry out this subsection.’’. 

(b) STATE OF MIND.—Section 21D(b)(2) of the Securities Exchange Act of 1934 (15 U.S.C. 78u–4(b)(2)) is amended— 

(1) by striking ‘‘In any’’ and inserting the following: 


sroberts on DSKD5P82C1PROD with HEARING
518 

‘‘(A) IN GENERAL.—Except as provided in subparagraph 

(B), in any’’; and 

(2) by adding at the end the following: 

‘‘(B) EXCEPTION.—In the case of an action for money 

damages brought against a credit rating agency or a controlling person under this title, it shall be sufficient, for 

purposes of pleading any required state of mind in relation 

to such action, that the complaint state with particularity 

facts giving rise to a strong inference that the credit rating 

agency knowingly or recklessly failed— 

‘‘(i) to conduct a reasonable investigation of the 

rated security with respect to the factual elements relied upon by its own methodology for evaluating credit 

risk; or 

‘‘(ii) to obtain reasonable verification of such factual elements (which verification may be based on a 

sampling technique that does not amount to an audit) 

from other sources that the credit rating agency considered to be competent and that were independent of the 

issuer and underwriter.’’. 

SEC. 934. REFERRING TIPS TO LAW ENFORCEMENT OR REGULATORY 

AUTHORITIES. 

Section 15E of the Securities Exchange Act of 1934 (15 U.S.C. 

78o–7), as amended by this subtitle, is amended by adding at the 

end the following: 

‘‘(u) DUTY TO REPORT TIPS ALLEGING MATERIAL VIOLATIONS OF

LAW.— 

‘‘(1) DUTY TO REPORT.—Each nationally recognized statistical rating organization shall refer to the appropriate law enforcement or regulatory authorities any information that the nationally recognized statistical rating organization receives from 

a third party and finds credible that alleges that an issuer of 

securities rated by the nationally recognized statistical rating 

organization has committed or is committing a material violation of law that has not been adjudicated by a Federal or State 

court. 

‘‘(2) RULE OF CONSTRUCTION.—Nothing in paragraph (1) 

may be construed to require a nationally recognized statistical 

rating organization to verify the accuracy of the information described in paragraph (1).’’. 

SEC. 935. CONSIDERATION OF INFORMATION FROM SOURCES OTHER 

THAN THE ISSUER IN RATING DECISIONS. 

Section 15E of the Securities Exchange Act of 1934 (15 U.S.C. 

78o–7), as amended by this subtitle, is amended by adding at the 

end the following: 

‘‘(v) INFORMATION FROM SOURCES OTHER THAN THE ISSUER.— 

In producing a credit rating, a nationally recognized statistical rating organization shall consider information about an issuer that the 

nationally recognized statistical rating organization has, or receives 

from a source other than the issuer or underwriter, that the nationally recognized statistical rating organization finds credible and potentially significant to a rating decision.’’. 


sroberts on DSKD5P82C1PROD with HEARING
519 

SEC. 936. QUALIFICATION STANDARDS FOR CREDIT RATING ANALYSTS. 

Not later than 1 year after the date of enactment of this Act, 

the Commission shall issue rules that are reasonably designed to 

ensure that any person employed by a nationally recognized statistical rating organization to perform credit ratings— 

(1) meets standards of training, experience, and competence 

necessary to produce accurate ratings for the categories of 

issuers whose securities the person rates; and 

(2) is tested for knowledge of the credit rating process. 

SEC. 937. TIMING OF REGULATIONS. 

Unless otherwise specifically provided in this subtitle, the Commission shall issue final regulations, as required by this subtitle 

and the amendments made by this subtitle, not later than 1 year 

after the date of enactment of this Act. 

SEC. 938. UNIVERSAL RATINGS SYMBOLS. 

(a) RULEMAKING.—The Commission shall require, by rule, each 

nationally recognized statistical rating organization to establish, 

maintain, and enforce written policies and procedures that— 

(1) assess the probability that an issuer of a security or 

money market instrument will default, fail to make timely payments, or otherwise not make payments to investors in accordance with the terms of the security or money market instrument; 

(2) clearly define and disclose the meaning of any symbol 

used by the nationally recognized statistical rating organization 

to denote a credit rating; and 

(3) apply any symbol described in paragraph (2) in a manner that is consistent for all types of securities and money market instruments for which the symbol is used. 

(b) RULE OF CONSTRUCTION.—Nothing in this section shall prohibit a nationally recognized statistical rating organization from 

using distinct sets of symbols to denote credit ratings for different 

types of securities or money market instruments. 

SEC. 939. REMOVAL OF STATUTORY REFERENCES TO CREDIT RATINGS. 

(a) FEDERAL DEPOSIT INSURANCE ACT.—The Federal Deposit 

Insurance Act (12 U.S.C. 1811 et seq.) is amended— 

(1) in section 7(b)(1)(E)(i), by striking ‘‘credit rating entities, 

and other private economic’’ and insert ‘‘private economic, credit,’’; 

(2) in section 28(d)— 

(A) in the subsection heading, by striking ‘‘NOT OF IN- VESTMENT GRADE’’; 

(B) in paragraph (1), by striking ‘‘not of investment 

grade’’ and inserting ‘‘that does not meet standards of credit-worthiness as established by the Corporation’’; 

(C) in paragraph (2), by striking ‘‘not of investment 

grade’’; 

(D) by striking paragraph (3); 

(E) by redesignating paragraph (4) as paragraph (3); 

and 

(F) in paragraph (3), as so redesignated— 

(i) by striking subparagraph (A); 

(ii) by redesignating subparagraphs (B) and (C) as 

subparagraphs (A) and (B), respectively; and 


sroberts on DSKD5P82C1PROD with HEARING
520 

(iii) in subparagraph (B), as so redesignated, by 

striking ‘‘not of investment grade’’ and inserting ‘‘that 

does not meet standards of credit-worthiness as established by the Corporation’’; and 

(3) in section 28(e)— 

(A) in the subsection heading, by striking ‘‘NOT OF INVESTMENT GRADE’’; 

(B) in paragraph (1), by striking ‘‘not of investment 

grade’’ and inserting ‘‘that does not meet standards of credit-worthiness as established by the Corporation’’; and 

(C) in paragraphs (2) and (3), by striking ‘‘not of investment grade’’ each place that it appears and inserting 

‘‘that does not meet standards of credit-worthiness established by the Corporation’’. 

(b) FEDERAL HOUSING ENTERPRISES FINANCIAL SAFETY AND

SOUNDNESS ACT OF 1992.—Section 1319 of the Federal Housing 

Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 

4519) is amended by striking ‘‘that is a nationally recognized statistical rating organization, as such term is defined in section 3(a) of 

the Securities Exchange Act of 1934,’’. 

(c) INVESTMENT COMPANY ACT OF 1940.—Section 

6(a)(5)(A)(iv)(I) Investment Company Act of 1940 (15 U.S.C. 80a– 

6(a)(5)(A)(iv)(I)) is amended by striking ‘‘is rated investment grade 

by not less than 1 nationally recognized statistical rating organization’’ and inserting ‘‘meets such standards of credit-worthiness as 

the Commission shall adopt’’. 

(d) REVISED STATUTES.—Section 5136A of title LXII of the Revised Statutes of the United States (12 U.S.C. 24a) is amended— 

(1) in subsection (a)(2)(E), by striking ‘‘any applicable rating’’ and inserting ‘‘standards of credit-worthiness established 

by the Comptroller of the Currency’’; 

(2) in the heading for subsection (a)(3) by striking ‘‘RATING

OR COMPARABLE REQUIREMENT’’ and inserting ‘‘REQUIREMENT’’; 

(3) subsection (a)(3), by amending subparagraph (A) to 

read as follows: 

‘‘(A) IN GENERAL.—A national bank meets the requirements of this paragraph if the bank is one of the 100 largest insured banks and has not fewer than 1 issue of outstanding debt that meets standards of credit-worthiness or 

other criteria as the Secretary of the Treasury and the 

Board of Governors of the Federal Reserve System may 

jointly establish.’’. 

(4) in the heading for subsection (f), by striking ‘‘MAINTAIN

PUBLIC RATING OR’’ and inserting ‘‘MEET STANDARDS OF CREDIT-WORTHINESS’’; and 

(5) in subsection (f)(1), by striking ‘‘any applicable rating’’ 

and inserting ‘‘standards of credit-worthiness established by the 

Comptroller of the Currency’’. 

(e) SECURITIES EXCHANGE ACT OF 1934.—Section 3(a) Securities Exchange Act of 1934 (15 U.S.C. 78a(3)(a)) is amended— 

(1) in paragraph (41), by striking ‘‘is rated in one of the two 

highest rating categories by at least one nationally recognized 

statistical rating organization’’ and inserting ‘‘meets standards 

of credit-worthiness as established by the Commission’’; and 


sroberts on DSKD5P82C1PROD with HEARING
521 

(2) in paragraph (53)(A), by striking ‘‘is rated in 1 of the 

4 highest rating categories by at least 1 nationally recognized 

statistical rating organization’’ and inserting ‘‘meets standards 

of credit-worthiness as established by the Commission’’. 

(f) WORLD BANK DISCUSSIONS.—Section 3(a)(6) of the amendment in the nature of a substitute to the text of H.R. 4645, as ordered reported from the Committee on Banking, Finance and Urban 

Affairs on September 22, 1988, as enacted into law by section 555 

of Public Law 100–461, (22 U.S.C. 286hh(a)(6)), is amended by 

striking ‘‘credit rating’’ and inserting ‘‘credit-worthiness’’. 

(g) EFFECTIVE DATE.—The amendments made by this section 

shall take effect 2 years after the date of enactment of this Act. 

(h) STUDY AND REPORT.— (1) IN GENERAL.—Commission shall undertake a study on 

the feasability and desirability of— 

(A) standardizing credit ratings terminology, so that 

all credit rating agencies issue credit ratings using identical terms; 

(B) standardizing the market stress conditions under 

which ratings are evaluated; 

(C) requiring a quantitative correspondence between 

credit ratings and a range of default probabilities and loss 

expectations under standardized conditions of economic 

stress; and 

(D) standardizing credit rating terminology across 

asset classes, so that named ratings correspond to a standard range of default probabilities and expected losses independent of asset class and issuing entity. 

(2) REPORT.—Not later than 1 year after the date of enactment of this Act, the Commission shall submit to Congress a report containing the findings of the study under paragraph (1) 

and the recommendations, if any, of the Commission with respect to the study. 

SEC. 939A. REVIEW OF RELIANCE ON RATINGS. 

(a) AGENCY REVIEW.—Not later than 1 year after the date of the 

enactment of this subtitle, each Federal agency shall, to the extent 

applicable, review— 

(1) any regulation issued by such agency that requires the 

use of an assessment of the credit-worthiness of a security or 

money market instrument; and 

(2) any references to or requirements in such regulations regarding credit ratings. 

(b) MODIFICATIONS REQUIRED.—Each such agency shall modify 

any such regulations identified by the review conducted under subsection (a) to remove any reference to or requirement of reliance on 

credit ratings and to substitute in such regulations such standard 

of credit-worthiness as each respective agency shall determine as appropriate for such regulations. In making such determination, such 

agencies shall seek to establish, to the extent feasible, uniform 

standards of credit-worthiness for use by each such agency, taking 

into account the entities regulated by each such agency and the purposes for which such entities would rely on such standards of creditworthiness. 

(c) REPORT.—Upon conclusion of the review required under subsection (a), each Federal agency shall transmit a report to Congress 


sroberts on DSKD5P82C1PROD with HEARING
522 

containing a description of any modification of any regulation such 

agency made pursuant to subsection (b). 

SEC. 939B. ELIMINATION OF EXEMPTION FROM FAIR DISCLOSURE 

RULE. 

Not later than 90 days after the date of enactment of this subtitle, the Securities Exchange Commission shall revise Regulation 

FD (17 C.F.R. 243.100) to remove from such regulation the exemption for entities whose primary business is the issuance of credit ratings (17 C.F.R. 243.100(b)(2)(iii)). 

SEC. 939C. SECURITIES AND EXCHANGE COMMISSION STUDY ON 

STRENGTHENING CREDIT RATING AGENCY INDEPENDENCE. 

(a) STUDY.—The Commission shall conduct a study of— 

(1) the independence of nationally recognized statistical rating organizations; and 

(2) how the independence of nationally recognized statistical rating organizations affects the ratings issued by the nationally recognized statistical rating organizations. 

(b) SUBJECTS FOR EVALUATION.—In conducting the study under 

subsection (a), the Commission shall evaluate— 

(1) the management of conflicts of interest raised by a nationally recognized statistical rating organization providing 

other services, including risk management advisory services, 

ancillary assistance, or consulting services; 

(2) the potential impact of rules prohibiting a nationally 

recognized statistical rating organization that provides a rating 

to an issuer from providing other services to the issuer; and 

(3) any other issue relating to nationally recognized statistical rating organizations, as the Chairman of the Commission 

determines is appropriate. 

(c) REPORT.—Not later than 3 years after the date of enactment 

of this Act, the Chairman of the Commission shall submit to the 

Committee on Banking, Housing, and Urban Affairs of the Senate 

and the Committee on Financial Services of the House of Representatives a report on the results of the study conducted under subsection (a), including recommendations, if any, for improving the integrity of ratings issued by nationally recognized statistical rating 

organizations. 

SEC. 939D. GOVERNMENT ACCOUNTABILITY OFFICE STUDY ON ALTERNATIVE BUSINESS MODELS. 

(a) STUDY.—The Comptroller General of the United States shall 

conduct a study on alternative means for compensating nationally 

recognized statistical rating organizations in order to create incentives for nationally recognized statistical rating organizations to 

provide more accurate credit ratings, including any statutory 

changes that would be required to facilitate the use of an alternative 

means of compensation. 

(b) REPORT.—Not later than 18 months after the date of enactment of this Act, the Comptroller General shall submit to the Committee on Banking, Housing, and Urban Affairs of the Senate and 

the Committee on Financial Services of the House of Representatives 

a report on the results of the study conducted under subsection (a), 

including recommendations, if any, for providing incentives to credit rating agencies to improve the credit rating process. 


sroberts on DSKD5P82C1PROD with HEARING
523 

SEC. 939E. GOVERNMENT ACCOUNTABILITY OFFICE STUDY ON THE 

CREATION OF AN INDEPENDENT PROFESSIONAL ANALYST 

ORGANIZATION. 

(a) STUDY.—The Comptroller General of the United States shall 

conduct a study on the feasibility and merits of creating an independent professional organization for rating analysts employed by 

nationally recognized statistical rating organizations that would be 

responsible for— 

(1) establishing independent standards for governing the 

profession of rating analysts; 

(2) establishing a code of ethical conduct; and 

(3) overseeing the profession of rating analysts. 

(b) REPORT.—Not later than 1 year after the date of publication 

of the rules issued by the Commission pursuant to section 936, the 

Comptroller General shall submit to the Committee on Banking, 

Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives a report on the results of the study conducted under subsection (a). 

SEC. 939F. STUDY AND RULEMAKING ON ASSIGNED CREDIT RATINGS. 

(a) DEFINITION.—In this section, the term ‘‘structured finance 

product’’ means an asset-backed security, as defined in section 

3(a)(77) of the Securities Exchange Act of 1934, as added by section 

941, and any structured product based on an asset-backed security, 

as determined by the Commission, by rule. 

(b) STUDY.—The Commission shall carry out a study of— 

(1) the credit rating process for structured finance products 

and the conflicts of interest associated with the issuer-pay and 

the subscriber-pay models; 

(2) the feasibility of establishing a system in which a public 

or private utility or a self-regulatory organization assigns nationally recognized statistical rating organizations to determine 

the credit ratings of structured finance products, including— 

(A) an assessment of potential mechanisms for determining fees for the nationally recognized statistical rating 

organizations; 

(B) appropriate methods for paying fees to the nationally recognized statistical rating organizations; 

(C) the extent to which the creation of such a system 

would be viewed as the creation of moral hazard by the 

Federal Government; and 

(D) any constitutional or other issues concerning the establishment of such a system; 

(3) the range of metrics that could be used to determine the 

accuracy of credit ratings; and 

(4) alternative means for compensating nationally recognized statistical rating organizations that would create incentives for accurate credit ratings. 

(c) REPORT AND RECOMMENDATION.—Not later than 24 months 

after the date of enactment of this Act, the Commission shall submit 

to the Committee on Banking, Housing, and Urban Affairs of the 

Senate and the Committee on Financial Services of the House of 

Representatives a report that contains— 

(1) the findings of the study required under subsection (b); 

and 


sroberts on DSKD5P82C1PROD with HEARING
524 

(2) any recommendations for regulatory or statutory 

changes that the Commission determines should be made to implement the findings of the study required under subsection (b). 

(d) RULEMAKING.— (1) RULEMAKING.—After submission of the report under 

subsection (c), the Commission shall, by rule, as the Commission determines is necessary or appropriate in the public interest or for the protection of investors, establish a system for the 

assignment of nationally recognized statistical rating organizations to determine the initial credit ratings of structured finance 

products, in a manner that prevents the issuer, sponsor, or underwriter of the structured finance product from selecting the 

nationally recognized statistical rating organization that will 

determine the initial credit ratings and monitor such credit ratings. In issuing any rule under this paragraph, the Commission 

shall give thorough consideration to the provisions of section 

15E(w) of the Securities Exchange Act of 1934, as that provision 

would have been added by section 939D of H.R. 4173 (111th 

Congress), as passed by the Senate on May 20, 2010, and shall 

implement the system described in such section 939D unless the 

Commission determines that an alternative system would better 

serve the public interest and the protection of investors. 

(2) RULE OF CONSTRUCTION.—Nothing in this subsection 

may be construed to limit or suspend any other rulemaking authority of the Commission. 

SEC. 939G. EFFECT OF RULE 436(G). 

Rule 436(g), promulgated by the Securities and Exchange Commission under the Securities Act of 1933, shall have no force or effect. 

SEC. 939H. SENSE OF CONGRESS. 

It is the sense of Congress that the Securities and Exchange 

Commission should exercise the rulemaking authority of the Commission under section 15E(h)(2)(B) of the Securities Exchange Act of 

1934 (15 U.S.C. 78o–7(h)(2)(B)) to prevent improper conflicts of interest arising from employees of nationally recognized statistical rating organizations providing services to issuers of securities that are 

unrelated to the issuance of credit ratings, including consulting, advisory, and other services. 

Subtitle D—Improvements to the Asset-Backed Securitization 

Process 

SEC. 941. REGULATION OF CREDIT RISK RETENTION. 

(a) DEFINITION OF ASSET-BACKED SECURITY.—Section 3(a) of 

the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)) is amended 

by adding at the end the following: 

‘‘(77) ASSET-BACKED SECURITY.—The term ‘asset-backed security’— 

‘‘(A) means a fixed-income or other security 

collateralized by any type of self-liquidating financial asset 

(including a loan, a lease, a mortgage, or a secured or unsecured receivable) that allows the holder of the security to 

receive payments that depend primarily on cash flow from 

the asset, including— 

‘‘(i) a collateralized mortgage obligation; 


sroberts on DSKD5P82C1PROD with HEARING
525 

‘‘(ii) a collateralized debt obligation; 

‘‘(iii) a collateralized bond obligation; 

‘‘(iv) a collateralized debt obligation of assetbacked securities; 

‘‘(v) a collateralized debt obligation of 

collateralized debt obligations; and 

‘‘(vi) a security that the Commission, by rule, determines to be an asset-backed security for purposes of 

this section; and 

‘‘(B) does not include a security issued by a finance 

subsidiary held by the parent company or a company controlled by the parent company, if none of the securities 

issued by the finance subsidiary are held by an entity that 

is not controlled by the parent company.’’. 

(b) CREDIT RISK RETENTION.—The Securities Exchange Act of 

1934 (15 U.S.C. 78a et seq.) is amended by inserting after section 

15F, as added by this Act, the following: 

‘‘SEC. 15G. CREDIT RISK RETENTION. 

‘‘(a) DEFINITIONS.—In this section— 

‘‘(1) the term ‘Federal banking agencies’ means the Office of 

the Comptroller of the Currency, the Board of Governors of the 

Federal Reserve System, and the Federal Deposit Insurance 

Corporation; 

‘‘(2) the term ‘insured depository institution’ has the same 

meaning as in section 3(c) of the Federal Deposit Insurance Act 

(12 U.S.C. 1813(c)); 

‘‘(3) the term ‘securitizer’ means— 

‘‘(A) an issuer of an asset-backed security; or 

‘‘(B) a person who organizes and initiates an assetbacked securities transaction by selling or transferring assets, either directly or indirectly, including through an affiliate, to the issuer; and 

‘‘(4) the term ‘originator’ means a person who— 

‘‘(A) through the extension of credit or otherwise, creates a financial asset that collateralizes an asset-backed security; and 

‘‘(B) sells an asset directly or indirectly to a securitizer. 

‘‘(b) REGULATIONS REQUIRED.— ‘‘(1) IN GENERAL.—Not later than 270 days after the date 

of enactment of this section, the Federal banking agencies and 

the Commission shall jointly prescribe regulations to require 

any securitizer to retain an economic interest in a portion of the 

credit risk for any asset that the securitizer, through the 

issuance of an asset-backed security, transfers, sells, or conveys 

to a third party. 

‘‘(2) RESIDENTIAL MORTGAGES.—Not later than 270 days 

after the date of the enactment of this section, the Federal banking agencies, the Commission, the Secretary of Housing and 

Urban Development, and the Federal Housing Finance Agency, 

shall jointly prescribe regulations to require any securitizer to 

retain an economic interest in a portion of the credit risk for 

any residential mortgage asset that the securitizer, through the 

issuance of an asset-backed security, transfers, sells, or conveys 

to a third party. 

‘‘(c) STANDARDS FOR REGULATIONS.— 


sroberts on DSKD5P82C1PROD with HEARING
526 

‘‘(1) STANDARDS.—The regulations prescribed under subsection (b) shall— 

‘‘(A) prohibit a securitizer from directly or indirectly 

hedging or otherwise transferring the credit risk that the 

securitizer is required to retain with respect to an asset; 

‘‘(B) require a securitizer to retain— 

‘‘(i) not less than 5 percent of the credit risk for any 

asset— 

‘‘(I) that is not a qualified residential mortgage that is transferred, sold, or conveyed through 

the issuance of an asset-backed security by the 

securitizer; or 

‘‘(II) that is a qualified residential mortgage 

that is transferred, sold, or conveyed through the 

issuance of an asset-backed security by the 

securitizer, if 1 or more of the assets that 

collateralize the asset-backed security are not 

qualified residential mortgages; or 

‘‘(ii) less than 5 percent of the credit risk for an 

asset that is not a qualified residential mortgage that 

is transferred, sold, or conveyed through the issuance 

of an asset-backed security by the securitizer, if the 

originator of the asset meets the underwriting standards prescribed under paragraph (2)(B); 

‘‘(C) specify— 

‘‘(i) the permissible forms of risk retention for purposes of this section; 

‘‘(ii) the minimum duration of the risk retention required under this section; and 

‘‘(iii) that a securitizer is not required to retain any 

part of the credit risk for an asset that is transferred, 

sold or conveyed through the issuance of an assetbacked security by the securitizer, if all of the assets 

that collateralize the asset-backed security are qualified 

residential mortgages; 

‘‘(D) apply, regardless of whether the securitizer is an 

insured depository institution; 

‘‘(E) with respect to a commercial mortgage, specify the 

permissible types, forms, and amounts of risk retention that 

would meet the requirements of subparagraph (B), which in 

the determination of the Federal banking agencies and the 

Commission may include— 

‘‘(i) retention of a specified amount or percentage of 

the total credit risk of the asset; 

‘‘(ii) retention of the first-loss position by a thirdparty purchaser that specifically negotiates for the purchase of such first loss position, holds adequate financial resources to back losses, provides due diligence on 

all individual assets in the pool before the issuance of 

the asset-backed securities, and meets the same standards for risk retention as the Federal banking agencies 

and the Commission require of the securitizer; 

‘‘(iii) a determination by the Federal banking agencies and the Commission that the underwriting standards and controls for the asset are adequate; and 


sroberts on DSKD5P82C1PROD with HEARING
527 

‘‘(iv) provision of adequate representations and 

warranties and related enforcement mechanisms; and 

‘‘(F) establish appropriate standards for retention of an 

economic interest with respect to collateralized debt obligations, securities collateralized by collateralized debt obligations, and similar instruments collateralized by other assetbacked securities; and 

‘‘(G) provide for— 

‘‘(i) a total or partial exemption of any 

securitization, as may be appropriate in the public interest and for the protection of investors; 

‘‘(ii) a total or partial exemption for the 

securitization of an asset issued or guaranteed by the 

United States, or an agency of the United States, as the 

Federal banking agencies and the Commission jointly 

determine appropriate in the public interest and for the 

protection of investors, except that, for purposes of this 

clause, the Federal National Mortgage Association and 

the Federal Home Loan Mortgage Corporation are not 

agencies of the United States; 

‘‘(iii) a total or partial exemption for any assetbacked security that is a security issued or guaranteed 

by any State of the United States, or by any political 

subdivision of a State or territory, or by any public instrumentality of a State or territory that is exempt from 

the registration requirements of the Securities Act of 

1933 by reason of section 3(a)(2) of that Act (15 U.S.C. 

77c(a)(2)), or a security defined as a qualified scholarship funding bond in section 150(d)(2) of the Internal 

Revenue Code of 1986, as may be appropriate in the 

public interest and for the protection of investors; and 

‘‘(iv) the allocation of risk retention obligations between a securitizer and an originator in the case of a 

securitizer that purchases assets from an originator, as 

the Federal banking agencies and the Commission 

jointly determine appropriate. 

‘‘(2) ASSET CLASSES.— ‘‘(A) ASSET CLASSES.—The regulations prescribed 

under subsection (b) shall establish asset classes with separate rules for securitizers of different classes of assets, including residential mortgages, commercial mortgages, commercial loans, auto loans, and any other class of assets that 

the Federal banking agencies and the Commission deem 

appropriate. 

‘‘(B) CONTENTS.—For each asset class established 

under subparagraph (A), the regulations prescribed under 

subsection (b) shall include underwriting standards established by the Federal banking agencies that specify the 

terms, conditions, and characteristics of a loan within the 

asset class that indicate a low credit risk with respect to the 

loan. 

‘‘(d) ORIGINATORS.—In determining how to allocate risk retention obligations between a securitizer and an originator under subsection (c)(1)(E)(iv), the Federal banking agencies and the Commission shall— 


sroberts on DSKD5P82C1PROD with HEARING
528 

‘‘(1) reduce the percentage of risk retention obligations required of the securitizer by the percentage of risk retention obligations required of the originator; and 

‘‘(2) consider— 

‘‘(A) whether the assets sold to the securitizer have 

terms, conditions, and characteristics that reflect low credit 

risk; 

‘‘(B) whether the form or volume of transactions in 

securitization markets creates incentives for imprudent 

origination of the type of loan or asset to be sold to the 

securitizer; and 

‘‘(C) the potential impact of the risk retention obligations on the access of consumers and businesses to credit on 

reasonable terms, which may not include the transfer of 

credit risk to a third party. 

‘‘(e) EXEMPTIONS, EXCEPTIONS, AND ADJUSTMENTS.— ‘‘(1) IN GENERAL.—The Federal banking agencies and the 

Commission may jointly adopt or issue exemptions, exceptions, 

or adjustments to the rules issued under this section, including 

exemptions, exceptions, or adjustments for classes of institutions 

or assets relating to the risk retention requirement and the prohibition on hedging under subsection (c)(1). 

‘‘(2) APPLICABLE STANDARDS.—Any exemption, exception, or 

adjustment adopted or issued by the Federal banking agencies 

and the Commission under this paragraph shall— 

‘‘(A) help ensure high quality underwriting standards 

for the securitizers and originators of assets that are 

securitized or available for securitization; and 

‘‘(B) encourage appropriate risk management practices 

by the securitizers and originators of assets, improve the access of consumers and businesses to credit on reasonable 

terms, or otherwise be in the public interest and for the protection of investors. 

‘‘(3) CERTAIN INSTITUTIONS AND PROGRAMS EXEMPT.— 

‘‘(A) FARM CREDIT SYSTEM INSTITUTIONS.—Notwithstanding any other provision of this section, the requirements of this section shall not apply to any loan or other 

financial asset made, insured, guaranteed, or purchased by 

any institution that is subject to the supervision of the 

Farm Credit Administration, including the Federal Agricultural Mortgage Corporation. 

‘‘(B) OTHER FEDERAL PROGRAMS.—This section shall 

not apply to any residential, multifamily, or health care facility mortgage loan asset, or securitization based directly 

or indirectly on such an asset, which is insured or guaranteed by the United States or an agency of the United States. 

For purposes of this subsection, the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, and the Federal home loan banks shall not be 

considered an agency of the United States. 

‘‘(4) EXEMPTION FOR QUALIFIED RESIDENTIAL MORTGAGES.— 

‘‘(A) IN GENERAL.—The Federal banking agencies, the 

Commission, the Secretary of Housing and Urban Development, and the Director of the Federal Housing Finance 

Agency shall jointly issue regulations to exempt qualified 


sroberts on DSKD5P82C1PROD with HEARING
529 

residential mortgages from the risk retention requirements 

of this subsection. 

‘‘(B) QUALIFIED RESIDENTIAL MORTGAGE.—The Federal 

banking agencies, the Commission, the Secretary of Housing and Urban Development, and the Director of the Federal Housing Finance Agency shall jointly define the term 

‘qualified residential mortgage’ for purposes of this subsection, taking into consideration underwriting and product 

features that historical loan performance data indicate result in a lower risk of default, such as— 

‘‘(i) documentation and verification of the financial 

resources relied upon to qualify the mortgagor; 

‘‘(ii) standards with respect to— 

‘‘(I) the residual income of the mortgagor after 

all monthly obligations; 

‘‘(II) the ratio of the housing payments of the 

mortgagor to the monthly income of the mortgagor; 

‘‘(III) the ratio of total monthly installment 

payments of the mortgagor to the income of the 

mortgagor; 

‘‘(iii) mitigating the potential for payment shock on 

adjustable rate mortgages through product features 

and underwriting standards; 

‘‘(iv) mortgage guarantee insurance or other types 

of insurance or credit enhancement obtained at the 

time of origination, to the extent such insurance or 

credit enhancement reduces the risk of default; and 

‘‘(v) prohibiting or restricting the use of balloon 

payments, negative amortization, prepayment penalties, 

interest-only payments, and other features that have 

been demonstrated to exhibit a higher risk of borrower 

default. 

‘‘(C) LIMITATION ON DEFINITION.—The Federal banking 

agencies, the Commission, the Secretary of Housing and 

Urban Development, and the Director of the Federal Housing Finance Agency in defining the term ‘qualified residential mortgage’, as required by subparagraph (B), shall define that term to be no broader than the definition ‘qualified mortgage’ as the term is defined under section 

129C(c)(2) of the Truth in Lending Act, as amended by the 

Consumer Financial Protection Act of 2010, and regulations adopted thereunder. 

‘‘(5) CONDITION FOR QUALIFIED RESIDENTIAL MORTGAGE EXEMPTION.—The regulations issued under paragraph (4) shall 

provide that an asset-backed security that is collateralized by 

tranches of other asset-backed securities shall not be exempt 

from the risk retention requirements of this subsection. 

‘‘(6) CERTIFICATION.—The Commission shall require an 

issuer to certify, for each issuance of an asset-backed security 

collateralized exclusively by qualified residential mortgages, 

that the issuer has evaluated the effectiveness of the internal supervisory controls of the issuer with respect to the process for 

ensuring that all assets that collateralize the asset-backed security are qualified residential mortgages. 


sroberts on DSKD5P82C1PROD with HEARING
530 

‘‘(f) ENFORCEMENT.—The regulations issued under this section 

shall be enforced by— 

‘‘(1) the appropriate Federal banking agency, with respect 

to any securitizer that is an insured depository institution; and 

‘‘(2) the Commission, with respect to any securitizer that is 

not an insured depository institution. 

‘‘(g) AUTHORITY OF COMMISSION.—The authority of the Commission under this section shall be in addition to the authority of the 

Commission to otherwise enforce the securities laws. 

‘‘(h) AUTHORITY TO COORDINATE ON RULEMAKING.—The Chairperson of the Financial Stability Oversight Council shall coordinate 

all joint rulemaking required under this section. 

‘‘(i) EFFECTIVE DATE OF REGULATIONS.—The regulations issued 

under this section shall become effective— 

‘‘(1) with respect to securitizers and originators of assetbacked securities backed by residential mortgages, 1 year after 

the date on which final rules under this section are published 

in the Federal Register; and 

‘‘(2) with respect to securitizers and originators of all other 

classes of asset-backed securities, 2 years after the date on 

which final rules under this section are published in the Federal Register.’’. 

(c) STUDY ON RISK RETENTION.— 

(1) STUDY.—The Board of Governors of the Federal Reserve 

System, in coordination and consultation with the Comptroller 

of the Currency, the Director of the Office of Thrift Supervision, 

the Chairperson of the Federal Deposit Insurance Corporation, 

and the Securities and Exchange Commission shall conduct a 

study of the combined impact on each individual class of assetbacked security established under section 15G(c)(2) of the Securities Exchange Act of 1934, as added by subsection (b), of— 

(A) the new credit risk retention requirements contained in the amendment made by subsection (b), including 

the effect credit risk retention requirements have on increasing the market for Federally subsidized loans; and 

(B) the Financial Accounting Statements 166 and 167 

issued by the Financial Accounting Standards Board. 

(2) REPORT.—Not later than 90 days after the date of enactment of this Act, the Board of Governors of the Federal Reserve 

System shall submit to Congress a report on the study conducted under paragraph (1). Such report shall include statutory 

and regulatory recommendations for eliminating any negative 

impacts on the continued viability of the asset-backed 

securitization markets and on the availability of credit for new 

lending identified by the study conducted under paragraph (1). 

SEC. 942. DISCLOSURES AND REPORTING FOR ASSET-BACKED SECURITIES. 

(a) SECURITIES EXCHANGE ACT OF 1934.—Section 15(d) of the 

Securities Exchange Act of 1934 (15 U.S.C. 78o(d)) is amended— 

(1) by striking ‘‘(d) Each’’ and inserting the following: 

‘‘(d) SUPPLEMENTARY AND PERIODIC INFORMATION.— 

‘‘(1) IN GENERAL.—Each’’; 

(2) in the third sentence, by inserting after ‘‘securities of 

each class’’ the following: ‘‘, other than any class of asset-backed 

securities,’’; and 


sroberts on DSKD5P82C1PROD with HEARING
531 

(3) by adding at the end the following: 

‘‘(2) ASSET-BACKED SECURITIES.— ‘‘(A) SUSPENSION OF DUTY TO FILE.—The Commission 

may, by rule or regulation, provide for the suspension or 

termination of the duty to file under this subsection for any 

class of asset-backed security, on such terms and conditions 

and for such period or periods as the Commission deems 

necessary or appropriate in the public interest or for the 

protection of investors. 

‘‘(B) CLASSIFICATION OF ISSUERS.—The Commission 

may, for purposes of this subsection, classify issuers and 

prescribe requirements appropriate for each class of issuers 

of asset-backed securities.’’. 

(b) SECURITIES ACT OF 1933.—Section 7 of the Securities Act of 

1933 (15 U.S.C. 77g) is amended by adding at the end the following: 

‘‘(c) DISCLOSURE REQUIREMENTS.— ‘‘(1) IN GENERAL.—The Commission shall adopt regulations 

under this subsection requiring each issuer of an asset-backed 

security to disclose, for each tranche or class of security, information regarding the assets backing that security. 

‘‘(2) CONTENT OF REGULATIONS.—In adopting regulations 

under this subsection, the Commission shall— 

‘‘(A) set standards for the format of the data provided 

by issuers of an asset-backed security, which shall, to the 

extent feasible, facilitate comparison of such data across securities in similar types of asset classes; and 

‘‘(B) require issuers of asset-backed securities, at a minimum, to disclose asset-level or loan-level data, if such data 

are necessary for investors to independently perform due 

diligence, including— 

‘‘(i) data having unique identifiers relating to loan 

brokers or originators; 

‘‘(ii) the nature and extent of the compensation of 

the broker or originator of the assets backing the security; and 

‘‘(iii) the amount of risk retention by the originator 

and the securitizer of such assets.’’. 

SEC. 943. REPRESENTATIONS AND WARRANTIES IN ASSET-BACKED OFFERINGS. 

Not later than 180 days after the date of enactment of this Act, 

the Securities and Exchange Commission shall prescribe regulations 

on the use of representations and warranties in the market for assetbacked securities (as that term is defined in section 3(a)(77) of the 

Securities Exchange Act of 1934, as added by this subtitle) that— 

(1) require each national recognized statistical rating organization to include in any report accompanying a credit rating 

a description of— 

(A) the representations, warranties, and enforcement 

mechanisms available to investors; and 

(B) how they differ from the representations, warranties, and enforcement mechanisms in issuances of similar 

securities; and 

(2) require any securitizer (as that term is defined in section 15G(a) of the Securities Exchange Act of 1934, as added by 


sroberts on DSKD5P82C1PROD with HEARING
532 

this subtitle) to disclose fulfilled and unfulfilled repurchase requests across all trusts aggregated by the securitizer, so that investors may identify asset originators with clear underwriting 

deficiencies. 

SEC. 944. EXEMPTED TRANSACTIONS UNDER THE SECURITIES ACT OF 

1933. 

(a) EXEMPTION ELIMINATED.—Section 4 of the Securities Act of 

1933 (15 U.S.C. 77d) is amended— 

(1) by striking paragraph (5); and 

(2) by striking ‘‘(6) transactions’’ and inserting the following: 

‘‘(5) transactions’’. 

(b) CONFORMING AMENDMENT.—Section 3(a)(4)(B)(vii)(I) of the 

Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(4)(B)(vii)(I)) is 

amended by striking ‘‘4(6)’’ and inserting ‘‘4(5)’’. 

SEC. 945. DUE DILIGENCE ANALYSIS AND DISCLOSURE IN ASSETBACKED SECURITIES ISSUES. 

Section 7 of the Securities Act of 1933 (15 U.S.C. 77g), as 

amended by this subtitle, is amended by adding at the end the following: 

‘‘(d) REGISTRATION STATEMENT FOR ASSET-BACKED SECURITIES.—Not later than 180 days after the date of enactment of this 

subsection, the Commission shall issue rules relating to the registration statement required to be filed by any issuer of an asset-backed 

security (as that term is defined in section 3(a)(77) of the Securities 

Exchange Act of 1934) that require any issuer of an asset-backed security— 

‘‘(1) to perform a review of the assets underlying the assetbacked security; and 

‘‘(2) to disclose the nature of the review under paragraph 

(1).’’. 

SEC. 946. STUDY ON THE MACROECONOMIC EFFECTS OF RISK RETENTION REQUIREMENTS. 

(a) STUDY REQUIRED.—The Chairman of the Financial Services 

Oversight Council shall carry out a study on the macroeconomic effects of the risk retention requirements under this subtitle, and the 

amendments made by this subtitle, with emphasis placed on potential beneficial effects with respect to stabilizing the real estate market. Such study shall include— 

(1) an analysis of the effects of risk retention on real estate 

asset price bubbles, including a retrospective estimate of what 

fraction of real estate losses may have been averted had such 

requirements been in force in recent years; 

(2) an analysis of the feasibility of minimizing real estate 

price bubbles by proactively adjusting the percentage of risk retention that must be borne by creditors and securitizers of real 

estate debt, as a function of regional or national market conditions; 

(3) a comparable analysis for proactively adjusting mortgage origination requirements; 

(4) an assessment of whether such proactive adjustments 

should be made by an independent regulator, or in a formulaic 

and transparent manner; 


sroberts on DSKD5P82C1PROD with HEARING
533 

(5) an assessment of whether such adjustments should take 

place independently or in concert with monetary policy; and 

(6) recommendations for implementation and enabling legislation. 

(b) REPORT.—Not later than the end of the 180-day period beginning on the date of the enactment of this title, the Chairman of 

the Financial Services Oversight Council shall issue a report to the 

Congress containing any findings and determinations made in carrying out the study required under subsection (a). 

Subtitle E—Accountability and Executive Compensation 

SEC. 951. SHAREHOLDER VOTE ON EXECUTIVE COMPENSATION DISCLOSURES. 

The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is 

amended by inserting after section 14 (15 U.S.C. 78n) the following: 

‘‘SEC. 14A. SHAREHOLDER APPROVAL OF EXECUTIVE COMPENSATION. 

‘‘(a) SEPARATE RESOLUTION REQUIRED.— 

‘‘(1) IN GENERAL.—Not less frequently than once every 3 

years, a proxy or consent or authorization for an annual or 

other meeting of the shareholders for which the proxy solicitation rules of the Commission require compensation disclosure 

shall include a separate resolution subject to shareholder vote 

to approve the compensation of executives, as disclosed pursuant to section 229.402 of title 17, Code of Federal Regulations, 

or any successor thereto. 

‘‘(2) FREQUENCY OF VOTE.—Not less frequently than once 

every 6 years, a proxy or consent or authorization for an annual 

or other meeting of the shareholders for which the proxy solicitation rules of the Commission require compensation disclosure 

shall include a separate resolution subject to shareholder vote 

to determine whether votes on the resolutions required under 

paragraph (1) will occur every 1, 2, or 3 years. 

‘‘(3) EFFECTIVE DATE.—The proxy or consent or authorization for the first annual or other meeting of the shareholders occurring after the end of the 6-month period beginning on the 

date of enactment of this section shall include— 

‘‘(A) the resolution described in paragraph (1); and 

‘‘(B) a separate resolution subject to shareholder vote to 

determine whether votes on the resolutions required under 

paragraph (1) will occur every 1, 2, or 3 years. 

‘‘(b) SHAREHOLDER APPROVAL OF GOLDEN PARACHUTE COM- PENSATION.— ‘‘(1) DISCLOSURE.—In any proxy or consent solicitation material (the solicitation of which is subject to the rules of the 

Commission pursuant to subsection (a)) for a meeting of the 

shareholders occurring after the end of the 6-month period beginning on the date of enactment of this section, at which shareholders are asked to approve an acquisition, merger, consolidation, or proposed sale or other disposition of all or substantially 

all the assets of an issuer, the person making such solicitation 

shall disclose in the proxy or consent solicitation material, in a 

clear and simple form in accordance with regulations to be promulgated by the Commission, any agreements or understandings that such person has with any named executive offiVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00537 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
534 

cers of such issuer (or of the acquiring issuer, if such issuer is 

not the acquiring issuer) concerning any type of compensation 

(whether present, deferred, or contingent) that is based on or 

otherwise relates to the acquisition, merger, consolidation, sale, 

or other disposition of all or substantially all of the assets of 

the issuer and the aggregate total of all such compensation that 

may (and the conditions upon which it may) be paid or become 

payable to or on behalf of such executive officer. 

‘‘(2) SHAREHOLDER APPROVAL.—Any proxy or consent or authorization relating to the proxy or consent solicitation material 

containing the disclosure required by paragraph (1) shall include a separate resolution subject to shareholder vote to approve such agreements or understandings and compensation as 

disclosed, unless such agreements or understandings have been 

subject to a shareholder vote under subsection (a). 

‘‘(c) RULE OF CONSTRUCTION.—The shareholder vote referred to 

in subsections (a) and (b) shall not be binding on the issuer or the 

board of directors of an issuer, and may not be construed— 

‘‘(1) as overruling a decision by such issuer or board of directors; 

‘‘(2) to create or imply any change to the fiduciary duties 

of such issuer or board of directors; 

‘‘(3) to create or imply any additional fiduciary duties for 

such issuer or board of directors; or 

‘‘(4) to restrict or limit the ability of shareholders to make 

proposals for inclusion in proxy materials related to executive 

compensation. 

‘‘(d) DISCLOSURE OF VOTES.—Every institutional investment 

manager subject to section 13(f) shall report at least annually how 

it voted on any shareholder vote pursuant to subsections (a) and (b), 

unless such vote is otherwise required to be reported publicly by rule 

or regulation of the Commission. 

‘‘(e) EXEMPTION.—The Commission may, by rule or order, exempt an issuer or class of issuers from the requirement under subsection (a) or (b). In determining whether to make an exemption 

under this subsection, the Commission shall take into account, 

among other considerations, whether the requirements under subsections (a) and (b) disproportionately burdens small issuers.’’. 

SEC. 952. COMPENSATION COMMITTEE INDEPENDENCE. 

(a) IN GENERAL.—The Securities Exchange Act of 1934 (15 

U.S.C. 78 et seq.) is amended by inserting after section 10B, as 

added by section 753, the following: 

‘‘SEC. 10C. COMPENSATION COMMITTEES. 

‘‘(a) INDEPENDENCE OF COMPENSATION COMMITTEES.— 

‘‘(1) LISTING STANDARDS.—The Commission shall, by rule, 

direct the national securities exchanges and national securities 

associations to prohibit the listing of any equity security of an 

issuer, other than an issuer that is a controlled company, limited partnership, company in bankruptcy proceedings, openended management investment company that is registered 

under the Investment Company Act of 1940, or a foreign private 

issuer that provides annual disclosures to shareholders of the 

reasons that the foreign private issuer does not have an indeVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00538 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
535 

pendent compensation committee, that does not comply with the 

requirements of this subsection. 

‘‘(2) INDEPENDENCE OF COMPENSATION COMMITTEES.—The 

rules of the Commission under paragraph (1) shall require that 

each member of the compensation committee of the board of directors of an issuer be— 

‘‘(A) a member of the board of directors of the issuer; 

and 

‘‘(B) independent. 

‘‘(3) INDEPENDENCE.—The rules of the Commission under 

paragraph (1) shall require that, in determining the definition 

of the term ‘independence’ for purposes of paragraph (2), the national securities exchanges and the national securities associations shall consider relevant factors, including— 

‘‘(A) the source of compensation of a member of the 

board of directors of an issuer, including any consulting, 

advisory, or other compensatory fee paid by the issuer to 

such member of the board of directors; and 

‘‘(B) whether a member of the board of directors of an 

issuer is affiliated with the issuer, a subsidiary of the 

issuer, or an affiliate of a subsidiary of the issuer. 

‘‘(4) EXEMPTION AUTHORITY.—The rules of the Commission 

under paragraph (1) shall permit a national securities exchange 

or a national securities association to exempt a particular relationship from the requirements of paragraph (2), with respect to 

the members of a compensation committee, as the national securities exchange or national securities association determines is 

appropriate, taking into consideration the size of an issuer and 

any other relevant factors. 

‘‘(b) INDEPENDENCE OF COMPENSATION CONSULTANTS AND

OTHER COMPENSATION COMMITTEE ADVISERS.— 

‘‘(1) IN GENERAL.—The compensation committee of an issuer 

may only select a compensation consultant, legal counsel, or 

other adviser to the compensation committee after taking into 

consideration the factors identified by the Commission under 

paragraph (2). 

‘‘(2) RULES.—The Commission shall identify factors that affect the independence of a compensation consultant, legal counsel, or other adviser to a compensation committee of an issuer. 

Such factors shall be competitively neutral among categories of 

consultants, legal counsel, or other advisers and preserve the 

ability of compensation committees to retain the services of 

members of any such category, and shall include— 

‘‘(A) the provision of other services to the issuer by the 

person that employs the compensation consultant, legal 

counsel, or other adviser; 

‘‘(B) the amount of fees received from the issuer by the 

person that employs the compensation consultant, legal 

counsel, or other adviser, as a percentage of the total revenue of the person that employs the compensation consultant, legal counsel, or other adviser; 

‘‘(C) the policies and procedures of the person that employs the compensation consultant, legal counsel, or other 

adviser that are designed to prevent conflicts of interest; 


sroberts on DSKD5P82C1PROD with HEARING
536 

‘‘(D) any business or personal relationship of the compensation consultant, legal counsel, or other adviser with a 

member of the compensation committee; and 

‘‘(E) any stock of the issuer owned by the compensation 

consultant, legal counsel, or other adviser. 

‘‘(c) COMPENSATION COMMITTEE AUTHORITY RELATING TO COM- PENSATION CONSULTANTS.— ‘‘(1) AUTHORITY TO RETAIN COMPENSATION CONSULTANT.— ‘‘(A) IN GENERAL.—The compensation committee of an 

issuer, in its capacity as a committee of the board of directors, may, in its sole discretion, retain or obtain the advice 

of a compensation consultant. 

‘‘(B) DIRECT RESPONSIBILITY OF COMPENSATION COM- MITTEE.—The compensation committee of an issuer shall be 

directly responsible for the appointment, compensation, and 

oversight of the work of a compensation consultant. 

‘‘(C) RULE OF CONSTRUCTION.—This paragraph may 

not be construed— 

‘‘(i) to require the compensation committee to implement or act consistently with the advice or recommendations of the compensation consultant; or 

‘‘(ii) to affect the ability or obligation of a compensation committee to exercise its own judgment in 

fulfillment of the duties of the compensation committee. 

‘‘(2) DISCLOSURE.—In any proxy or consent solicitation material for an annual meeting of the shareholders (or a special 

meeting in lieu of the annual meeting) occurring on or after the 

date that is 1 year after the date of enactment of this section, 

each issuer shall disclose in the proxy or consent material, in 

accordance with regulations of the Commission, whether— 

‘‘(A) the compensation committee of the issuer retained 

or obtained the advice of a compensation consultant; and 

‘‘(B) the work of the compensation consultant has 

raised any conflict of interest and, if so, the nature of the 

conflict and how the conflict is being addressed. 

‘‘(d) AUTHORITY TO ENGAGE INDEPENDENT LEGAL COUNSEL AND

OTHER ADVISERS.— ‘‘(1) IN GENERAL.—The compensation committee of an 

issuer, in its capacity as a committee of the board of directors, 

may, in its sole discretion, retain and obtain the advice of independent legal counsel and other advisers. 

‘‘(2) DIRECT RESPONSIBILITY OF COMPENSATION COMMITTEE.—The compensation committee of an issuer shall be directly responsible for the appointment, compensation, and oversight of the work of independent legal counsel and other advisers. 

‘‘(3) RULE OF CONSTRUCTION.—This subsection may not be 

construed— 

‘‘(A) to require a compensation committee to implement 

or act consistently with the advice or recommendations of 

independent legal counsel or other advisers under this subsection; or 

‘‘(B) to affect the ability or obligation of a compensation 

committee to exercise its own judgment in fulfillment of the 

duties of the compensation committee. 


sroberts on DSKD5P82C1PROD with HEARING
537 

‘‘(e) COMPENSATION OF COMPENSATION CONSULTANTS, INDEPENDENT LEGAL COUNSEL, AND OTHER ADVISERS.—Each issuer 

shall provide for appropriate funding, as determined by the compensation committee in its capacity as a committee of the board of 

directors, for payment of reasonable compensation— 

‘‘(1) to a compensation consultant; and 

‘‘(2) to independent legal counsel or any other adviser to the 

compensation committee. 

‘‘(f) COMMISSION RULES.— 

‘‘(1) IN GENERAL.—Not later than 360 days after the date 

of enactment of this section, the Commission shall, by rule, direct the national securities exchanges and national securities 

associations to prohibit the listing of any security of an issuer 

that is not in compliance with the requirements of this section. 

‘‘(2) OPPORTUNITY TO CURE DEFECTS.—The rules of the 

Commission under paragraph (1) shall provide for appropriate 

procedures for an issuer to have a reasonable opportunity to 

cure any defects that would be the basis for the prohibition 

under paragraph (1), before the imposition of such prohibition. 

‘‘(3) EXEMPTION AUTHORITY.— 

‘‘(A) IN GENERAL.—The rules of the Commission under 

paragraph (1) shall permit a national securities exchange 

or a national securities association to exempt a category of 

issuers from the requirements under this section, as the national securities exchange or the national securities association determines is appropriate. 

‘‘(B) CONSIDERATIONS.—In determining appropriate exemptions under subparagraph (A), the national securities 

exchange or the national securities association shall take 

into account the potential impact of the requirements of this 

section on smaller reporting issuers. 

‘‘(g) CONTROLLED COMPANY EXEMPTION.— 

‘‘(1) IN GENERAL.—This section shall not apply to any controlled company. 

‘‘(2) DEFINITION.—For purposes of this section, the term 

‘controlled company’ means an issuer— 

‘‘(A) that is listed on a national securities exchange or 

by a national securities association; and 

‘‘(B) that holds an election for the board of directors of 

the issuer in which more than 50 percent of the voting 

power is held by an individual, a group, or another 

issuer.’’. 

(b) STUDY AND REPORT.— 

(1) STUDY.—The Securities and Exchange Commission 

shall conduct a study and review of the use of compensation 

consultants and the effects of such use. 

(2) REPORT.—Not later than 2 years after the date of the 

enactment of this Act, the Commission shall submit a report to 

Congress on the results of the study and review required by this 

subsection. 

SEC. 953. EXECUTIVE COMPENSATION DISCLOSURES. 

(a) DISCLOSURE OF PAY VERSUS PERFORMANCE.—Section 14 of 

the Securities Exchange Act of 1934 (15 U.S.C. 78n), as amended 

by this title, is amended by adding at the end the following: 


sroberts on DSKD5P82C1PROD with HEARING
538 

‘‘(i) DISCLOSURE OF PAY VERSUS PERFORMANCE.—The Commission shall, by rule, require each issuer to disclose in any proxy or 

consent solicitation material for an annual meeting of the shareholders of the issuer a clear description of any compensation required to be disclosed by the issuer under section 229.402 of title 17, 

Code of Federal Regulations (or any successor thereto), including information that shows the relationship between executive compensation actually paid and the financial performance of the issuer, taking into account any change in the value of the shares of stock and 

dividends of the issuer and any distributions. The disclosure under 

this subsection may include a graphic representation of the information required to be disclosed.’’. 

(b) ADDITIONAL DISCLOSURE REQUIREMENTS.— 

(1) IN GENERAL.—The Commission shall amend section 

229.402 of title 17, Code of Federal Regulations, to require each 

issuer to disclose in any filing of the issuer described in section 

229.10(a) of title 17, Code of Federal Regulations (or any successor thereto)— 

(A) the median of the annual total compensation of all 

employees of the issuer, except the chief executive officer (or 

any equivalent position) of the issuer; 

(B) the annual total compensation of the chief executive 

officer (or any equivalent position) of the issuer; and 

(C) the ratio of the amount described in subparagraph 

(A) to the amount described in subparagraph (B). 

(2) TOTAL COMPENSATION.—For purposes of this subsection, 

the total compensation of an employee of an issuer shall be determined in accordance with section 229.402(c)(2)(x) of title 17, 

Code of Federal Regulations, as in effect on the day before the 

date of enactment of this Act. 

SEC. 954. RECOVERY OF ERRONEOUSLY AWARDED COMPENSATION. 

The Securities Exchange Act of 1934 is amended by inserting 

after section 10C, as added by section 952, the following: 

‘‘SEC. 10D. RECOVERY OF ERRONEOUSLY AWARDED COMPENSATION 

POLICY. 

‘‘(a) LISTING STANDARDS.—The Commission shall, by rule, direct the national securities exchanges and national securities associations to prohibit the listing of any security of an issuer that does 

not comply with the requirements of this section. 

‘‘(b) RECOVERY OF FUNDS.—The rules of the Commission under 

subsection (a) shall require each issuer to develop and implement a 

policy providing— 

‘‘(1) for disclosure of the policy of the issuer on incentivebased compensation that is based on financial information required to be reported under the securities laws; and 

‘‘(2) that, in the event that the issuer is required to prepare 

an accounting restatement due to the material noncompliance of 

the issuer with any financial reporting requirement under the 

securities laws, the issuer will recover from any current or 

former executive officer of the issuer who received incentivebased compensation (including stock options awarded as compensation) during the 3-year period preceding the date on which 

the issuer is required to prepare an accounting restatement, 


sroberts on DSKD5P82C1PROD with HEARING
539 

based on the erroneous data, in excess of what would have been 

paid to the executive officer under the accounting restatement.’’. 

SEC. 955. DISCLOSURE REGARDING EMPLOYEE AND DIRECTOR HEDGING. 

Section 14 of the Securities Exchange Act of 1934 (15 U.S.C. 

78n), as amended by this title, is amended by adding at the end the 

following: 

‘‘(j) DISCLOSURE OF HEDGING BY EMPLOYEES AND DIRECTORS.— 

The Commission shall, by rule, require each issuer to disclose in 

any proxy or consent solicitation material for an annual meeting of 

the shareholders of the issuer whether any employee or member of 

the board of directors of the issuer, or any designee of such employee 

or member, is permitted to purchase financial instruments (including prepaid variable forward contracts, equity swaps, collars, and 

exchange funds) that are designed to hedge or offset any decrease 

in the market value of equity securities— 

‘‘(1) granted to the employee or member of the board of directors by the issuer as part of the compensation of the employee 

or member of the board of directors; or 

‘‘(2) held, directly or indirectly, by the employee or member 

of the board of directors.’’. 

SEC. 956. ENHANCED COMPENSATION STRUCTURE REPORTING. 

(a) ENHANCED DISCLOSURE AND REPORTING OF COMPENSATION

ARRANGEMENTS.— 

(1) IN GENERAL.—Not later than 9 months after the date of 

enactment of this title, the appropriate Federal regulators jointly shall prescribe regulations or guidelines to require each covered financial institution to disclose to the appropriate Federal 

regulator the structures of all incentive-based compensation arrangements offered by such covered financial institutions sufficient to determine whether the compensation structure— 

(A) provides an executive officer, employee, director, or 

principal shareholder of the covered financial institution 

with excessive compensation, fees, or benefits; or 

(B) could lead to material financial loss to the covered 

financial institution. 

(2) RULES OF CONSTRUCTION.—Nothing in this section shall 

be construed as requiring the reporting of the actual compensation of particular individuals. Nothing in this section shall be 

construed to require a covered financial institution that does 

not have an incentive-based payment arrangement to make the 

disclosures required under this subsection. 

(b) PROHIBITION ON CERTAIN COMPENSATION ARRANGEMENTS.—Not later than 9 months after the date of enactment of this 

title, the appropriate Federal regulators shall jointly prescribe regulations or guidelines that prohibit any types of incentive-based payment arrangement, or any feature of any such arrangement, that the 

regulators determine encourages inappropriate risks by covered financial institutions— 

(1) by providing an executive officer, employee, director, or 

principal shareholder of the covered financial institution with 

excessive compensation, fees, or benefits; or 

(2) that could lead to material financial loss to the covered 

financial institution. 


sroberts on DSKD5P82C1PROD with HEARING
540 

(c) STANDARDS.—The appropriate Federal regulators shall— 

(1) ensure that any standards for compensation established 

under subsections (a) or (b) are comparable to the standards established under section of the Federal Deposit Insurance Act (12 

U.S.C. 2 1831p–1) for insured depository institutions; and 

(2) in establishing such standards under such subsections, 

take into consideration the compensation standards described 

in section 39(c) of the Federal Deposit Insurance Act (12 U.S.C. 

1831p–9 1(c)). 

(d) ENFORCEMENT.—The provisions of this section and the regulations issued under this section shall be enforced under section 505 

of the Gramm-Leach-Bliley Act and, for purposes of such section, a 

violation of this section or such regulations shall be treated as a violation of subtitle A of title V of such Act. 

(e) DEFINITIONS.—As used in this section— 

(1) the term ‘‘appropriate Federal regulator’’ means the 

Board of Governors of the Federal Reserve System, the Office of 

the Comptroller of the Currency, the Board of Directors of the 

Federal Deposit Insurance Corporation, the Director of the Office of Thrift Supervision, the National Credit Union Administration Board, the Securities and Exchange Commission, the 

Federal Housing Finance Agency; and 

(2) the term ‘‘covered financial institution’’ means— 

(A) a depository institution or depository institution 

holding company, as such terms are defined in section 3 of 

the Federal Deposit Insurance Act (12 U.S.C. 1813); 

(B) a broker-dealer registered under section 15 of the 

Securities Exchange Act of 1934 (15 U.S.C. 78o); 

(C) a credit union, as described in section 

19(b)(1)(A)(iv) of the Federal Reserve Act; 

(D) an investment advisor, as such term is defined in 

section 202(a)(11) of the Investment Advisers Act of 1940 

(15 U.S.C. 80b–2(a)(11)); 

(E) the Federal National Mortgage Association; 

(F) the Federal Home Loan Mortgage Corporation; and 

(G) any other financial institution that the appropriate 

Federal regulators, jointly, by rule, determine should be 

treated as a covered financial institution for purposes of 

this section. 

(f) EXEMPTION FOR CERTAIN FINANCIAL INSTITUTIONS.—The requirements of this section shall not apply to covered financial institutions with assets of less than $1,000,000,000. 

SEC. 957. VOTING BY BROKERS. 

Section 6(b) of the Securities Exchange Act of 1934 (15 U.S.C. 

78f(b)) is amended— 

(1) in paragraph (9)— 

(A) in subparagraph (A), by redesignating clauses (i) 

through (v) as subclauses (I) through (V), respectively, and 

adjusting the margins accordingly; 

(B) by redesignating subparagraphs (A) through (D) as 

clauses (i) through (iv), respectively, and adjusting the margins accordingly; 

(C) by inserting ‘‘(A)’’ after ‘‘(9)’’; and 


sroberts on DSKD5P82C1PROD with HEARING
541 

(D) in the matter immediately following clause (iv), as 

so redesignated, by striking ‘‘As used’’ and inserting the following: 

‘‘(B) As used’’. 

(2) by adding at the end the following: 

‘‘(10)(A) The rules of the exchange prohibit any member 

that is not the beneficial owner of a security registered under 

section 12 from granting a proxy to vote the security in connection with a shareholder vote described in subparagraph (B), unless the beneficial owner of the security has instructed the member to vote the proxy in accordance with the voting instructions 

of the beneficial owner. 

‘‘(B) A shareholder vote described in this subparagraph is 

a shareholder vote with respect to the election of a member of 

the board of directors of an issuer, executive compensation, or 

any other significant matter, as determined by the Commission, 

by rule, and does not include a vote with respect to the 

uncontested election of a member of the board of directors of 

any investment company registered under the Investment Company Act of 1940 (15 U.S.C. 80b–1 et seq.). 

‘‘(C) Nothing in this paragraph shall be construed to prohibit a national securities exchange from prohibiting a member 

that is not the beneficial owner of a security registered under 

section 12 from granting a proxy to vote the security in connection with a shareholder vote not described in subparagraph 

(A).’’. 

Subtitle F—Improvements to the Management of the 

Securities and Exchange Commission 

SEC. 961. REPORT AND CERTIFICATION OF INTERNAL SUPERVISORY 

CONTROLS. 

(a) ANNUAL REPORTS AND CERTIFICATION.—Not later than 90 

days after the end of each fiscal year, the Commission shall submit 

a report to the Committee on Banking, Housing, and Urban Affairs 

of the Senate and the Committee on Financial Services of the House 

of Representatives on the conduct by the Commission of examinations of registered entities, enforcement investigations, and review of 

corporate financial securities filings. 

(b) CONTENTS OF REPORTS.—Each report under subsection (a) 

shall contain— 

(1) an assessment, as of the end of the most recent fiscal 

year, of the effectiveness of— 

(A) the internal supervisory controls of the Commission; and 

(B) the procedures of the Commission applicable to the 

staff of the Commission who perform examinations of registered entities, enforcement investigations, and reviews of 

corporate financial securities filings; 

(2) a certification that the Commission has adequate internal supervisory controls to carry out the duties of the Commission described in paragraph (1)(B); and 

(3) a summary by the Comptroller General of the United 

States of the review carried out under subsection (d). 

(c) CERTIFICATION.— 


sroberts on DSKD5P82C1PROD with HEARING
542 

(1) SIGNATURE.—The certification under subsection (b)(2) 

shall be signed by the Director of the Division of Enforcement, 

the Director of the Division of Corporation Finance, and the Director of the Office of Compliance Inspections and Examinations (or the head of any successor division or office). 

(2) CONTENT OF CERTIFICATION.—Each individual described in paragraph (1) shall certify that the individual— 

(A) is directly responsible for establishing and maintaining the internal supervisory controls of the Division or 

Office of which the individual is the head; 

(B) is knowledgeable about the internal supervisory 

controls of the Division or Office of which the individual is 

the head; 

(C) has evaluated the effectiveness of the internal supervisory controls during the 90-day period ending on the 

final day of the fiscal year to which the report relates; and 

(D) has disclosed to the Commission any significant deficiencies in the design or operation of internal supervisory 

controls that could adversely affect the ability of the Division or Office to consistently conduct inspections, or investigations, or reviews of filings with professional competence 

and integrity. 

(d) NEW DIRECTOR OR ACTING DIRECTOR.—Notwithstanding 

subsection (a), if the Director of the Division of Enforcement, the Director of the Division of Corporate Finance, or the Director of the 

Office of Compliance Inspections and Examinations has served as 

Director of the Division or Office for less than 90 days on the date 

on which a report is required to be submitted under subsection (a), 

the Commission may submit the report on the date on which the Director has served as Director for 90 days. If there is no Director of 

the Division of Enforcement, the Division of Corporate Finance, or 

the Office of Compliance Inspections and Examinations, on the date 

on which a report is required to be submitted under subsection (a), 

the Acting Director of the Division or Office may make the certification required under subsection (c). 

(e) REVIEW BY THE COMPTROLLER GENERAL.— (1) REPORT.—The Comptroller General of the United States 

shall submit to the Committee on Banking, Housing, and 

Urban Affairs of the Senate and the Committee on Financial 

Services of the House of Representatives a report that contains 

a review of the adequacy and effectiveness of the internal supervisory control structure and procedures described in subsection 

(b)(1), not less frequently than once every 3 years, at a time to 

coincide with the publication of the reports of the Commission 

under this section. 

(2) AUTHORITY TO HIRE EXPERTS.—The Comptroller General of the United States may hire independent consultants with 

specialized expertise in any area relevant to the duties of the 

Comptroller General described in this section, in order to assist 

the Comptroller General in carrying out such duties. 

SEC. 962. TRIENNIAL REPORT ON PERSONNEL MANAGEMENT. 

(a) TRIENNIAL REPORT REQUIRED.—Once every 3 years, the 

Comptroller General of the United States shall submit a report to 

the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of RepVerDate Mar 15 2010 21:10 Jul 06, 2010 Jkt 057098 PO 00000 Frm 00546 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
543 

resentatives on the quality of personnel management by the Commission. 

(b) CONTENTS OF REPORT.—Each report under subsection (a) 

shall include— 

(1) an evaluation of— 

(A) the effectiveness of supervisors in using the skills, 

talents, and motivation of the employees of the Commission 

to achieve the goals of the Commission; 

(B) the criteria for promoting employees of the Commission to supervisory positions; 

(C) the fairness of the application of the promotion criteria to the decisions of the Commission; 

(D) the competence of the professional staff of the Commission; 

(E) the efficiency of communication between the units of 

the Commission regarding the work of the Commission (including communication between divisions and between 

subunits of a division) and the efforts by the Commission 

to promote such communication; 

(F) the turnover within subunits of the Commission, including the consideration of supervisors whose subordinates 

have an unusually high rate of turnover; 

(G) whether there are excessive numbers of low-level, 

mid-level, or senior-level managers; 

(H) any initiatives of the Commission that increase the 

competence of the staff of the Commission; 

(I) the actions taken by the Commission regarding employees of the Commission who have failed to perform their 

duties and circumstances under which the Commission has 

issued to employees a notice of termination; and 

(J) such other factors relating to the management of 

the Commission as the Comptroller General determines are 

appropriate; 

(2) an evaluation of any improvements made with respect 

to the areas described in paragraph (1) since the date of submission of the previous report; and 

(3) recommendations for how the Commission can use the 

human resources of the Commission more effectively and efficiently to carry out the mission of the Commission. 

(c) CONSULTATION.—In preparing the report under subsection 

(a), the Comptroller General shall consult with current employees of 

the Commission, retired employees and other former employees of 

the Commission, the Inspector General of the Commission, persons 

that have business before the Commission, any union representing 

the employees of the Commission, private management consultants, 

academics, and any other source that the Comptroller General 

deems appropriate. 

(d) REPORT BY COMMISSION.—Not later than 90 days after the 

date on which the Comptroller General submits each report under 

subsection (a), the Commission shall submit to the Committee on 

Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives a report describing the actions taken by the Commission in response to 

the recommendations contained in the report under subsection (a). 

(e) REIMBURSEMENTS FOR COST OF REPORTS.— 


sroberts on DSKD5P82C1PROD with HEARING
544 

(1) REIMBURSEMENTS REQUIRED.—The Commission shall 

reimburse the Government Accountability Office for the full cost 

of making the reports under this section, as billed therefor by 

the Comptroller General. 

(2) CREDITING AND USE OF REIMBURSEMENTS.—Such reimbursements shall— 

(A) be credited to the appropriation account ‘‘Salaries 

and Expenses, Government Accountability Office’’ current 

when the payment is received; and 

(B) remain available until expended. 

(f) AUTHORITY TO HIRE EXPERTS.—The Comptroller General of 

the United States may hire independent consultants with specialized expertise in any area relevant to the duties of the Comptroller 

General described in this section, in order to assist the Comptroller 

General in carrying out such duties. 

SEC. 963. ANNUAL FINANCIAL CONTROLS AUDIT. 

(a) REPORTS OF COMMISSION.— 

(1) ANNUAL REPORTS REQUIRED.—Not later than 6 months 

after the end of each fiscal year, the Commission shall publish 

and submit to Congress a report that— 

(A) describes the responsibility of the management of 

the Commission for establishing and maintaining an adequate internal control structure and procedures for financial reporting; and 

(B) contains an assessment of the effectiveness of the 

internal control structure and procedures for financial reporting of the Commission during that fiscal year. 

(2) ATTESTATION.—The reports required under paragraph 

(1) shall be attested to by the Chairman and chief financial officer of the Commission. 

(b) REPORT BY COMPTROLLER GENERAL.— 

(1) REPORT REQUIRED.—Not later than 6 months after the 

end of the first fiscal year after the date of enactment of this 

Act, the Comptroller General of the United States shall submit 

a report to Congress that assesses— 

(A) the effectiveness of the internal control structure 

and procedures of the Commission for financial reporting; 

and 

(B) the assessment of the Commission under subsection 

(a)(1)(B). 

(2) ATTESTATION.—The Comptroller General shall attest to, 

and report on, the assessment made by the Commission under 

subsection (a). 

(c) REIMBURSEMENTS FOR COST OF REPORTS.— 

(1) REIMBURSEMENTS REQUIRED.—The Commission shall 

reimburse the Government Accountability Office for the full cost 

of making the reports under subsection (b), as billed therefor by 

the Comptroller General. 

(2) CREDITING AND USE OF REIMBURSEMENTS.—Such reimbursements shall— 

(A) be credited to the appropriation account ‘‘Salaries 

and Expenses, Government Accountability Office’’ current 

when the payment is received; and 

(B) remain available until expended. 


sroberts on DSKD5P82C1PROD with HEARING
545 

SEC. 964. REPORT ON OVERSIGHT OF NATIONAL SECURITIES ASSOCIATIONS. 

(a) REPORT REQUIRED.—Not later than 2 years after the date of 

enactment of this Act, and every 3 years thereafter, the Comptroller 

General of the United States shall submit to the Committee on 

Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives a report that includes an evaluation of the oversight by the Commission 

of national securities associations registered under section 15A of 

the Securities Exchange Act of 1934 (15 U.S.C. 78o–3) with respect 

to— 

(1) the governance of such national securities associations, 

including the identification and management of conflicts of interest by such national securities associations, together with an 

analysis of the impact of any conflicts of interest on the regulatory enforcement or rulemaking by such national securities 

associations; 

(2) the examinations carried out by the national securities 

associations, including the expertise of the examiners; 

(3) the executive compensation practices of such national securities associations; 

(4) the arbitration services provided by the national securities associations; 

(5) the review performed by national securities associations 

of advertising by the members of the national securities associations; 

(6) the cooperation with and assistance to State securities 

administrators by the national securities associations to promote investor protection; 

(7) how the funding of national securities associations is 

used to support the mission of the national securities associations, including— 

(A) the methods of funding; 

(B) the sufficiency of funds; 

(C) how funds are invested by the national securities 

association pending use; and 

(D) the impact of the methods, sufficiency, and investment of funds on regulatory enforcement by the national securities associations; 

(8) the policies regarding the employment of former employees of national securities associations by regulated entities; 

(9) the ongoing effectiveness of the rules of the national securities associations in achieving the goals of the rules; 

(10) the transparency of governance and activities of the 

national securities associations; and 

(11) any other issue that has an impact, as determined by 

the Comptroller General, on the effectiveness of such national 

securities associations in performing their mission and in dealing fairly with investors and members; 

(b) REIMBURSEMENTS FOR COST OF REPORTS.— 

(1) REIMBURSEMENTS REQUIRED.—The Commission shall 

reimburse the Government Accountability Office for the full cost 

of making the reports under subsection (a), as billed therefor by 

the Comptroller General. 


sroberts on DSKD5P82C1PROD with HEARING
546 

(2) CREDITING AND USE OF REIMBURSEMENTS.—Such reimbursements shall— 

(A) be credited to the appropriation account ‘‘Salaries 

and Expenses, Government Accountability Office’’ current 

when the payment is received; and 

(B) remain available until expended. 

SEC. 965. COMPLIANCE EXAMINERS. 

Section 4 of the Securities Exchange Act of 1934 (15 U.S.C. 

78d) is amended by adding at the end the following: 

‘‘(h) EXAMINERS.— 

‘‘(1) DIVISION OF TRADING AND MARKETS.—The Division of 

Trading and Markets of the Commission, or any successor organizational unit, shall have a staff of examiners who shall— 

‘‘(A) perform compliance inspections and examinations 

of entities under the jurisdiction of that Division; and 

‘‘(B) report to the Director of that Division. 

‘‘(2) DIVISION OF INVESTMENT MANAGEMENT.—The Division 

of Investment Management of the Commission, or any successor 

organizational unit, shall have a staff of examiners who shall— 

‘‘(A) perform compliance inspections and examinations 

of entities under the jurisdiction of that Division; and 

‘‘(B) report to the Director of that Division.’’. 

SEC. 966. SUGGESTION PROGRAM FOR EMPLOYEES OF THE COMMISSION. 

The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is 

amended by inserting after section 4C (15 U.S.C. 78d–3) the following: 

‘‘SEC. 4D. ADDITIONAL DUTIES OF INSPECTOR GENERAL. 

‘‘(a) SUGGESTION SUBMISSIONS BY COMMISSION EMPLOYEES.— 

‘‘(1) HOTLINE ESTABLISHED.—The Inspector General of the 

Commission shall establish and maintain a telephone hotline or 

other electronic means for the receipt of— 

‘‘(A) suggestions by employees of the Commission for 

improvements in the work efficiency, effectiveness, and productivity, and the use of the resources, of the Commission; 

and 

‘‘(B) allegations by employees of the Commission of 

waste, abuse, misconduct, or mismanagement within the 

Commission. 

‘‘(2) CONFIDENTIALITY.—The Inspector General shall maintain as confidential— 

‘‘(A) the identity of any individual who provides information by the means established under paragraph (1), unless the individual requests otherwise, in writing; and 

‘‘(B) at the request of any such individual, any specific 

information provided by the individual. 

‘‘(b) CONSIDERATION OF REPORTS.—The Inspector General shall 

consider any suggestions or allegations received by the means established under subsection (a)(1), and shall recommend appropriate action in relation to such suggestions or allegations. 

‘‘(c) RECOGNITION.—The Inspector General may recognize any 

employee who makes a suggestion under subsection (a)(1) (or by 

other means) that would or does— 


sroberts on DSKD5P82C1PROD with HEARING
547 

‘‘(1) increase the work efficiency, effectiveness, or productivity of the Commission; or 

‘‘(2) reduce waste, abuse, misconduct, or mismanagement 

within the Commission. 

‘‘(d) REPORT.—The Inspector General of the Commission shall 

submit to Congress an annual report containing a description of— 

‘‘(1) the nature, number, and potential benefits of any suggestions received under subsection (a); 

‘‘(2) the nature, number, and seriousness of any allegations 

received under subsection (a); 

‘‘(3) any recommendations made or actions taken by the Inspector General in response to substantiated allegations received under subsection (a); and 

‘‘(4) any action the Commission has taken in response to 

suggestions or allegations received under subsection (a). 

‘‘(e) FUNDING.—The activities of the Inspector General under 

this subsection shall be funded by the Securities and Exchange 

Commission Investor Protection Fund established under section 

21F.’’. 

SEC. 967. COMMISSION ORGANIZATIONAL STUDY AND REFORM. 

(a) STUDY REQUIRED.— 

(1) IN GENERAL.—Not later than the end of the 90-day period beginning on the date of the enactment of this subtitle, the 

Securities and Exchange Commission (hereinafter in this section referred to as the ‘‘SEC’’) shall hire an independent consultant of high caliber and with expertise in organizational restructuring and the operations of capital markets to examine 

the internal operations, structure, funding, and the need for 

comprehensive reform of the SEC, as well as the SEC’s relationship with and the reliance on self-regulatory organizations and 

other entities relevant to the regulation of securities and the 

protection of securities investors that are under the SEC’s oversight. 

(2) SPECIFIC AREAS FOR STUDY.—The study required under 

paragraph (1) shall, at a minimum, include the study of— 

(A) the possible elimination of unnecessary or redundant units at the SEC; 

(B) improving communications between SEC offices 

and divisions; 

(C) the need to put in place a clear chain-of-command 

structure, particularly for enforcement examinations and 

compliance inspections; 

(D) the effect of high-frequency trading and other technological advances on the market and what the SEC requires to monitor the effect of such trading and advances 

on the market; 

(E) the SEC’s hiring authorities, workplace policies, 

and personal practices, including— 

(i) whether there is a need to further streamline 

hiring authorities for those who are not lawyers, accountants, compliance examiners, or economists; 

(ii) whether there is a need for further pay reforms; 

(iii) the diversity of skill sets of SEC employees 

and whether the present skill set diversity efficiently 


sroberts on DSKD5P82C1PROD with HEARING
548 

and effectively fosters the SEC’s mission of investor 

protection; and 

(iv) the application of civil service laws by the 

SEC; 

(F) whether the SEC’s oversight and reliance on selfregulatory organizations promotes efficient and effective 

governance for the securities markets; and 

(G) whether adjusting the SEC’s reliance on self-regulatory organizations is necessary to promote more efficient 

and effective governance for the securities markets. 

(b) CONSULTANT REPORT.—Not later than the end of the 150- 

day period after being retained, the independent consultant hired 

pursuant to subsection (a)(1) shall issue a report to the SEC and the 

Congress containing— 

(1) a detailed description of any findings and conclusions 

made while carrying out the study required under subsection 

(a)(1); and 

(2) recommendations for legislative, regulatory, or administrative action that the consultant determines appropriate to enable the SEC and other entities on which the consultant reports 

to perform their statutorily or otherwise mandated missions. 

(c) SEC REPORT.—Not later than the end of the 6-month period 

beginning on the date the consultant issues the report under subsection (b), and every 6 months thereafter during the 2-year period 

following the date on which the consultant issues such report, the 

SEC shall issue a report to the Committee on Financial Services of 

the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate describing the SEC’s implementation of the regulatory and administrative recommendations 

contained in the consultant’s report. 

SEC. 968. STUDY ON SEC REVOLVING DOOR. 

(a) GOVERNMENT ACCOUNTABILITY OFFICE STUDY.—The Comptroller General of the United States shall conduct a study that 

will— 

(1) review the number of employees who leave the Securities 

and Exchange Commission to work for financial institutions 

regulated by such Commission; 

(2) determine how many employees who leave the Securities 

and Exchange Commission worked on cases that involved financial institutions regulated by such Commission; 

(3) review the length of time employees work for the Securities and Exchange Commission before leaving to be employed by 

financial institutions regulated by such Commission; 

(4) review existing internal controls and make recommendations on strengthening such controls to ensure that 

employees of the Securities and Exchange Commission who are 

later employed by financial institutions did not assist such institutions in violating any rules or regulations of the Commission during the course of their employment with such Commission; 

(5) determine if greater post-employment restrictions are 

necessary to prevent employees of the Securities and Exchange 

Commission from being employed by financial institutions after 

employment with such Commission; 


sroberts on DSKD5P82C1PROD with HEARING
549 

(6) determine if the volume of employees of the Securities 

and Exchange Commission who are later employed by financial 

institutions has led to inefficiencies in enforcement; 

(7) determine if employees of the Securities and Exchange 

Commission who are later employed by financial institutions 

assisted such institutions in circumventing Federal rules and 

regulations while employed by such Commission; 

(8) review any information that may address the volume of 

employees of the Securities and Exchange Commission who are 

later employed by financial institutions, and make recommendations to Congress; and 

(9) review other additional issues as may be raised during 

the course of the study conducted under this subsection. 

(b) REPORT.—Not later than 1 year after the date of the enactment of this subtitle, the Comptroller General of the United States 

shall submit to the Committee on Financial Services of the House 

of Representatives and the Committee on Banking, Housing, and 

Urban Affairs of the Senate a report on the results of the study required by subsection (a). 

Subtitle G—Strengthening Corporate Governance 

SEC. 971. PROXY ACCESS. 

(a) PROXY ACCESS.—Section 14(a) of the Securities Exchange 

Act of 1934 (15 U.S.C. 78n(a)) is amended— 

(1) by inserting ‘‘(1)’’ after ‘‘(a)’’; and 

(2) by adding at the end the following: 

‘‘(2) The rules and regulations prescribed by the Commission 

under paragraph (1) may include— 

‘‘(A) a requirement that a solicitation of proxy, consent, or 

authorization by (or on behalf of) an issuer include a nominee 

submitted by a shareholder to serve on the board of directors 

of the issuer; and 

‘‘(B) a requirement that an issuer follow a certain procedure 

in relation to a solicitation described in subparagraph (A).’’. 

(b) REGULATIONS.—The Commission may issue rules permitting 

the use by a shareholder of proxy solicitation materials supplied by 

an issuer of securities for the purpose of nominating individuals to 

membership on the board of directors of the issuer, under such 

terms and conditions as the Commission determines are in the interests of shareholders and for the protection of investors. 

(c) EXEMPTIONS.—The Commission may, by rule or order, exempt an issuer or class of issuers from the requirement made by this 

section or an amendment made by this section. In determining 

whether to make an exemption under this subsection, the Commission shall take into account, among other considerations, whether 

the requirement in the amendment made by subsection (a) disproportionately burdens small issuers. 

SEC. 972. DISCLOSURES REGARDING CHAIRMAN AND CEO STRUCTURES. 

The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is 

amended by inserting after section 14A, as added by this title, the 

following: 


sroberts on DSKD5P82C1PROD with HEARING
550 

‘‘SEC. 14B. CORPORATE GOVERNANCE. 

‘‘Not later than 180 days after the date of enactment of this subsection, the Commission shall issue rules that require an issuer to 

disclose in the annual proxy sent to investors the reasons why the 

issuer has chosen— 

‘‘(1) the same person to serve as chairman of the board of 

directors and chief executive officer (or in equivalent positions); 

or 

‘‘(2) different individuals to serve as chairman of the board 

of directors and chief executive officer (or in equivalent positions 

of the issuer).’’. 

Subtitle H—Municipal Securities 

SEC. 975. REGULATION OF MUNICIPAL SECURITIES AND CHANGES TO 

THE BOARD OF THE MSRB. 

(a) REGISTRATION OF MUNICIPAL SECURITIES DEALERS AND MU- NICIPAL ADVISORS.—Section 15B(a) of the Securities Exchange Act 

of 1934 (15 U.S.C. 78o–4(a)) is amended— 

(1) in paragraph (1)— 

(A) by inserting ‘‘(A)’’ after ‘‘(1)’’; and 

(B) by adding at the end the following: 

‘‘(B) It shall be unlawful for a municipal advisor to 

provide advice to or on behalf of a municipal entity or obligated person with respect to municipal financial products 

or the issuance of municipal securities, or to undertake a 

solicitation of a municipal entity or obligated person, unless the municipal advisor is registered in accordance with 

this subsection.’’; 

(2) in paragraph (2), by inserting ‘‘or municipal advisor’’ 

after ‘‘municipal securities dealer’’ each place that term appears; 

(3) in paragraph (3), by inserting ‘‘or municipal advisor’’ 

after ‘‘municipal securities dealer’’ each place that term appears; 

(4) in paragraph (4), by striking ‘‘dealer, or municipal securities dealer or class of brokers, dealers, or municipal securities 

dealers’’ and inserting ‘‘dealer, municipal securities dealer, or 

municipal advisor, or class of brokers, dealers, municipal securities dealers, or municipal advisors’’; and 

(5) by adding at the end the following: 

‘‘(5) No municipal advisor shall make use of the mails or 

any means or instrumentality of interstate commerce to provide 

advice to or on behalf of a municipal entity or obligated person 

with respect to municipal financial products, the issuance of 

municipal securities, or to undertake a solicitation of a municipal entity or obligated person, in connection with which such 

municipal advisor engages in any fraudulent, deceptive, or manipulative act or practice.’’. 

(b) MUNICIPAL SECURITIES RULEMAKING BOARD.—Section 

15B(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78o–4(b)) 

is amended— 

(1) in paragraph (1)— 

(A) in the first sentence, by striking ‘‘Not later than’’ 

and all that follows through ‘‘appointed by the Commission’’ and inserting ‘‘The Municipal Securities Rulemaking 


sroberts on DSKD5P82C1PROD with HEARING
551 

Board shall be composed of 15 members, or such other 

number of members as specified by rules of the Board pursuant to paragraph (2)(B),’’; 

(B) by striking the second sentence and inserting the 

following: ‘‘The members of the Board shall serve as members for a term of 3 years or for such other terms as specified by rules of the Board pursuant to paragraph (2)(B), 

and shall consist of (A) 8 individuals who are independent 

of any municipal securities broker, municipal securities 

dealer, or municipal advisor, at least 1 of whom shall be 

representative of institutional or retail investors in municipal securities, at least 1 of whom shall be representative of 

municipal entities, and at least 1 of whom shall be a member of the public with knowledge of or experience in the municipal industry (which members are hereinafter referred to 

as ‘public representatives’); and (B) 7 individuals who are 

associated with a broker, dealer, municipal securities dealer, or municipal advisor, including at least 1 individual 

who is associated with and representative of brokers, dealers, or municipal securities dealers that are not banks or 

subsidiaries or departments or divisions of banks (which 

members are hereinafter referred to as ‘broker-dealer representatives’), at least 1 individual who is associated with 

and representative of municipal securities dealers which 

are banks or subsidiaries or departments or divisions of 

banks (which members are hereinafter referred to as ‘bank 

representatives’), and at least 1 individual who is associated with a municipal advisor (which members are hereinafter referred to as ‘advisor representatives’ and, together 

with the broker-dealer representatives and the bank representatives, are referred to as ‘regulated representatives’). 

Each member of the board shall be knowledgeable of matters related to the municipal securities markets.’’; and 

(C) in the third sentence, by striking ‘‘initial’’; 

(2) in paragraph (2)— 

(A) in the matter preceding subparagraph (A)— 

(i) by inserting before the period at the end of the 

first sentence the following: ‘‘and advice provided to or 

on behalf of municipal entities or obligated persons by 

brokers, dealers, municipal securities dealers, and municipal advisors with respect to municipal financial 

products, the issuance of municipal securities, and solicitations of municipal entities or obligated persons 

undertaken by brokers, dealers, municipal securities 

dealers, and municipal advisors’’; and 

(ii) by striking the second sentence; 

(B) in subparagraph (A)— 

(i) in the matter preceding clause (i)— 

(I) by inserting ‘‘, and no broker, dealer, municipal securities dealer, or municipal advisor 

shall provide advice to or on behalf of a municipal 

entity or obligated person with respect to municipal financial products or the issuance of municipal securities,’’ after ‘‘sale of, any municipal security’’; and 


sroberts on DSKD5P82C1PROD with HEARING
552 

(II) by inserting ‘‘and municipal entities or obligated persons’’ after ‘‘protection of investors’’; 

(ii) in clause (i), by striking ‘‘municipal securities 

brokers and municipal securities dealers’’ each place 

that term appears and inserting ‘‘municipal securities 

brokers, municipal securities dealers, and municipal 

advisors’’; 

(iii) in clause (ii), by adding ‘‘and’’ at the end; 

(iv) in clause (iii), by striking ‘‘; and’’ and inserting 

a period; and 

(v) by striking clause (iv); 

(C) by amending subparagraph (B) to read as follows: 

‘‘(B) establish fair procedures for the nomination and election of members of the Board and assure fair representation in 

such nominations and elections of public representatives, broker 

dealer representatives, bank representatives, and advisor representatives. Such rules— 

‘‘(i) shall provide that the number of public representatives of the Board shall at all times exceed the total number 

of regulated representatives and that the membership shall 

at all times be as evenly divided in number as possible between public representatives and regulated representatives; 

‘‘(ii) shall specify the length or lengths of terms members shall serve; 

‘‘(iii) may increase the number of members which shall 

constitute the whole Board, provided that such number is 

an odd number; and 

‘‘(iv) shall establish requirements regarding the independence of public representatives.’’. 

(D) in subparagraph (C)— 

(i) by inserting ‘‘and municipal financial products’’ 

after ‘‘municipal securities’’ the first two times that 

term appears; 

(ii) by inserting ‘‘, municipal entities, obligated 

persons,’’ before ‘‘and the public interest’’; 

(iii) by striking ‘‘between’’ and inserting ‘‘among’’; 

(iv) by striking ‘‘issuers, municipal securities brokers, or municipal securities dealers, to fix’’ and inserting ‘‘municipal entities, obligated persons, municipal 

securities brokers, municipal securities dealers, or municipal advisors, to fix’’; and 

(v) by striking ‘‘brokers or municipal securities 

dealers, to regulate’’ and inserting ‘‘brokers, municipal 

securities dealers, or municipal advisors, to regulate’’; 

(E) in subparagraph (D)— 

(i) by inserting ‘‘and advice concerning municipal 

financial products’’ after ‘‘transactions in municipal securities’’; 

(ii) by striking ‘‘That no’’ and inserting ‘‘that no’’; 

(iii) by inserting ‘‘municipal advisor,’’ before ‘‘or 

person associated’’; and 

(iv) by striking ‘‘a municipal securities broker or 

municipal securities dealer may be compelled’’ and inserting ‘‘a municipal securities broker, municipal securities dealer, or municipal advisor may be compelled’’; 


sroberts on DSKD5P82C1PROD with HEARING
553 

(F) in subparagraph (E)— 

(i) by striking ‘‘municipal securities brokers and 

municipal securities dealers’’ and inserting ‘‘municipal 

securities brokers, municipal securities dealers, and 

municipal advisors’’; and 

(ii) by striking ‘‘municipal securities broker or municipal securities dealer’’ and inserting ‘‘municipal securities broker, municipal securities dealer, or municipal advisor’’; 

(G) in subparagraph (G), by striking ‘‘municipal securities brokers and municipal securities dealers’’ and inserting 

‘‘municipal securities brokers, municipal securities dealers, 

and municipal advisors’’; 

(H) in subparagraph (J)— 

(i) by striking ‘‘municipal securities broker and 

each municipal securities dealer’’ and inserting ‘‘municipal securities broker, municipal securities dealer, 

and municipal advisor’’; and 

(ii) by striking the period at the end of the second 

sentence and inserting ‘‘, which may include charges 

for failure to submit to the Board, or to any information system operated by the Board, within the prescribed timeframes, any items of information or documents required to be submitted under any rule issued 

by the Board.’’; 

(I) in subparagraph (K)— 

(i) by inserting ‘‘broker, dealer, or’’ before ‘‘municipal securities dealer’’ each place that term appears; 

and 

(ii) by striking ‘‘municipal securities investment 

portfolio’’ and inserting ‘‘related account of a broker, 

dealer, or municipal securities dealer’’; and 

(J) by adding at the end the following: 

‘‘(L) with respect to municipal advisors— 

‘‘(i) prescribe means reasonably designed to prevent 

acts, practices, and courses of business as are not consistent with a municipal advisor’s fiduciary duty to its 

clients; 

‘‘(ii) provide continuing education requirements for 

municipal advisors; 

‘‘(iii) provide professional standards; and 

‘‘(iv) not impose a regulatory burden on small municipal advisors that is not necessary or appropriate in 

the public interest and for the protection of investors, 

municipal entities, and obligated persons, provided 

that there is robust protection of investors against 

fraud.’’; 

(3) by redesignating paragraph (3) as paragraph (7); and 

(4) by inserting after paragraph (2) the following: 

‘‘(3) The Board, in conjunction with or on behalf of any 

Federal financial regulator or self-regulatory organization, 

may— 

‘‘(A) establish information systems; and 

‘‘(B) assess such reasonable fees and charges for the 

submission of information to, or the receipt of information 


sroberts on DSKD5P82C1PROD with HEARING
554 

from, such systems from any persons which systems may be 

developed for the purposes of serving as a repository of information from municipal market participants or otherwise 

in furtherance of the purposes of the Board, a Federal financial regulator, or a self-regulatory organization, except 

that the Board— 

‘‘(i) may not charge a fee to municipal entities or 

obligated persons to submit documents or other information to the Board or charge a fee to any person to 

obtain, directly from the Internet site of the Board, documents or information submitted by municipal entities, 

obligated persons, brokers, dealers, municipal securities dealers, or municipal advisors, including documents submitted under the rules of the Board or the 

Commission; and 

‘‘(ii) shall not be prohibited from charging commercially reasonable fees for automated subscription-based 

feeds or similar services, or for charging for other data 

or document-based services customized upon request of 

any person, made available to commercial enterprises, 

municipal securities market professionals, or the general public, whether delivered through the Internet or 

any other means, that contain all or part of the documents or information, subject to approval of the fees by 

the Commission under section 19(b). 

‘‘(4) The Board may provide guidance and assistance in the 

enforcement of, and examination for, compliance with the rules 

of the Board to the Commission, a registered securities association under section 15A, or any other appropriate regulatory 

agency, as applicable. 

‘‘(5) The Board, the Commission, and a registered securities 

association under section 15A, or the designees of the Board, the 

Commission, or such association, shall meet not less frequently 

than 2 times a year— 

‘‘(A) to describe the work of the Board, the Commission, 

and the registered securities association involving the regulation of municipal securities; and 

‘‘(B) to share information about— 

‘‘(i) the interpretation of the Board, the Commission, and the registered securities association of Board 

rules; and 

‘‘(ii) examination and enforcement of compliance 

with Board rules.’’. 

(c) DISCIPLINE OF BROKERS, DEALERS, MUNICIPAL SECURITIES

DEALERS AND MUNICIPAL ADVISORS; FIDUCIARY DUTY OF MUNICIPAL ADVISORS.—Section 15B(c) of the Securities Exchange Act of 

1934 (15 U.S.C. 78o–4(c)) is amended— 

(1) in paragraph (1), by inserting ‘‘, and no broker, dealer, 

municipal securities dealer, or municipal advisor shall make 

use of the mails or any means or instrumentality of interstate 

commerce to provide advice to or on behalf of a municipal entity 

or obligated person with respect to municipal financial products, the issuance of municipal securities, or to undertake a solicitation of a municipal entity or obligated person,’’ after ‘‘any 

municipal security’’; 


sroberts on DSKD5P82C1PROD with HEARING
555 

(2) by adding at the end of paragraph (1) the following: ‘‘A 

municipal advisor and any person associated with such municipal advisor shall be deemed to have a fiduciary duty to any 

municipal entity for whom such municipal advisor acts as a 

municipal advisor, and no municipal advisor may engage in 

any act, practice, or course of business which is not consistent 

with a municipal advisor’s fiduciary duty or that is in contravention of any rule of the Board.’’. 

(3) in paragraph (2), by inserting ‘‘or municipal advisor’’ 

after ‘‘municipal securities dealer’’ each place that term appears; 

(4) in paragraph (3)— 

(A) by inserting ‘‘or municipal entities or obligated person’’ after ‘‘protection of investors’’ each place that term appears; and 

(B) by inserting ‘‘or municipal advisor’’ after ‘‘municipal securities dealer’’ each place that term appears; 

(5) in paragraph (4), by inserting ‘‘or municipal advisor’’ 

after ‘‘municipal securities dealer or obligated person’’ each 

place that term appears; 

(6) in paragraph (6)(B), by inserting ‘‘or municipal entities 

or obligated person’’ after ‘‘protection of investors’’; 

(7) in paragraph (7)— 

(A) in subparagraph (A)— 

(i) in clause (i), by striking ‘‘; and’’ and inserting 

a semicolon; 

(ii) in clause (ii), by striking the period and inserting ‘‘; and’’; and 

(iii) by adding at the end the following: 

‘‘(iii) the Commission, or its designee, in the case 

of municipal advisors.’’. 

(B) in subparagraph (B), by inserting ‘‘or municipal entities or obligated person’’ after ‘‘protection of investors’’; 

and 

(8) by adding at the end the following: 

‘‘(9)(A) Fines collected by the Commission for violations of 

the rules of the Board shall be equally divided between the 

Commission and the Board. 

‘‘(B) Fines collected by a registered securities association 

under section 15A(7) with respect to violations of the rules of 

the Board shall be accounted for by such registered securities 

association separately from other fines collected under section 

15A(7) and shall be allocated between such registered securities 

association and the Board, and such allocation shall require 

the registered securities association to pay to the Board 1⁄3 of all 

fines collected by the registered securities association reasonably 

allocable to violations of the rules of the Board, or such other 

portion of such fines as may be directed by the Commission 

upon agreement between the registered securities association 

and the Board.’’. 

(d) ISSUANCE OF MUNICIPAL SECURITIES.—Section 15B(d)(2) of 

the Securities Exchange Act of 1934 (15 U.S.C. 78o–4(d)) is amended— 

(1) by striking ‘‘through a municipal securities broker or 

municipal securities dealer or otherwise’’ and inserting 


sroberts on DSKD5P82C1PROD with HEARING
556 

‘‘through a municipal securities broker, municipal securities 

dealer, municipal advisor, or otherwise’’; and 

(2) by inserting ‘‘or municipal advisors’’ before ‘‘to furnish’’. 

(e) DEFINITIONS.—Section 15B of the Securities Exchange Act of 

1934 (15 U.S.C. 78o–4) is amended by adding at the end the following: 

‘‘(e) DEFINITIONS.—For purposes of this section— 

‘‘(1) the term ‘Board’ means the Municipal Securities Rulemaking Board established under subsection (b)(1); 

‘‘(2) the term ‘guaranteed investment contract’ includes any 

investment that has specified withdrawal or reinvestment provisions and a specifically negotiated or bid interest rate, and also 

includes any agreement to supply investments on 2 or more future dates, such as a forward supply contract; 

‘‘(3) the term ‘investment strategies’ includes plans or programs for the investment of the proceeds of municipal securities 

that are not municipal derivatives, guaranteed investment contracts, and the recommendation of and brokerage of municipal 

escrow investments; 

‘‘(4) the term ‘municipal advisor’— 

‘‘(A) means a person (who is not a municipal entity or 

an employee of a municipal entity) that— 

‘‘(i) provides advice to or on behalf of a municipal 

entity or obligated person with respect to municipal financial products or the issuance of municipal securities, including advice with respect to the structure, timing, terms, and other similar matters concerning such 

financial products or issues; or 

‘‘(ii) undertakes a solicitation of a municipal entity; 

‘‘(B) includes financial advisors, guaranteed investment 

contract brokers, third-party marketers, placement agents, 

solicitors, finders, and swap advisors, if such persons are 

described in any of clauses (i) through (iii) of subparagraph 

(A); and 

‘‘(C) does not include a broker, dealer, or municipal securities dealer serving as an underwriter (as defined in section 2(a)(11) of the Securities Act of 1933) (15 U.S.C. 

77b(a)(11)), any investment adviser registered under the Investment Advisers Act of 1940, or persons associated with 

such investment advisers who are providing investment advice, any commodity trading advisor registered under the 

Commodity Exchange Act or persons associated with a 

commodity trading advisor who are providing advice related to swaps, attorneys offering legal advice or providing 

services that are of a traditional legal nature, or engineers 

providing engineering advice; 

‘‘(5) the term ‘municipal financial product’ means municipal derivatives, guaranteed investment contracts, and investment strategies; 

‘‘(6) the term ‘rules of the Board’ means the rules proposed 

and adopted by the Board under subsection (b)(2); 

‘‘(7) the term ‘person associated with a municipal advisor’ 

or ‘associated person of an advisor’ means— 


sroberts on DSKD5P82C1PROD with HEARING
557 

‘‘(A) any partner, officer, director, or branch manager 

of such municipal advisor (or any person occupying a similar status or performing similar functions); 

‘‘(B) any other employee of such municipal advisor who 

is engaged in the management, direction, supervision, or 

performance of any activities relating to the provision of 

advice to or on behalf of a municipal entity or obligated 

person with respect to municipal financial products or the 

issuance of municipal securities; and 

‘‘(C) any person directly or indirectly controlling, controlled by, or under common control with such municipal 

advisor; 

‘‘(8) the term ‘municipal entity’ means any State, political 

subdivision of a State, or municipal corporate instrumentality 

of a State, including— 

‘‘(A) any agency, authority, or instrumentality of the 

State, political subdivision, or municipal corporate instrumentality; 

‘‘(B) any plan, program, or pool of assets sponsored or 

established by the State, political subdivision, or municipal 

corporate instrumentality or any agency, authority, or instrumentality thereof; and 

‘‘(C) any other issuer of municipal securities; 

‘‘(9) the term ‘solicitation of a municipal entity or obligated 

person’ means a direct or indirect communication with a municipal entity or obligated person made by a person, for direct 

or indirect compensation, on behalf of a broker, dealer, municipal securities dealer, municipal advisor, or investment adviser 

(as defined in section 202 of the Investment Advisers Act of 

1940) that does not control, is not controlled by, or is not under 

common control with the person undertaking such solicitation 

for the purpose of obtaining or retaining an engagement by a 

municipal entity or obligated person of a broker, dealer, municipal securities dealer, or municipal advisor for or in connection 

with municipal financial products, the issuance of municipal 

securities, or of an investment adviser to provide investment advisory services to or on behalf of a municipal entity; and 

‘‘(10) the term ‘obligated person’ means any person, including an issuer of municipal securities, who is either generally or 

through an enterprise, fund, or account of such person, committed by contract or other arrangement to support the payment 

of all or part of the obligations on the municipal securities to 

be sold in an offering of municipal securities.’’. 

(f) REGISTERED SECURITIES ASSOCIATION.—Section 15A(b) of 

the Securities Exchange Act of 1934 (15 U.S.C. 78o–3(b)) is amended by adding at the end the following: 

‘‘(15) The rules of the association provide that the association shall— 

‘‘(A) request guidance from the Municipal Securities 

Rulemaking Board in interpretation of the rules of the Municipal Securities Rulemaking Board; and 

‘‘(B) provide information to the Municipal Securities 

Rulemaking Board about the enforcement actions and examinations of the association under section 15B(b)(2)(E), so 

that the Municipal Securities Rulemaking Board may— 


sroberts on DSKD5P82C1PROD with HEARING
558 

‘‘(i) assist in such enforcement actions and examinations; and 

‘‘(ii) evaluate the ongoing effectiveness of the rules 

of the Board.’’. 

(g) REGISTRATION AND REGULATION OF BROKERS AND DEALERS.—Section 15 of the Securities Exchange Act of 1934 is amended— 

(1) in subsection (b)(4), by inserting ‘‘municipal advisor,’’ 

after ‘‘municipal securities dealer’’ each place that term appears; and 

(2) in subsection (c), by inserting ‘‘broker, dealer, or’’ before 

‘‘municipal securities dealer’’ each place that term appears. 

(h) ACCOUNTS AND RECORDS, REPORTS, EXAMINATIONS OF EXCHANGES, MEMBERS, AND OTHERS.—Section 17(a)(1) of the Securities Exchange Act of 1934 is amended by inserting ‘‘municipal advisor,’’ after ‘‘municipal securities dealer’’. 

(i) EFFECTIVE DATE.—This section, and the amendments made 

by this section, shall take effect on October 1, 2010. 

SEC. 976. GOVERNMENT ACCOUNTABILITY OFFICE STUDY OF INCREASED DISCLOSURE TO INVESTORS. 

(a) STUDY.—The Comptroller General of the United States shall 

conduct a study and review of the disclosure required to be made 

by issuers of municipal securities. 

(b) SUBJECTS FOR EVALUATION.—In conducting the study under 

subsection (a), the Comptroller General of the United States shall— 

(1) broadly describe— 

(A) the size of the municipal securities markets and the 

issuers and investors; and 

(B) the disclosures provided by issuers to investors; 

(2) compare the amount, frequency, and quality of disclosures that issuers of municipal securities are required by law to 

provide for the benefit of municipal securities holders, including 

the amount of and frequency of disclosures actually provided by 

issuers of municipal securities, with the amount of and frequency of disclosures that issuers of corporate securities provide 

for the benefit of corporate securities holders, taking into account the differences between issuers of municipal securities 

and issuers of corporate securities; 

(3) evaluate the costs and benefits to various types of 

issuers of municipal securities of requiring issuers of municipal 

bonds to provide additional financial disclosures for the benefit 

of investors; 

(4) evaluate the potential benefit to investors from additional financial disclosures by issuers of municipal bonds; and 

(5) make recommendations relating to disclosure requirements for municipal issuers, including the advisability of the 

repeal or retention of section 15B(d) of the Securities Exchange 

Act of 1934 (15 U.S.C. 78o–4(d)) (commonly known as the 

‘‘Tower Amendment’’). 

(c) REPORT.—Not later than 24 months after the date of enactment of this Act, the Comptroller General of the United States shall 

submit a report to Congress on the results of the study conducted 

under subsection (a), including recommendations for how to improve disclosure by issuers of municipal securities. 


sroberts on DSKD5P82C1PROD with HEARING
559 

SEC. 977. GOVERNMENT ACCOUNTABILITY OFFICE STUDY ON THE MUNICIPAL SECURITIES MARKETS. 

(a) STUDY.—The Comptroller General of the United States shall 

conduct a study of the municipal securities markets. 

(b) REPORT.—Not later than 18 months after the date of enactment of this Act, the Comptroller General of the United States shall 

submit a report to the Committee on Banking, Housing, and Urban 

Affairs of the Senate, and the Committee on Financial Services of 

the House of Representatives, with copies to the Special Committee 

on Aging of the Senate and the Commission, on the results of the 

study conducted under subsection (a), including— 

(1) an analysis of the mechanisms for trading, quality of 

trade executions, market transparency, trade reporting, price 

discovery, settlement clearing, and credit enhancements; 

(2) the needs of the markets and investors and the impact 

of recent innovations; 

(3) recommendations for how to improve the transparency, 

efficiency, fairness, and liquidity of trading in the municipal securities markets, including with reference to items listed in 

paragraph (1); and 

(4) potential uses of derivatives in the municipal securities 

markets. 

(c) RESPONSES.—Not later than 180 days after receipt of the report required under subsection (b), the Commission shall submit a 

response to the Committee on Banking, Housing, and Urban Affairs 

of the Senate, and the Committee on Financial Services of the House 

of Representatives, with a copy to the Special Committee on Aging 

of the Senate, stating the actions the Commission has taken in response to the recommendations contained in such report. 

SEC. 978. FUNDING FOR GOVERNMENTAL ACCOUNTING STANDARDS 

BOARD. 

(a) AMENDMENT TO THE SECURITIES ACT OF 1933.—Section 19 

of the Securities Act of 1933 (15 U.S.C. 77s), as amended by section 

912, is further amended by adding at the end the following: 

‘‘(g) FUNDING FOR THE GASB.— 

‘‘(1) IN GENERAL.—The Commission may, subject to the limitations imposed by section 15B of the Securities Exchange Act 

of 1934 (15 U.S.C. 78o–4), require a national securities association registered under the Securities Exchange Act of 1934 to establish— 

‘‘(A) a reasonable annual accounting support fee to adequately fund the annual budget of the Governmental Accounting Standards Board (referred to in this subsection as 

the ‘GASB’); and 

‘‘(B) rules and procedures, in consultation with the 

principal organizations representing State governors, legislators, local elected officials, and State and local finance officers, to provide for the equitable allocation, assessment, 

and collection of the accounting support fee established 

under subparagraph (A) from the members of the association, and the remittance of all such accounting support fees 

to the Financial Accounting Foundation. 

‘‘(2) ANNUAL BUDGET.—For purposes of this subsection, the 

annual budget of the GASB is the annual budget reviewed and 


sroberts on DSKD5P82C1PROD with HEARING
560 

approved according to the internal procedures of the Financial 

Accounting Foundation. 

‘‘(3) USE OF FUNDS.—Any fees or funds collected under this 

subsection shall be used to support the efforts of the GASB to 

establish standards of financial accounting and reporting recognized as generally accepted accounting principles applicable to 

State and local governments of the United States. 

‘‘(4) LIMITATION ON FEE.—The annual accounting support 

fees collected under this subsection for a fiscal year shall not exceed the recoverable annual budgeted expenses of the GASB 

(which may include operating expenses, capital, and accrued 

items). 

‘‘(5) RULES OF CONSTRUCTION.— ‘‘(A) FEES NOT PUBLIC MONIES.—Accounting support 

fees collected under this subsection and other receipts of the 

GASB shall not be considered public monies of the United 

States. 

‘‘(B) LIMITATION ON AUTHORITY OF THE COMMISSION.— Nothing in this subsection shall be construed to— 

‘‘(i) provide the Commission or any national securities association direct or indirect oversight of the budget or technical agenda of the GASB; or 

‘‘(ii) affect the setting of generally accepted accounting principles by the GASB. 

‘‘(C) NONINTERFERENCE WITH STATES.—Nothing in this 

subsection shall be construed to impair or limit the authority of a State or local government to establish accounting 

and financial reporting standards.’’ 

(b) STUDY OF FUNDING FOR GOVERNMENTAL ACCOUNTING

STANDARDS BOARD.— (1) STUDY.—The Comptroller General of the United States 

shall conduct a study that evaluates— 

(A) the role and importance of the Governmental Accounting Standards Board in the municipal securities markets; and 

(B) the manner and the level at which the Governmental Accounting Standards Board has been funded. 

(2) CONSULTATION.—In conducting the study required 

under paragraph (1), the Comptroller General shall consult 

with the principal organizations representing State governors, 

legislators, local elected officials, and State and local finance 

officers. 

(3) REPORT.—Not later than 180 days after the date of enactment of this Act, the Comptroller General shall submit to the 

Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of 

Representatives a report on the study required under paragraph 

(1). 

SEC. 979. COMMISSION OFFICE OF MUNICIPAL SECURITIES. 

(a) IN GENERAL.—There shall be in the Commission an Office 

of Municipal Securities, which shall— 

(1) administer the rules of the Commission with respect to 

the practices of municipal securities brokers and dealers, municipal securities advisors, municipal securities investors, and 

municipal securities issuers; and 


sroberts on DSKD5P82C1PROD with HEARING
561 

(2) coordinate with the Municipal Securities Rulemaking 

Board for rulemaking and enforcement actions as required by 

law. 

(b) DIRECTOR OF THE OFFICE.—The head of the Office of Municipal Securities shall be the Director, who shall report to the Chairman. 

(c) STAFFING.— (1) IN GENERAL.—The Office of Municipal Securities shall 

be staffed sufficiently to carry out the requirements of this section. 

(2) REQUIREMENT.—The staff of the Office of Municipal Securities shall include individuals with knowledge of and expertise in municipal finance. 

Subtitle I—Public Company Accounting Oversight Board, 

Portfolio Margining, and Other Matters 

SEC. 981. AUTHORITY TO SHARE CERTAIN INFORMATION WITH FOREIGN AUTHORITIES. 

(a) DEFINITION.—Section 2(a) of the Sarbanes-Oxley Act of 2002 

(15 U.S.C. 7201(a)) is amended by adding at the end the following: 

‘‘(17) FOREIGN AUDITOR OVERSIGHT AUTHORITY.—The term 

‘foreign auditor oversight authority’ means any governmental 

body or other entity empowered by a foreign government to conduct inspections of public accounting firms or otherwise to administer or enforce laws related to the regulation of public accounting firms.’’. 

(b) AVAILABILITY TO SHARE INFORMATION.—Section 105(b)(5) of 

the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7215(b)(5)) is amended 

by adding at the end the following: 

‘‘(C) AVAILABILITY TO FOREIGN OVERSIGHT AUTHORI- TIES.—Without the loss of its status as confidential and 

privileged in the hands of the Board, all information referred to in subparagraph (A) that relates to a public accounting firm that a foreign government has empowered a 

foreign auditor oversight authority to inspect or otherwise 

enforce laws with respect to, may, at the discretion of the 

Board, be made available to the foreign auditor oversight 

authority, if— 

‘‘(i) the Board finds that it is necessary to accomplish the purposes of this Act or to protect investors; 

‘‘(ii) the foreign auditor oversight authority provides— 

‘‘(I) such assurances of confidentiality as the 

Board may request; 

‘‘(II) a description of the applicable information systems and controls of the foreign auditor 

oversight authority; and 

‘‘(III) a description of the laws and regulations 

of the foreign government of the foreign auditor 

oversight authority that are relevant to information access; and 

‘‘(iii) the Board determines that it is appropriate to 

share such information.’’. 

(c) CONFORMING AMENDMENT.—Section 105(b)(5)(A) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7215(b)(5)(A)) is amended by 


sroberts on DSKD5P82C1PROD with HEARING
562 

striking ‘‘subparagraph (B)’’ and inserting ‘‘subparagraphs (B) and 

(C)’’. 

SEC. 982. OVERSIGHT OF BROKERS AND DEALERS. 

(a) DEFINITIONS.— 

(1) DEFINITIONS AMENDED.—Title I of the Sarbanes-Oxley 

Act of 2002 (15 U.S.C. 7201 et seq.) is amended by adding at 

the end the following new section: 

‘‘SEC. 110. DEFINITIONS. 

‘‘For the purposes of this title, the following definitions shall 

apply: 

‘‘(1) AUDIT.—The term ‘audit’ means an examination of the 

financial statements, reports, documents, procedures, controls, 

or notices of any issuer, broker, or dealer by an independent 

public accounting firm in accordance with the rules of the 

Board or the Commission, for the purpose of expressing an 

opinion on the financial statements or providing an audit report. 

‘‘(2) AUDIT REPORT.—The term ‘audit report’ means a document, report, notice, or other record— 

‘‘(A) prepared following an audit performed for purposes of compliance by an issuer, broker, or dealer with the 

requirements of the securities laws; and 

‘‘(B) in which a public accounting firm either— 

‘‘(i) sets forth the opinion of that firm regarding a 

financial statement, report, notice, or other document, 

procedures, or controls; or 

‘‘(ii) asserts that no such opinion can be expressed. 

‘‘(3) BROKER.—The term ‘broker’ means a broker (as such 

term is defined in section 3(a)(4) of the Securities Exchange Act 

of 1934 (15 U.S.C. 78c(a)(4))) that is required to file a balance 

sheet, income statement, or other financial statement under section 17(e)(1)(A) of such Act (15 U.S.C. 78q(e)(1)(A)), where such 

balance sheet, income statement, or financial statement is required to be certified by a registered public accounting firm. 

‘‘(4) DEALER.—The term ‘dealer’ means a dealer (as such 

term is defined in section 3(a)(5) of the Securities Exchange Act 

of 1934 (15 U.S.C. 78c(a)(5))) that is required to file a balance 

sheet, income statement, or other financial statement under section 17(e)(1)(A) of such Act (15 U.S.C. 78q(e)(1)(A)), where such 

balance sheet, income statement, or financial statement is required to be certified by a registered public accounting firm. 

‘‘(5) PROFESSIONAL STANDARDS.—The term ‘professional 

standards’ means— 

‘‘(A) accounting principles that are— 

‘‘(i) established by the standard setting body described in section 19(b) of the Securities Act of 1933, as 

amended by this Act, or prescribed by the Commission 

under section 19(a) of that Act (15 U.S.C. 17a(s)) or 

section 13(b) of the Securities Exchange Act of 1934 (15 

U.S.C. 78a(m)); and 

‘‘(ii) relevant to audit reports for particular issuers, 

brokers, or dealers, or dealt with in the quality control 

system of a particular registered public accounting 

firm; and 


sroberts on DSKD5P82C1PROD with HEARING
563 

‘‘(B) auditing standards, standards for attestation engagements, quality control policies and procedures, ethical 

and competency standards, and independence standards 

(including rules implementing title II) that the Board or 

the Commission determines— 

‘‘(i) relate to the preparation or issuance of audit 

reports for issuers, brokers, or dealers; and 

‘‘(ii) are established or adopted by the Board under 

section 103(a), or are promulgated as rules of the Commission. 

‘‘(6) SELF-REGULATORY ORGANIZATION.—The term ‘self-regulatory organization’ has the same meaning as in section 3(a) of 

the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)).’’. 

(2) CONFORMING AMENDMENT.—Section 2(a) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7201(a)) is amended in the 

matter preceding paragraph (1), by striking ‘‘In this’’ and inserting ‘‘Except as otherwise specifically provided in this Act, in 

this’’. 

(b) ESTABLISHMENT AND ADMINISTRATION OF THE PUBLIC COM- PANY ACCOUNTING OVERSIGHT BOARD.—Section 101 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7211) is amended— 

(1) by striking ‘‘issuers’’ each place that term appears and 

inserting ‘‘issuers, brokers, and dealers’’; and 

(2) in subsection (a)— 

(A) by striking ‘‘public companies’’ and inserting ‘‘companies’’; and 

(B) by striking ‘‘for companies the securities of which 

are sold to, and held by and for, public investors’’. 

(c) REGISTRATION WITH THE BOARD.—Section 102 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7212) is amended— 

(1) in subsection (a)— 

(A) by striking ‘‘Beginning 180’’ and all that follows 

through ‘‘101(d), it’’ and inserting ‘‘It’’; and 

(B) by striking ‘‘issuer’’ and inserting ‘‘issuer, broker, or 

dealer’’; 

(2) in subsection (b)— 

(A) in paragraph (2)(A), by striking ‘‘issuers’’ and inserting ‘‘issuers, brokers, and dealers’’; and 

(B) by striking ‘‘issuer’’ each place that term appears 

and inserting ‘‘issuer, broker, or dealer’’. 

(d) AUDITING AND INDEPENDENCE.—Section 103(a) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7213(a)) is amended— 

(1) in paragraph (1), by striking ‘‘and such ethics standards’’ and inserting ‘‘such ethics standards, and such independence standards’’; 

(2) in paragraph (2)(A)(iii), by striking ‘‘describe in each 

audit report’’ and inserting ‘‘in each audit report for an issuer, 

describe’’; and 

(3) in paragraph (2)(B)(i), by striking ‘‘issuers’’ and inserting ‘‘issuers, brokers, and dealers’’. 

(e) INSPECTIONS OF REGISTERED PUBLIC ACCOUNTING FIRMS.— 

(1) AMENDMENTS.—Section 104(a) of the Sarbanes-Oxley 

Act of 2002 (15 U.S.C. 7214(a)) is amended— 

(A) by striking ‘‘The Board shall’’ and inserting the following: 


sroberts on DSKD5P82C1PROD with HEARING
564 

‘‘(1) INSPECTIONS GENERALLY.—The Board shall’’; and 

(B) by adding at the end the following: 

‘‘(2) INSPECTIONS OF AUDIT REPORTS FOR BROKERS AND

DEALERS.— 

‘‘(A) The Board may, by rule, conduct and require a 

program of inspection in accordance with paragraph (1), on 

a basis to be determined by the Board, of registered public 

accounting firms that provide one or more audit reports for 

a broker or dealer. The Board, in establishing such a program, may allow for differentiation among classes of brokers and dealers, as appropriate. 

‘‘(B) If the Board determines to establish a program of 

inspection pursuant to subparagraph (A), the Board shall 

consider in establishing any inspection schedules whether 

differing schedules would be appropriate with respect to 

registered public accounting firms that issue audit reports 

only for one or more brokers or dealers that do not receive, 

handle, or hold customer securities or cash or are not a 

member of the Securities Investor Protection Corporation. 

‘‘(C) Any rules of the Board pursuant to this paragraph 

shall be subject to prior approval by the Commission pursuant to section 107(b) before the rules become effective, including an opportunity for public notice and comment. 

‘‘(D) Notwithstanding anything to the contrary in section 102 of this Act, a public accounting firm shall not be 

required to register with the Board if the public accounting 

firm is exempt from the inspection program which may be 

established by the Board under subparagraph (A).’’. 

(2) CONFORMING AMENDMENT.—Section 17(e)(1)(A) of the 

Securities Exchange Act of 1934 (15 U.S.C. 78q(e)(1)(A)) is 

amended by striking ‘‘registered public accounting firm’’ and inserting ‘‘independent public accounting firm, or by a registered 

public accounting firm if the firm is required to be registered 

under the Sarbanes-Oxley Act of 2002,’’. 

(f) INVESTIGATIONS AND DISCIPLINARY PROCEEDINGS.—Section 

105(c)(7)(B) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 

7215(c)(7)(B)) is amended— 

(1) in the subparagraph heading, by inserting ‘‘, BROKER, 

OR DEALER’’ after ‘‘ISSUER’’; 

(2) by striking ‘‘any issuer’’ each place that term appears 

and inserting ‘‘any issuer, broker, or dealer’’; and 

(3) by striking ‘‘an issuer under this subsection’’ and inserting ‘‘a registered public accounting firm under this subsection’’. 

(g) FOREIGN PUBLIC ACCOUNTING FIRMS.—Section 106(a) of the 

Sarbanes-Oxley Act of 2002 (15 U.S.C. 7216(a)) is amended— 

(1) in paragraph (1), by striking ‘‘issuer’’ and inserting 

‘‘issuer, broker, or dealer’’; and 

(2) in paragraph (2), by striking ‘‘issuers’’ and inserting 

‘‘issuers, brokers, or dealers’’. 

(h) FUNDING.—Section 109 of the Sarbanes-Oxley Act of 2002 

(15 U.S.C. 7219) is amended— 

(1) in subsection (c)(2), by striking ‘‘subsection (i)’’ and inserting ‘‘subsection (j)’’; 

(2) in subsection (d)— 


sroberts on DSKD5P82C1PROD with HEARING
565 

(A) in paragraph (2), by striking ‘‘allowing for differentiation among classes of issuers, as appropriate’’ and inserting ‘‘and among brokers and dealers, in accordance with 

subsection (h), and allowing for differentiation among 

classes of issuers, brokers and dealers, as appropriate’’; and 

(B) by adding at the end the following: 

‘‘(3) BROKERS AND DEALERS.—The Board shall begin the allocation, assessment, and collection of fees under paragraph (2) 

with respect to brokers and dealers with the payment of support 

fees to fund the first full fiscal year beginning after the date of 

enactment of the Investor Protection and Securities Reform Act 

of 2010.’’; 

(3) by redesignating subsections (h), (i), and (j) as subsections (i), (j), and (k), respectively; and 

(4) by inserting after subsection (g) the following: 

‘‘(h) ALLOCATION OF ACCOUNTING SUPPORT FEES AMONG BRO- KERS AND DEALERS.— ‘‘(1) OBLIGATION TO PAY.—Each broker or dealer shall pay 

to the Board the annual accounting support fee allocated to 

such broker or dealer under this section. 

‘‘(2) ALLOCATION.—Any amount due from a broker or dealer 

(or from a particular class of brokers and dealers) under this 

section shall be allocated among brokers and dealers and payable by the broker or dealer (or the brokers and dealers in the 

particular class, as applicable). 

‘‘(3) PROPORTIONALITY.—The amount due from a broker or 

dealer shall be in proportion to the net capital of the broker or 

dealer (before or after any adjustments), compared to the total 

net capital of all brokers and dealers (before or after any adjustments), in accordance with rules issued by the Board.’’. 

(i) REFERRAL OF INVESTIGATIONS TO A SELF-REGULATORY ORGA- NIZATION.—Section 105(b)(4)(B) of the Sarbanes-Oxley Act of 2002 

(15 U.S.C. 7215(b)(4)(B)) is amended— 

(1) by redesignating clauses (ii) and (iii) as clauses (iii) and 

(iv), respectively; and 

(2) by inserting after clause (i) the following: 

‘‘(ii) to a self-regulatory organization, in the case of 

an investigation that concerns an audit report for a 

broker or dealer that is under the jurisdiction of such 

self-regulatory organization;’’. 

(j) USE OF DOCUMENTS RELATED TO AN INSPECTION OR INVESTIGATION.—Section 105(b)(5)(B)(ii) of the Sarbanes-Oxley Act of 

2002 (15 U.S.C. 7215(b)(5)(B)(ii)) is amended— 

(1) in subclause (III), by striking ‘‘and’’ at the end; 

(2) in subclause (IV), by striking the comma and inserting 

‘‘; and’’; and 

(3) by inserting after subclause (IV) the following: 

‘‘(V) a self-regulatory organization, with respect to an audit report for a broker or dealer that 

is under the jurisdiction of such self-regulatory organization,’’. 

SEC. 983. PORTFOLIO MARGINING. 

(a) ADVANCES.—Section 9(a)(1) of the Securities Investor Protection Act of 1970 (15 U.S.C. 78fff3(a)(1)) is amended by inserting ‘‘or 

options on commodity futures contracts’’ after ‘‘claim for securities’’. 


sroberts on DSKD5P82C1PROD with HEARING
566 

(b) DEFINITIONS.—Section 16 of the Securities Investor Protection Act of 1970 (15 U.S.C. 78lll) is amended— 

(1) by striking paragraph (2) and inserting the following: 

‘‘(2) CUSTOMER.— 

‘‘(A) IN GENERAL.—The term ‘customer’ of a debtor 

means any person (including any person with whom the 

debtor deals as principal or agent) who has a claim on account of securities received, acquired, or held by the debtor 

in the ordinary course of its business as a broker or dealer 

from or for the securities accounts of such person for safekeeping, with a view to sale, to cover consummated sales, 

pursuant to purchases, as collateral, security, or for purposes of effecting transfer. 

‘‘(B) INCLUDED PERSONS.—The term ‘customer’ includes— 

‘‘(i) any person who has deposited cash with the 

debtor for the purpose of purchasing securities; 

‘‘(ii) any person who has a claim against the debtor for cash, securities, futures contracts, or options on 

futures contracts received, acquired, or held in a portfolio margining account carried as a securities account 

pursuant to a portfolio margining program approved 

by the Commission; and 

‘‘(iii) any person who has a claim against the debtor arising out of sales or conversions of such securities. 

‘‘(C) EXCLUDED PERSONS.—The term ‘customer’ does 

not include any person, to the extent that— 

‘‘(i) the claim of such person arises out of transactions with a foreign subsidiary of a member of SIPC; 

or 

‘‘(ii) such person has a claim for cash or securities 

which by contract, agreement, or understanding, or by 

operation of law, is part of the capital of the debtor, or 

is subordinated to the claims of any or all creditors of 

the debtor, notwithstanding that some ground exists for 

declaring such contract, agreement, or understanding 

void or voidable in a suit between the claimant and the 

debtor.’’; 

(2) in paragraph (4)— 

(A) in subparagraph (C), by striking ‘‘and’’ at the end; 

(B) by redesignating subparagraph (D) as subparagraph (E); and 

(C) by inserting after subparagraph (C) the following: 

‘‘(D) in the case of a portfolio margining account of a 

customer that is carried as a securities account pursuant to 

a portfolio margining program approved by the Commission, a futures contract or an option on a futures contract 

received, acquired, or held by or for the account of a debtor 

from or for such portfolio margining account, and the proceeds thereof; and’’; 

(3) in paragraph (9), in the matter following subparagraph 

(L), by inserting after ‘‘Such term’’ the following: ‘‘includes revenues earned by a broker or dealer in connection with a transaction in the portfolio margining account of a customer carried 


sroberts on DSKD5P82C1PROD with HEARING
567 

as securities accounts pursuant to a portfolio margining program approved by the Commission. Such term’’; and 

(4) in paragraph (11)— 

(A) in subparagraph (A)— 

(i) by striking ‘‘filing date, all’’ and all that follows 

through the end of the subparagraph and inserting the 

following: ‘‘filing date— 

‘‘(i) all securities positions of such customer (other 

than customer name securities reclaimed by such customer); and 

‘‘(ii) all positions in futures contracts and options 

on futures contracts held in a portfolio margining account carried as a securities account pursuant to a 

portfolio margining program approved by the Commission, including all property collateralizing such positions, to the extent that such property is not otherwise 

included herein; minus’’; and 

(B) in the matter following subparagraph (C), by striking ‘‘In determining’’ and inserting the following: ‘‘A claim 

for a commodity futures contract received, acquired, or held 

in a portfolio margining account pursuant to a portfolio 

margining program approved by the Commission or a 

claim for a security futures contract, shall be deemed to be 

a claim with respect to such contract as of the filing date, 

and such claim shall be treated as a claim for cash. In determining’’. 

SEC. 984. LOAN OR BORROWING OF SECURITIES. 

(a) RULEMAKING AUTHORITY.—Section 10 of the Securities Exchange Act of 1934 (15 U.S.C. 78j) is amended by adding at the end 

the following: 

‘‘(c)(1) To effect, accept, or facilitate a transaction involving the 

loan or borrowing of securities in contravention of such rules and 

regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors. 

‘‘(2) Nothing in paragraph (1) may be construed to limit the authority of the appropriate Federal banking agency (as defined in section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. 1813(q))), 

the National Credit Union Administration, or any other Federal department or agency having a responsibility under Federal law to 

prescribe rules or regulations restricting transactions involving the 

loan or borrowing of securities in order to protect the safety and 

soundness of a financial institution or to protect the financial system from systemic risk.’’. 

(b) RULEMAKING REQUIRED.—Not later than 2 years after the 

date of enactment of this Act, the Commission shall promulgate 

rules that are designed to increase the transparency of information 

available to brokers, dealers, and investors, with respect to the loan 

or borrowing of securities. 

SEC. 985. TECHNICAL CORRECTIONS TO FEDERAL SECURITIES LAWS. 

(a) SECURITIES ACT OF 1933.—The Securities Act of 1933 (15 

U.S.C. 77a et seq.) is amended— 

(1) in section 3(a)(4) (15 U.S.C. 77c(a)(4)), by striking ‘‘individual;’’ and inserting ‘‘individual,’’; 

(2) in section 18 (15 U.S.C. 77r)— 


sroberts on DSKD5P82C1PROD with HEARING
568 

(A) in subsection (b)(1)(C), by striking ‘‘is a security’’ 

and inserting ‘‘a security’’; and 

(B) in subsection (c)(2)(B)(i), by striking ‘‘State, or’’ and 

inserting ‘‘State or’’; 

(3) in section 19(d)(6)(A) (15 U.S.C. 77s(d)(6)(A)), by striking ‘‘in paragraph (1) of (3)’’ and inserting ‘‘in paragraph (1) or 

(3)’’; and 

(4) in section 27A(c)(1)(B)(ii) (15 U.S.C. 77z–2(c)(1)(B)(ii)), 

by striking ‘‘business entity;’’ and inserting ‘‘business entity,’’. 

(b) SECURITIES EXCHANGE ACT OF 1934.—The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended— 

(1) in section 2 (15 U.S.C. 78b), by striking ‘‘affected’’ and 

inserting ‘‘effected’’; 

(2) in section 3 (15 U.S.C. 78c)— 

(A) in subsection (a)(55)(A), by striking ‘‘section 

3(a)(12) of the Securities Exchange Act of 1934’’ and inserting ‘‘section 3(a)(12) of this title’’; and 

(B) in subsection (g), by striking ‘‘company, account 

person, or entity’’ and inserting ‘‘company, account, person, 

or entity’’; 

(3) in section 10A(i)(1)(B) (15 U.S.C. 78j–1(i)(1)(B))— 

(A) in the subparagraph heading, by striking ‘‘MINI- MUS’’ and inserting ‘‘MINIMIS’’; and 

(B) in clause (i), by striking ‘‘nonaudit’’ and inserting 

‘‘non-audit’’; 

(4) in section 13(b)(1) (15 U.S.C. 78m(b)(1)), by striking 

‘‘earning statement’’ and inserting ‘‘earnings statement’’; 

(5) in section 15 (15 U.S.C. 78o)— 

(A) in subsection (b)(1)— 

(i) in subparagraph (B), by striking ‘‘The order 

granting’’ and all that follows through ‘‘from such 

membership.’’; and 

(ii) in the undesignated matter immediately following subparagraph (B), by inserting after the first 

sentence the following: ‘‘The order granting registration 

shall not be effective until such broker or dealer has become a member of a registered securities association, or 

until such broker or dealer has become a member of a 

national securities exchange, if such broker or dealer 

effects transactions solely on that exchange, unless the 

Commission has exempted such broker or dealer, by 

rule or order, from such membership.’’; 

(6) in section 15C(a)(2) (15 U.S.C. 78o–5(a)(2))— 

(A) by redesignating clauses (i) and (ii) as subparagraphs (A) and (B), respectively, and adjusting the subparagraph margins accordingly; 

(B) in subparagraph (B), as so redesignated, by striking ‘‘The order granting’’ and all that follows through 

‘‘from such membership.’’; and 

(C) in the matter following subparagraph (B), as so redesignated, by inserting after the first sentence the following: ‘‘The order granting registration shall not be effective until such government securities broker or government 

securities dealer has become a member of a national securities exchange registered under section 6 of this title, or a seVerDate Mar 15 2010 04:29 Jul 07, 2010 Jkt 057098 PO 00000 Frm 00572 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
569 

curities association registered under section 15A of this 

title, unless the Commission has exempted such government 

securities broker or government securities dealer, by rule or 

order, from such membership.’’; 

(7) in section 17(b)(1)(B) (15 U.S.C. 78q(b)(1)(B)), by striking ‘‘15A(k) gives’’ and inserting ‘‘15A(k), give’’; and 

(8) in section 21C(c)(2) (15 U.S.C. 78u–3(c)(2)), by striking 

‘‘paragraph (1) subsection’’ and inserting ‘‘Paragraph (1)’’. 

(c) TRUST INDENTURE ACT OF 1939.—The Trust Indenture Act 

of 1939 (15 U.S.C. 77aaa et seq.) is amended— 

(1) in section 304(b) (15 U.S.C. 77ddd(b)), by striking ‘‘section 2 of such Act’’ and inserting ‘‘section 2(a) of such Act’’; and 

(2) in section 317(a)(1) (15 U.S.C. 77qqq(a)(1)), by striking 

‘‘, in the’’ and inserting ‘‘in the’’. 

(d) INVESTMENT COMPANY ACT OF 1940.—The Investment Company Act of 1940 (15 U.S.C. 80a–1 et seq.) is amended— 

(1) in section 2(a)(19) (15 U.S.C. 80a–2(a)(19)), in the matter following subparagraph (B)(vii)— 

(A) by striking ‘‘clause (vi)’’ each place that term appears and inserting ‘‘clause (vii)’’; and 

(B) in each of subparagraphs (A)(vi) and (B)(vi), by 

adding ‘‘and’’ at the end of subclause (III); 

(2) in section 9(b)(4)(B) (15 U.S.C. 80a–9(b)(4)(B)), by adding ‘‘or’’ after the semicolon at the end; 

(3) in section 12(d)(1)(J) (15 U.S.C. 80a–12(d)(1)(J)), by 

striking ‘‘any provision of this subsection’’ and inserting ‘‘any 

provision of this paragraph’’; 

(4) in section 17(f) (15 U.S.C. 80a–17(f))— 

(A) in paragraph (4), by striking ‘‘No such member’’ 

and inserting ‘‘No member of a national securities exchange’’; and 

(B) in paragraph (6), by striking ‘‘company may serve’’ 

and inserting ‘‘company, may serve’’; and 

(5) in section 61(a)(3)(B)(iii) (15 U.S.C. 80a– 

60(a)(3)(B)(iii))— 

(A) by striking ‘‘paragraph (1) of section 205’’ and inserting ‘‘section 205(a)(1)’’; and 

(B) by striking ‘‘clause (A) or (B) of that section’’ and 

inserting ‘‘paragraph (1) or (2) of section 205(b)’’. 

(e) INVESTMENT ADVISERS ACT OF 1940.—The Investment Advisers Act of 1940 (15 U.S.C. 80b–1 et seq.) is amended— 

(1) in section 203 (15 U.S.C. 80b–3)— 

(A) in subsection (c)(1)(A), by striking ‘‘principal business office and’’ and inserting ‘‘principal office, principal 

place of business, and’’; and 

(B) in subsection (k)(4)(B), in the matter following 

clause (ii), by striking ‘‘principal place of business’’ and inserting ‘‘principal office or place of business’’; 

(2) in section 206(3) (15 U.S.C. 80b–6(3)), by adding ‘‘or’’ 

after the semicolon at the end; 

(3) in section 213(a) (15 U.S.C. 80b–13(a)), by striking 

‘‘principal place of business’’ and inserting ‘‘principal office or 

place of business’’; and 


sroberts on DSKD5P82C1PROD with HEARING
570 

(4) in section 222 (15 U.S.C. 80b–18a), by striking ‘‘principal place of business’’ each place that term appears and inserting ‘‘principal office and place of business’’. 

SEC. 986. CONFORMING AMENDMENTS RELATING TO REPEAL OF THE 

PUBLIC UTILITY HOLDING COMPANY ACT OF 1935. 

(a) SECURITIES EXCHANGE ACT OF 1934.—The Securities Exchange Act of 1934 (15 U.S.C. 78 et seq.) is amended— 

(1) in section 3(a)(47) (15 U.S.C. 78c(a)(47)), by striking 

‘‘the Public Utility Holding Company Act of 1935 (15 U.S.C. 

79a et seq.),’’; 

(2) in section 12(k) (15 U.S.C. 78l(k)), by amending paragraph (7) to read as follows:

‘‘(7) DEFINITION.—For purposes of this subsection, the term 

‘emergency’ means— 

‘‘(A) a major market disturbance characterized by or 

constituting— 

‘‘(i) sudden and excessive fluctuations of securities 

prices generally, or a substantial threat thereof, that 

threaten fair and orderly markets; or 

‘‘(ii) a substantial disruption of the safe or efficient 

operation of the national system for clearance and settlement of transactions in securities, or a substantial 

threat thereof; or 

‘‘(B) a major disturbance that substantially disrupts, or 

threatens to substantially disrupt— 

‘‘(i) the functioning of securities markets, investment companies, or any other significant portion or 

segment of the securities markets; or 

‘‘(ii) the transmission or processing of securities 

transactions.’’; and 

(3) in section 21(h)(2) (15 U.S.C. 78u(h)(2)), by striking 

‘‘section 18(c) of the Public Utility Holding Company Act of 

1935,’’. 

(b) TRUST INDENTURE ACT OF 1939.—The Trust Indenture Act 

of 1939 (15 U.S.C. 77aaa et seq.) is amended— 

(1) in section 303 (15 U.S.C. 77ccc), by striking paragraph 

(17) and inserting the following: 

‘‘(17) The terms ‘Securities Act of 1933’ and ‘Securities Exchange Act of 1934’ shall be deemed to refer, respectively, to 

such Acts, as amended, whether amended prior to or after the 

enactment of this title.’’; 

(2) in section 308 (15 U.S.C. 77hhh), by striking ‘‘Securities 

Act of 1933, the Securities Exchange Act of 1934, or the Public 

Utility Holding Company Act of 1935’’ each place that term appears and inserting ‘‘Securities Act of 1933 or the Securities Exchange Act of 1934’’; 

(3) in section 310 (15 U.S.C. 77jjj), by striking subsection 

(c); 

(4) in section 311 (15 U.S.C. 77kkk), by striking subsection 

(c); 

(5) in section 323(b) (15 U.S.C. 77www(b)), by striking ‘‘Securities Act of 1933, or the Securities Exchange Act of 1934, or 

the Public Utility Holding Company Act of 1935’’ and inserting 

‘‘Securities Act of 1933 or the Securities Exchange Act of 1934’’; 

and 


sroberts on DSKD5P82C1PROD with HEARING
571 

(6) in section 326 (15 U.S.C. 77zzz), by striking ‘‘Securities 

Act of 1933, or the Securities Exchange Act of 1934, or the Public Utility Holding Company Act of 1935,’’ and inserting ‘‘Securities Act of 1933 or the Securities Exchange Act of 1934’’. 

(c) INVESTMENT COMPANY ACT OF 1940.—The Investment Company Act of 1940 (15 U.S.C. 80a–1 et seq.) is amended— 

(1) in section 2(a)(44) (15 U.S.C. 80a–2(a)(44)), by striking 

‘‘ ‘Public Utility Holding Company Act of 1935’,’’; 

(2) in section 3(c) (15 U.S.C. 80a–3(c)), by striking paragraph (8) and inserting the following: 

‘‘(8) [Repealed]’’; 

(3) in section 38(b) (15 U.S.C. 80a–37(b)), by striking ‘‘the 

Public Utility Holding Company Act of 1935,’’; and 

(4) in section 50 (15 U.S.C. 80a–49), by striking ‘‘the Public 

Utility Holding Company Act of 1935,’’. 

(d) INVESTMENT ADVISERS ACT OF 1940.—Section 202(a)(21) of 

the Investment Advisers Act of 1940 (15 U.S.C. 80b–2(a)(21)) is 

amended by striking ‘‘ ‘Public Utility Holding Company Act of 

1935’,’’. 

SEC. 987. AMENDMENT TO DEFINITION OF MATERIAL LOSS AND NONMATERIAL LOSSES TO THE DEPOSIT INSURANCE FUND 

FOR PURPOSES OF INSPECTOR GENERAL REVIEWS. 

(a) IN GENERAL.—Section 38(k) of the Federal Deposit Insurance Act (U.S.C. 1831o(k)) is amended— 

(1) in paragraph (2), by striking subparagraph (B) and inserting the following: 

‘‘(B) MATERIAL LOSS DEFINED.—The term ‘material loss’ 

means any estimated loss in excess of— 

‘‘(i) $200,000,000, if the loss occurs during the period beginning on January 1, 2010, and ending on December 31, 2011; 

‘‘(ii) $150,000,000, if the loss occurs during the period beginning on January 1, 2012, and ending on December 31, 2013; and 

‘‘(iii) $50,000,000, if the loss occurs on or after 

January 1, 2014, provided that if the inspector general 

of a Federal banking agency certifies to the Committee 

on Banking, Housing, and Urban Affairs of the Senate 

and the Committee on Financial Services of the House 

of Representatives that the number of projected failures 

of depository institutions that would require material 

loss reviews for the following 12 months will be greater 

than 30 and would hinder the effectiveness of its oversight functions, then the definition of ‘material loss’ 

shall be $75,000,000 for a duration of 1 year from the 

date of the certification.’’; 

(2) in paragraph (4)(A) by striking ‘‘the report’’ and inserting ‘‘any report on losses required under this subsection,’’; 

(3) by striking paragraph (6); 

(4) by redesignating paragraph (5) as paragraph (6); and 

(5) by inserting after paragraph (4) the following: 

‘‘(5) LOSSES THAT ARE NOT MATERIAL.— 

‘‘(A) SEMIANNUAL REPORT.—For the 6-month period 

ending on March 31, 2010, and each 6-month period thereVerDate Mar 15 2010 04:29 Jul 07, 2010 Jkt 057098 PO 00000 Frm 00575 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
572 

after, the Inspector General of each Federal banking agency 

shall— 

‘‘(i) identify losses that the Inspector General estimates have been incurred by the Deposit Insurance 

Fund during that 6-month period, with respect to the 

insured depository institutions supervised by the Federal banking agency; 

‘‘(ii) for each loss incurred by the Deposit Insurance Fund that is not a material loss, determine— 

‘‘(I) the grounds identified by the Federal 

banking agency or State bank supervisor for appointing the Corporation as receiver under section 

11(c)(5); and 

‘‘(II) whether any unusual circumstances exist 

that might warrant an in-depth review of the loss; 

and 

‘‘(iii) prepare and submit a written report to the 

appropriate Federal banking agency and to Congress 

on the results of any determination by the Inspector 

General, including— 

‘‘(I) an identification of any loss that warrants 

an in-depth review, together with the reasons why 

such review is warranted, or, if the Inspector General determines that no review is warranted, an explanation of such determination; and 

‘‘(II) for each loss identified under subclause 

(I) that warrants an in-depth review, the date by 

which such review, and a report on such review 

prepared in a manner consistent with reports 

under paragraph (1)(A), will be completed and 

submitted to the Federal banking agency and Congress. 

‘‘(B) DEADLINE FOR SEMIANNUAL REPORT.—The Inspector General of each Federal banking agency shall— 

‘‘(i) submit each report required under paragraph 

(A) expeditiously, and not later than 90 days after the 

end of the 6-month period covered by the report; and 

‘‘(ii) provide a copy of the report required under 

paragraph (A) to any Member of Congress, upon request.’’. 

(b) TECHNICAL AND CONFORMING AMENDMENT.—The heading 

for subsection (k) of section 38 of the Federal Deposit Insurance Act 

(U.S.C. 1831o(k)) is amended to read as follows: 

‘‘(k) REVIEWS REQUIRED WHEN DEPOSIT INSURANCE FUND INCURS LOSSES.—’’. 

SEC. 988. AMENDMENT TO DEFINITION OF MATERIAL LOSS AND NONMATERIAL LOSSES TO THE NATIONAL CREDIT UNION 

SHARE INSURANCE FUND FOR PURPOSES OF INSPECTOR 

GENERAL REVIEWS. 

(a) IN GENERAL.—Section 216(j) of the Federal Credit Union 

Act (12 U.S.C. 1790d(j)) is amended to read as follows: 

‘‘(j) REVIEWS REQUIRED WHEN SHARE INSURANCE FUND EXPERIENCES LOSSES.— 


sroberts on DSKD5P82C1PROD with HEARING
573 

‘‘(1) IN GENERAL.—If the Fund incurs a material loss with 

respect to an insured credit union, the Inspector General of the 

Board shall— 

‘‘(A) submit to the Board a written report reviewing the 

supervision of the credit union by the Administration (including the implementation of this section by the Administration), which shall include— 

‘‘(i) a description of the reasons why the problems 

of the credit union resulted in a material loss to the 

Fund; and 

‘‘(ii) recommendations for preventing any such loss 

in the future; and 

‘‘(B) submit a copy of the report under subparagraph 

(A) to— 

‘‘(i) the Comptroller General of the United States; 

‘‘(ii) the Corporation; 

‘‘(iii) in the case of a report relating to a State 

credit union, the appropriate State supervisor; and 

‘‘(iv) to any Member of Congress, upon request. 

‘‘(2) MATERIAL LOSS DEFINED.—For purposes of determining 

whether the Fund has incurred a material loss with respect to 

an insured credit union, a loss is material if it exceeds the sum 

of— ‘‘(A) $25,000,000; and 

‘‘(B) an amount equal to 10 percent of the total assets 

of the credit union on the date on which the Board initiated 

assistance under section 208 or was appointed liquidating 

agent. 

‘‘(3) PUBLIC DISCLOSURE REQUIRED.— ‘‘(A) IN GENERAL.—The Board shall disclose a report 

under this subsection, upon request under section 552 of 

title 5, United States Code, without excising— 

‘‘(i) any portion under section 552(b)(5) of title 5, 

United States Code; or 

‘‘(ii) any information about the insured credit 

union (other than trade secrets) under section 552(b)(8) 

of title 5, United States Code. 

‘‘(B) RULE OF CONSTRUCTION.—Subparagraph (A) may 

not be construed as requiring the agency to disclose the 

name of any customer of the insured credit union (other 

than an institution-affiliated party), or information from 

which the identity of such customer could reasonably be 

ascertained. 

‘‘(4) LOSSES THAT ARE NOT MATERIAL.— 

‘‘(A) SEMIANNUAL REPORT.—For the 6-month period 

ending on March 31, 2010, and each 6-month period thereafter, the Inspector General of the Board shall— 

‘‘(i) identify any losses that the Inspector General 

estimates were incurred by the Fund during such 6- 

month period, with respect to insured credit unions; 

‘‘(ii) for each loss to the Fund that is not a material loss, determine— 

‘‘(I) the grounds identified by the Board or the 

State official having jurisdiction over a State credit union for appointing the Board as the liquiVerDate Mar 15 2010 04:29 Jul 07, 2010 Jkt 057098 PO 00000 Frm 00577 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
574 

dating agent for any Federal or State credit union; 

and 

‘‘(II) whether any unusual circumstances exist 

that might warrant an in-depth review of the loss; 

and 

‘‘(iii) prepare and submit a written report to the 

Board and to Congress on the results of the determinations of the Inspector General that includes— 

‘‘(I) an identification of any loss that warrants 

an in-depth review, and the reasons such review is 

warranted, or if the Inspector General determines 

that no review is warranted, an explanation of 

such determination; and 

‘‘(II) for each loss identified in subclause (I) 

that warrants an in-depth review, the date by 

which such review, and a report on the review prepared in a manner consistent with reports under 

paragraph (1)(A), will be completed. 

‘‘(B) DEADLINE FOR SEMIANNUAL REPORT.—The Inspector General of the Board shall— 

‘‘(i) submit each report required under subparagraph (A) expeditiously, and not later than 90 days 

after the end of the 6-month period covered by the report; and 

‘‘(ii) provide a copy of the report required under 

subparagraph (A) to any Member of Congress, upon request. 

‘‘(5) GAO REVIEW.—The Comptroller General of the United 

States shall, under such conditions as the Comptroller General 

determines to be appropriate— 

‘‘(A) review each report made under paragraph (1), including the extent to which the Inspector General of the 

Board complied with the requirements under section 8L of 

the Inspector General Act of 1978 (5 U.S.C. App.) with respect to each such report; and 

‘‘(B) recommend improvements to the supervision of insured credit unions (including improvements relating to the 

implementation of this section).’’. 

SEC. 989. GOVERNMENT ACCOUNTABILITY OFFICE STUDY ON PROPRIETARY TRADING. 

(a) DEFINITIONS.—In this section— 

(1) the term ‘‘covered entity’’ means— 

(A) an insured depository institution, an affiliate of an 

insured depository institution, a bank holding company, a 

financial holding company, or a subsidiary of a bank holding company or a financial holding company, as those 

terms are defined in the Bank Holding Company Act of 

1956 (12 U.S.C. 1841 et seq.); and 

(B) any other entity, as the Comptroller General of the 

United States may determine; and 

(2) the term ‘‘proprietary trading’’ means the act of a covered entity investing as a principal in securities, commodities, 

derivatives, hedge funds, private equity firms, or such other financial products or entities as the Comptroller General may determine. 


sroberts on DSKD5P82C1PROD with HEARING
575 

(b) STUDY.— (1) IN GENERAL.—The Comptroller General of the United 

States shall conduct a study regarding the risks and conflicts 

associated with proprietary trading by and within covered entities, including an evaluation of— 

(A) whether proprietary trading presents a material 

systemic risk to the stability of the United States financial 

system, and if so, the costs and benefits of options for mitigating such systemic risk; 

(B) whether proprietary trading presents material risks 

to the safety and soundness of the covered entities that engage in such activities, and if so, the costs and benefits of 

options for mitigating such risks; 

(C) whether proprietary trading presents material conflicts of interest between covered entities that engage in proprietary trading and the clients of the institutions who use 

the firm to execute trades or who rely on the firm to manage assets, and if so, the costs and benefits of options for 

mitigating such conflicts of interest; 

(D) whether adequate disclosure regarding the risks 

and conflicts of proprietary trading is provided to the depositors, trading and asset management clients, and investors of covered entities that engage in proprietary trading, 

and if not, the costs and benefits of options for the improvement of such disclosure; and 

(E) whether the banking, securities, and commodities 

regulators of institutions that engage in proprietary trading 

have in place adequate systems and controls to monitor 

and contain any risks and conflicts of interest related to 

proprietary trading, and if not, the costs and benefits of options for the improvement of such systems and controls. 

(2) CONSIDERATIONS.—In carrying out the study required 

under paragraph (1), the Comptroller General shall consider— 

(A) current practice relating to proprietary trading; 

(B) the advisability of a complete ban on proprietary 

trading; 

(C) limitations on the scope of activities that covered 

entities may engage in with respect to proprietary trading; 

(D) the advisability of additional capital requirements 

for covered entities that engage in proprietary trading; 

(E) enhanced restrictions on transactions between affiliates related to proprietary trading; 

(F) enhanced accounting disclosures relating to proprietary trading; 

(G) enhanced public disclosure relating to proprietary 

trading; and 

(H) any other options the Comptroller General deems 

appropriate. 

(c) REPORT TO CONGRESS.—Not later than 15 months after the 

date of enactment of this Act, the Comptroller General shall submit 

a report to Congress on the results of the study conducted under 

subsection (b). 

(d) ACCESS BY COMPTROLLER GENERAL.—For purposes of conducting the study required under subsection (b), the Comptroller 

General shall have access, upon request, to any information, data, 


sroberts on DSKD5P82C1PROD with HEARING
576 

schedules, books, accounts, financial records, reports, files, electronic communications, or other papers, things, or property belonging to or in use by a covered entity that engages in proprietary trading, and to the officers, directors, employees, independent public accountants, financial advisors, staff, and agents and representatives 

of a covered entity (as related to the activities of the agent or representative on behalf of the covered entity), at such reasonable times 

as the Comptroller General may request. The Comptroller General 

may make and retain copies of books, records, accounts, and other 

records, as the Comptroller General deems appropriate. 

(e) CONFIDENTIALITY OF REPORTS.— (1) IN GENERAL.—Except as provided in paragraph (2), the 

Comptroller General may not disclose information regarding— 

(A) any proprietary trading activity of a covered entity, 

unless such information is disclosed at a level of generality 

that does not reveal the investment or trading position or 

strategy of the covered entity for any specific security, commodity, derivative, or other investment or financial product; or 

(B) any individual interviewed by the Comptroller General for purposes of the study under subsection (b), unless 

such information is disclosed at a level of generality that 

does not reveal— 

(i) the name of or identifying details relating to 

such individual; or 

(ii) in the case of an individual who is an employee 

of a third party that provides professional services to 

a covered entity believed to be engaged in proprietary 

trading, the name of or any identifying details relating 

to such third party. 

(2) EXCEPTIONS.—The Comptroller General may disclose 

the information described in paragraph (1)— 

(A) to a department, agency, or official of the Federal 

Government, for official use, upon request; 

(B) to a committee of Congress, upon request; and 

(C) to a court, upon an order of such court. 

SEC. 989A. SENIOR INVESTOR PROTECTIONS. 

(a) DEFINITIONS.—As used in this section— 

(1) the term ‘‘eligible entity’’ means— 

(A) a securities commission (or any agency or office performing like functions) of a State that the Office determines 

has adopted rules on the appropriate use of designations in 

the offer or sale of securities or the provision of investment 

advice that meet or exceed the minimum requirements of 

the NASAA Model Rule on the Use of Senior-Specific Certifications and Professional Designations (or any successor 

thereto); 

(B) the insurance commission (or any agency or office 

performing like functions) of any State that the Office determines has— 

(i) adopted rules on the appropriate use of designations in the sale of insurance products that, to the extent practicable, conform to the minimum requirements 

of the National Association of Insurance Commissioners Model Regulation on the Use of Senior-Specific 


sroberts on DSKD5P82C1PROD with HEARING
577 

Certifications and Professional Designations in the 

Sale of Life Insurance and Annuities (or any successor 

thereto); and 

(ii) adopted rules with respect to fiduciary or suitability requirements in the sale of annuities that meet 

or exceed the minimum requirements established by the 

Suitability in Annuity Transactions Model Regulation 

of the National Association of Insurance Commissioners (or any successor thereto); or 

(C) a consumer protection agency of any State, if— 

(i) the securities commission (or any agency or office performing like functions) of the State is eligible 

under subparagraph (A); or 

(ii) the insurance commission (or any agency or office performing like functions) of the State is eligible 

under subparagraph (B); 

(2) the term ‘‘financial product’’ means a security, an insurance product (including an insurance product that pays a return, whether fixed or variable), a bank product, and a loan 

product; 

(3) the term ‘‘misleading designation’’— 

(A) means a certification, professional designation, or 

other purported credential that indicates or implies that a 

salesperson or adviser has special certification or training 

in advising or servicing seniors; and 

(B) does not include a certification, professional designation, license, or other credential that— 

(i) was issued by or obtained from an academic institution having regional accreditation; 

(ii) meets the standards for certifications and professional designations outlined by the NASAA Model 

Rule on the Use of Senior-Specific Certifications and 

Professional Designations (or any successor thereto) or 

by the Model Regulations on the Use of Senior-Specific 

Certifications and Professional Designations in the 

Sale of Life Insurance and Annuities, adopted by the 

National Association of Insurance Commissioners (or 

any successor thereto); or 

(iii) was issued by or obtained from a State; 

(4) the term ‘‘misleading or fraudulent marketing’’ means 

the use of a misleading designation by a person that sells to or 

advises a senior in connection with the sale of a financial product; 

(5) the term ‘‘NASAA’’ means the North American Securities Administrators Association; 

(6) the term ‘‘Office’’ means the Office of Financial Literacy 

of the Bureau; 

(7) the term ‘‘senior’’ means any individual who has attained the age of 62 years or older; and 

(8) the term ‘‘State’’ has the same meaning as in section 3 

of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)). 

(b) GRANTS TO STATES FOR ENHANCED PROTECTION OF SENIORS

FROM BEING MISLED BY FALSE DESIGNATIONS.—The Office shall establish a program under which the Office may make grants to 

States or eligible entities— 


sroberts on DSKD5P82C1PROD with HEARING
578 

(1) to hire staff to identify, investigate, and prosecute 

(through civil, administrative, or criminal enforcement actions) 

cases involving misleading or fraudulent marketing; 

(2) to fund technology, equipment, and training for regulators, prosecutors, and law enforcement officers, in order to 

identify salespersons and advisers who target seniors through 

the use of misleading designations; 

(3) to fund technology, equipment, and training for prosecutors to increase the successful prosecution of salespersons and 

advisers who target seniors with the use of misleading designations; 

(4) to provide educational materials and training to regulators on the appropriateness of the use of designations by salespersons and advisers in connection with the sale and marketing 

of financial products; 

(5) to provide educational materials and training to seniors 

to increase awareness and understanding of misleading or 

fraudulent marketing; 

(6) to develop comprehensive plans to combat misleading or 

fraudulent marketing of financial products to seniors; and 

(7) to enhance provisions of State law to provide protection 

for seniors against misleading or fraudulent marketing. 

(c) APPLICATIONS.—A State or eligible entity desiring a grant 

under this section shall submit an application to the Office, in such 

form and in such a manner as the Office may determine, that includes— 

(1) a proposal for activities to protect seniors from misleading or fraudulent marketing that are proposed to be funded 

using a grant under this section, including— 

(A) an identification of the scope of the problem of misleading or fraudulent marketing in the State; 

(B) a description of how the proposed activities 

would— 

(i) protect seniors from misleading or fraudulent 

marketing in the sale of financial products, including 

by proactively identifying victims of misleading and 

fraudulent marketing who are seniors; 

(ii) assist in the investigation and prosecution of 

those using misleading or fraudulent marketing; and 

(iii) discourage and reduce cases of misleading or 

fraudulent marketing; and 

(C) a description of how the proposed activities would 

be coordinated with other State efforts; and 

(2) any other information, as the Office determines is appropriate. 

(d) PERFORMANCE OBJECTIVES AND REPORTING REQUIREMENTS.—The Office may establish such performance objectives and 

reporting requirements for States and eligible entities receiving a 

grant under this section as the Office determines are necessary to 

carry out and assess the effectiveness of the program under this section. 

(e) MAXIMUM AMOUNT.—The amount of a grant under this section may not exceed— 


sroberts on DSKD5P82C1PROD with HEARING
579 

(1) $500,000 for each of 3 consecutive fiscal years, if the recipient is a State, or an eligible entity of a State, that has 

adopted rules— 

(A) on the appropriate use of designations in the offer 

or sale of securities or investment advice that meet or exceed the minimum requirements of the NASAA Model Rule 

on the Use of Senior-Specific Certifications and Professional Designations (or any successor thereto); 

(B) on the appropriate use of designations in the sale 

of insurance products that, to the extent practicable, conform to the minimum requirements of the National Association of Insurance Commissioners Model Regulation on the 

Use of Senior-Specific Certifications and Professional Designations in the Sale of Life Insurance and Annuities (or 

any successor thereto); and 

(C) with respect to fiduciary or suitability requirements 

in the sale of annuities that meet or exceed the minimum 

requirements established by the Suitability in Annuity 

Transactions Model Regulation of the National Association 

of Insurance Commissioners (or any successor thereto); and 

(2) $100,000 for each of 3 consecutive fiscal years, if the recipient is a State, or an eligible entity of a State, that has 

adopted— 

(A) rules on the appropriate use of designations in the 

offer or sale of securities or investment advice that meet or 

exceed the minimum requirements of the NASAA Model 

Rule on the Use of Senior-Specific Certifications and Professional Designations (or any successor thereto); or 

(B) rules— 

(i) on the appropriate use of designations in the 

sale of insurance products that, to the extent practicable, conform to the minimum requirements of the 

National Association of Insurance Commissioners 

Model Regulation on the Use of Senior-Specific Certifications and Professional Designations in the Sale of 

Life Insurance and Annuities (or any successor thereto); and 

(ii) with respect to fiduciary or suitability requirements in the sale of annuities that meet or exceed the 

minimum requirements established by the Suitability 

in Annuity Transactions Model Regulation of the National Association of Insurance Commissioners (or any 

successor thereto). 

(f) SUBGRANTS.—A State or eligible entity that receives a grant 

under this section may make a subgrant, as the State or eligible entity determines is necessary to carry out the activities funded using 

a grant under this section. 

(g) REAPPLICATION.—A State or eligible entity that receives a 

grant under this section may reapply for a grant under this section, 

notwithstanding the limitations on grant amounts under subsection 

(e). 

(h) AUTHORIZATION OF APPROPRIATIONS.—There are authorized 

to be appropriated to carry out this section, $8,000,000 for each of 

fiscal years 2011 through 2015. 


sroberts on DSKD5P82C1PROD with HEARING
580 

SEC. 989B. DESIGNATED FEDERAL ENTITY INSPECTORS GENERAL 

INDEPENDENCE. 

Section 8G of the Inspector General Act of 1978 (5 U.S.C. App.) 

is amended— 

(1) in subsection (a)(4)— 

(A) in the matter preceding subparagraph (A), by inserting ‘‘the board or commission of the designated Federal 

entity, or in the event the designated Federal entity does not 

have a board or commission,’’ after ‘‘means’’; 

(B) in subparagraph (A), by striking ‘‘and’’ after the 

semicolon; and 

(C) by adding after subparagraph (B) the following: 

‘‘(C) with respect to the Federal Labor Relations Authority, such term means the members of the Authority (described under section 7104 of title 5, United States Code); 

‘‘(D) with respect to the National Archives and Records 

Administration, such term means the Archivist of the 

United States; 

‘‘(E) with respect to the National Credit Union Administration, such term means the National Credit Union Administration Board (described under section 102 of the Federal Credit Union Act (12 U.S.C. 1752a)); 

‘‘(F) with respect to the National Endowment of the 

Arts, such term means the National Council on the Arts; 

‘‘(G) with respect to the National Endowment for the 

Humanities, such term means the National Council on the 

Humanities; and 

‘‘(H) with respect to the Peace Corps, such term means 

the Director of the Peace Corps;’’; and 

(2) in subsection (h), by inserting ‘‘if the designated Federal 

entity is not a board or commission, include’’ after ‘‘designated 

Federal entities and’’. 

SEC. 989C. STRENGTHENING INSPECTOR GENERAL ACCOUNTABILITY. 

Section 5(a) of the Inspector General Act of 1978 (5 U.S.C. 

App.) is amended— 

(1) in paragraph (12), by striking ‘‘and’’ after the semicolon; 

(2) in paragraph (13), by striking the period and inserting 

a semicolon; and 

(3) by adding at the end the following: 

‘‘(14)(A) an appendix containing the results of any peer review conducted by another Office of Inspector General during 

the reporting period; or 

‘‘(B) if no peer review was conducted within that reporting 

period, a statement identifying the date of the last peer review 

conducted by another Office of Inspector General; 

‘‘(15) a list of any outstanding recommendations from any 

peer review conducted by another Office of Inspector General 

that have not been fully implemented, including a statement describing the status of the implementation and why implementation is not complete; and 

‘‘(16) a list of any peer reviews conducted by the Inspector 

General of another Office of the Inspector General during the 

reporting period, including a list of any outstanding recommendations made from any previous peer review (including 


sroberts on DSKD5P82C1PROD with HEARING
581 

any peer review conducted before the reporting period) that remain outstanding or have not been fully implemented.’’. 

SEC. 989D. REMOVAL OF INSPECTORS GENERAL OF DESIGNATED FEDERAL ENTITIES. 

Section 8G(e) of the Inspector General Act of 1978 (5 U.S.C. 

App.) is amended— 

(1) by redesignating the sentences following ‘‘(e)’’ as paragraph (2); and 

(2) by striking ‘‘(e)’’ and inserting the following: 

‘‘(e)(1) In the case of a designated Federal entity for which a 

board or commission is the head of the designated Federal entity, 

a removal under this subsection may only be made upon the written 

concurrence of a 2⁄3 majority of the board or commission.’’. 

SEC. 989E. ADDITIONAL OVERSIGHT OF FINANCIAL REGULATORY SYSTEM. 

(a) COUNCIL OF INSPECTORS GENERAL ON FINANCIAL OVERSIGHT.— 

(1) ESTABLISHMENT AND MEMBERSHIP.—There is established a Council of Inspectors General on Financial Oversight 

(in this section referred to as the ‘‘Council of Inspectors General’’) chaired by the Inspector General of the Department of the 

Treasury and composed of the inspectors general of the following: 

(A) The Board of Governors of the Federal Reserve System. 

(B) The Commodity Futures Trading Commission. 

(C) The Department of Housing and Urban Development. 

(D) The Department of the Treasury. 

(E) The Federal Deposit Insurance Corporation. 

(F) The Federal Housing Finance Agency. 

(G) The National Credit Union Administration. 

(H) The Securities and Exchange Commission. 

(I) The Troubled Asset Relief Program (until the termination of the authority of the Special Inspector General for 

such program under section 121(k) of the Emergency Economic Stabilization Act of 2008 (12 U.S.C. 5231(k))). 

(2) DUTIES.— 

(A) MEETINGS.—The Council of Inspectors General 

shall meet not less than once each quarter, or more frequently if the chair considers it appropriate, to facilitate 

the sharing of information among inspectors general and to 

discuss the ongoing work of each inspector general who is 

a member of the Council of Inspectors General, with a focus 

on concerns that may apply to the broader financial sector 

and ways to improve financial oversight. 

(B) ANNUAL REPORT.—Each year the Council of Inspectors General shall submit to the Council and to Congress 

a report including— 

(i) for each inspector general who is a member of 

the Council of Inspectors General, a section within the 

exclusive editorial control of such inspector general 

that highlights the concerns and recommendations of 

such inspector general in such inspector general’s ongoVerDate Mar 15 2010 04:29 Jul 07, 2010 Jkt 057098 PO 00000 Frm 00585 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
582 

ing and completed work, with a focus on issues that 

may apply to the broader financial sector; and 

(ii) a summary of the general observations of the 

Council of Inspectors General based on the views expressed by each inspector general as required by clause 

(i), with a focus on measures that should be taken to 

improve financial oversight. 

(3) WORKING GROUPS TO EVALUATE COUNCIL.— 

(A) CONVENING A WORKING GROUP.—The Council of Inspectors General may, by majority vote, convene a Council 

of Inspectors General Working Group to evaluate the effectiveness and internal operations of the Council. 

(B) PERSONNEL AND RESOURCES.—The inspectors general who are members of the Council of Inspectors General 

may detail staff and resources to a Council of Inspectors 

General Working Group established under this paragraph 

to enable it to carry out its duties. 

(C) REPORTS.—A Council of Inspectors General Working Group established under this paragraph shall submit 

regular reports to the Council and to Congress on its evaluations pursuant to this paragraph. 

(b) RESPONSE TO REPORT BY COUNCIL.—The Council shall respond to the concerns raised in the report of the Council of Inspectors General under subsection (a)(2)(B) for such year. 

SEC. 989F. GAO STUDY OF PERSON TO PERSON LENDING. 

(a) STUDY.— 

(1) IN GENERAL.—The Comptroller General of the United 

States shall conduct a study of person to person lending to determine the optimal Federal regulatory structure. 

(2) CONSULTATION.—In conducting the study required 

under paragraph (1), the Comptroller General shall consult 

with Federal banking agencies, the Commission, consumer 

groups, outside experts, and the person to person lending industry. 

(3) CONTENT OF STUDY.—The study required under paragraph (1) shall include an examination of— 

(A) the regulatory structure as it exists on the date of 

enactment of this Act, as determined by the Commission, 

with particular attention to— 

(i) the application of the Securities Act of 1933 to 

person to person lending platforms; 

(ii) the posting of consumer loan information on 

the EDGAR database of the Commission; and 

(iii) the treatment of privately held person to person lending platforms as public companies; 

(B) the State and other Federal regulators responsible 

for the oversight and regulation of person to person lending 

markets; 

(C) any Federal, State, or local government or private 

studies of person to person lending completed or in progress 

on the date of enactment of this Act; 

(D) consumer privacy and data protections, minimum 

credit standards, anti-money laundering and risk management in the regulatory structure as it exists on the date of 


sroberts on DSKD5P82C1PROD with HEARING
583 

enactment of this Act, and whether additional or alternative safeguards are needed; and 

(E) the uses of person to person lending. 

(b) REPORT.— 

(1) IN GENERAL.—Not later than 1 year after the date of enactment of this Act, the Comptroller General shall submit a report on the study required under subsection (a) to the Committee on Banking, Housing, and Urban Affairs of the Senate 

and the Committee on Financial Services of the House of Representatives. 

(2) CONTENT OF REPORT.—The report required under paragraph (1) shall include alternative regulatory options, including— 

(A) the involvement of other Federal agencies; and 

(B) alternative approaches by the Commission and recommendations on whether the alternative approaches are 

effective. 

SEC. 989G. EXEMPTION FOR NONACCELERATED FILERS. 

(a) EXEMPTION.—Section 404 of the Sarbanes-Oxley Act of 2002 

is amended by adding at the end the following: 

‘‘(c) EXEMPTION FOR SMALLER ISSUERS.—Subsection (b) shall 

not apply with respect to any audit report prepared for an issuer 

that is neither a ‘large accelerated filer’ nor an ‘accelerated filer’ as 

those terms are defined in Rule 12b–2 of the Commission (17 C.F.R. 

240.12b–2).’’. 

(b) STUDY.—The Securities and Exchange Commission shall 

conduct a study to determine how the Commission could reduce the 

burden of complying with section 404(b) of the Sarbanes-Oxley Act 

of 2002 for companies whose market capitalization is between 

$75,000,000 and $250,000,000 for the relevant reporting period 

while maintaining investor protections for such companies. The 

study shall also consider whether any such methods of reducing the 

compliance burden or a complete exemption for such companies 

from compliance with such section would encourage companies to 

list on exchanges in the United States in their initial public offerings. Not later than 9 months after the date of the enactment of this 

subtitle, the Commission shall transmit a report of such study to 

Congress. 

SEC. 989H. CORRECTIVE RESPONSES BY HEADS OF CERTAIN ESTABLISHMENTS TO DEFICIENCIES IDENTIFIED BY INSPECTORS GENERAL. 

The Chairman of the Board of Governors of the Federal Reserve 

System, the Chairman of the Commodity Futures Trading Commission, the Chairman of the National Credit Union Administration, 

the Director of the Pension Benefit Guaranty Corporation, and the 

Chairman of the Securities and Exchange Commission shall each— 

(1) take action to address deficiencies identified by a report 

or investigation of the Inspector General of the establishment 

concerned; or 

(2) certify to both Houses of Congress that no action is necessary or appropriate in connection with a deficiency described 

in paragraph (1). 


sroberts on DSKD5P82C1PROD with HEARING
584 

SEC. 989I. GAO STUDY REGARDING EXEMPTION FOR SMALLER 

ISSUERS. 

(a) STUDY REGARDING EXEMPTION FOR SMALLER ISSUERS.—The 

Comptroller General of the United States shall carry out a study on 

the impact of the amendments made by this Act to section 404(b) of 

the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7262(b)), which shall include an analysis of— 

(1) whether issuers that are exempt from such section 

404(b) have fewer or more restatements of published accounting 

statements than issuers that are required to comply with such 

section 404(b); 

(2) the cost of capital for issuers that are exempt from such 

section 404(b) compared to the cost of capital for issuers that 

are required to comply with such section 404(b); 

(3) whether there is any difference in the confidence of investors in the integrity of financial statements of issuers that 

comply with such section 404(b) and issuers that are exempt 

from compliance with such section 404(b); 

(4) whether issuers that do not receive the attestation for internal controls required under such section 404(b) should be required to disclose the lack of such attestation to investors; and 

(5) the costs and benefits to issuers that are exempt from 

such section 404(b) that voluntarily have obtained the attestation of an independent auditor. 

(b) REPORT.—Not later than 3 years after the date of enactment 

of this Act, the Comptroller General shall submit to the Committee 

on Banking, Housing, and Urban Affairs of the Senate and the 

Committee on Financial Services of the House of Representatives a 

report on the results of the study required under subsection (a). 

SEC. 989J. FURTHER PROMOTING THE ADOPTION OF THE NAIC MODEL 

REGULATIONS THAT ENHANCE PROTECTION OF SENIORS 

AND OTHER CONSUMERS. 

(a) IN GENERAL.—The Commission shall treat as exempt securities described under section 3(a)(8) of the Securities Act of 1933 (15 

U.S.C. 77c(a)(8)) any insurance or endowment policy or annuity 

contract or optional annuity contract— 

(1) the value of which does not vary according to the performance of a separate account; 

(2) that— 

(A) satisfies standard nonforfeiture laws or similar requirements of the applicable State at the time of issue; or 

(B) in the absence of applicable standard nonforfeiture 

laws or requirements, satisfies the Model Standard Nonforfeiture Law for Life Insurance or Model Standard Nonforfeiture Law for Individual Deferred Annuities, or any successor model law, as published by the National Association 

of Insurance Commissioners; and 

(3) that is issued— 

(A) on and after June 16, 2013, in a State, or issued 

by an insurance company that is domiciled in a State, 

that— 

(i) adopts rules that govern suitability requirements in the sale of an insurance or endowment policy 

or annuity contract or optional annuity contract, which 

shall substantially meet or exceed the minimum reVerDate Mar 15 2010 04:29 Jul 07, 2010 Jkt 057098 PO 00000 Frm 00588 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
585 

quirements established by the Suitability in Annuity 

Transactions Model Regulation adopted by the National Association of Insurance Commissioners in 

March 2010; and 

(ii) adopts rules that substantially meet or exceed 

the minimum requirements of any successor modifications to the model regulations described in subparagraph (A) within 5 years of the adoption by the Association of any further successors thereto; or 

(B) by an insurance company that adopts and implements practices on a nationwide basis for the sale of any 

insurance or endowment policy or annuity contract or optional annuity contract that meet or exceed the minimum 

requirements established by the National Association of Insurance Commissioners Suitability in Annuity Transactions Model Regulation (Model 275), and any successor 

thereto, and is therefore subject to examination by the State 

of domicile of the insurance company, or by any other State 

where the insurance company conducts sales of such products, for the purpose of monitoring compliance under this 

section. 

(b) RULE OF CONSTRUCTION.—Nothing in this section shall be 

construed to affect whether any insurance or endowment policy or 

annuity contract or optional annuity contract that is not described 

in this section is or is not an exempt security under section 3(a)(8) 

of the Securities Act of 1933 (15 U.S.C. 77c(a)(8)). 

Subtitle J—Securities and Exchange Commission Match 

Funding 

SEC. 991. SECURITIES AND EXCHANGE COMMISSION MATCH FUNDING. 

(a) MATCH FUNDING AUTHORITY.— (1) AMENDMENTS.—Section 31 of the Securities Exchange 

Act of 1934 (15 U.S.C. 78ee) is amended— 

(A) by striking subsection (a) and inserting the following: 

‘‘(a) RECOVERY OF COSTS OF ANNUAL APPROPRIATION.—The 

Commission shall, in accordance with this section, collect transaction fees and assessments that are designed to recover the costs 

to the Government of the annual appropriation to the Commission 

by Congress.’’; 

(B) in subsection (e)(2), by striking ‘‘September 30’’ and 

inserting ‘‘September 25’’; 

(C) in subsection (g), by striking ‘‘April 30 of the fiscal 

year preceding the fiscal year to which such rate applies’’ 

and inserting ‘‘30 days after the date on which an Act making a regular appropriation to the Commission for such fiscal year is enacted’’; 

(D) by striking subsection (j) and inserting the following: 

‘‘(j) ADJUSTMENTS TO FEE RATES.— ‘‘(1) ANNUAL ADJUSTMENT.—Subject to subsections (i)(1)(B) 

and (k), for each fiscal year, the Commission shall by order adjust each of the rates applicable under subsections (b) and (c) 

for such fiscal year to a uniform adjusted rate that, when applied to the baseline estimate of the aggregate dollar amount of 


sroberts on DSKD5P82C1PROD with HEARING
586 

sales for such fiscal year, is reasonably likely to produce aggregate fee collections under this section (including assessments 

collected under subsection (d) of this section) that are equal to 

the regular appropriation to the Commission by Congress for 

such fiscal year. 

‘‘(2) MID-YEAR ADJUSTMENT.—Subject to subsections 

(i)(1)(B) and (k), for each fiscal year, the Commission shall determine, by March 1 of such fiscal year, whether, based on the 

actual aggregate dollar volume of sales during the first 5 

months of such fiscal year, the baseline estimate of the aggregate dollar volume of sales used under paragraph (1) for such 

fiscal year is reasonably likely to be 10 percent (or more) greater 

or less than the actual aggregate dollar volume of sales for such 

fiscal year. If the Commission so determines, the Commission 

shall by order, no later than March 1, adjust each of the rates 

applicable under subsections (b) and (c) for such fiscal year to 

a uniform adjusted rate that, when applied to the revised estimate of the aggregate dollar amount of sales for the remainder 

of such fiscal year, is reasonably likely to produce aggregate fee 

collections under this section (including fees collected during 

such five-month period and assessments collected under subsection (d) of this section) that are equal to the regular appropriation to the Commission by Congress for such fiscal year. In 

making such revised estimate, the Commission shall, after consultation with the Congressional Budget Office and the Office 

of Management and Budget, use the same methodology required 

by subsection (l). 

‘‘(3) REVIEW.—In exercising its authority under this subsection, the Commission shall not be required to comply with 

the provisions of section 553 of title 5, United States Code. An 

adjusted rate prescribed under paragraph (1) or (2) and published under subsection (g) shall not be subject to judicial review. 

‘‘(4) EFFECTIVE DATE.— 

‘‘(A) ANNUAL ADJUSTMENT.—Subject to subsections 

(i)(1)(B) and (k), an adjusted rate prescribed under paragraph (1) shall take effect on the later of— 

‘‘(i) the first day of the fiscal year to which such 

rate applies; or 

‘‘(ii) 60 days after the date on which an Act making a regular appropriation to the Commission for such 

fiscal year is enacted. 

‘‘(B) MID-YEAR ADJUSTMENT.—An adjusted rate prescribed under paragraph (2) shall take effect on April 1 of 

the fiscal year to which such rate applies.’’; 

(E) in subsection (k), by striking ‘‘30 days’’ and inserting ‘‘60 days’’; and 

(F) in subsection (l), by striking ‘‘DEFINITIONS.—’’ and 

all that follows through ‘‘SALES.—The baseline’’ and inserting ‘‘BASELINE ESTIMATE OF THE AGGREGATE DOLLAR

AMOUNT OF SALES.—The baseline’’. 

(2) EFFECTIVE DATE.—The amendments made by this subsection shall take effect on the later of— 

(A) October 1, 2011; or 


sroberts on DSKD5P82C1PROD with HEARING
587 

(B) the date of enactment of an Act making a regular 

appropriation to the Commission for fiscal year 2012. 

(b) AMENDMENTS TO REGISTRATION FEE PROVISIONS.— (1) SECTION 6(b) OF THE SECURITIES ACT OF 1933.—Section 

6(b) of the Securities Act of 1933 (15 U.S.C. 77f(b)) is amended— 

(A) by striking ‘‘offsetting’’ each place that term appears and inserting ‘‘fee’’; 

(B) by striking paragraphs (1), (3), (4), (6), (8), and (9); 

(C) by redesignating paragraph (2) as paragraph (1); 

(D) by redesignating paragraph (5) as paragraph (2); 

(E) by redesignating paragraph (7) as paragraph (3); 

(F) by redesignating paragraph (10) as paragraph (5); 

(G) by redesignating paragraph (11) as paragraph (6); 

(H) in paragraph (1), as so redesignated, by striking 

‘‘paragraph (5) or (6).’’ and inserting ‘‘paragraph (2).’’; 

(I) in paragraph (2), as so redesignated— 

(i) by striking ‘‘of the fiscal years 2003 through 

2011’’ and inserting ‘‘fiscal year’’; and 

(ii) by striking ‘‘paragraph (2)’’ and inserting 

‘‘paragraph (1)’’; 

(J) by inserting after paragraph (3), as so redesignated, 

the following: 

‘‘(4) REVIEW AND EFFECTIVE DATE.—In exercising its authority under this subsection, the Commission shall not be required to comply with the provisions of section 553 of title 5, 

United States Code. An adjusted rate prescribed under paragraph (2) and published under paragraph (5) shall not be subject to judicial review. An adjusted rate prescribed under paragraph (2) shall take effect on the first day of the fiscal year to 

which such rate applies.’’; 

(K) in paragraph (5), as redesignated, by striking 

‘‘April 30’’ and inserting ‘‘August 31’’; 

(L) in paragraph (6), as so redesignated— 

(i) by striking ‘‘of the fiscal years 2002 through 

2011’’ and inserting ‘‘fiscal year’’; and 

(ii) by inserting at the end of the table in subparagraph (A) the following: 

‘‘2012 .................................................................... $425,000,000 

2013 ...................................................................... $455,000,000 

2014 ...................................................................... $485,000,000 

2015 ...................................................................... $515,000,000 

2016 ...................................................................... $550,000,000 

2017 ...................................................................... $585,000,000 

2018 ...................................................................... $620,000,000 

2019 ...................................................................... $660,000,000 

2020 ...................................................................... $705,000,000 

2021 and each fiscal year thereafter .................. An amount that is equal to the target fee collection amount for the prior fiscal year, adjusted by the rate of inflation.’’. 

(2) SECTION 13(e) OF THE SECURITIES EXCHANGE ACT OF

1934.—Section 13(e) of the Securities Exchange Act of 1934 (15 

U.S.C. 78m(e)) is amended— 

(A) in paragraph (3), by striking ‘‘paragraphs (5) and 

(6)’’ and inserting ‘‘paragraph (4)’’; 

(B) by striking paragraphs (4), (5), and (6); 


sroberts on DSKD5P82C1PROD with HEARING
588 

(C) by inserting after paragraph (3) the following: 

‘‘(4) ANNUAL ADJUSTMENT.—For each fiscal year, the Commission shall by order adjust the rate required by paragraph 

(3) for such fiscal year to a rate that is equal to the rate (expressed in dollars per million) that is applicable under section 

6(b) of the Securities Act of 1933 for such fiscal year. 

‘‘(5) FEE COLLECTIONS.—Fees collected pursuant to this 

subsection for fiscal year 2012 and each fiscal year thereafter 

shall be deposited and credited as general revenue of the Treasury and shall not be available for obligation. 

‘‘(6) EFFECTIVE DATE; PUBLICATION.—In exercising its authority under this subsection, the Commission shall not be required to comply with the provisions of section 553 of title 5, 

United States Code. An adjusted rate prescribed under paragraph (4) shall be published and take effect in accordance with 

section 6(b) of the Securities Act of 1933 (15 U.S.C. 77f(b)).’’; 

and 

(D) by striking paragraphs (8), (9), and (10). 

(3) SECTION 14(g) OF THE SECURITIES EXCHANGE ACT OF

1934.—Section 14(g) of the Securities Exchange Act of 1934 (15 

U.S.C. 78n(g)) is amended— 

(A) in paragraph (1), by striking ‘‘paragraphs (5) and 

(6)’’ each time that term appears and inserting ‘‘paragraph 

(4)’’; 

(B) in paragraph (3), by striking ‘‘paragraphs (5) and 

(6)’’ and inserting ‘‘paragraph (4)’’; 

(C) by striking paragraphs (4), (5), and (6); 

(D) by inserting after paragraph (3) the following: 

‘‘(4) ANNUAL ADJUSTMENT.—For each fiscal year, the Commission shall by order adjust the rate required by paragraphs 

(1) and (3) for such fiscal year to a rate that is equal to the rate 

(expressed in dollars per million) that is applicable under section 6(b) of the Securities Act of 1933 (15 U.S.C. 77f(b)) for such 

fiscal year. 

‘‘(5) FEE COLLECTION.—Fees collected pursuant to this subsection for fiscal year 2012 and each fiscal year thereafter shall 

be deposited and credited as general revenue of the Treasury 

and shall not be available for obligation. 

‘‘(6) REVIEW; EFFECTIVE DATE; PUBLICATION.—In exercising 

its authority under this subsection, the Commission shall not be 

required to comply with the provisions of section 553 of title 5, 

United States Code. An adjusted rate prescribed under paragraph (4) shall be published and take effect in accordance with 

section 6(b) of the Securities Act of 1933 (15 U.S.C. 77f(b)).’’; 

(E) by striking paragraphs (8), (9), and (10); and 

(F) by redesignating paragraph (11) as paragraph (8). 

(4) EFFECTIVE DATE.—The amendments made by this subsection shall take effect on October 1, 2011, except that for fiscal 

year 2012, the Commission shall publish the rate established 

under section 6(b) of the Securities Act of 1933 (15 U.S.C. 

77f(b)), as amended by this Act, on August 31, 2011. 

(c) AUTHORIZATION OF APPROPRIATIONS.—Section 35 of the Securities Exchange Act of 1934 (15 U.S.C. 78kk) is amended to read 

as follows: 


sroberts on DSKD5P82C1PROD with HEARING
589 

‘‘SEC. 35. AUTHORIZATION OF APPROPRIATIONS. 

‘‘In addition to any other funds authorized to be appropriated 

to the Commission, there are authorized to be appropriated to carry 

out the functions, powers, and duties of the Commission— 

‘‘(1) for fiscal year 2011, $1,300,000,000; 

‘‘(2) for fiscal year 2012, $1,500,000,000; 

‘‘(3) for fiscal year 2013, $1,750,000,000; 

‘‘(4) for fiscal year 2014, $2,000,000,000; and 

‘‘(5) for fiscal year 2015, $2,250,000,000.’’. 

(d) TRANSMITTAL OF BUDGET REQUESTS.— 

(1) AMENDMENT.—Section 31 of the Securities Exchange 

Act of 1934 (15 U.S.C. 78ee) is amended by adding at the end 

the following: 

‘‘(m) TRANSMITTAL OF COMMISSION BUDGET REQUESTS.— 

‘‘(1) BUDGET REQUIRED.—For fiscal year 2012, and each fiscal year thereafter, the Commission shall prepare and submit 

a budget to the President. Whenever the Commission submits a 

budget estimate or request to the President or the Office of Management and Budget, the Commission shall concurrently transmit copies of the estimate or request to the Committee on Appropriations of the Senate, the Committee on Appropriations of the 

House of Representatives, the Committee on Banking, Housing, 

and Urban Affairs of the Senate, and the Committee on Financial Services of the House of Representatives. 

‘‘(2) SUBMISSION TO CONGRESS.—The President shall submit each budget submitted under paragraph (1) to Congress, in 

unaltered form, together with the annual budget for the Administration submitted by the President. 

‘‘(3) CONTENTS.—The Commission shall include in each 

budget submitted under paragraph (1)— 

‘‘(A) an itemization of the amount of funds necessary to 

carry out the functions of the Commission. 

‘‘(B) an amount to be designated as contingency funding to be used by the Commission to address unanticipated 

needs; and 

‘‘(C) a designation of any activities of the Commission 

for which multi-year budget authority would be suitable.’’. 

(2) BUDGET OF THE PRESIDENT.—For fiscal year 2012, and 

each fiscal year thereafter, the annual budget for the Administration submitted by the President to Congress shall reflect the 

amendments made by this section. 

(e) SECURITIES AND EXCHANGE COMMISSION RESERVE FUND.— 

(1) AMENDMENT.—Section 4 of the Securities Exchange Act 

of 1934 (15 U.S.C. 78d), as amended by this Act, is amended 

by adding at the end the following: 

‘‘(i) SECURITIES AND EXCHANGE COMMISSION RESERVE FUND.— 

‘‘(1) RESERVE FUND ESTABLISHED.—There is established in 

the Treasury of the United States a separate fund, to be known 

as the ‘Securities and Exchange Commission Reserve Fund’ (referred to in this subsection as the ‘Reserve Fund’). 

‘‘(2) RESERVE FUND AMOUNTS.— 

‘‘(A) IN GENERAL.—Except as provided in subparagraph 

(B), any registration fees collected by the Commission under 

section 6(b) of the Securities Act of 1933 (15 U.S.C. 77f(b)) 


sroberts on DSKD5P82C1PROD with HEARING
590 

or section 24(f) of the Investment Company Act of 1940 (15 

U.S.C. 80a–24(f)) shall be deposited into the Reserve Fund. 

‘‘(B) LIMITATIONS.—For any 1 fiscal year— 

‘‘(i) the amount deposited in the Fund may not exceed $50,000,000; and 

‘‘(ii) the balance in the Fund may not exceed 

$100,000,000. 

‘‘(C) EXCESS FEES.—Any amounts in excess of the limitations described in subparagraph (B) that the Commission 

collects from registration fees under section 6(b) of the Securities Act of 1933 (15 U.S.C. 77f(b)) or section 24(f) of the 

Investment Company Act of 1940 (15 U.S.C. 80a–24(f)) 

shall be deposited in the General Fund of the Treasury of 

the United States and shall not be available for obligation 

by the Commission. 

‘‘(3) USE OF AMOUNTS IN RESERVE FUND.—The Commission 

may obligate amounts in the Reserve Fund, not to exceed a total 

of $100,000,000 in any 1 fiscal year, as the Commission determines is necessary to carry out the functions of the Commission. 

Any amounts in the reserve fund shall remain available until 

expended. Not later than 10 days after the date on which the 

Commission obligates amounts under this paragraph, the Commission shall notify Congress of the date, amount, and purpose 

of the obligation. 

‘‘(4) RULE OF CONSTRUCTION.—Amounts collected and deposited in the Reserve Fund shall not be construed to be Government funds or appropriated monies and shall not be subject 

to apportionment for the purpose of chapter 15 of title 31, 

United States Code, or under any other authority.’’. 

(2) EFFECTIVE DATE.—The amendment made by this subsection shall take effect on October 1, 2011. 

TITLE X—BUREAU OF CONSUMER FINANCIAL 

PROTECTION 

SEC. 1001. SHORT TITLE. 

This title may be cited as the ‘‘Consumer Financial Protection 

Act of 2010’’. 

SEC. 1002. DEFINITIONS. 

Except as otherwise provided in this title, for purposes of this 

title, the following definitions shall apply: 

(1) AFFILIATE.—The term ‘‘affiliate’’ means any person that 

controls, is controlled by, or is under common control with another person. 

(2) BUREAU.—The term ‘‘Bureau’’ means the Bureau of Consumer Financial Protection. 

(3) BUSINESS OF INSURANCE.—The term ‘‘business of insurance’’ means the writing of insurance or the reinsuring of risks 

by an insurer, including all acts necessary to such writing or 

reinsuring and the activities relating to the writing of insurance 

or the reinsuring of risks conducted by persons who act as, or 

are, officers, directors, agents, or employees of insurers or who 

are other persons authorized to act on behalf of such persons. 


sroberts on DSKD5P82C1PROD with HEARING
591 

(4) CONSUMER.—The term ‘‘consumer’’ means an individual 

or an agent, trustee, or representative acting on behalf of an individual. 

(5) CONSUMER FINANCIAL PRODUCT OR SERVICE.—The term 

‘‘consumer financial product or service’’ means any financial 

product or service that is described in one or more categories 

under— 

(A) paragraph (15) and is offered or provided for use 

by consumers primarily for personal, family, or household 

purposes; or 

(B) clause (i), (iii), (ix), or (x) of paragraph (15)(A), and 

is delivered, offered, or provided in connection with a consumer financial product or service referred to in subparagraph (A). 

(6) COVERED PERSON.—The term ‘‘covered person’’ means— 

(A) any person that engages in offering or providing a 

consumer financial product or service; and 

(B) any affiliate of a person described in subparagraph 

(A) if such affiliate acts as a service provider to such person. 

(7) CREDIT.—The term ‘‘credit’’ means the right granted by 

a person to a consumer to defer payment of a debt, incur debt 

and defer its payment, or purchase property or services and 

defer payment for such purchase. 

(8) DEPOSIT-TAKING ACTIVITY.—The term ‘‘deposit-taking 

activity’’ means— 

(A) the acceptance of deposits, maintenance of deposit 

accounts, or the provision of services related to the acceptance of deposits or the maintenance of deposit accounts; 

(B) the acceptance of funds, the provision of other services related to the acceptance of funds, or the maintenance 

of member share accounts by a credit union; or 

(C) the receipt of funds or the equivalent thereof, as the 

Bureau may determine by rule or order, received or held by 

a covered person (or an agent for a covered person) for the 

purpose of facilitating a payment or transferring funds or 

value of funds between a consumer and a third party. 

(9) DESIGNATED TRANSFER DATE.—The term ‘‘designated 

transfer date’’ means the date established under section 1062. 

(10) DIRECTOR.—The term ‘‘Director’’ means the Director of 

the Bureau. 

(11) ELECTRONIC CONDUIT SERVICES.—The term ‘‘electronic 

conduit services’’— 

(A) means the provision, by a person, of electronic data 

transmission, routing, intermediate or transient storage, or 

connections to a telecommunications system or network; 

and 

(B) does not include a person that provides electronic 

conduit services if, when providing such services, the person— 

(i) selects or modifies the content of the electronic 

data; 

(ii) transmits, routes, stores, or provides connections for electronic data, including financial data, in a 

manner that such financial data is differentiated from 


sroberts on DSKD5P82C1PROD with HEARING
592 

other types of data of the same form that such person 

transmits, routes, or stores, or with respect to which, 

provides connections; or 

(iii) is a payee, payor, correspondent, or similar 

party to a payment transaction with a consumer. 

(12) ENUMERATED CONSUMER LAWS.—Except as otherwise 

specifically provided in section 1029, subtitle G or subtitle H, 

the term ‘‘enumerated consumer laws’’ means— 

(A) the Alternative Mortgage Transaction Parity Act of 

1982 (12 U.S.C. 3801 et seq.); 

(B) the Consumer Leasing Act of 1976 (15 U.S.C. 1667 

et seq.); 

(C) the Electronic Fund Transfer Act (15 U.S.C. 1693 

et seq.), except with respect to section 920 of that Act; 

(D) the Equal Credit Opportunity Act (15 U.S.C. 1691 

et seq.); 

(E) the Fair Credit Billing Act (15 U.S.C. 1666 et seq.); 

(F) the Fair Credit Reporting Act (15 U.S.C. 1681 et 

seq.), except with respect to sections 615(e) and 628 of that 

Act (15 U.S.C. 1681m(e), 1681w); 

(G) the Home Owners Protection Act of 1998 (12 U.S.C. 

4901 et seq.); 

(H) the Fair Debt Collection Practices Act (15 U.S.C. 

1692 et seq.); 

(I) subsections (b) through (f) of section 43 of the Federal Deposit Insurance Act (12 U.S.C. 1831t(c)–(f)); 

(J) sections 502 through 509 of the Gramm-Leach-Bliley Act (15 U.S.C. 6802–6809) except for section 505 as it 

applies to section 501(b); 

(K) the Home Mortgage Disclosure Act of 1975 (12 

U.S.C. 2801 et seq.); 

(L) the Home Ownership and Equity Protection Act of 

1994 (15 U.S.C. 1601 note); 

(M) the Real Estate Settlement Procedures Act of 1974 

(12 U.S.C. 2601 et seq.); 

(N) the S.A.F.E. Mortgage Licensing Act of 2008 (12 

U.S.C. 5101 et seq.); 

(O) the Truth in Lending Act (15 U.S.C. 1601 et seq.); 

(P) the Truth in Savings Act (12 U.S.C. 4301 et seq.); 

(Q) section 626 of the Omnibus Appropriations Act, 

2009 (Public Law 111–8); and 

(R) the Interstate Land Sales Full Disclosure Act (15 

U.S.C. 1701). 

(13) FAIR LENDING.—The term ‘‘fair lending’’ means fair, 

equitable, and nondiscriminatory access to credit for consumers. 

(14) FEDERAL CONSUMER FINANCIAL LAW.—The term ‘‘Federal consumer financial law’’ means the provisions of this title, 

the enumerated consumer laws, the laws for which authorities 

are transferred under subtitles F and H, and any rule or order 

prescribed by the Bureau under this title, an enumerated consumer law, or pursuant to the authorities transferred under 

subtitles F and H. The term does not include the Federal Trade 

Commission Act. 

(15) FINANCIAL PRODUCT OR SERVICE.— 


sroberts on DSKD5P82C1PROD with HEARING
593 

(A) IN GENERAL.—The term ‘‘financial product or service’’ means— 

(i) extending credit and servicing loans, including 

acquiring, purchasing, selling, brokering, or other extensions of credit (other than solely extending commercial credit to a person who originates consumer credit 

transactions); 

(ii) extending or brokering leases of personal or 

real property that are the functional equivalent of purchase finance arrangements, if— 

(I) the lease is on a non-operating basis; 

(II) the initial term of the lease is at least 90 

days; and 

(III) in the case of a lease involving real property, at the inception of the initial lease, the transaction is intended to result in ownership of the 

leased property to be transferred to the lessee, subject to standards prescribed by the Bureau; 

(iii) providing real estate settlement services, except 

such services excluded under subparagraph (C), or performing appraisals of real estate or personal property; 

(iv) engaging in deposit-taking activities, transmitting or exchanging funds, or otherwise acting as a custodian of funds or any financial instrument for use by 

or on behalf of a consumer; 

(v) selling, providing, or issuing stored value or 

payment instruments, except that, in the case of a sale 

of, or transaction to reload, stored value, only if the 

seller exercises substantial control over the terms or 

conditions of the stored value provided to the consumer 

where, for purposes of this clause— 

(I) a seller shall not be found to exercise substantial control over the terms or conditions of the 

stored value if the seller is not a party to the contract with the consumer for the stored value product, and another person is principally responsible 

for establishing the terms or conditions of the 

stored value; and 

(II) advertising the nonfinancial goods or services of the seller on the stored value card or device 

is not in itself an exercise of substantial control 

over the terms or conditions; 

(vi) providing check cashing, check collection, or 

check guaranty services; 

(vii) providing payments or other financial data 

processing products or services to a consumer by any 

technological means, including processing or storing financial or banking data for any payment instrument, 

or through any payments systems or network used for 

processing payments data, including payments made 

through an online banking system or mobile telecommunications network, except that a person shall not 

be deemed to be a covered person with respect to financial data processing solely because the person— 


sroberts on DSKD5P82C1PROD with HEARING
594 

(I) is a merchant, retailer, or seller of any nonfinancial good or service who engages in financial 

data processing by transmitting or storing payments data about a consumer exclusively for purpose of initiating payments instructions by the consumer to pay such person for the purchase of, or to 

complete a commercial transaction for, such nonfinancial good or service sold directly by such person to the consumer; or 

(II) provides access to a host server to a person 

for purposes of enabling that person to establish 

and maintain a website; 

(viii) providing financial advisory services (other 

than services relating to securities provided by a person 

regulated by the Commission or a person regulated by 

a State securities Commission, but only to the extent 

that such person acts in a regulated capacity) to consumers on individual financial matters or relating to 

proprietary financial products or services (other than 

by publishing any bona fide newspaper, news magazine, or business or financial publication of general 

and regular circulation, including publishing market 

data, news, or data analytics or investment information or recommendations that are not tailored to the individual needs of a particular consumer), including— 

(I) providing credit counseling to any consumer; and 

(II) providing services to assist a consumer 

with debt management or debt settlement, modifying the terms of any extension of credit, or avoiding foreclosure; 

(ix) collecting, analyzing, maintaining, or providing consumer report information or other account 

information, including information relating to the 

credit history of consumers, used or expected to be used 

in connection with any decision regarding the offering 

or provision of a consumer financial product or service, 

except to the extent that— 

(I) a person— 

(aa) collects, analyzes, or maintains information that relates solely to the transactions 

between a consumer and such person; 

(bb) provides the information described in 

item (aa) to an affiliate of such person; or 

(cc) provides information that is used or 

expected to be used solely in any decision regarding the offering or provision of a product 

or service that is not a consumer financial 

product or service, including a decision for employment, government licensing, or a residential lease or tenancy involving a consumer; 

and 

(II) the information described in subclause 

(I)(aa) is not used by such person or affiliate in 

connection with any decision regarding the offering 


sroberts on DSKD5P82C1PROD with HEARING
595 

or provision of a consumer financial product or 

service to the consumer, other than credit described 

in section 1027(a)(2)(A); 

(x) collecting debt related to any consumer financial product or service; and 

(xi) such other financial product or service as may 

be defined by the Bureau, by regulation, for purposes 

of this title, if the Bureau finds that such financial 

product or service is— 

(I) entered into or conducted as a subterfuge or 

with a purpose to evade any Federal consumer financial law; or 

(II) permissible for a bank or for a financial 

holding company to offer or to provide under any 

provision of a Federal law or regulation applicable 

to a bank or a financial holding company, and 

has, or likely will have, a material impact on consumers. 

(B) RULE OF CONSTRUCTION.— (i) IN GENERAL.—For purposes of subparagraph 

(A)(xi)(II), and subject to clause (ii) of this subparagraph, the following activities provided to a covered 

person shall not, for purposes of this title, be considered incidental or complementary to a financial activity permissible for a financial holding company to engage in under any provision of a Federal law or regulation applicable to a financial holding company: 

(I) Providing information products or services 

to a covered person for identity authentication. 

(II) Providing information products or services 

for fraud or identify theft detection, prevention, or 

investigation. 

(III) Providing document retrieval or delivery 

services. 

(IV) Providing public records information retrieval. 

(V) Providing information products or services 

for anti-money-laundering activities. 

(ii) LIMITATION.—Nothing in clause (i) may be construed as modifying or limiting the authority of the Bureau to exercise any— 

(I) examination or enforcement powers authority under this title with respect to a covered person 

or service provider engaging in an activity described in subparagraph (A)(ix); or 

(II) powers authorized by this title to prescribe 

rules, issue orders, or take other actions under any 

enumerated consumer law or law for which the authorities are transferred under subtitle F or H. 

(C) EXCLUSIONS.—The term ‘‘financial product or service’’ does not include— 

(i) the business of insurance; or 

(ii) electronic conduit services. 

(16) FOREIGN EXCHANGE.—The term ‘‘foreign exchange’’ 

means the exchange, for compensation, of currency of the United 


sroberts on DSKD5P82C1PROD with HEARING
596 

States or of a foreign government for currency of another government. 

(17) INSURED CREDIT UNION.—The term ‘‘insured credit 

union’’ has the same meaning as in section 101 of the Federal 

Credit Union Act (12 U.S.C. 1752). 

(18) PAYMENT INSTRUMENT.—The term ‘‘payment instrument’’ means a check, draft, warrant, money order, traveler’s 

check, electronic instrument, or other instrument, payment of 

funds, or monetary value (other than currency). 

(19) PERSON.—The term ‘‘person’’ means an individual, 

partnership, company, corporation, association (incorporated or 

unincorporated), trust, estate, cooperative organization, or other 

entity. 

(20) PERSON REGULATED BY THE COMMODITY FUTURES

TRADING COMMISSION.—The term ‘‘person regulated by the Commodity Futures Trading Commission’’ means any person that is 

registered, or required by statute or regulation to be registered, 

with the Commodity Futures Trading Commission, but only to 

the extent that the activities of such person are subject to the 

jurisdiction of the Commodity Futures Trading Commission 

under the Commodity Exchange Act. 

(21) PERSON REGULATED BY THE COMMISSION.—The term 

‘‘person regulated by the Commission’’ means a person who is— 

(A) a broker or dealer that is required to be registered 

under the Securities Exchange Act of 1934; 

(B) an investment adviser that is registered under the 

Investment Advisers Act of 1940; 

(C) an investment company that is required to be registered under the Investment Company Act of 1940, and 

any company that has elected to be regulated as a business 

development company under that Act; 

(D) a national securities exchange that is required to be 

registered under the Securities Exchange Act of 1934; 

(E) a transfer agent that is required to be registered 

under the Securities Exchange Act of 1934; 

(F) a clearing corporation that is required to be registered under the Securities Exchange Act of 1934; 

(G) any self-regulatory organization that is required to 

be registered with the Commission; 

(H) any nationally recognized statistical rating organization that is required to be registered with the Commission; 

(I) any securities information processor that is required 

to be registered with the Commission; 

(J) any municipal securities dealer that is required to 

be registered with the Commission; 

(K) any other person that is required to be registered 

with the Commission under the Securities Exchange Act of 

1934; and 

(L) any employee, agent, or contractor acting on behalf 

of, registered with, or providing services to, any person described in any of subparagraphs (A) through (K), but only 

to the extent that any person described in any of subparagraphs (A) through (K), or the employee, agent, or contractor of such person, acts in a regulated capacity. 


sroberts on DSKD5P82C1PROD with HEARING
597 

(22) PERSON REGULATED BY A STATE INSURANCE REGULATOR.—The term ‘‘person regulated by a State insurance regulator’’ means any person that is engaged in the business of insurance and subject to regulation by any State insurance regulator, but only to the extent that such person acts in such capacity. 

(23) PERSON THAT PERFORMS INCOME TAX PREPARATION ACTIVITIES FOR CONSUMERS.—The term ‘‘person that performs income tax preparation activities for consumers’’ means— 

(A) any tax return preparer (as defined in section 

7701(a)(36) of the Internal Revenue Code of 1986), regardless of whether compensated, but only to the extent that the 

person acts in such capacity; 

(B) any person regulated by the Secretary under section 

330 of title 31, United States Code, but only to the extent 

that the person acts in such capacity; and 

(C) any authorized IRS e-file Providers (as defined for 

purposes of section 7216 of the Internal Revenue Code of 

1986), but only to the extent that the person acts in such 

capacity. 

(24) PRUDENTIAL REGULATOR.—The term ‘‘prudential regulator’’ means— 

(A) in the case of an insured depository institution or 

depository institution holding company (as defined in section 3 of the Federal Deposit Insurance Act), or subsidiary 

of such institution or company, the appropriate Federal 

banking agency, as that term is defined in section 3 of the 

Federal Deposit Insurance Act; and 

(B) in the case of an insured credit union, the National 

Credit Union Administration. 

(25) RELATED PERSON.—The term ‘‘related person’’— 

(A) shall apply only with respect to a covered person 

that is not a bank holding company (as that term is defined 

in section 2 of the Bank Holding Company Act of 1956), 

credit union, or depository institution; 

(B) shall be deemed to mean a covered person for all 

purposes of any provision of Federal consumer financial 

law; and 

(C) means— 

(i) any director, officer, or employee charged with 

managerial responsibility for, or controlling shareholder of, or agent for, such covered person; 

(ii) any shareholder, consultant, joint venture partner, or other person, as determined by the Bureau (by 

rule or on a case-by-case basis) who materially participates in the conduct of the affairs of such covered person; and 

(iii) any independent contractor (including any attorney, appraiser, or accountant) who knowingly or 

recklessly participates in any— 

(I) violation of any provision of law or regulation; or 

(II) breach of a fiduciary duty. 

(26) SERVICE PROVIDER.— 


sroberts on DSKD5P82C1PROD with HEARING
598 

(A) IN GENERAL.—The term ‘‘service provider’’ means 

any person that provides a material service to a covered 

person in connection with the offering or provision by such 

covered person of a consumer financial product or service, 

including a person that— 

(i) participates in designing, operating, or maintaining the consumer financial product or service; or 

(ii) processes transactions relating to the consumer 

financial product or service (other than unknowingly or 

incidentally transmitting or processing financial data 

in a manner that such data is undifferentiated from 

other types of data of the same form as the person 

transmits or processes). 

(B) EXCEPTIONS.—The term ‘‘service provider’’ does not 

include a person solely by virtue of such person offering or 

providing to a covered person— 

(i) a support service of a type provided to businesses generally or a similar ministerial service; or 

(ii) time or space for an advertisement for a consumer financial product or service through print, newspaper, or electronic media. 

(C) RULE OF CONSTRUCTION.—A person that is a service provider shall be deemed to be a covered person to the 

extent that such person engages in the offering or provision 

of its own consumer financial product or service. 

(27) STATE.—The term ‘‘State’’ means any State, territory, 

or possession of the United States, the District of Columbia, the 

Commonwealth of Puerto Rico, the Commonwealth of the 

Northern Mariana Islands, Guam, American Samoa, or the 

United States Virgin Islands or any federally recognized Indian 

tribe, as defined by the Secretary of the Interior under section 

104(a) of the Federally Recognized Indian Tribe List Act of 

1994 (25 U.S.C. 479a–1(a)). 

(28) STORED VALUE.— 

(A) IN GENERAL.—The term ‘‘stored value’’ means funds 

or monetary value represented in any electronic format, 

whether or not specially encrypted, and stored or capable of 

storage on electronic media in such a way as to be retrievable and transferred electronically, and includes a prepaid 

debit card or product, or any other similar product, regardless of whether the amount of the funds or monetary value 

may be increased or reloaded. 

(B) EXCLUSION.—Notwithstanding subparagraph (A), 

the term ‘‘stored value’’ does not include a special purpose 

card or certificate, which shall be defined for purposes of 

this paragraph as funds or monetary value represented in 

any electronic format, whether or not specially encrypted, 

that is— 

(i) issued by a merchant, retailer, or other seller of 

nonfinancial goods or services; 

(ii) redeemable only for transactions with the merchant, retailer, or seller of nonfinancial goods or services or with an affiliate of such person, which affiliate 

itself is a merchant, retailer, or seller of nonfinancial 

goods or services; 


sroberts on DSKD5P82C1PROD with HEARING
599 

(iii) issued in a specified amount that, except in 

the case of a card or product used solely for telephone 

services, may not be increased or reloaded; 

(iv) purchased on a prepaid basis in exchange for 

payment; and 

(v) honored upon presentation to such merchant, 

retailer, or seller of nonfinancial goods or services or 

an affiliate of such person, which affiliate itself is a 

merchant, retailer, or seller of nonfinancial goods or 

services, only for any nonfinancial goods or services. 

(29) TRANSMITTING OR EXCHANGING FUNDS.—The term 

‘‘transmitting or exchanging funds’’ means receiving currency, 

monetary value, or payment instruments from a consumer for 

the purpose of exchanging or transmitting the same by any 

means, including transmission by wire, facsimile, electronic 

transfer, courier, the Internet, or through bill payment services 

or through other businesses that facilitate third-party transfers 

within the United States or to or from the United States. 

Subtitle A—Bureau of Consumer Financial Protection 

SEC. 1011. ESTABLISHMENT OF THE BUREAU OF CONSUMER FINANCIAL PROTECTION. 

(a) BUREAU ESTABLISHED.—There is established in the Federal 

Reserve System, an independent bureau to be known as the ‘‘Bureau 

of Consumer Financial Protection’’, which shall regulate the offering 

and provision of consumer financial products or services under the 

Federal consumer financial laws. The Bureau shall be considered 

an Executive agency, as defined in section 105 of title 5, United 

States Code. Except as otherwise provided expressly by law, all Federal laws dealing with public or Federal contracts, property, works, 

officers, employees, budgets, or funds, including the provisions of 

chapters 5 and 7 of title 5, shall apply to the exercise of the powers 

of the Bureau. 

(b) DIRECTOR AND DEPUTY DIRECTOR.— 

(1) IN GENERAL.—There is established the position of the 

Director, who shall serve as the head of the Bureau. 

(2) APPOINTMENT.—Subject to paragraph (3), the Director 

shall be appointed by the President, by and with the advice and 

consent of the Senate. 

(3) QUALIFICATION.—The President shall nominate the Director from among individuals who are citizens of the United 

States. 

(4) COMPENSATION.—The Director shall be compensated at 

the rate prescribed for level II of the Executive Schedule under 

section 5313 of title 5, United States Code. 

(5) DEPUTY DIRECTOR.—There is established the position of 

Deputy Director, who shall— 

(A) be appointed by the Director; and 

(B) serve as acting Director in the absence or unavailability of the Director. 

(c) TERM.— 

(1) IN GENERAL.—The Director shall serve for a term of 5 

years. 


sroberts on DSKD5P82C1PROD with HEARING
600 

(2) EXPIRATION OF TERM.—An individual may serve as Director after the expiration of the term for which appointed, until 

a successor has been appointed and qualified. 

(3) REMOVAL FOR CAUSE.—The President may remove the 

Director for inefficiency, neglect of duty, or malfeasance in office. 

(d) SERVICE RESTRICTION.—No Director or Deputy Director may 

hold any office, position, or employment in any Federal reserve 

bank, Federal home loan bank, covered person, or service provider 

during the period of service of such person as Director or Deputy Director. 

(e) OFFICES.—The principal office of the Bureau shall be in the 

District of Columbia. The Director may establish regional offices of 

the Bureau, including in cities in which the Federal reserve banks, 

or branches of such banks, are located, in order to carry out the responsibilities assigned to the Bureau under the Federal consumer financial laws. 

SEC. 1012. EXECUTIVE AND ADMINISTRATIVE POWERS. 

(a) POWERS OF THE BUREAU.—The Bureau is authorized to establish the general policies of the Bureau with respect to all executive and administrative functions, including— 

(1) the establishment of rules for conducting the general 

business of the Bureau, in a manner not inconsistent with this 

title; 

(2) to bind the Bureau and enter into contracts; 

(3) directing the establishment and maintenance of divisions or other offices within the Bureau, in order to carry out 

the responsibilities under the Federal consumer financial laws, 

and to satisfy the requirements of other applicable law; 

(4) to coordinate and oversee the operation of all administrative, enforcement, and research activities of the Bureau; 

(5) to adopt and use a seal; 

(6) to determine the character of and the necessity for the 

obligations and expenditures of the Bureau; 

(7) the appointment and supervision of personnel employed 

by the Bureau; 

(8) the distribution of business among personnel appointed 

and supervised by the Director and among administrative units 

of the Bureau; 

(9) the use and expenditure of funds; 

(10) implementing the Federal consumer financial laws 

through rules, orders, guidance, interpretations, statements of 

policy, examinations, and enforcement actions; and 

(11) performing such other functions as may be authorized 

or required by law. 

(b) DELEGATION OF AUTHORITY.—The Director of the Bureau 

may delegate to any duly authorized employee, representative, or 

agent any power vested in the Bureau by law. 

(c) AUTONOMY OF THE BUREAU.— 

(1) COORDINATION WITH THE BOARD OF GOVERNORS.—Notwithstanding any other provision of law applicable to the supervision or examination of persons with respect to Federal consumer financial laws, the Board of Governors may delegate to 

the Bureau the authorities to examine persons subject to the juVerDate Mar 15 2010 04:29 Jul 07, 2010 Jkt 057098 PO 00000 Frm 00604 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
601 

risdiction of the Board of Governors for compliance with the 

Federal consumer financial laws. 

(2) AUTONOMY.—Notwithstanding the authorities granted 

to the Board of Governors under the Federal Reserve Act, the 

Board of Governors may not— 

(A) intervene in any matter or proceeding before the Director, including examinations or enforcement actions, unless otherwise specifically provided by law; 

(B) appoint, direct, or remove any officer or employee 

of the Bureau; or 

(C) merge or consolidate the Bureau, or any of the 

functions or responsibilities of the Bureau, with any division or office of the Board of Governors or the Federal reserve banks. 

(3) RULES AND ORDERS.—No rule or order of the Bureau 

shall be subject to approval or review by the Board of Governors. The Board of Governors may not delay or prevent the 

issuance of any rule or order of the Bureau. 

(4) RECOMMENDATIONS AND TESTIMONY.—No officer or 

agency of the United States shall have any authority to require 

the Director or any other officer of the Bureau to submit legislative recommendations, or testimony or comments on legislation, 

to any officer or agency of the United States for approval, comments, or review prior to the submission of such recommendations, testimony, or comments to the Congress, if such recommendations, testimony, or comments to the Congress include 

a statement indicating that the views expressed therein are 

those of the Director or such officer, and do not necessarily reflect the views of the Board of Governors or the President. 

(5) CLARIFICATION OF AUTONOMY OF THE BUREAU IN LEGAL

PROCEEDINGS.—The Bureau shall not be liable under any provision of law for any action or inaction of the Board of Governors, 

and the Board of Governors shall not be liable under any provision of law for any action or inaction of the Bureau. 

SEC. 1013. ADMINISTRATION. 

(a) PERSONNEL.— (1) APPOINTMENT.— (A) IN GENERAL.—The Director may fix the number of, 

and appoint and direct, all employees of the Bureau, in accordance with the applicable provisions of title 5, United 

States Code. 

(B) EMPLOYEES OF THE BUREAU.—The Director is authorized to employ attorneys, compliance examiners, compliance supervision analysts, economists, statisticians, and 

other employees as may be deemed necessary to conduct the 

business of the Bureau. Unless otherwise provided expressly 

by law, any individual appointed under this section shall 

be an employee as defined in section 2105 of title 5, United 

States Code, and subject to the provisions of such title and 

other laws generally applicable to the employees of an Executive agency. 

(C) WAIVER AUTHORITY.— 

(i) IN GENERAL.—In making any appointment 

under subparagraph (A), the Director may waive the 

requirements of chapter 33 of title 5, United States 


sroberts on DSKD5P82C1PROD with HEARING
602 

Code, and the regulations implementing such chapter, 

to the extent necessary to appoint employees on terms 

and conditions that are consistent with those set forth 

in section 11(1) of the Federal Reserve Act (12 U.S.C. 

248(1)), while providing for— 

(I) fair, credible, and transparent methods of 

establishing qualification requirements for, recruitment for, and appointments to positions; 

(II) fair and open competition and equitable 

treatment in the consideration and selection of individuals to positions; 

(III) fair, credible, and transparent methods of 

assigning, reassigning, detailing, transferring, and 

promoting employees. 

(ii) VETERANS PREFERENCES.—In implementing 

this subparagraph, the Director shall comply with the 

provisions of section 2302(b)(11), regarding veterans’ 

preference requirements, in a manner consistent with 

that in which such provisions are applied under chapter 33 of title 5, United States Code. The authority 

under this subparagraph to waive the requirements of 

that chapter 33 shall expire 5 years after the date of 

enactment of this Act. 

(2) COMPENSATION.—Notwithstanding any otherwise applicable provision of title 5, United States Code, concerning compensation, including the provisions of chapter 51 and chapter 

53, the following provisions shall apply with respect to employees of the Bureau: 

(A) The rates of basic pay for all employees of the Bureau may be set and adjusted by the Director. 

(B) The Director shall at all times provide compensation (including benefits) to each class of employees that, at 

a minimum, are comparable to the compensation and benefits then being provided by the Board of Governors for the 

corresponding class of employees. 

(C) All such employees shall be compensated (including 

benefits) on terms and conditions that are consistent with 

the terms and conditions set forth in section 11(l) of the 

Federal Reserve Act (12 U.S.C. 248(l)). 

(3) BUREAU PARTICIPATION IN FEDERAL RESERVE SYSTEM

RETIREMENT PLAN AND FEDERAL RESERVE SYSTEM THRIFT

PLAN.— 

(A) EMPLOYEE ELECTION.—Employees appointed to the 

Bureau may elect to participate in either— 

(i) both the Federal Reserve System Retirement 

Plan and the Federal Reserve System Thrift Plan, 

under the same terms on which such participation is 

offered to employees of the Board of Governors who 

participate in such plans and under the terms and conditions specified under section 1064(i)(1)(C); or 

(ii) the Civil Service Retirement System under 

chapter 83 of title 5, United States Code, or the Federal 

Employees Retirement System under chapter 84 of title 

5, United States Code, if previously covered under one 

of those Federal employee retirement systems. 


sroberts on DSKD5P82C1PROD with HEARING
603 

(B) ELECTION PERIOD.—Bureau employees shall make 

an election under this paragraph not later than 1 year after 

the date of appointment by, or transfer under subtitle F to, 

the Bureau. Participation in, and benefit accruals under, 

any other retirement plan established or maintained by the 

Federal Government shall end not later than the date on 

which participation in, and benefit accruals under, the 

Federal Reserve System Retirement Plan and Federal Reserve System Thrift Plan begin. 

(C) EMPLOYER CONTRIBUTION.—The Bureau shall pay 

an employer contribution to the Federal Reserve System Retirement Plan, in the amount established as an employer 

contribution under the Federal Employees Retirement System, as established under chapter 84 of title 5, United 

States Code, for each Bureau employee who elects to participate in the Federal Reserve System Retirement Plan. 

The Bureau shall pay an employer contribution to the Federal Reserve System Thrift Plan for each Bureau employee 

who elects to participate in such plan, as required under 

the terms of such plan. 

(D) CONTROLLED GROUP STATUS.—The Bureau is the 

same employer as the Federal Reserve System (as comprised of the Board of Governors and each of the 12 Federal reserve banks prior to the date of enactment of this 

Act) for purposes of subsections (b), (c), (m), and (o) of section 414 of the Internal Revenue Code of 1986, (26 U.S.C. 

414). 

(4) LABOR-MANAGEMENT RELATIONS.—Chapter 71 of title 5, 

United States Code, shall apply to the Bureau and the employees of the Bureau. 

(5) AGENCY OMBUDSMAN.— (A) ESTABLISHMENT REQUIRED.—Not later than 180 

days after the designated transfer date, the Bureau shall 

appoint an ombudsman. 

(B) DUTIES OF OMBUDSMAN.—The ombudsman appointed in accordance with subparagraph (A) shall— 

(i) act as a liaison between the Bureau and any affected person with respect to any problem that such 

party may have in dealing with the Bureau, resulting 

from the regulatory activities of the Bureau; and 

(ii) assure that safeguards exist to encourage complainants to come forward and preserve confidentiality. 

(b) SPECIFIC FUNCTIONAL UNITS.— 

(1) RESEARCH.—The Director shall establish a unit whose 

functions shall include researching, analyzing, and reporting 

on— 

(A) developments in markets for consumer financial 

products or services, including market areas of alternative 

consumer financial products or services with high growth 

rates and areas of risk to consumers; 

(B) access to fair and affordable credit for traditionally 

underserved communities; 

(C) consumer awareness, understanding, and use of 

disclosures and communications regarding consumer financial products or services; 


sroberts on DSKD5P82C1PROD with HEARING
604 

(D) consumer awareness and understanding of costs, 

risks, and benefits of consumer financial products or services; 

(E) consumer behavior with respect to consumer financial products or services, including performance on mortgage loans; and 

(F) experiences of traditionally underserved consumers, 

including un-banked and under-banked consumers. 

(2) COMMUNITY AFFAIRS.—The Director shall establish a 

unit whose functions shall include providing information, guidance, and technical assistance regarding the offering and provision of consumer financial products or services to traditionally 

underserved consumers and communities. 

(3) COLLECTING AND TRACKING COMPLAINTS.— (A) IN GENERAL.—The Director shall establish a unit 

whose functions shall include establishing a single, toll-free 

telephone number, a website, and a database or utilizing 

an existing database to facilitate the centralized collection 

of, monitoring of, and response to consumer complaints regarding consumer financial products or services. The Director shall coordinate with the Federal Trade Commission or 

other Federal agencies to route complaints to such agencies, 

where appropriate. 

(B) ROUTING CALLS TO STATES.—To the extent practicable, State agencies may receive appropriate complaints 

from the systems established under subparagraph (A), if— 

(i) the State agency system has the functional capacity to receive calls or electronic reports routed by the 

Bureau systems; 

(ii) the State agency has satisfied any conditions of 

participation in the system that the Bureau may establish, including treatment of personally identifiable information and sharing of information on complaint 

resolution or related compliance procedures and resources; and 

(iii) participation by the State agency includes 

measures necessary to provide for protection of personally identifiable information that conform to the standards for protection of the confidentiality of personally 

identifiable information and for data integrity and security that apply to the Federal agencies described in 

subparagraph (D). 

(C) REPORTS TO THE CONGRESS.—The Director shall 

present an annual report to Congress not later than March 

31 of each year on the complaints received by the Bureau 

in the prior year regarding consumer financial products 

and services. Such report shall include information and 

analysis about complaint numbers, complaint types, and, 

where applicable, information about resolution of complaints. 

(D) DATA SHARING REQUIRED.—To facilitate preparation of the reports required under subparagraph (C), supervision and enforcement activities, and monitoring of the 

market for consumer financial products and services, the 

Bureau shall share consumer complaint information with 


sroberts on DSKD5P82C1PROD with HEARING
605 

prudential regulators, the Federal Trade Commission, other 

Federal agencies, and State agencies, subject to the standards applicable to Federal agencies for protection of the 

confidentiality of personally identifiable information and 

for data security and integrity. The prudential regulators, 

the Federal Trade Commission, and other Federal agencies 

shall share data relating to consumer complaints regarding 

consumer financial products and services with the Bureau, 

subject to the standards applicable to Federal agencies for 

protection of confidentiality of personally identifiable information and for data security and integrity. 

(c) OFFICE OF FAIR LENDING AND EQUAL OPPORTUNITY.— (1) ESTABLISHMENT.—The Director shall establish within 

the Bureau the Office of Fair Lending and Equal Opportunity. 

(2) FUNCTIONS.—The Office of Fair Lending and Equal Opportunity shall have such powers and duties as the Director 

may delegate to the Office, including— 

(A) providing oversight and enforcement of Federal 

laws intended to ensure the fair, equitable, and nondiscriminatory access to credit for both individuals and 

communities that are enforced by the Bureau, including the 

Equal Credit Opportunity Act and the Home Mortgage Disclosure Act; 

(B) coordinating fair lending efforts of the Bureau with 

other Federal agencies and State regulators, as appropriate, to promote consistent, efficient, and effective enforcement of Federal fair lending laws; 

(C) working with private industry, fair lending, civil 

rights, consumer and community advocates on the promotion of fair lending compliance and education; and 

(D) providing annual reports to Congress on the efforts 

of the Bureau to fulfill its fair lending mandate. 

(3) ADMINISTRATION OF OFFICE.—There is established the 

position of Assistant Director of the Bureau for Fair Lending 

and Equal Opportunity, who— 

(A) shall be appointed by the Director; and 

(B) shall carry out such duties as the Director may delegate to such Assistant Director. 

(d) OFFICE OF FINANCIAL EDUCATION.— (1) ESTABLISHMENT.—The Director shall establish an Office 

of Financial Education, which shall be responsible for developing and implementing initiatives intended to educate and empower consumers to make better informed financial decisions. 

(2) OTHER DUTIES.—The Office of Financial Education 

shall develop and implement a strategy to improve the financial 

literacy of consumers that includes measurable goals and objectives, in consultation with the Financial Literacy and Education Commission, consistent with the National Strategy for 

Financial Literacy, through activities including providing opportunities for consumers to access— 

(A) financial counseling, including community-based 

financial counseling, where practicable; 

(B) information to assist with the evaluation of credit 

products and the understanding of credit histories and 

scores; 


sroberts on DSKD5P82C1PROD with HEARING
606 

(C) savings, borrowing, and other services found at 

mainstream financial institutions; 

(D) activities intended to— 

(i) prepare the consumer for educational expenses 

and the submission of financial aid applications, and 

other major purchases; 

(ii) reduce debt; and 

(iii) improve the financial situation of the consumer; 

(E) assistance in developing long-term savings strategies; and 

(F) wealth building and financial services during the 

preparation process to claim earned income tax credits and 

Federal benefits. 

(3) COORDINATION.—The Office of Financial Education 

shall coordinate with other units within the Bureau in carrying 

out its functions, including— 

(A) working with the Community Affairs Office to implement the strategy to improve financial literacy of consumers; and 

(B) working with the research unit established by the 

Director to conduct research related to consumer financial 

education and counseling. 

(4) REPORT.—Not later than 24 months after the designated 

transfer date, and annually thereafter, the Director shall submit a report on its financial literacy activities and strategy to 

improve financial literacy of consumers to— 

(A) the Committee on Banking, Housing, and Urban 

Affairs of the Senate; and 

(B) the Committee on Financial Services of the House 

of Representatives. 

(5) MEMBERSHIP IN FINANCIAL LITERACY AND EDUCATION

COMMISSION.—Section 513(c)(1) of the Financial Literacy and 

Education Improvement Act (20 U.S.C. 9702(c)(1)) is amended— 

(A) in subparagraph (B), by striking ‘‘and’’ at the end; 

(B) by redesignating subparagraph (C) as subparagraph (D); and 

(C) by inserting after subparagraph (B) the following 

new subparagraph: 

‘‘(C) the Director of the Bureau of Consumer Financial 

Protection; and’’. 

(6) CONFORMING AMENDMENT.—Section 513(d) of the Financial Literacy and Education Improvement Act (20 U.S.C. 

9702(d)) is amended by adding at the end the following: ‘‘The 

Director of the Bureau of Consumer Financial Protection shall 

serve as the Vice Chairman.’’. 

(7) STUDY AND REPORT ON FINANCIAL LITERACY PROGRAM.— 

(A) IN GENERAL.—The Comptroller General of the 

United States shall conduct a study to identify— 

(i) the feasibility of certification of persons providing the programs or performing the activities described in paragraph (2), including recognizing outstanding programs, and developing guidelines and resources for community-based practitioners, including— 


sroberts on DSKD5P82C1PROD with HEARING
607 

(I) a potential certification process and standards for certification; 

(II) appropriate certifying entities; 

(III) resources required for funding such a 

process; and 

(IV) a cost-benefit analysis of such certification; 

(ii) technological resources intended to collect, analyze, evaluate, or promote financial literacy and counseling programs; 

(iii) effective methods, tools, and strategies intended to educate and empower consumers about personal finance management; and 

(iv) recommendations intended to encourage the 

development of programs that effectively improve financial education outcomes and empower consumers to 

make better informed financial decisions based on findings. 

(B) REPORT.—Not later than 1 year after the date of 

enactment of this Act, the Comptroller General of the 

United States shall submit a report on the results of the 

study conducted under this paragraph to the Committee on 

Banking, Housing, and Urban Affairs of the Senate and 

the Committee on Financial Services of the House of Representatives. 

(e) OFFICE OF SERVICE MEMBER AFFAIRS.— (1) IN GENERAL.—The Director shall establish an Office of 

Service Member Affairs, which shall be responsible for developing and implementing initiatives for service members and 

their families intended to— 

(A) educate and empower service members and their 

families to make better informed decisions regarding consumer financial products and services; 

(B) coordinate with the unit of the Bureau established 

under subsection (b)(3), in order to monitor complaints by 

service members and their families and responses to those 

complaints by the Bureau or other appropriate Federal or 

State agency; and 

(C) coordinate efforts among Federal and State agencies, as appropriate, regarding consumer protection measures relating to consumer financial products and services 

offered to, or used by, service members and their families. 

(2) COORDINATION.— 

(A) REGIONAL SERVICES.—The Director is authorized to 

assign employees of the Bureau as may be deemed necessary to conduct the business of the Office of Service Member Affairs, including by establishing and maintaining the 

functions of the Office in regional offices of the Bureau located near military bases, military treatment facilities, or 

other similar military facilities. 

(B) AGREEMENTS.—The Director is authorized to enter 

into memoranda of understanding and similar agreements 

with the Department of Defense, including any branch or 

agency as authorized by the department, in order to carry 

out the business of the Office of Service Member Affairs. 


sroberts on DSKD5P82C1PROD with HEARING
608 

(3) DEFINITION.—As used in this subsection, the term ‘‘service member’’ means any member of the United States Armed 

Forces and any member of the National Guard or Reserves. 

(f) TIMING.—The Office of Fair Lending and Equal Opportunity, the Office of Financial Education, and the Office of Service 

Member Affairs shall each be established not later than 1 year after 

the designated transfer date. 

(g) OFFICE OF FINANCIAL PROTECTION FOR OLDER AMERICANS.— 

(1) ESTABLISHMENT.—Before the end of the 180-day period 

beginning on the designated transfer date, the Director shall establish the Office of Financial Protection for Older Americans, 

the functions of which shall include activities designed to facilitate the financial literacy of individuals who have attained the 

age of 62 years or more (in this subsection, referred to as ‘‘seniors’’) on protection from unfair, deceptive, and abusive practices and on current and future financial choices, including 

through the dissemination of materials to seniors on such topics. 

(2) ASSISTANT DIRECTOR.—The Office of Financial Protection for Older Americans (in this subsection referred to as the 

‘‘Office’’) shall be headed by an assistant director. 

(3) DUTIES.—The Office shall— 

(A) develop goals for programs that provide seniors financial literacy and counseling, including programs that— 

(i) help seniors recognize warning signs of unfair, 

deceptive, or abusive practices, protect themselves from 

such practices; 

(ii) provide one-on-one financial counseling on 

issues including long-term savings and later-life economic security; and 

(iii) provide personal consumer credit advocacy to 

respond to consumer problems caused by unfair, deceptive, or abusive practices; 

(B) monitor certifications or designations of financial 

advisors who advise seniors and alert the Commission and 

State regulators of certifications or designations that are 

identified as unfair, deceptive, or abusive; 

(C) not later than 18 months after the date of the establishment of the Office, submit to Congress and the Commission any legislative and regulatory recommendations on the 

best practices for— 

(i) disseminating information regarding the legitimacy of certifications of financial advisers who advise 

seniors; 

(ii) methods in which a senior can identify the financial advisor most appropriate for the senior’s needs; 

and 

(iii) methods in which a senior can verify a financial advisor’s credentials; 

(D) conduct research to identify best practices and effective methods, tools, technology and strategies to educate 

and counsel seniors about personal finance management 

with a focus on— 


sroberts on DSKD5P82C1PROD with HEARING
609 

(i) protecting themselves from unfair, deceptive, 

and abusive practices; 

(ii) long-term savings; and 

(iii) planning for retirement and long-term care; 

(E) coordinate consumer protection efforts of seniors 

with other Federal agencies and State regulators, as appropriate, to promote consistent, effective, and efficient enforcement; and 

(F) work with community organizations, non-profit organizations, and other entities that are involved with educating or assisting seniors (including the National Education and Resource Center on Women and Retirement 

Planning). 

SEC. 1014. CONSUMER ADVISORY BOARD. 

(a) ESTABLISHMENT REQUIRED.—The Director shall establish a 

Consumer Advisory Board to advise and consult with the Bureau in 

the exercise of its functions under the Federal consumer financial 

laws, and to provide information on emerging practices in the consumer financial products or services industry, including regional 

trends, concerns, and other relevant information. 

(b) MEMBERSHIP.—In appointing the members of the Consumer 

Advisory Board, the Director shall seek to assemble experts in consumer protection, financial services, community development, fair 

lending and civil rights, and consumer financial products or services and representatives of depository institutions that primarily 

serve underserved communities, and representatives of communities 

that have been significantly impacted by higher-priced mortgage 

loans, and seek representation of the interests of covered persons 

and consumers, without regard to party affiliation. Not fewer than 

6 members shall be appointed upon the recommendation of the regional Federal Reserve Bank Presidents, on a rotating basis. 

(c) MEETINGS.—The Consumer Advisory Board shall meet from 

time to time at the call of the Director, but, at a minimum, shall 

meet at least twice in each year. 

(d) COMPENSATION AND TRAVEL EXPENSES.—Members of the 

Consumer Advisory Board who are not full-time employees of the 

United States shall— 

(1) be entitled to receive compensation at a rate fixed by the 

Director while attending meetings of the Consumer Advisory 

Board, including travel time; and 

(2) be allowed travel expenses, including transportation 

and subsistence, while away from their homes or regular places 

of business. 

SEC. 1015. COORDINATION. 

The Bureau shall coordinate with the Commission, the Commodity Futures Trading Commission, the Federal Trade Commission, and other Federal agencies and State regulators, as appropriate, to promote consistent regulatory treatment of consumer financial and investment products and services. 

SEC. 1016. APPEARANCES BEFORE AND REPORTS TO CONGRESS. 

(a) APPEARANCES BEFORE CONGRESS.—The Director of the Bureau shall appear before the Committee on Banking, Housing, and 

Urban Affairs of the Senate and the Committee on Financial Services and the Committee on Energy and Commerce of the House of 


sroberts on DSKD5P82C1PROD with HEARING
610 

Representatives at semi-annual hearings regarding the reports required under subsection (b). 

(b) REPORTS REQUIRED.—The Bureau shall, concurrent with 

each semi-annual hearing referred to in subsection (a), prepare and 

submit to the President and to the Committee on Banking, Housing, 

and Urban Affairs of the Senate and the Committee on Financial 

Services and the Committee on Energy and Commerce of the House 

of Representatives, a report, beginning with the session following the 

designated transfer date. The Bureau may also submit such report 

to the Committee on Commerce, Science, and Transportation of the 

Senate. 

(c) CONTENTS.—The reports required by subsection (b) shall include— 

(1) a discussion of the significant problems faced by consumers in shopping for or obtaining consumer financial products or services; 

(2) a justification of the budget request of the previous year; 

(3) a list of the significant rules and orders adopted by the 

Bureau, as well as other significant initiatives conducted by the 

Bureau, during the preceding year and the plan of the Bureau 

for rules, orders, or other initiatives to be undertaken during 

the upcoming period; 

(4) an analysis of complaints about consumer financial 

products or services that the Bureau has received and collected 

in its central database on complaints during the preceding year; 

(5) a list, with a brief statement of the issues, of the public 

supervisory and enforcement actions to which the Bureau was 

a party during the preceding year; 

(6) the actions taken regarding rules, orders, and supervisory actions with respect to covered persons which are not 

credit unions or depository institutions; 

(7) an assessment of significant actions by State attorneys 

general or State regulators relating to Federal consumer financial law; 

(8) an analysis of the efforts of the Bureau to fulfill the fair 

lending mission of the Bureau; and 

(9) an analysis of the efforts of the Bureau to increase workforce and contracting diversity consistent with the procedures 

established by the Office of Minority and Women Inclusion. 

SEC. 1017. FUNDING; PENALTIES AND FINES. 

(a) TRANSFER OF FUNDS FROM BOARD OF GOVERNORS.— 

(1) IN GENERAL.—Each year (or quarter of such year), beginning on the designated transfer date, and each quarter 

thereafter, the Board of Governors shall transfer to the Bureau 

from the combined earnings of the Federal Reserve System, the 

amount determined by the Director to be reasonably necessary 

to carry out the authorities of the Bureau under Federal consumer financial law, taking into account such other sums made 

available to the Bureau from the preceding year (or quarter of 

such year). 

(2) FUNDING CAP.— 

(A) IN GENERAL.—Notwithstanding paragraph (1), and 

in accordance with this paragraph, the amount that shall 

be transferred to the Bureau in each fiscal year shall not 

exceed a fixed percentage of the total operating expenses of 


sroberts on DSKD5P82C1PROD with HEARING
611 

the Federal Reserve System, as reported in the Annual Report, 2009, of the Board of Governors, equal to— 

(i) 10 percent of such expenses in fiscal year 2011; 

(ii) 11 percent of such expenses in fiscal year 2012; 

and 

(iii) 12 percent of such expenses in fiscal year 2013, 

and in each year thereafter. 

(B) ADJUSTMENT OF AMOUNT.—The dollar amount referred to in subparagraph (A)(iii) shall be adjusted annually, using the percent increase, if any, in the employment 

cost index for total compensation for State and local government workers published by the Federal Government, or 

the successor index thereto, for the 12-month period ending 

on September 30 of the year preceding the transfer. 

(C) REVIEWABILITY.—Notwithstanding any other provision in this title, the funds derived from the Federal Reserve System pursuant to this subsection shall not be subject to review by the Committees on Appropriations of the 

House of Representatives and the Senate. 

(3) TRANSITION PERIOD.—Beginning on the date of enactment of this Act and until the designated transfer date, the 

Board of Governors shall transfer to the Bureau the amount estimated by the Secretary needed to carry out the authorities 

granted to the Bureau under Federal consumer financial law, 

from the date of enactment of this Act until the designated 

transfer date. 

(4) BUDGET AND FINANCIAL MANAGEMENT.— (A) FINANCIAL OPERATING PLANS AND FORECASTS.—The 

Director shall provide to the Director of the Office of Management and Budget copies of the financial operating plans 

and forecasts of the Director, as prepared by the Director 

in the ordinary course of the operations of the Bureau, and 

copies of the quarterly reports of the financial condition 

and results of operations of the Bureau, as prepared by the 

Director in the ordinary course of the operations of the Bureau. 

(B) FINANCIAL STATEMENTS.—The Bureau shall prepare annually a statement of— 

(i) assets and liabilities and surplus or deficit; 

(ii) income and expenses; and 

(iii) sources and application of funds. 

(C) FINANCIAL MANAGEMENT SYSTEMS.—The Bureau 

shall implement and maintain financial management systems that comply substantially with Federal financial management systems requirements and applicable Federal accounting standards. 

(D) ASSERTION OF INTERNAL CONTROLS.—The Director 

shall provide to the Comptroller General of the United 

States an assertion as to the effectiveness of the internal 

controls that apply to financial reporting by the Bureau, 

using the standards established in section 3512(c) of title 

31, United States Code. 

(E) RULE OF CONSTRUCTION.—This subsection may not 

be construed as implying any obligation on the part of the 

Director to consult with or obtain the consent or approval 


sroberts on DSKD5P82C1PROD with HEARING
612 

of the Director of the Office of Management and Budget 

with respect to any report, plan, forecast, or other information referred to in subparagraph (A) or any jurisdiction or 

oversight over the affairs or operations of the Bureau. 

(F) FINANCIAL STATEMENTS.—The financial statements 

of the Bureau shall not be consolidated with the financial 

statements of either the Board of Governors or the Federal 

Reserve System. 

(5) AUDIT OF THE BUREAU.— (A) IN GENERAL.—The Comptroller General shall annually audit the financial transactions of the Bureau in accordance with the United States generally accepted government auditing standards, as may be prescribed by the 

Comptroller General of the United States. The audit shall 

be conducted at the place or places where accounts of the 

Bureau are normally kept. The representatives of the Government Accountability Office shall have access to the personnel and to all books, accounts, documents, papers, 

records (including electronic records), reports, files, and all 

other papers, automated data, things, or property belonging 

to or under the control of or used or employed by the Bureau pertaining to its financial transactions and necessary 

to facilitate the audit, and such representatives shall be afforded full facilities for verifying transactions with the balances or securities held by depositories, fiscal agents, and 

custodians. All such books, accounts, documents, records, 

reports, files, papers, and property of the Bureau shall remain in possession and custody of the Bureau. The Comptroller General may obtain and duplicate any such books, 

accounts, documents, records, working papers, automated 

data and files, or other information relevant to such audit 

without cost to the Comptroller General, and the right of 

access of the Comptroller General to such information shall 

be enforceable pursuant to section 716(c) of title 31, United 

States Code. 

(B) REPORT.—The Comptroller General shall submit to 

the Congress a report of each annual audit conducted 

under this subsection. The report to the Congress shall set 

forth the scope of the audit and shall include the statement 

of assets and liabilities and surplus or deficit, the statement of income and expenses, the statement of sources and 

application of funds, and such comments and information 

as may be deemed necessary to inform Congress of the financial operations and condition of the Bureau, together 

with such recommendations with respect thereto as the 

Comptroller General may deem advisable. A copy of each 

report shall be furnished to the President and to the Bureau at the time submitted to the Congress. 

(C) ASSISTANCE AND COSTS.—For the purpose of conducting an audit under this subsection, the Comptroller 

General may, in the discretion of the Comptroller General, 

employ by contract, without regard to section 3709 of the 

Revised Statutes of the United States (41 U.S.C. 5), professional services of firms and organizations of certified public 

accountants for temporary periods or for special purposes. 


sroberts on DSKD5P82C1PROD with HEARING
613 

Upon the request of the Comptroller General, the Director 

of the Bureau shall transfer to the Government Accountability Office from funds available, the amount requested 

by the Comptroller General to cover the full costs of any 

audit and report conducted by the Comptroller General. 

The Comptroller General shall credit funds transferred to 

the account established for salaries and expenses of the 

Government Accountability Office, and such amount shall 

be available upon receipt and without fiscal year limitation 

to cover the full costs of the audit and report. 

(b) CONSUMER FINANCIAL PROTECTION FUND.— 

(1) SEPARATE FUND IN FEDERAL RESERVE ESTABLISHED.— 

There is established in the Federal Reserve a separate fund, to 

be known as the ‘‘Bureau of Consumer Financial Protection 

Fund’’ (referred to in this section as the ‘‘Bureau Fund’’). The 

Bureau Fund shall be maintained and established at a Federal 

reserve bank, in accordance with such requirements as the 

Board of Governors may impose. 

(2) FUND RECEIPTS.—All amounts transferred to the Bureau under subsection (a) shall be deposited into the Bureau 

Fund. 

(3) INVESTMENT AUTHORITY.— 

(A) AMOUNTS IN BUREAU FUND MAY BE INVESTED.—The 

Bureau may request the Board of Governors to direct the 

investment of the portion of the Bureau Fund that is not, 

in the judgment of the Bureau, required to meet the current 

needs of the Bureau. 

(B) ELIGIBLE INVESTMENTS.—Investments authorized 

by this paragraph shall be made in obligations of the 

United States or obligations that are guaranteed as to principal and interest by the United States, with maturities 

suitable to the needs of the Bureau Fund, as determined by 

the Bureau. 

(C) INTEREST AND PROCEEDS CREDITED.—The interest 

on, and the proceeds from the sale or redemption of, any 

obligations held in the Bureau Fund shall be credited to 

the Bureau Fund. 

(c) USE OF FUNDS.— 

(1) IN GENERAL.—Funds obtained by, transferred to, or 

credited to the Bureau Fund shall be immediately available to 

the Bureau and under the control of the Director, and shall remain available until expended, to pay the expenses of the Bureau in carrying out its duties and responsibilities. The compensation of the Director and other employees of the Bureau 

and all other expenses thereof may be paid from, obtained by, 

transferred to, or credited to the Bureau Fund under this section. 

(2) FUNDS THAT ARE NOT GOVERNMENT FUNDS.—Funds obtained by or transferred to the Bureau Fund shall not be construed to be Government funds or appropriated monies. 

(3) AMOUNTS NOT SUBJECT TO APPORTIONMENT.—Notwithstanding any other provision of law, amounts in the Bureau 

Fund and in the Civil Penalty Fund established under subsection (d) shall not be subject to apportionment for purposes of 


sroberts on DSKD5P82C1PROD with HEARING
614 

chapter 15 of title 31, United States Code, or under any other 

authority. 

(d) PENALTIES AND FINES.— (1) ESTABLISHMENT OF VICTIMS RELIEF FUND.—There is established in the Federal Reserve a separate fund, to be known 

as the ‘‘Consumer Financial Civil Penalty Fund’’ (referred to in 

this section as the ‘‘Civil Penalty Fund’’). The Civil Penalty 

Fund shall be maintained and established at a Federal reserve 

bank, in accordance with such requirements as the Board of 

Governors may impose. If the Bureau obtains a civil penalty 

against any person in any judicial or administrative action 

under Federal consumer financial laws, the Bureau shall deposit into the Civil Penalty Fund, the amount of the penalty collected. 

(2) PAYMENT TO VICTIMS.—Amounts in the Civil Penalty 

Fund shall be available to the Bureau, without fiscal year limitation, for payments to the victims of activities for which civil 

penalties have been imposed under the Federal consumer financial laws. To the extent that such victims cannot be located or 

such payments are otherwise not practicable, the Bureau may 

use such funds for the purpose of consumer education and financial literacy programs. 

(e) AUTHORIZATION OF APPROPRIATIONS; ANNUAL REPORT.— (1) DETERMINATION REGARDING NEED FOR APPROPRIATED

FUNDS.— (A) IN GENERAL.—The Director is authorized to determine that sums available to the Bureau under this section 

will not be sufficient to carry out the authorities of the Bureau under Federal consumer financial law for the upcoming year. 

(B) REPORT REQUIRED.—When making a determination 

under subparagraph (A), the Director shall prepare a report 

regarding the funding of the Bureau, including the assets 

and liabilities of the Bureau, and the extent to which the 

funding needs of the Bureau are anticipated to exceed the 

level of the amount set forth in subsection (a)(2). The Director shall submit the report to the President and to the Committee on Appropriations of the Senate and the Committee 

on Appropriations of the House of Representatives. 

(2) AUTHORIZATION OF APPROPRIATIONS.—If the Director 

makes the determination and submits the report pursuant to 

paragraph (1), there are hereby authorized to be appropriated 

to the Bureau, for the purposes of carrying out the authorities 

granted in Federal consumer financial law, $200,000,000 for 

each of fiscal years 2010, 2011, 2012, 2013, and 2014. 

(3) APPORTIONMENT.—Notwithstanding any other provision 

of law, the amounts in paragraph (2) shall be subject to apportionment under section 1517 of title 31, United States Code, 

and restrictions that generally apply to the use of appropriated 

funds in title 31, United States Code, and other laws. 

(4) ANNUAL REPORT.—The Director shall prepare and submit a report, on an annual basis, to the Committee on Appropriations of the Senate and the Committee on Appropriations of 

the House of Representatives regarding the financial operating 

plans and forecasts of the Director, the financial condition and 


sroberts on DSKD5P82C1PROD with HEARING
615 

results of operations of the Bureau, and the sources and application of funds of the Bureau, including any funds appropriated in accordance with this subsection. 

SEC. 1018. EFFECTIVE DATE. 

This subtitle shall become effective on the date of enactment of 

this Act. 

Subtitle B—General Powers of the Bureau 

SEC. 1021. PURPOSE, OBJECTIVES, AND FUNCTIONS. 

(a) PURPOSE.—The Bureau shall seek to implement and, where 

applicable, enforce Federal consumer financial law consistently for 

the purpose of ensuring that all consumers have access to markets 

for consumer financial products and services and that markets for 

consumer financial products and services are fair, transparent, and 

competitive. 

(b) OBJECTIVES.—The Bureau is authorized to exercise its authorities under Federal consumer financial law for the purposes of 

ensuring that, with respect to consumer financial products and services— 

(1) consumers are provided with timely and understandable 

information to make responsible decisions about financial 

transactions; 

(2) consumers are protected from unfair, deceptive, or abusive acts and practices and from discrimination; 

(3) outdated, unnecessary, or unduly burdensome regulations are regularly identified and addressed in order to reduce 

unwarranted regulatory burdens; 

(4) Federal consumer financial law is enforced consistently, 

without regard to the status of a person as a depository institution, in order to promote fair competition; and 

(5) markets for consumer financial products and services 

operate transparently and efficiently to facilitate access and innovation. 

(c) FUNCTIONS.—The primary functions of the Bureau are— 

(1) conducting financial education programs; 

(2) collecting, investigating, and responding to consumer 

complaints; 

(3) collecting, researching, monitoring, and publishing information relevant to the functioning of markets for consumer 

financial products and services to identify risks to consumers 

and the proper functioning of such markets; 

(4) subject to sections 1024 through 1026, supervising covered persons for compliance with Federal consumer financial 

law, and taking appropriate enforcement action to address violations of Federal consumer financial law; 

(5) issuing rules, orders, and guidance implementing Federal consumer financial law; and 

(6) performing such support activities as may be necessary 

or useful to facilitate the other functions of the Bureau. 

SEC. 1022. RULEMAKING AUTHORITY. 

(a) IN GENERAL.—The Bureau is authorized to exercise its authorities under Federal consumer financial law to administer, enforce, and otherwise implement the provisions of Federal consumer 

financial law. 


sroberts on DSKD5P82C1PROD with HEARING
616 

(b) RULEMAKING, ORDERS, AND GUIDANCE.— (1) GENERAL AUTHORITY.—The Director may prescribe rules 

and issue orders and guidance, as may be necessary or appropriate to enable the Bureau to administer and carry out the 

purposes and objectives of the Federal consumer financial laws, 

and to prevent evasions thereof. 

(2) STANDARDS FOR RULEMAKING.—In prescribing a rule 

under the Federal consumer financial laws— 

(A) the Bureau shall consider— 

(i) the potential benefits and costs to consumers 

and covered persons, including the potential reduction 

of access by consumers to consumer financial products 

or services resulting from such rule; and 

(ii) the impact of proposed rules on covered persons, as described in section 1026, and the impact on 

consumers in rural areas; 

(B) the Bureau shall consult with the appropriate prudential regulators or other Federal agencies prior to proposing a rule and during the comment process regarding 

consistency with prudential, market, or systemic objectives 

administered by such agencies; and 

(C) if, during the consultation process described in subparagraph (B), a prudential regulator provides the Bureau 

with a written objection to the proposed rule of the Bureau 

or a portion thereof, the Bureau shall include in the adopting release a description of the objection and the basis for 

the Bureau decision, if any, regarding such objection, except that nothing in this clause shall be construed as altering or limiting the procedures under section 1023 that may 

apply to any rule prescribed by the Bureau. 

(3) EXEMPTIONS.— (A) IN GENERAL.—The Bureau, by rule, may conditionally or unconditionally exempt any class of covered persons, service providers, or consumer financial products or 

services, from any provision of this title, or from any rule 

issued under this title, as the Bureau determines necessary 

or appropriate to carry out the purposes and objectives of 

this title, taking into consideration the factors in subparagraph (B). 

(B) FACTORS.—In issuing an exemption, as permitted 

under subparagraph (A), the Bureau shall, as appropriate, 

take into consideration— 

(i) the total assets of the class of covered persons; 

(ii) the volume of transactions involving consumer 

financial products or services in which the class of covered persons engages; and 

(iii) existing provisions of law which are applicable 

to the consumer financial product or service and the extent to which such provisions provide consumers with 

adequate protections. 

(4) EXCLUSIVE RULEMAKING AUTHORITY.— 

(A) IN GENERAL.—Notwithstanding any other provisions of Federal law and except as provided in section 

1061(b)(5), to the extent that a provision of Federal consumer financial law authorizes the Bureau and another 


sroberts on DSKD5P82C1PROD with HEARING
617 

Federal agency to issue regulations under that provision of 

law for purposes of assuring compliance with Federal consumer financial law and any regulations thereunder, the 

Bureau shall have the exclusive authority to prescribe rules 

subject to those provisions of law. 

(B) DEFERENCE.—Notwithstanding any power granted 

to any Federal agency or to the Council under this title, 

and subject to section 1061(b)(5)(E), the deference that a 

court affords to the Bureau with respect to a determination 

by the Bureau regarding the meaning or interpretation of 

any provision of a Federal consumer financial law shall be 

applied as if the Bureau were the only agency authorized 

to apply, enforce, interpret, or administer the provisions of 

such Federal consumer financial law. 

(c) MONITORING.— (1) IN GENERAL.—In order to support its rulemaking and 

other functions, the Bureau shall monitor for risks to consumers 

in the offering or provision of consumer financial products or 

services, including developments in markets for such products 

or services. 

(2) CONSIDERATIONS.—In allocating its resources to perform the monitoring required by this section, the Bureau may 

consider, among other factors— 

(A) likely risks and costs to consumers associated with 

buying or using a type of consumer financial product or 

service; 

(B) understanding by consumers of the risks of a type 

of consumer financial product or service; 

(C) the legal protections applicable to the offering or 

provision of a consumer financial product or service, including the extent to which the law is likely to adequately 

protect consumers; 

(D) rates of growth in the offering or provision of a consumer financial product or service; 

(E) the extent, if any, to which the risks of a consumer 

financial product or service may disproportionately affect 

traditionally underserved consumers; or 

(F) the types, number, and other pertinent characteristics of covered persons that offer or provide the consumer 

financial product or service. 

(3) SIGNIFICANT FINDINGS.— 

(A) IN GENERAL.—The Bureau shall publish not fewer 

than 1 report of significant findings of its monitoring required by this subsection in each calendar year, beginning 

with the first calendar year that begins at least 1 year after 

the designated transfer date. 

(B) CONFIDENTIAL INFORMATION.—The Bureau may 

make public such information obtained by the Bureau 

under this section as is in the public interest, through aggregated reports or other appropriate formats designed to 

protect confidential information in accordance with paragraphs (4), (6), (8), and (9). 

(4) COLLECTION OF INFORMATION.— 

(A) IN GENERAL.—In conducting any monitoring or assessment required by this section, the Bureau shall have the 


sroberts on DSKD5P82C1PROD with HEARING
618 

authority to gather information from time to time regarding 

the organization, business conduct, markets, and activities 

of covered persons and service providers. 

(B) METHODOLOGY.—In order to gather information described in subparagraph (A), the Bureau may— 

(i) gather and compile information from a variety 

of sources, including examination reports concerning 

covered persons or service providers, consumer complaints, voluntary surveys and voluntary interviews of 

consumers, surveys and interviews with covered persons and service providers, and review of available 

databases; and 

(ii) require covered persons and service providers 

participating in consumer financial services markets to 

file with the Bureau, under oath or otherwise, in such 

form and within such reasonable period of time as the 

Bureau may prescribe by rule or order, annual or special reports, or answers in writing to specific questions, 

furnishing information described in paragraph (4), as 

necessary for the Bureau to fulfill the monitoring, assessment, and reporting responsibilities imposed by 

Congress. 

(C) LIMITATION.—The Bureau may not use its authorities under this paragraph to obtain records from covered 

persons and service providers participating in consumer financial services markets for purposes of gathering or analyzing the personally identifiable financial information of 

consumers. 

(5) LIMITED INFORMATION GATHERING.—In order to assess 

whether a nondepository is a covered person, as defined in section 1002, the Bureau may require such nondepository to file 

with the Bureau, under oath or otherwise, in such form and 

within such reasonable period of time as the Bureau may prescribe by rule or order, annual or special reports, or answers in 

writing to specific questions. 

(6) CONFIDENTIALITY RULES.— (A) RULEMAKING.—The Bureau shall prescribe rules regarding the confidential treatment of information obtained 

from persons in connection with the exercise of its authorities under Federal consumer financial law. 

(B) ACCESS BY THE BUREAU TO REPORTS OF OTHER

REGULATORS.— 

(i) EXAMINATION AND FINANCIAL CONDITION REPORTS.—Upon providing reasonable assurances of confidentiality, the Bureau shall have access to any report 

of examination or financial condition made by a prudential regulator or other Federal agency having jurisdiction over a covered person or service provider, and 

to all revisions made to any such report. 

(ii) PROVISION OF OTHER REPORTS TO THE BU- REAU.—In addition to the reports described in clause 

(i), a prudential regulator or other Federal agency having jurisdiction over a covered person or service provider may, in its discretion, furnish to the Bureau any 

other report or other confidential supervisory informaVerDate Mar 15 2010 04:29 Jul 07, 2010 Jkt 057098 PO 00000 Frm 00622 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
619 

tion concerning any insured depository institution, 

credit union, or other entity examined by such agency 

under authority of any provision of Federal law. 

(C) ACCESS BY OTHER REGULATORS TO REPORTS OF THE

BUREAU.— 

(i) EXAMINATION REPORTS.—Upon providing reasonable assurances of confidentiality, a prudential regulator, a State regulator, or any other Federal agency 

having jurisdiction over a covered person or service 

provider shall have access to any report of examination 

made by the Bureau with respect to such person, and 

to all revisions made to any such report. 

(ii) PROVISION OF OTHER REPORTS TO OTHER REGU- LATORS.—In addition to the reports described in clause 

(i), the Bureau may, in its discretion, furnish to a prudential regulator or other agency having jurisdiction 

over a covered person or service provider any other report or other confidential supervisory information concerning such person examined by the Bureau under the 

authority of any other provision of Federal law. 

(7) REGISTRATION.— (A) IN GENERAL.—The Bureau may prescribe rules regarding registration requirements applicable to a covered 

person, other than an insured depository institution, insured credit union, or related person. 

(B) REGISTRATION INFORMATION.—Subject to rules prescribed by the Bureau, the Bureau may publicly disclose 

registration information to facilitate the ability of consumers to identify covered persons that are registered with 

the Bureau. 

(C) CONSULTATION WITH STATE AGENCIES.—In developing and implementing registration requirements under 

this paragraph, the Bureau shall consult with State agencies regarding requirements or systems (including coordinated or combined systems for registration), where appropriate. 

(8) PRIVACY CONSIDERATIONS.—In collecting information 

from any person, publicly releasing information held by the Bureau, or requiring covered persons to publicly report information, the Bureau shall take steps to ensure that proprietary, personal, or confidential consumer information that is protected 

from public disclosure under section 552(b) or 552a of title 5, 

United States Code, or any other provision of law, is not made 

public under this title. 

(9) CONSUMER PRIVACY.— 

(A) IN GENERAL.—The Bureau may not obtain from a 

covered person or service provider any personally identifiable financial information about a consumer from the financial records of the covered person or service provider, 

except— 

(i) if the financial records are reasonably described 

in a request by the Bureau and the consumer provides 

written permission for the disclosure of such information by the covered person or service provider to the Bureau; or 


sroberts on DSKD5P82C1PROD with HEARING
620 

(ii) as may be specifically permitted or required 

under other applicable provisions of law and in accordance with the Right to Financial Privacy Act of 1978 

(12 U.S.C. 3401 et seq.). 

(B) TREATMENT OF COVERED PERSON OR SERVICE PRO- VIDER.—With respect to the application of any provision of 

the Right to Financial Privacy Act of 1978, to a disclosure 

by a covered person or service provider subject to this subsection, the covered person or service provider shall be 

treated as if it were a ‘‘financial institution’’, as defined in 

section 1101 of that Act (12 U.S.C. 3401). 

(d) ASSESSMENT OF SIGNIFICANT RULES.— (1) IN GENERAL.—The Bureau shall conduct an assessment 

of each significant rule or order adopted by the Bureau under 

Federal consumer financial law. The assessment shall address, 

among other relevant factors, the effectiveness of the rule or 

order in meeting the purposes and objectives of this title and the 

specific goals stated by the Bureau. The assessment shall reflect 

available evidence and any data that the Bureau reasonably 

may collect. 

(2) REPORTS.—The Bureau shall publish a report of its assessment under this subsection not later than 5 years after the 

effective date of the subject rule or order. 

(3) PUBLIC COMMENT REQUIRED.—Before publishing a report of its assessment, the Bureau shall invite public comment 

on recommendations for modifying, expanding, or eliminating 

the newly adopted significant rule or order. 

SEC. 1023. REVIEW OF BUREAU REGULATIONS. 

(a) REVIEW OF BUREAU REGULATIONS.—On the petition of a 

member agency of the Council, the Council may set aside a final 

regulation prescribed by the Bureau, or any provision thereof, if the 

Council decides, in accordance with subsection (c), that the regulation or provision would put the safety and soundness of the United 

States banking system or the stability of the financial system of the 

United States at risk. 

(b) PETITION.— (1) PROCEDURE.—An agency represented by a member of 

the Council may petition the Council, in writing, and in accordance with rules prescribed pursuant to subsection (f), to stay the 

effectiveness of, or set aside, a regulation if the member agency 

filing the petition— 

(A) has in good faith attempted to work with the Bureau to resolve concerns regarding the effect of the rule on 

the safety and soundness of the United States banking system or the stability of the financial system of the United 

States; and 

(B) files the petition with the Council not later than 10 

days after the date on which the regulation has been published in the Federal Register. 

(2) PUBLICATION.—Any petition filed with the Council 

under this section shall be published in the Federal Register 

and transmitted contemporaneously with filing to the Committee on Banking, Housing, and Urban Affairs of the Senate 

and the Committee on Financial Services of the House of Representatives. 


sroberts on DSKD5P82C1PROD with HEARING
621 

(c) STAYS AND SET ASIDES.— 

(1) STAY.— 

(A) IN GENERAL.—Upon the request of any member 

agency, the Chairperson of the Council may stay the effectiveness of a regulation for the purpose of allowing appropriate consideration of the petition by the Council. 

(B) EXPIRATION.—A stay issued under this paragraph 

shall expire on the earlier of— 

(i) 90 days after the date of filing of the petition 

under subsection (b); or 

(ii) the date on which the Council makes a decision 

under paragraph (3). 

(2) NO ADVERSE INFERENCE.—After the expiration of any 

stay imposed under this section, no inference shall be drawn regarding the validity or enforceability of a regulation which was 

the subject of the petition. 

(3) VOTE.— 

(A) IN GENERAL.—The decision to issue a stay of, or set 

aside, any regulation under this section shall be made only 

with the affirmative vote in accordance with subparagraph 

(B) of 2⁄3 of the members of the Council then serving. 

(B) AUTHORIZATION TO VOTE.—A member of the Council may vote to stay the effectiveness of, or set aside, a final 

regulation prescribed by the Bureau only if the agency or 

department represented by that member has— 

(i) considered any relevant information provided 

by the agency submitting the petition and by the Bureau; and 

(ii) made an official determination, at a public 

meeting where applicable, that the regulation which is 

the subject of the petition would put the safety and 

soundness of the United States banking system or the 

stability of the financial system of the United States at 

risk. 

(4) DECISIONS TO SET ASIDE.— 

(A) EFFECT OF DECISION.—A decision by the Council to 

set aside a regulation prescribed by the Bureau, or provision thereof, shall render such regulation, or provision 

thereof, unenforceable. 

(B) TIMELY ACTION REQUIRED.—The Council may not 

issue a decision to set aside a regulation, or provision thereof, which is the subject of a petition under this section after 

the expiration of the later of— 

(i) 45 days following the date of filing of the petition, unless a stay is issued under paragraph (1); or 

(ii) the expiration of a stay issued by the Council 

under this section. 

(C) SEPARATE AUTHORITY.—The issuance of a stay 

under this section does not affect the authority of the Council to set aside a regulation. 

(5) DISMISSAL DUE TO INACTION.—A petition under this section shall be deemed dismissed if the Council has not issued a 

decision to set aside a regulation, or provision thereof, within 

the period for timely action under paragraph (4)(B). 


sroberts on DSKD5P82C1PROD with HEARING
622 

(6) PUBLICATION OF DECISION.—Any decision under this 

subsection to issue a stay of, or set aside, a regulation or provision thereof shall be published by the Council in the Federal 

Register as soon as practicable after the decision is made, with 

an explanation of the reasons for the decision. 

(7) RULEMAKING PROCEDURES INAPPLICABLE.—The notice 

and comment procedures under section 553 of title 5, United 

States Code, shall not apply to any decision under this section 

of the Council to issue a stay of, or set aside, a regulation. 

(8) JUDICIAL REVIEW OF DECISIONS BY THE COUNCIL.—A decision by the Council to set aside a regulation prescribed by the 

Bureau, or provision thereof, shall be subject to review under 

chapter 7 of title 5, United States Code. 

(d) APPLICATION OF OTHER LAW.—Nothing in this section shall 

be construed as altering, limiting, or restricting the application of 

any other provision of law, except as otherwise specifically provided 

in this section, including chapter 5 and chapter 7 of title 5, United 

States Code, to a regulation which is the subject of a petition filed 

under this section. 

(e) SAVINGS CLAUSE.—Nothing in this section shall be construed as limiting or restricting the Bureau from engaging in a rulemaking in accordance with applicable law. 

(f) IMPLEMENTING RULES.—The Council shall prescribe procedural rules to implement this section. 

SEC. 1024. SUPERVISION OF NONDEPOSITORY COVERED PERSONS. 

(a) SCOPE OF COVERAGE.— 

(1) APPLICABILITY.—Notwithstanding any other provision of 

this title, and except as provided in paragraph (3), this section 

shall apply to any covered person who— 

(A) offers or provides origination, brokerage, or servicing of loans secured by real estate for use by consumers 

primarily for personal, family, or household purposes, or 

loan modification or foreclosure relief services in connection 

with such loans; 

(B) is a larger participant of a market for other consumer financial products or services, as defined by rule in 

accordance with paragraph (2); 

(C) the Bureau has reasonable cause to determine, by 

order, after notice to the covered person and a reasonable 

opportunity for such covered person to respond, based on 

complaints collected through the system under section 

1013(b)(3) or information from other sources, that such covered person is engaging, or has engaged, in conduct that 

poses risks to consumers with regard to the offering or provision of consumer financial products or services; 

(D) offers or provides to a consumer any private education loan, as defined in section 140 of the Truth in Lending Act (15 U.S.C. 1650), notwithstanding section 

1027(a)(2)(A) and subject to section 1027(a)(2)(C); or 

(E) offers or provides to a consumer a payday loan. 

(2) RULEMAKING TO DEFINE COVERED PERSONS SUBJECT TO

THIS SECTION.—The Bureau shall consult with the Federal 

Trade Commission prior to issuing a rule, in accordance with 

paragraph (1)(B), to define covered persons subject to this secVerDate Mar 15 2010 04:29 Jul 07, 2010 Jkt 057098 PO 00000 Frm 00626 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
623 

tion. The Bureau shall issue its initial rule not later than 1 

year after the designated transfer date. 

(3) RULES OF CONSTRUCTION.— (A) CERTAIN PERSONS EXCLUDED.—This section shall 

not apply to persons described in section 1025(a) or 

1026(a). 

(B) ACTIVITY LEVELS.—For purposes of computing activity levels under paragraph (1) or rules issued thereunder, 

activities of affiliated companies (other than insured depository institutions or insured credit unions) shall be aggregated. 

(b) SUPERVISION.— (1) IN GENERAL.—The Bureau shall require reports and 

conduct examinations on a periodic basis of persons described 

in subsection (a)(1) for purposes of— 

(A) assessing compliance with the requirements of Federal consumer financial law; 

(B) obtaining information about the activities and compliance systems or procedures of such person; and 

(C) detecting and assessing risks to consumers and to 

markets for consumer financial products and services. 

(2) RISK-BASED SUPERVISION PROGRAM.—The Bureau shall 

exercise its authority under paragraph (1) in a manner designed to ensure that such exercise, with respect to persons described in subsection (a)(1), is based on the assessment by the 

Bureau of the risks posed to consumers in the relevant product 

markets and geographic markets, and taking into consideration, as applicable— 

(A) the asset size of the covered person; 

(B) the volume of transactions involving consumer financial products or services in which the covered person 

engages; 

(C) the risks to consumers created by the provision of 

such consumer financial products or services; 

(D) the extent to which such institutions are subject to 

oversight by State authorities for consumer protection; and 

(E) any other factors that the Bureau determines to be 

relevant to a class of covered persons. 

(3) COORDINATION.—To minimize regulatory burden, the 

Bureau shall coordinate its supervisory activities with the supervisory activities conducted by prudential regulators and the 

State bank regulatory authorities, including establishing their 

respective schedules for examining persons described in subsection (a)(1) and requirements regarding reports to be submitted by such persons. 

(4) USE OF EXISTING REPORTS.—The Bureau shall, to the 

fullest extent possible, use— 

(A) reports pertaining to persons described in subsection (a)(1) that have been provided or required to have 

been provided to a Federal or State agency; and 

(B) information that has been reported publicly. 

(5) PRESERVATION OF AUTHORITY.—Nothing in this title 

may be construed as limiting the authority of the Director to require reports from persons described in subsection (a)(1), as permitted under paragraph (1), regarding information owned or 


sroberts on DSKD5P82C1PROD with HEARING
624 

under the control of such person, regardless of whether such information is maintained, stored, or processed by another person. 

(6) REPORTS OF TAX LAW NONCOMPLIANCE.—The Bureau 

shall provide the Commissioner of Internal Revenue with any 

report of examination or related information identifying possible tax law noncompliance. 

(7) REGISTRATION, RECORDKEEPING AND OTHER REQUIREMENTS FOR CERTAIN PERSONS.— 

(A) IN GENERAL.—The Bureau shall prescribe rules to 

facilitate supervision of persons described in subsection 

(a)(1) and assessment and detection of risks to consumers. 

(B) RECORDKEEPING.—The Bureau may require a person described in subsection (a)(1), to generate, provide, or 

retain records for the purposes of facilitating supervision of 

such persons and assessing and detecting risks to consumers. 

(C) REQUIREMENTS CONCERNING OBLIGATIONS.—The 

Bureau may prescribe rules regarding a person described 

in subsection (a)(1), to ensure that such persons are legitimate entities and are able to perform their obligations to 

consumers. Such requirements may include background 

checks for principals, officers, directors, or key personnel 

and bonding or other appropriate financial requirements. 

(D) CONSULTATION WITH STATE AGENCIES.—In developing and implementing requirements under this paragraph, the Bureau shall consult with State agencies 

regarding requirements or systems (including coordinated 

or combined systems for registration), where appropriate. 

(c) ENFORCEMENT AUTHORITY.— 

(1) THE BUREAU TO HAVE ENFORCEMENT AUTHORITY.—Except as provided in paragraph (3) and section 1061, with respect to any person described in subsection (a)(1), to the extent 

that Federal law authorizes the Bureau and another Federal 

agency to enforce Federal consumer financial law, the Bureau 

shall have exclusive authority to enforce that Federal consumer 

financial law. 

(2) REFERRAL.—Any Federal agency authorized to enforce a 

Federal consumer financial law described in paragraph (1) may 

recommend in writing to the Bureau that the Bureau initiate an 

enforcement proceeding, as the Bureau is authorized by that 

Federal law or by this title. 

(3) COORDINATION WITH THE FEDERAL TRADE COMMISSION.— 

(A) IN GENERAL.—The Bureau and the Federal Trade 

Commission shall negotiate an agreement for coordinating 

with respect to enforcement actions by each agency regarding the offering or provision of consumer financial products 

or services by any covered person that is described in subsection (a)(1), or service providers thereto. The agreement 

shall include procedures for notice to the other agency, 

where feasible, prior to initiating a civil action to enforce 

any Federal law regarding the offering or provision of consumer financial products or services. 


sroberts on DSKD5P82C1PROD with HEARING
625 

(B) CIVIL ACTIONS.—Whenever a civil action has been 

filed by, or on behalf of, the Bureau or the Federal Trade 

Commission for any violation of any provision of Federal 

law described in subparagraph (A), or any regulation prescribed under such provision of law— 

(i) the other agency may not, during the pendency 

of that action, institute a civil action under such provision of law against any defendant named in the complaint in such pending action for any violation alleged 

in the complaint; and 

(ii) the Bureau or the Federal Trade Commission 

may intervene as a party in any such action brought 

by the other agency, and, upon intervening— 

(I) be heard on all matters arising in such enforcement action; and 

(II) file petitions for appeal in such actions. 

(C) AGREEMENT TERMS.—The terms of any agreement 

negotiated under subparagraph (A) may modify or supersede the provisions of subparagraph (B). 

(D) DEADLINE.—The agencies shall reach the agreement required under subparagraph (A) not later than 6 

months after the designated transfer date. 

(d) EXCLUSIVE RULEMAKING AND EXAMINATION AUTHORITY.— 

Notwithstanding any other provision of Federal law and except as 

provided in section 1061, to the extent that Federal law authorizes 

the Bureau and another Federal agency to issue regulations or guidance, conduct examinations, or require reports from a person described in subsection (a)(1) under such law for purposes of assuring 

compliance with Federal consumer financial law and any regulations thereunder, the Bureau shall have the exclusive authority to 

prescribe rules, issue guidance, conduct examinations, require reports, or issue exemptions with regard to a person described in subsection (a)(1), subject to those provisions of law. 

(e) SERVICE PROVIDERS.—A service provider to a person described in subsection (a)(1) shall be subject to the authority of the 

Bureau under this section, to the same extent as if such service provider were engaged in a service relationship with a bank, and the 

Bureau were an appropriate Federal banking agency under section 

7(c) of the Bank Service Company Act (12 U.S.C. 1867(c)). In conducting any examination or requiring any report from a service provider subject to this subsection, the Bureau shall coordinate with 

the appropriate prudential regulator, as applicable. 

(f) PRESERVATION OF FARM CREDIT ADMINISTRATION AUTHOR- ITY.—No provision of this title may be construed as modifying, limiting, or otherwise affecting the authority of the Farm Credit Administration. 

SEC. 1025. SUPERVISION OF VERY LARGE BANKS, SAVINGS ASSOCIATIONS, AND CREDIT UNIONS. 

(a) SCOPE OF COVERAGE.—This section shall apply to any covered person that is— 

(1) an insured depository institution with total assets of 

more than $10,000,000,000 and any affiliate thereof; or 

(2) an insured credit union with total assets of more than 

$10,000,000,000 and any affiliate thereof. 

(b) SUPERVISION.— 


sroberts on DSKD5P82C1PROD with HEARING
626 

(1) IN GENERAL.—The Bureau shall have exclusive authority to require reports and conduct examinations on a periodic 

basis of persons described in subsection (a) for purposes of— 

(A) assessing compliance with the requirements of Federal consumer financial laws; 

(B) obtaining information about the activities subject to 

such laws and the associated compliance systems or procedures of such persons; and 

(C) detecting and assessing associated risks to consumers and to markets for consumer financial products 

and services. 

(2) COORDINATION.—To minimize regulatory burden, the 

Bureau shall coordinate its supervisory activities with the supervisory activities conducted by prudential regulators and the 

State bank regulatory authorities, including consultation regarding their respective schedules for examining such persons 

described in subsection (a) and requirements regarding reports 

to be submitted by such persons. 

(3) USE OF EXISTING REPORTS.—The Bureau shall, to the 

fullest extent possible, use— 

(A) reports pertaining to a person described in subsection (a) that have been provided or required to have been 

provided to a Federal or State agency; and 

(B) information that has been reported publicly. 

(4) PRESERVATION OF AUTHORITY.—Nothing in this title 

may be construed as limiting the authority of the Director to require reports from a person described in subsection (a), as permitted under paragraph (1), regarding information owned or 

under the control of such person, regardless of whether such information is maintained, stored, or processed by another person. 

(5) REPORTS OF TAX LAW NONCOMPLIANCE.—The Bureau 

shall provide the Commissioner of Internal Revenue with any 

report of examination or related information identifying possible tax law noncompliance. 

(c) PRIMARY ENFORCEMENT AUTHORITY.— 

(1) THE BUREAU TO HAVE PRIMARY ENFORCEMENT AUTHORITY.—To the extent that the Bureau and another Federal agency 

are authorized to enforce a Federal consumer financial law, the 

Bureau shall have primary authority to enforce that Federal 

consumer financial law with respect to any person described in 

subsection (a). 

(2) REFERRAL.—Any Federal agency, other than the Federal 

Trade Commission, that is authorized to enforce a Federal consumer financial law may recommend, in writing, to the Bureau 

that the Bureau initiate an enforcement proceeding with respect 

to a person described in subsection (a), as the Bureau is authorized to do by that Federal consumer financial law. 

(3) BACKUP ENFORCEMENT AUTHORITY OF OTHER FEDERAL

AGENCY.—If the Bureau does not, before the end of the 120-day 

period beginning on the date on which the Bureau receives a 

recommendation under paragraph (2), initiate an enforcement 

proceeding, the other agency referred to in paragraph (2) may 

initiate an enforcement proceeding, including performing follow 


sroberts on DSKD5P82C1PROD with HEARING
627 

up supervisory and support functions incidental thereto, to assure compliance with such proceeding. 

(d) SERVICE PROVIDERS.—A service provider to a person described in subsection (a) shall be subject to the authority of the Bureau under this section, to the same extent as if the Bureau were an 

appropriate Federal banking agency under section 7(c) of the Bank 

Service Company Act 12 U.S.C. 1867(c). In conducting any examination or requiring any report from a service provider subject to 

this subsection, the Bureau shall coordinate with the appropriate 

prudential regulator. 

(e) SIMULTANEOUS AND COORDINATED SUPERVISORY ACTION.— (1) EXAMINATIONS.—A prudential regulator and the Bureau 

shall, with respect to each insured depository institution, insured credit union, or other covered person described in subsection (a) that is supervised by the prudential regulator and 

the Bureau, respectively— 

(A) coordinate the scheduling of examinations of the insured depository institution, insured credit union, or other 

covered person described in subsection (a); 

(B) conduct simultaneous examinations of each insured 

depository institution or insured credit union, unless such 

institution requests examinations to be conducted separately; 

(C) share each draft report of examination with the 

other agency and permit the receiving agency a reasonable 

opportunity (which shall not be less than a period of 30 

days after the date of receipt) to comment on the draft report before such report is made final; and 

(D) prior to issuing a final report of examination or 

taking supervisory action, take into consideration concerns, 

if any, raised in the comments made by the other agency. 

(2) COORDINATION WITH STATE BANK SUPERVISORS.—The 

Bureau shall pursue arrangements and agreements with State 

bank supervisors to coordinate examinations, consistent with 

paragraph (1). 

(3) AVOIDANCE OF CONFLICT IN SUPERVISION.— (A) REQUEST.—If the proposed supervisory determinations of the Bureau and a prudential regulator (in this section referred to collectively as the ‘‘agencies’’) are conflicting, an insured depository institution, insured credit 

union, or other covered person described in subsection (a) 

may request the agencies to coordinate and present a joint 

statement of coordinated supervisory action. 

(B) JOINT STATEMENT.—The agencies shall provide a 

joint statement under subparagraph (A), not later than 30 

days after the date of receipt of the request of the insured 

depository institution, credit union, or covered person described in subsection (a). 

(4) APPEALS TO GOVERNING PANEL.— (A) IN GENERAL.—If the agencies do not resolve the conflict or issue a joint statement required by subparagraph 

(B), or if either of the agencies takes or attempts to take any 

supervisory action relating to the request for the joint statement without the consent of the other agency, an insured 

depository institution, insured credit union, or other covVerDate Mar 15 2010 04:29 Jul 07, 2010 Jkt 057098 PO 00000 Frm 00631 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
628 

ered person described in subsection (a) may institute an appeal to a governing panel, as provided in this subsection, 

not later than 30 days after the expiration of the period 

during which a joint statement is required to be filed under 

paragraph (3)(B). 

(B) COMPOSITION OF GOVERNING PANEL.—The governing panel for an appeal under this paragraph shall be 

composed of— 

(i) a representative from the Bureau and a representative of the prudential regulator, both of whom— 

(I) have not participated in the material supervisory determinations under appeal; and 

(II) do not directly or indirectly report to the 

person who participated materially in the supervisory determinations under appeal; and 

(ii) one individual representative, to be determined 

on a rotating basis, from among the Board of Governors, the Corporation, the National Credit Union Administration, and the Office of the Comptroller of the 

Currency, other than any agency involved in the subject dispute. 

(C) CONDUCT OF APPEAL.—In an appeal under this 

paragraph— 

(i) the insured depository institution, insured credit union, or other covered person described in subsection (a)— 

(I) shall include in its appeal all the facts and 

legal arguments pertaining to the matter; and 

(II) may, through counsel, employees, or representatives, appear before the governing panel in 

person or by telephone; and 

(ii) the governing panel— 

(I) may request the insured depository institution, insured credit union, or other covered person 

described in subsection (a), the Bureau, or the prudential regulator to produce additional information relevant to the appeal; and 

(II) by a majority vote of its members, shall 

provide a final determination, in writing, not later 

than 30 days after the date of filing of an 

informationally complete appeal, or such longer 

period as the panel and the insured depository institution, insured credit union, or other covered 

person described in subsection (a) may jointly 

agree. 

(D) PUBLIC AVAILABILITY OF DETERMINATIONS.—A governing panel shall publish all information contained in a 

determination by the governing panel, with appropriate 

redactions of information that would be subject to an exemption from disclosure under section 552 of title 5, United 

States Code. 

(E) PROHIBITION AGAINST RETALIATION.—The Bureau 

and the prudential regulators shall prescribe rules to provide safeguards from retaliation against the insured depository institution, insured credit union, or other covered perVerDate Mar 15 2010 04:29 Jul 07, 2010 Jkt 057098 PO 00000 Frm 00632 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
629 

son described in subsection (a) instituting an appeal under 

this paragraph, as well as their officers and employees. 

(F) LIMITATION.—The process provided in this paragraph shall not apply to a determination by a prudential 

regulator to appoint a conservator or receiver for an insured depository institution or a liquidating agent for an 

insured credit union, as the case may be, or a decision to 

take action pursuant to section 38 of the Federal Deposit 

Insurance Act (12 U.S.C. 1831o) or section 212 of the Federal Credit Union Act (112 U.S.C. 1790a), as applicable. 

(G) EFFECT ON OTHER AUTHORITY.—Nothing in this 

section shall modify or limit the authority of the Bureau to 

interpret, or take enforcement action under, any Federal 

consumer financial law, or the authority of a prudential 

regulator to interpret or take enforcement action under any 

other provision of Federal law for safety and soundness 

purposes. 

SEC. 1026. OTHER BANKS, SAVINGS ASSOCIATIONS, AND CREDIT 

UNIONS. 

(a) SCOPE OF COVERAGE.—This section shall apply to any covered person that is— 

(1) an insured depository institution with total assets of 

$10,000,000,000 or less; or 

(2) an insured credit union with total assets of 

$10,000,000,000 or less. 

(b) REPORTS.—The Director may require reports from a person 

described in subsection (a), as necessary to support the role of the 

Bureau in implementing Federal consumer financial law, to support 

its examination activities under subsection (c), and to assess and detect risks to consumers and consumer financial markets. 

(1) USE OF EXISTING REPORTS.—The Bureau shall, to the 

fullest extent possible, use— 

(A) reports pertaining to a person described in subsection (a) that have been provided or required to have been 

provided to a Federal or State agency; and 

(B) information that has been reported publicly. 

(2) PRESERVATION OF AUTHORITY.—Nothing in this subsection may be construed as limiting the authority of the Director from requiring from a person described in subsection (a), as 

permitted under paragraph (1), information owned or under the 

control of such person, regardless of whether such information 

is maintained, stored, or processed by another person. 

(3) REPORTS OF TAX LAW NONCOMPLIANCE.—The Bureau 

shall provide the Commissioner of Internal Revenue with any 

report of examination or related information identifying possible tax law noncompliance. 

(c) EXAMINATIONS.— 

(1) IN GENERAL.—The Bureau may, at its discretion, include examiners on a sampling basis of the examinations performed by the prudential regulator to assess compliance with 

the requirements of Federal consumer financial law of persons 

described in subsection (a). 

(2) AGENCY COORDINATION.—The prudential regulator 

shall— 


sroberts on DSKD5P82C1PROD with HEARING
630 

(A) provide all reports, records, and documentation related to the examination process for any institution included in the sample referred to in paragraph (1) to the Bureau on a timely and continual basis; 

(B) involve such Bureau examiner in the entire examination process for such person; and 

(C) consider input of the Bureau concerning the scope 

of an examination, conduct of the examination, the contents 

of the examination report, the designation of matters requiring attention, and examination ratings. 

(d) ENFORCEMENT.— (1) IN GENERAL.—Except for requiring reports under subsection (b), the prudential regulator is authorized to enforce the 

requirements of Federal consumer financial laws and, with respect to a covered person described in subsection (a), shall have 

exclusive authority (relative to the Bureau) to enforce such laws. 

(2) COORDINATION WITH PRUDENTIAL REGULATOR.— (A) REFERRAL.—When the Bureau has reason to believe 

that a person described in subsection (a) has engaged in a 

material violation of a Federal consumer financial law, the 

Bureau shall notify the prudential regulator in writing and 

recommend appropriate action to respond. 

(B) RESPONSE.—Upon receiving a recommendation 

under subparagraph (A), the prudential regulator shall 

provide a written response to the Bureau not later than 60 

days thereafter. 

(e) SERVICE PROVIDERS.—A service provider to a substantial 

number of persons described in subsection (a) shall be subject to the 

authority of the Bureau under section 1025 to the same extent as if 

the Bureau were an appropriate Federal bank agency under section 

7(c) of the Bank Service Company Act (12 U.S.C. 1867(c)). When 

conducting any examination or requiring any report from a service 

provider subject to this subsection, the Bureau shall coordinate with 

the appropriate prudential regulator. 

SEC. 1027. LIMITATIONS ON AUTHORITIES OF THE BUREAU; PRESERVATION OF AUTHORITIES. 

(a) EXCLUSION FOR MERCHANTS, RETAILERS, AND OTHER SELLERS OF NONFINANCIAL GOODS OR SERVICES.— 

(1) SALE OR BROKERAGE OF NONFINANCIAL GOOD OR SERVICE.—The Bureau may not exercise any rulemaking, supervisory, enforcement or other authority under this title with respect to a person who is a merchant, retailer, or seller of any 

nonfinancial good or service and is engaged in the sale or brokerage of such nonfinancial good or service, except to the extent 

that such person is engaged in offering or providing any consumer financial product or service, or is otherwise subject to 

any enumerated consumer law or any law for which authorities 

are transferred under subtitle F or H. 

(2) OFFERING OR PROVISION OF CERTAIN CONSUMER FINANCIAL PRODUCTS OR SERVICES IN CONNECTION WITH THE SALE OR

BROKERAGE OF NONFINANCIAL GOOD OR SERVICE.— 

(A) IN GENERAL.—Except as provided in subparagraph 

(B), and subject to subparagraph (C), the Bureau may not 

exercise any rulemaking, supervisory, enforcement, or other 

authority under this title with respect to a merchant, reVerDate Mar 15 2010 04:29 Jul 07, 2010 Jkt 057098 PO 00000 Frm 00634 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
631 

tailer, or seller of nonfinancial goods or services, but only 

to the extent that such person— 

(i) extends credit directly to a consumer, in a case 

in which the good or service being provided is not itself 

a consumer financial product or service (other than 

credit described in this subparagraph), exclusively for 

the purpose of enabling that consumer to purchase 

such nonfinancial good or service directly from the 

merchant, retailer, or seller; 

(ii) directly, or through an agreement with another 

person, collects debt arising from credit extended as described in clause (i); or 

(iii) sells or conveys debt described in clause (i) 

that is delinquent or otherwise in default. 

(B) APPLICABILITY.—Subparagraph (A) does not apply 

to any credit transaction or collection of debt, other than as 

described in subparagraph (C)(i), arising from a transaction described in subparagraph (A)— 

(i) in which the merchant, retailer, or seller of nonfinancial goods or services assigns, sells or otherwise 

conveys to another person such debt owed by the consumer (except for a sale of debt that is delinquent or 

otherwise in default, as described in subparagraph 

(A)(iii)); 

(ii) in which the credit extended significantly exceeds the market value of the nonfinancial good or 

service provided, or the Bureau otherwise finds that the 

sale of the nonfinancial good or service is done as a 

subterfuge, so as to evade or circumvent the provisions 

of this title; or 

(iii) in which the merchant, retailer, or seller of 

nonfinancial goods or services regularly extends credit 

and the credit is subject to a finance charge. 

(C) LIMITATIONS.— 

(i) IN GENERAL.—Notwithstanding subparagraph 

(B), subparagraph (A) shall apply with respect to a 

merchant, retailer, or seller of nonfinancial goods or 

services that is not engaged significantly in offering or 

providing consumer financial products or services. 

(ii) EXCEPTION.—Subparagraph (A) and clause (i) 

of this subparagraph do not apply to any merchant, retailer, or seller of nonfinancial goods or services— 

(I) if such merchant, retailer, or seller of nonfinancial goods or services is engaged in a transaction described in subparagraph (B)(i) or (B)(ii); 

or 

(II) to the extent that such merchant, retailer, 

or seller is subject to any enumerated consumer 

law or any law for which authorities are transferred under subtitle F or H, but the Bureau may 

exercise such authority only with respect to that 

law. 

(D) RULES.— 

(i) AUTHORITY OF OTHER AGENCIES.—No provision 

of this title shall be construed as modifying, limiting, 


sroberts on DSKD5P82C1PROD with HEARING
632 

or superseding the supervisory or enforcement authority of the Federal Trade Commission or any other 

agency (other than the Bureau) with respect to credit 

extended, or the collection of debt arising from such extension, directly by a merchant or retailer to a consumer exclusively for the purpose of enabling that consumer to purchase nonfinancial goods or services directly from the merchant or retailer. 

(ii) SMALL BUSINESSES.—A merchant, retailer, or 

seller of nonfinancial goods or services that would otherwise be subject to the authority of the Bureau solely 

by virtue of the application of subparagraph (B)(iii) 

shall be deemed not to be engaged significantly in offering or providing consumer financial products or 

services under subparagraph (C)(i), if such person— 

(I) only extends credit for the sale of nonfinancial goods or services, as described in subparagraph (A)(i); 

(II) retains such credit on its own accounts (except to sell or convey such debt that is delinquent 

or otherwise in default); and 

(III) meets the relevant industry size threshold 

to be a small business concern, based on annual 

receipts, pursuant to section 3 of the Small Business Act (15 U.S.C. 632) and the implementing 

rules thereunder. 

(iii) INITIAL YEAR.—A merchant, retailer, or seller 

of nonfinancial goods or services shall be deemed to 

meet the relevant industry size threshold described in 

clause (ii)(III) during the first year of operations of that 

business concern if, during that year, the receipts of 

that business concern reasonably are expected to meet 

that size threshold. 

(iv) OTHER STANDARDS FOR SMALL BUSINESS.— 

With respect to a merchant, retailer, or seller of nonfinancial goods or services that is a classified on a 

basis other than annual receipts for the purposes of 

section 3 of the Small Business Act (15 U.S.C. 632) 

and the implementing rules thereunder, such merchant, retailer, or seller shall be deemed to meet the 

relevant industry size threshold described in clause 

(ii)(III) if such merchant, retailer, or seller meets the 

relevant industry size threshold to be a small business 

concern based on the number of employees, or other 

such applicable measure, established under that Act. 

(E) EXCEPTION FROM STATE ENFORCEMENT.—To the extent that the Bureau may not exercise authority under this 

subsection with respect to a merchant, retailer, or seller of 

nonfinancial goods or services, no action by a State attorney general or State regulator with respect to a claim made 

under this title may be brought under subsection 1042(a), 

with respect to an activity described in any of clauses (i) 

through (iii) of subparagraph (A) by such merchant, retailer, or seller of nonfinancial goods or services. 

(b) EXCLUSION FOR REAL ESTATE BROKERAGE ACTIVITIES.— 


sroberts on DSKD5P82C1PROD with HEARING
633 

(1) REAL ESTATE BROKERAGE ACTIVITIES EXCLUDED.—Without limiting subsection (a), and except as permitted in paragraph (2), the Bureau may not exercise any rulemaking, supervisory, enforcement, or other authority under this title with respect to a person that is licensed or registered as a real estate 

broker or real estate agent, in accordance with State law, to the 

extent that such person— 

(A) acts as a real estate agent or broker for a buyer, 

seller, lessor, or lessee of real property; 

(B) brings together parties interested in the sale, purchase, lease, rental, or exchange of real property; 

(C) negotiates, on behalf of any party, any portion of a 

contract relating to the sale, purchase, lease, rental, or exchange of real property (other than in connection with the 

provision of financing with respect to any such transaction); or 

(D) offers to engage in any activity, or act in any capacity, described in subparagraph (A), (B), or (C). 

(2) DESCRIPTION OF ACTIVITIES.—The Bureau may exercise 

rulemaking, supervisory, enforcement, or other authority under 

this title with respect to a person described in paragraph (1) 

when such person is— 

(A) engaged in an activity of offering or providing any 

consumer financial product or service, except that the Bureau may exercise such authority only with respect to that 

activity; or 

(B) otherwise subject to any enumerated consumer law 

or any law for which authorities are transferred under subtitle F or H, but the Bureau may exercise such authority 

only with respect to that law. 

(c) EXCLUSION FOR MANUFACTURED HOME RETAILERS AND

MODULAR HOME RETAILERS.— 

(1) IN GENERAL.—The Director may not exercise any rulemaking, supervisory, enforcement, or other authority over a person to the extent that— 

(A) such person is not described in paragraph (2); and 

(B) such person— 

(i) acts as an agent or broker for a buyer or seller 

of a manufactured home or a modular home; 

(ii) facilitates the purchase by a consumer of a 

manufactured home or modular home, by negotiating 

the purchase price or terms of the sales contract (other 

than providing financing with respect to such transaction); or 

(iii) offers to engage in any activity described in 

clause (i) or (ii). 

(2) DESCRIPTION OF ACTIVITIES.—A person is described in 

this paragraph to the extent that such person is engaged in the 

offering or provision of any consumer financial product or service or is otherwise subject to any enumerated consumer law or 

any law for which authorities are transferred under subtitle F 

or H. 

(3) DEFINITIONS.—For purposes of this subsection, the following definitions shall apply: 


sroberts on DSKD5P82C1PROD with HEARING
634 

(A) MANUFACTURED HOME.—The term ‘‘manufactured 

home’’ has the same meaning as in section 603 of the National Manufactured Housing Construction and Safety 

Standards Act of 1974 (42 U.S.C. 5402). 

(B) MODULAR HOME.—The term ‘‘modular home’’ 

means a house built in a factory in 2 or more modules that 

meet the State or local building codes where the house will 

be located, and where such modules are transported to the 

building site, installed on foundations, and completed. 

(d) EXCLUSION FOR ACCOUNTANTS AND TAX PREPARERS.— (1) IN GENERAL.—Except as permitted in paragraph (2), the 

Bureau may not exercise any rulemaking, supervisory, enforcement, or other authority over— 

(A) any person that is a certified public accountant, 

permitted to practice as a certified public accounting firm, 

or certified or licensed for such purpose by a State, or any 

individual who is employed by or holds an ownership interest with respect to a person described in this subparagraph, 

when such person is performing or offering to perform— 

(i) customary and usual accounting activities, including the provision of accounting, tax, advisory, or 

other services that are subject to the regulatory authority of a State board of accountancy or a Federal authority; or 

(ii) other services that are incidental to such customary and usual accounting activities, to the extent 

that such incidental services are not offered or provided— 

(I) by the person separate and apart from such 

customary and usual accounting activities; or 

(II) to consumers who are not receiving such 

customary and usual accounting activities; or 

(B) any person, other than a person described in subparagraph (A) that performs income tax preparation activities for consumers. 

(2) DESCRIPTION OF ACTIVITIES.— (A) IN GENERAL.—Paragraph (1) shall not apply to any 

person described in paragraph (1)(A) or (1)(B) to the extent 

that such person is engaged in any activity which is not a 

customary and usual accounting activity described in paragraph (1)(A) or incidental thereto but which is the offering 

or provision of any consumer financial product or service, 

except to the extent that a person described in paragraph 

(1)(A) is engaged in an activity which is a customary and 

usual accounting activity described in paragraph (1)(A), or 

incidental thereto. 

(B) NOT A CUSTOMARY AND USUAL ACCOUNTING ACTIV- ITY.—For purposes of this subsection, extending or 

brokering credit is not a customary and usual accounting 

activity, or incidental thereto. 

(C) RULE OF CONSTRUCTION.—For purposes of subparagraphs (A) and (B), a person described in paragraph (1)(A) 

shall not be deemed to be extending credit, if such person 

is only extending credit directly to a consumer, exclusively 

for the purpose of enabling such consumer to purchase servVerDate Mar 15 2010 04:29 Jul 07, 2010 Jkt 057098 PO 00000 Frm 00638 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
635 

ices described in clause (i) or (ii) of paragraph (1)(A) directly from such person, and such credit is— 

(i) not subject to a finance charge; and 

(ii) not payable by written agreement in more than 

4 installments. 

(D) OTHER LIMITATIONS.—Paragraph (1) does not 

apply to any person described in paragraph (1)(A) or (1)(B) 

that is otherwise subject to any enumerated consumer law 

or any law for which authorities are transferred under subtitle F or H. 

(e) EXCLUSION FOR PRACTICE OF LAW.— (1) IN GENERAL.—Except as provided under paragraph (2), 

the Bureau may not exercise any supervisory or enforcement authority with respect to an activity engaged in by an attorney as 

part of the practice of law under the laws of a State in which 

the attorney is licensed to practice law. 

(2) RULE OF CONSTRUCTION.—Paragraph (1) shall not be 

construed so as to limit the exercise by the Bureau of any supervisory, enforcement, or other authority regarding the offering or 

provision of a consumer financial product or service described 

in any subparagraph of section 1002(5)— 

(A) that is not offered or provided as part of, or incidental to, the practice of law, occurring exclusively within 

the scope of the attorney-client relationship; or 

(B) that is otherwise offered or provided by the attorney 

in question with respect to any consumer who is not receiving legal advice or services from the attorney in connection 

with such financial product or service. 

(3) EXISTING AUTHORITY.—Paragraph (1) shall not be construed so as to limit the authority of the Bureau with respect 

to any attorney, to the extent that such attorney is otherwise 

subject to any of the enumerated consumer laws or the authorities transferred under subtitle F or H. 

(f) EXCLUSION FOR PERSONS REGULATED BY A STATE INSURANCE REGULATOR.— (1) IN GENERAL.—No provision of this title shall be construed as altering, amending, or affecting the authority of any 

State insurance regulator to adopt rules, initiate enforcement 

proceedings, or take any other action with respect to a person 

regulated by a State insurance regulator. Except as provided in 

paragraph (2), the Bureau shall have no authority to exercise 

any power to enforce this title with respect to a person regulated 

by a State insurance regulator. 

(2) DESCRIPTION OF ACTIVITIES.—Paragraph (1) does not 

apply to any person described in such paragraph to the extent 

that such person is engaged in the offering or provision of any 

consumer financial product or service or is otherwise subject to 

any enumerated consumer law or any law for which authorities 

are transferred under subtitle F or H. 

(3) STATE INSURANCE AUTHORITY UNDER GRAMM-LEACH-BLI- LEY.—Notwithstanding paragraph (2), the Bureau shall not exercise any authorities that are granted a State insurance authority under section 505(a)(6) of the Gramm-Leach-Bliley Act 

with respect to a person regulated by a State insurance authority. 


sroberts on DSKD5P82C1PROD with HEARING
636 

(g) EXCLUSION FOR EMPLOYEE BENEFIT AND COMPENSATION

PLANS AND CERTAIN OTHER ARRANGEMENTS UNDER THE INTERNAL

REVENUE CODE OF 1986.— 

(1) PRESERVATION OF AUTHORITY OF OTHER AGENCIES.—No 

provision of this title shall be construed as altering, amending, 

or affecting the authority of the Secretary of the Treasury, the 

Secretary of Labor, or the Commissioner of Internal Revenue to 

adopt regulations, initiate enforcement proceedings, or take any 

actions with respect to any specified plan or arrangement. 

(2) ACTIVITIES NOT CONSTITUTING THE OFFERING OR PROVI- SION OF ANY CONSUMER FINANCIAL PRODUCT OR SERVICE.—For 

purposes of this title, a person shall not be treated as having 

engaged in the offering or provision of any consumer financial 

product or service solely because such person is— 

(A) a specified plan or arrangement; 

(B) engaged in the activity of establishing or maintaining, for the benefit of employees of such person (or for members of an employee organization), any specified plan or arrangement; or 

(C) engaged in the activity of establishing or maintaining a qualified tuition program under section 529(b)(1) of 

the Internal Revenue Code of 1986 offered by a State or 

other prepaid tuition program offered by a State. 

(3) LIMITATION ON BUREAU AUTHORITY.— (A) IN GENERAL.—Except as provided under subparagraphs (B) and (C), the Bureau may not exercise any rulemaking or enforcement authority with respect to products 

or services that relate to any specified plan or arrangement. 

(B) BUREAU ACTION PURSUANT TO AGENCY REQUEST.— (i) AGENCY REQUEST.—The Secretary and the Secretary of Labor may jointly issue a written request to 

the Bureau regarding implementation of appropriate 

consumer protection standards under this title with respect to the provision of services relating to any specified plan or arrangement. 

(ii) AGENCY RESPONSE.—In response to a request 

by the Bureau, the Secretary and the Secretary of 

Labor shall jointly issue a written response, not later 

than 90 days after receipt of such request, to grant or 

deny the request of the Bureau regarding implementation of appropriate consumer protection standards 

under this title with respect to the provision of services 

relating to any specified plan or arrangement. 

(iii) SCOPE OF BUREAU ACTION.—Subject to a request or response pursuant to clause (i) or clause (ii) by 

the agencies made under this subparagraph, the Bureau may exercise rulemaking authority, and may act 

to enforce a rule prescribed pursuant to such request or 

response, in accordance with the provisions of this title. 

A request or response made by the Secretary and the 

Secretary of Labor under this subparagraph shall describe the basis for, and scope of, appropriate consumer 

protection standards to be implemented under this title 

with respect to the provision of services relating to any 

specified plan or arrangement. 


sroberts on DSKD5P82C1PROD with HEARING
637 

(C) DESCRIPTION OF PRODUCTS OR SERVICES.—To the 

extent that a person engaged in providing products or services relating to any specified plan or arrangement is subject 

to any enumerated consumer law or any law for which authorities are transferred under subtitle F or H, subparagraph (A) shall not apply with respect to that law. 

(4) SPECIFIED PLAN OR ARRANGEMENT.—For purposes of 

this subsection, the term ‘‘specified plan or arrangement’’ means 

any plan, account, or arrangement described in section 220, 

223, 401(a), 403(a), 403(b), 408, 408A, 529, or 530 of the Internal Revenue Code of 1986, or any employee benefit or compensation plan or arrangement, including a plan that is subject 

to title I of the Employee Retirement Income Security Act of 

1974, or any prepaid tuition program offered by a State. 

(h) PERSONS REGULATED BY A STATE SECURITIES COMMIS- SION.— (1) IN GENERAL.—No provision of this title shall be construed as altering, amending, or affecting the authority of any 

securities commission (or any agency or office performing like 

functions) of any State to adopt rules, initiate enforcement proceedings, or take any other action with respect to a person regulated by any securities commission (or any agency or office performing like functions) of any State. Except as permitted in 

paragraph (2) and subsection (f), the Bureau shall have no authority to exercise any power to enforce this title with respect to 

a person regulated by any securities commission (or any agency 

or office performing like functions) of any State, but only to the 

extent that the person acts in such regulated capacity. 

(2) DESCRIPTION OF ACTIVITIES.—Paragraph (1) shall not 

apply to any person to the extent such person is engaged in the 

offering or provision of any consumer financial product or service, or is otherwise subject to any enumerated consumer law or 

any law for which authorities are transferred under subtitle F 

or H. 

(i) EXCLUSION FOR PERSONS REGULATED BY THE COMMIS- SION.— (1) IN GENERAL.—No provision of this title may be construed as altering, amending, or affecting the authority of the 

Commission to adopt rules, initiate enforcement proceedings, or 

take any other action with respect to a person regulated by the 

Commission. The Bureau shall have no authority to exercise 

any power to enforce this title with respect to a person regulated 

by the Commission. 

(2) CONSULTATION AND COORDINATION.—Notwithstanding 

paragraph (1), the Commission shall consult and coordinate, 

where feasible, with the Bureau with respect to any rule (including any advance notice of proposed rulemaking) regarding 

an investment product or service that is the same type of product as, or that competes directly with, a consumer financial 

product or service that is subject to the jurisdiction of the Bureau under this title or under any other law. In carrying out 

this paragraph, the agencies shall negotiate an agreement to establish procedures for such coordination, including procedures 

for providing advance notice to the Bureau when the Commission is initiating a rulemaking. 


sroberts on DSKD5P82C1PROD with HEARING
638 

(j) EXCLUSION FOR PERSONS REGULATED BY THE COMMODITY

FUTURES TRADING COMMISSION.— 

(1) IN GENERAL.—No provision of this title shall be construed as altering, amending, or affecting the authority of the 

Commodity Futures Trading Commission to adopt rules, initiate enforcement proceedings, or take any other action with respect to a person regulated by the Commodity Futures Trading 

Commission. The Bureau shall have no authority to exercise 

any power to enforce this title with respect to a person regulated 

by the Commodity Futures Trading Commission. 

(2) CONSULTATION AND COORDINATION.—Notwithstanding 

paragraph (1), the Commodity Futures Trading Commission 

shall consult and coordinate with the Bureau with respect to 

any rule (including any advance notice of proposed rulemaking) 

regarding a product or service that is the same type of product 

as, or that competes directly with, a consumer financial product 

or service that is subject to the jurisdiction of the Bureau under 

this title or under any other law. 

(k) EXCLUSION FOR PERSONS REGULATED BY THE FARM CREDIT

ADMINISTRATION.— 

(1) IN GENERAL.—No provision of this title shall be construed as altering, amending, or affecting the authority of the 

Farm Credit Administration to adopt rules, initiate enforcement 

proceedings, or take any other action with respect to a person 

regulated by the Farm Credit Administration. The Bureau shall 

have no authority to exercise any power to enforce this title with 

respect to a person regulated by the Farm Credit Administration. 

(2) DEFINITION.—For purposes of this subsection, the term 

‘‘person regulated by the Farm Credit Administration’’ means 

any Farm Credit System institution that is chartered and subject to the provisions of the Farm Credit Act of 1971 (12 U.S.C. 

2001 et seq.). 

(l) EXCLUSION FOR ACTIVITIES RELATING TO CHARITABLE CONTRIBUTIONS.— 

(1) IN GENERAL.—The Director and the Bureau may not exercise any rulemaking, supervisory, enforcement, or other authority, including authority to order penalties, over any activities related to the solicitation or making of voluntary contributions to a tax-exempt organization as recognized by the Internal 

Revenue Service, by any agent, volunteer, or representative of 

such organizations to the extent the organization, agent, volunteer, or representative thereof is soliciting or providing advice, 

information, education, or instruction to any donor or potential 

donor relating to a contribution to the organization. 

(2) LIMITATION.—The exclusion in paragraph (1) does not 

apply to other activities not described in paragraph (1) that are 

the offering or provision of any consumer financial product or 

service, or are otherwise subject to any enumerated consumer 

law or any law for which authorities are transferred under subtitle F or H. 

(m) INSURANCE.—The Bureau may not define as a financial 

product or service, by regulation or otherwise, engaging in the business of insurance. 


sroberts on DSKD5P82C1PROD with HEARING
639 

(n) LIMITED AUTHORITY OF THE BUREAU.—Notwithstanding 

subsections (a) through (h) and (l), a person subject to or described 

in one or more of such provisions— 

(1) may be a service provider; and 

(2) may be subject to requests from, or requirements imposed by, the Bureau regarding information in order to carry 

out the responsibilities and functions of the Bureau and in accordance with section 1022, 1052, or 1053. 

(o) NO AUTHORITY TO IMPOSE USURY LIMIT.—No provision of 

this title shall be construed as conferring authority on the Bureau 

to establish a usury limit applicable to an extension of credit offered 

or made by a covered person to a consumer, unless explicitly authorized by law. 

(p) ATTORNEY GENERAL.—No provision of this title, including 

section 1024(c)(1), shall affect the authorities of the Attorney General under otherwise applicable provisions of law. 

(q) SECRETARY OF THE TREASURY.—No provision of this title 

shall affect the authorities of the Secretary, including with respect 

to prescribing rules, initiating enforcement proceedings, or taking 

other actions with respect to a person that performs income tax 

preparation activities for consumers. 

(r) DEPOSIT INSURANCE AND SHARE INSURANCE.—Nothing in 

this title shall affect the authority of the Corporation under the Federal Deposit Insurance Act or the National Credit Union Administration Board under the Federal Credit Union Act as to matters related to deposit insurance and share insurance, respectively. 

(s) FAIR HOUSING ACT.—No provision of this title shall be construed as affecting any authority arising under the Fair Housing 

Act. 

SEC. 1028. AUTHORITY TO RESTRICT MANDATORY PRE-DISPUTE ARBITRATION. 

(a) STUDY AND REPORT.—The Bureau shall conduct a study of, 

and shall provide a report to Congress concerning, the use of agreements providing for arbitration of any future dispute between covered persons and consumers in connection with the offering or providing of consumer financial products or services. 

(b) FURTHER AUTHORITY.—The Bureau, by regulation, may prohibit or impose conditions or limitations on the use of an agreement 

between a covered person and a consumer for a consumer financial 

product or service providing for arbitration of any future dispute between the parties, if the Bureau finds that such a prohibition or imposition of conditions or limitations is in the public interest and for 

the protection of consumers. The findings in such rule shall be consistent with the study conducted under subsection (a). 

(c) LIMITATION.—The authority described in subsection (b) may 

not be construed to prohibit or restrict a consumer from entering 

into a voluntary arbitration agreement with a covered person after 

a dispute has arisen. 

(d) EFFECTIVE DATE.—Notwithstanding any other provision of 

law, any regulation prescribed by the Bureau under subsection (b) 

shall apply, consistent with the terms of the regulation, to any 

agreement between a consumer and a covered person entered into 

after the end of the 180-day period beginning on the effective date 

of the regulation, as established by the Bureau. 


sroberts on DSKD5P82C1PROD with HEARING
640 

SEC. 1029. EXCLUSION FOR AUTO DEALERS. 

(a) SALE, SERVICING, AND LEASING OF MOTOR VEHICLES EXCLUDED.—Except as permitted in subsection (b), the Bureau may not 

exercise any rulemaking, supervisory, enforcement or any other authority, including any authority to order assessments, over a motor 

vehicle dealer that is predominantly engaged in the sale and servicing of motor vehicles, the leasing and servicing of motor vehicles, 

or both. 

(b) CERTAIN FUNCTIONS EXCEPTED.—Subsection (a) shall not 

apply to any person, to the extent that such person— 

(1) provides consumers with any services related to residential or commercial mortgages or self-financing transactions involving real property; 

(2) operates a line of business— 

(A) that involves the extension of retail credit or retail 

leases involving motor vehicles; and 

(B) in which— 

(i) the extension of retail credit or retail leases are 

provided directly to consumers; and 

(ii) the contract governing such extension of retail 

credit or retail leases is not routinely assigned to an 

unaffiliated third party finance or leasing source; or 

(3) offers or provides a consumer financial product or service not involving or related to the sale, financing, leasing, rental, repair, refurbishment, maintenance, or other servicing of 

motor vehicles, motor vehicle parts, or any related or ancillary 

product or service. 

(c) PRESERVATION OF AUTHORITIES OF OTHER AGENCIES.—Except as provided in subsections (b) and (d), nothing in this title, including subtitle F, shall be construed as modifying, limiting, or superseding the operation of any provision of Federal law, or otherwise affecting the authority of the Board of Governors, the Federal 

Trade Commission, or any other Federal agency, with respect to a 

person described in subsection (a). 

(d) FEDERAL TRADE COMMISSION AUTHORITY.—Notwithstanding section 18 of the Federal Trade Commission Act, the Federal Trade Commission is authorized to prescribe rules under sections 5 and 18(a)(1)(B) of the Federal Trade Commission Act, in accordance with section 553 of title 5, United States Code, with respect to a person described in subsection (a). 

(e) COORDINATION WITH OFFICE OF SERVICE MEMBER AF- FAIRS.—The Board of Governors and the Federal Trade Commission 

shall coordinate with the Office of Service Member Affairs, to ensure 

that— 

(1) service members and their families are educated and 

empowered to make better informed decisions regarding consumer financial products and services offered by motor vehicle 

dealers, with a focus on motor vehicle dealers in the proximity 

of military installations; and 

(2) complaints by service members and their families concerning such motor vehicle dealers are effectively monitored and 

responded to, and where appropriate, enforcement action is pursued by the authorized agencies. 

(f) DEFINITIONS.—For purposes of this section, the following 

definitions shall apply: 


sroberts on DSKD5P82C1PROD with HEARING
641 

(1) MOTOR VEHICLE.—The term ‘‘motor vehicle’’ means— 

(A) any self-propelled vehicle designed for transporting 

persons or property on a street, highway, or other road; 

(B) recreational boats and marine equipment; 

(C) motorcycles; 

(D) motor homes, recreational vehicle trailers, and 

slide-in campers, as those terms are defined in sections 

571.3 and 575.103 (d) of title 49, Code of Federal Regulations, or any successor thereto; and 

(E) other vehicles that are titled and sold through dealers. 

(2) MOTOR VEHICLE DEALER.—The term ‘‘motor vehicle 

dealer’’ means any person or resident in the United States, or 

any territory of the United States, who— 

(A) is licensed by a State, a territory of the United 

States, or the District of Columbia to engage in the sale of 

motor vehicles; and 

(B) takes title to, holds an ownership in, or takes physical custody of motor vehicles. 

SEC. 1029A. EFFECTIVE DATE. 

This subtitle shall become effective on the designated transfer 

date, except that sections 1022, 1024, and 1025(e) shall become effective on the date of enactment of this Act. 

Subtitle C—Specific Bureau Authorities 

SEC. 1031. PROHIBITING UNFAIR, DECEPTIVE, OR ABUSIVE ACTS OR 

PRACTICES. 

(a) IN GENERAL.—The Bureau may take any action authorized 

under subtitle E to prevent a covered person or service provider from 

committing or engaging in an unfair, deceptive, or abusive act or 

practice under Federal law in connection with any transaction with 

a consumer for a consumer financial product or service, or the offering of a consumer financial product or service. 

(b) RULEMAKING.—The Bureau may prescribe rules applicable 

to a covered person or service provider identifying as unlawful, unfair, deceptive, or abusive acts or practices in connection with any 

transaction with a consumer for a consumer financial product or 

service, or the offering of a consumer financial product or service. 

Rules under this section may include requirements for the purpose 

of preventing such acts or practices. 

(c) UNFAIRNESS.— 

(1) IN GENERAL.—The Bureau shall have no authority 

under this section to declare an act or practice in connection 

with a transaction with a consumer for a consumer financial 

product or service, or the offering of a consumer financial product or service, to be unlawful on the grounds that such act or 

practice is unfair, unless the Bureau has a reasonable basis to 

conclude that— 

(A) the act or practice causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers; and 

(B) such substantial injury is not outweighed by countervailing benefits to consumers or to competition. 


sroberts on DSKD5P82C1PROD with HEARING
642 

(2) CONSIDERATION OF PUBLIC POLICIES.—In determining 

whether an act or practice is unfair, the Bureau may consider 

established public policies as evidence to be considered with all 

other evidence. Such public policy considerations may not serve 

as a primary basis for such determination. 

(d) ABUSIVE.—The Bureau shall have no authority under this 

section to declare an act or practice abusive in connection with the 

provision of a consumer financial product or service, unless the act 

or practice— 

(1) materially interferes with the ability of a consumer to 

understand a term or condition of a consumer financial product 

or service; or 

(2) takes unreasonable advantage of— 

(A) a lack of understanding on the part of the consumer of the material risks, costs, or conditions of the product or service; 

(B) the inability of the consumer to protect the interests 

of the consumer in selecting or using a consumer financial 

product or service; or 

(C) the reasonable reliance by the consumer on a covered person to act in the interests of the consumer. 

(e) CONSULTATION.—In prescribing rules under this section, the 

Bureau shall consult with the Federal banking agencies, or other 

Federal agencies, as appropriate, concerning the consistency of the 

proposed rule with prudential, market, or systemic objectives administered by such agencies. 

(f) CONSIDERATION OF SEASONAL INCOME.—The rules of the Bureau under this section shall provide, with respect to an extension 

of credit secured by residential real estate or a dwelling, if documented income of the borrower, including income from a small business, is a repayment source for an extension of credit secured by residential real estate or a dwelling, the creditor may consider the 

seasonality and irregularity of such income in the underwriting of 

and scheduling of payments for such credit. 

SEC. 1032. DISCLOSURES. 

(a) IN GENERAL.—The Bureau may prescribe rules to ensure 

that the features of any consumer financial product or service, both 

initially and over the term of the product or service, are fully, accurately, and effectively disclosed to consumers in a manner that permits consumers to understand the costs, benefits, and risks associated with the product or service, in light of the facts and circumstances. 

(b) MODEL DISCLOSURES.— 

(1) IN GENERAL.—Any final rule prescribed by the Bureau 

under this section requiring disclosures may include a model 

form that may be used at the option of the covered person for 

provision of the required disclosures. 

(2) FORMAT.—A model form issued pursuant to paragraph 

(1) shall contain a clear and conspicuous disclosure that, at a 

minimum— 

(A) uses plain language comprehensible to consumers; 

(B) contains a clear format and design, such as an easily readable type font; and 

(C) succinctly explains the information that must be 

communicated to the consumer. 


sroberts on DSKD5P82C1PROD with HEARING
643 

(3) CONSUMER TESTING.—Any model form issued pursuant 

to this subsection shall be validated through consumer testing. 

(c) BASIS FOR RULEMAKING.—In prescribing rules under this 

section, the Bureau shall consider available evidence about consumer awareness, understanding of, and responses to disclosures or 

communications about the risks, costs, and benefits of consumer financial products or services. 

(d) SAFE HARBOR.—Any covered person that uses a model form 

included with a rule issued under this section shall be deemed to 

be in compliance with the disclosure requirements of this section 

with respect to such model form. 

(e) TRIAL DISCLOSURE PROGRAMS.— 

(1) IN GENERAL.—The Bureau may permit a covered person 

to conduct a trial program that is limited in time and scope, 

subject to specified standards and procedures, for the purpose 

of providing trial disclosures to consumers that are designed to 

improve upon any model form issued pursuant to subsection 

(b)(1), or any other model form issued to implement an enumerated statute, as applicable. 

(2) SAFE HARBOR.—The standards and procedures issued 

by the Bureau shall be designed to encourage covered persons 

to conduct trial disclosure programs. For the purposes of administering this subsection, the Bureau may establish a limited 

period during which a covered person conducting a trial disclosure program shall be deemed to be in compliance with, or may 

be exempted from, a requirement of a rule or an enumerated 

consumer law. 

(3) PUBLIC DISCLOSURE.—The rules of the Bureau shall 

provide for public disclosure of trial disclosure programs, which 

public disclosure may be limited, to the extent necessary to encourage covered persons to conduct effective trials. 

(f) COMBINED MORTGAGE LOAN DISCLOSURE.—Not later than 1 

year after the designated transfer date, the Bureau shall propose for 

public comment rules and model disclosures that combine the disclosures required under the Truth in Lending Act and sections 4 

and 5 of the Real Estate Settlement Procedures Act of 1974, into a 

single, integrated disclosure for mortgage loan transactions covered 

by those laws, unless the Bureau determines that any proposal 

issued by the Board of Governors and the Secretary of Housing and 

Urban Development carries out the same purpose. 

SEC. 1033. CONSUMER RIGHTS TO ACCESS INFORMATION. 

(a) IN GENERAL.—Subject to rules prescribed by the Bureau, a 

covered person shall make available to a consumer, upon request, 

information in the control or possession of the covered person concerning the consumer financial product or service that the consumer 

obtained from such covered person, including information relating 

to any transaction, series of transactions, or to the account including costs, charges and usage data. The information shall be made 

available in an electronic form usable by consumers. 

(b) EXCEPTIONS.—A covered person may not be required by this 

section to make available to the consumer— 

(1) any confidential commercial information, including an 

algorithm used to derive credit scores or other risk scores or 

predictors; 


sroberts on DSKD5P82C1PROD with HEARING
644 

(2) any information collected by the covered person for the 

purpose of preventing fraud or money laundering, or detecting, 

or making any report regarding other unlawful or potentially 

unlawful conduct; 

(3) any information required to be kept confidential by any 

other provision of law; or 

(4) any information that the covered person cannot retrieve 

in the ordinary course of its business with respect to that information. 

(c) NO DUTY TO MAINTAIN RECORDS.—Nothing in this section 

shall be construed to impose any duty on a covered person to maintain or keep any information about a consumer. 

(d) STANDARDIZED FORMATS FOR DATA.—The Bureau, by rule, 

shall prescribe standards applicable to covered persons to promote 

the development and use of standardized formats for information, 

including through the use of machine readable files, to be made 

available to consumers under this section. 

(e) CONSULTATION.—The Bureau shall, when prescribing any 

rule under this section, consult with the Federal banking agencies 

and the Federal Trade Commission to ensure, to the extent appropriate, that the rules— 

(1) impose substantively similar requirements on covered 

persons; 

(2) take into account conditions under which covered persons do business both in the United States and in other countries; and 

(3) do not require or promote the use of any particular technology in order to develop systems for compliance. 

SEC. 1034. RESPONSE TO CONSUMER COMPLAINTS AND INQUIRIES. 

(a) TIMELY REGULATOR RESPONSE TO CONSUMERS.—The Bureau shall establish, in consultation with the appropriate Federal 

regulatory agencies, reasonable procedures to provide a timely response to consumers, in writing where appropriate, to complaints 

against, or inquiries concerning, a covered person, including— 

(1) steps that have been taken by the regulator in response 

to the complaint or inquiry of the consumer; 

(2) any responses received by the regulator from the covered 

person; and 

(3) any follow-up actions or planned follow-up actions by 

the regulator in response to the complaint or inquiry of the consumer. 

(b) TIMELY RESPONSE TO REGULATOR BY COVERED PERSON.— 

A covered person subject to supervision and primary enforcement by 

the Bureau pursuant to section 1025 shall provide a timely response, in writing where appropriate, to the Bureau, the prudential 

regulators, and any other agency having jurisdiction over such covered person concerning a consumer complaint or inquiry, including— 

(1) steps that have been taken by the covered person to respond to the complaint or inquiry of the consumer; 

(2) responses received by the covered person from the consumer; and 

(3) follow-up actions or planned follow-up actions by the 

covered person to respond to the complaint or inquiry of the 

consumer. 


sroberts on DSKD5P82C1PROD with HEARING
645 

(c) PROVISION OF INFORMATION TO CONSUMERS.— 

(1) IN GENERAL.—A covered person subject to supervision 

and primary enforcement by the Bureau pursuant to section 

1025 shall, in a timely manner, comply with a consumer request for information in the control or possession of such covered person concerning the consumer financial product or service that the consumer obtained from such covered person, including supporting written documentation, concerning the account of the consumer. 

(2) EXCEPTIONS.—A covered person subject to supervision 

and primary enforcement by the Bureau pursuant to section 

1025, a prudential regulator, and any other agency having jurisdiction over a covered person subject to supervision and primary enforcement by the Bureau pursuant to section 1025 may 

not be required by this section to make available to the consumer— 

(A) any confidential commercial information, including 

an algorithm used to derive credit scores or other risk 

scores or predictors; 

(B) any information collected by the covered person for 

the purpose of preventing fraud or money laundering, or 

detecting or making any report regarding other unlawful or 

potentially unlawful conduct; 

(C) any information required to be kept confidential by 

any other provision of law; or 

(D) any nonpublic or confidential information, including confidential supervisory information. 

(d) AGREEMENTS WITH OTHER AGENCIES.—The Bureau shall 

enter into a memorandum of understanding with any affected Federal regulatory agency regarding procedures by which any covered 

person, and the prudential regulators, and any other agency having 

jurisdiction over a covered person, including the Secretary of the Department of Housing and Urban Development and the Secretary of 

Education, shall comply with this section. 

SEC. 1035. PRIVATE EDUCATION LOAN OMBUDSMAN. 

(a) ESTABLISHMENT.—The Secretary, in consultation with the 

Director, shall designate a Private Education Loan Ombudsman (in 

this section referred to as the ‘‘Ombudsman’’) within the Bureau, to 

provide timely assistance to borrowers of private education loans. 

(b) PUBLIC INFORMATION.—The Secretary and the Director shall 

disseminate information about the availability and functions of the 

Ombudsman to borrowers and potential borrowers, as well as institutions of higher education, lenders, guaranty agencies, loan 

servicers, and other participants in private education student loan 

programs. 

(c) FUNCTIONS OF OMBUDSMAN.—The Ombudsman designated 

under this subsection shall— 

(1) in accordance with regulations of the Director, receive, 

review, and attempt to resolve informally complaints from borrowers of loans described in subsection (a), including, as appropriate, attempts to resolve such complaints in collaboration 

with the Department of Education and with institutions of 

higher education, lenders, guaranty agencies, loan servicers, 

and other participants in private education loan programs; 


sroberts on DSKD5P82C1PROD with HEARING
646 

(2) not later than 90 days after the designated transfer 

date, establish a memorandum of understanding with the student loan ombudsman established under section 141(f) of the 

Higher Education Act of 1965 (20 U.S.C. 1018(f)), to ensure coordination in providing assistance to and serving borrowers 

seeking to resolve complaints related to their private education 

or Federal student loans; 

(3) compile and analyze data on borrower complaints regarding private education loans; and 

(4) make appropriate recommendations to the Director, the 

Secretary, the Secretary of Education, the Committee on Banking, Housing, and Urban Affairs and the Committee on Health, 

Education, Labor, and Pensions of the Senate and the Committee on Financial Services and the Committee on Education 

and Labor of the House of Representatives. 

(d) ANNUAL REPORTS.— 

(1) IN GENERAL.—The Ombudsman shall prepare an annual report that describes the activities, and evaluates the effectiveness of the Ombudsman during the preceding year. 

(2) SUBMISSION.—The report required by paragraph (1) 

shall be submitted on the same date annually to the Secretary, 

the Secretary of Education, the Committee on Banking, Housing, and Urban Affairs and the Committee on Health, Education, Labor, and Pensions of the Senate and the Committee 

on Financial Services and the Committee on Education and 

Labor of the House of Representatives. 

(e) DEFINITIONS.—For purposes of this section, the terms ‘‘private education loan’’ and ‘‘institution of higher education’’ have the 

same meanings as in section 140 of the Truth in Lending Act (15 

U.S.C. 1650). 

SEC. 1036. PROHIBITED ACTS. 

(a) IN GENERAL.—It shall be unlawful for— 

(1) any covered person or service provider— 

(A) to offer or provide to a consumer any financial 

product or service not in conformity with Federal consumer 

financial law, or otherwise commit any act or omission in 

violation of a Federal consumer financial law; or 

(B) to engage in any unfair, deceptive, or abusive act 

or practice; 

(2) any covered person or service provider to fail or refuse, 

as required by Federal consumer financial law, or any rule or 

order issued by the Bureau thereunder— 

(A) to permit access to or copying of records; 

(B) to establish or maintain records; or 

(C) to make reports or provide information to the Bureau; or 

(3) any person to knowingly or recklessly provide substantial assistance to a covered person or service provider in violation of the provisions of section 1031, or any rule or order 

issued thereunder, and notwithstanding any provision of this 

title, the provider of such substantial assistance shall be 

deemed to be in violation of that section to the same extent as 

the person to whom such assistance is provided. 


sroberts on DSKD5P82C1PROD with HEARING
647 

(b) EXCEPTION.—No person shall be held to have violated subsection (a)(1) solely by virtue of providing or selling time or space 

to a covered person or service provider placing an advertisement. 

SEC. 1037. EFFECTIVE DATE. 

This subtitle shall take effect on the designated transfer date. 

Subtitle D—Preservation of State Law 

SEC. 1041. RELATION TO STATE LAW. 

(a) IN GENERAL.— 

(1) RULE OF CONSTRUCTION.—This title, other than sections 

1044 through 1048, may not be construed as annulling, altering, or affecting, or exempting any person subject to the provisions of this title from complying with, the statutes, regulations, 

orders, or interpretations in effect in any State, except to the extent that any such provision of law is inconsistent with the provisions of this title, and then only to the extent of the inconsistency. 

(2) GREATER PROTECTION UNDER STATE LAW.—For purposes 

of this subsection, a statute, regulation, order, or interpretation 

in effect in any State is not inconsistent with the provisions of 

this title if the protection that such statute, regulation, order, or 

interpretation affords to consumers is greater than the protection provided under this title. A determination regarding 

whether a statute, regulation, order, or interpretation in effect 

in any State is inconsistent with the provisions of this title may 

be made by the Bureau on its own motion or in response to a 

nonfrivolous petition initiated by any interested person. 

(b) RELATION TO OTHER PROVISIONS OF ENUMERATED CONSUMER LAWS THAT RELATE TO STATE LAW.—No provision of this 

title, except as provided in section 1083, shall be construed as modifying, limiting, or superseding the operation of any provision of an 

enumerated consumer law that relates to the application of a law 

in effect in any State with respect to such Federal law. 

(c) ADDITIONAL CONSUMER PROTECTION REGULATIONS IN RESPONSE TO STATE ACTION.— 

(1) NOTICE OF PROPOSED RULE REQUIRED.—The Bureau 

shall issue a notice of proposed rulemaking whenever a majority of the States has enacted a resolution in support of the establishment or modification of a consumer protection regulation 

by the Bureau. 

(2) BUREAU CONSIDERATIONS REQUIRED FOR ISSUANCE OF

FINAL REGULATION.—Before prescribing a final regulation based 

upon a notice issued pursuant to paragraph (1), the Bureau 

shall take into account whether— 

(A) the proposed regulation would afford greater protection to consumers than any existing regulation; 

(B) the intended benefits of the proposed regulation for 

consumers would outweigh any increased costs or inconveniences for consumers, and would not discriminate unfairly 

against any category or class of consumers; and 

(C) a Federal banking agency has advised that the proposed regulation is likely to present an unacceptable safety 

and soundness risk to insured depository institutions. 

(3) EXPLANATION OF CONSIDERATIONS.—The Bureau— 


sroberts on DSKD5P82C1PROD with HEARING
648 

(A) shall include a discussion of the considerations required in paragraph (2) in the Federal Register notice of a 

final regulation prescribed pursuant to this subsection; and 

(B) whenever the Bureau determines not to prescribe a 

final regulation, shall publish an explanation of such determination in the Federal Register, and provide a copy of 

such explanation to each State that enacted a resolution in 

support of the proposed regulation, the Committee on Banking, Housing, and Urban Affairs of the Senate, and the 

Committee on Financial Services of the House of Representatives. 

(4) RESERVATION OF AUTHORITY.—No provision of this subsection shall be construed as limiting or restricting the authority of the Bureau to enhance consumer protection standards established pursuant to this title in response to its own motion or 

in response to a request by any other interested person. 

(5) RULE OF CONSTRUCTION.—No provision of this subsection shall be construed as exempting the Bureau from complying with subchapter II of chapter 5 of title 5, United States 

Code. 

(6) DEFINITION.—For purposes of this subsection, the term 

‘‘consumer protection regulation’’ means a regulation that the 

Bureau is authorized to prescribe under the Federal consumer 

financial laws. 

SEC. 1042. PRESERVATION OF ENFORCEMENT POWERS OF STATES. 

(a) IN GENERAL.— (1) ACTION BY STATE.—Except as provided in paragraph 

(2), the attorney general (or the equivalent thereof) of any State 

may bring a civil action in the name of such State in any district court of the United States in that State or in State court 

that is located in that State and that has jurisdiction over the 

defendant, to enforce provisions of this title or regulations 

issued under this title, and to secure remedies under provisions 

of this title or remedies otherwise provided under other law. A 

State regulator may bring a civil action or other appropriate 

proceeding to enforce the provisions of this title or regulations 

issued under this title with respect to any entity that is Statechartered, incorporated, licensed, or otherwise authorized to do 

business under State law (except as provided in paragraph (2)), 

and to secure remedies under provisions of this title or remedies 

otherwise provided under other provisions of law with respect 

to such an entity. 

(2) ACTION BY STATE AGAINST NATIONAL BANK OR FEDERAL

SAVINGS ASSOCIATION TO ENFORCE RULES.— 

(A) IN GENERAL.—Except as permitted under subparagraph (B), the attorney general (or equivalent thereof) of 

any State may not bring a civil action in the name of such 

State against a national bank or Federal savings association to enforce a provision of this title. 

(B) ENFORCEMENT OF RULES PERMITTED.—The attorney 

general (or the equivalent thereof) of any State may bring 

a civil action in the name of such State against a national 

bank or Federal savings association in any district court of 

the United States in the State or in State court that is located in that State and that has jurisdiction over the deVerDate Mar 15 2010 04:29 Jul 07, 2010 Jkt 057098 PO 00000 Frm 00652 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
649 

fendant to enforce a regulation prescribed by the Bureau 

under a provision of this title and to secure remedies under 

provisions of this title or remedies otherwise provided 

under other law. 

(3) RULE OF CONSTRUCTION.—No provision of this title 

shall be construed as modifying, limiting, or superseding the 

operation of any provision of an enumerated consumer law that 

relates to the authority of a State attorney general or State regulator to enforce such Federal law. 

(b) CONSULTATION REQUIRED.— 

(1) NOTICE.— 

(A) IN GENERAL.—Before initiating any action in a 

court or other administrative or regulatory proceeding 

against any covered person as authorized by subsection (a) 

to enforce any provision of this title, including any regulation prescribed by the Bureau under this title, a State attorney general or State regulator shall timely provide a copy 

of the complete complaint to be filed and written notice describing such action or proceeding to the Bureau and the 

prudential regulator, if any, or the designee thereof. 

(B) EMERGENCY ACTION.—If prior notice is not practicable, the State attorney general or State regulator shall 

provide a copy of the complete complaint and the notice to 

the Bureau and the prudential regulator, if any, immediately upon instituting the action or proceeding. 

(C) CONTENTS OF NOTICE.—The notification required 

under this paragraph shall, at a minimum, describe— 

(i) the identity of the parties; 

(ii) the alleged facts underlying the proceeding; 

and 

(iii) whether there may be a need to coordinate the 

prosecution of the proceeding so as not to interfere with 

any action, including any rulemaking, undertaken by 

the Bureau, a prudential regulator, or another Federal 

agency. 

(2) BUREAU RESPONSE.—In any action described in paragraph (1), the Bureau may— 

(A) intervene in the action as a party; 

(B) upon intervening— 

(i) remove the action to the appropriate United 

States district court, if the action was not originally 

brought there; and 

(ii) be heard on all matters arising in the action; 

and 

(C) appeal any order or judgment, to the same extent 

as any other party in the proceeding may. 

(c) REGULATIONS.—The Bureau shall prescribe regulations to 

implement the requirements of this section and, from time to time, 

provide guidance in order to further coordinate actions with the 

State attorneys general and other regulators. 

(d) PRESERVATION OF STATE AUTHORITY.— 

(1) STATE CLAIMS.—No provision of this section shall be 

construed as altering, limiting, or affecting the authority of a 

State attorney general or any other regulatory or enforcement 


sroberts on DSKD5P82C1PROD with HEARING
650 

agency or authority to bring an action or other regulatory proceeding arising solely under the law in effect in that State. 

(2) STATE SECURITIES REGULATORS.—No provision of this 

title shall be construed as altering, limiting, or affecting the authority of a State securities commission (or any agency or office 

performing like functions) under State law to adopt rules, initiate enforcement proceedings, or take any other action with respect to a person regulated by such commission or authority. 

(3) STATE INSURANCE REGULATORS.—No provision of this 

title shall be construed as altering, limiting, or affecting the authority of a State insurance commission or State insurance regulator under State law to adopt rules, initiate enforcement proceedings, or take any other action with respect to a person regulated by such commission or regulator. 

SEC. 1043. PRESERVATION OF EXISTING CONTRACTS. 

This title, and regulations, orders, guidance, and interpretations prescribed, issued, or established by the Bureau, shall not be 

construed to alter or affect the applicability of any regulation, order, 

guidance, or interpretation prescribed, issued, and established by 

the Comptroller of the Currency or the Director of the Office of 

Thrift Supervision regarding the applicability of State law under 

Federal banking law to any contract entered into on or before the 

date of enactment of this Act, by national banks, Federal savings 

associations, or subsidiaries thereof that are regulated and supervised by the Comptroller of the Currency or the Director of the Office 

of Thrift Supervision, respectively. 

SEC. 1044. STATE LAW PREEMPTION STANDARDS FOR NATIONAL 

BANKS AND SUBSIDIARIES CLARIFIED. 

(a) IN GENERAL.—Chapter one of title LXII of the Revised Statutes of the United States (12 U.S.C. 21 et seq.) is amended by inserting after section 5136B the following new section: 

‘‘SEC. 5136C. STATE LAW PREEMPTION STANDARDS FOR NATIONAL 

BANKS AND SUBSIDIARIES CLARIFIED. 

‘‘(a) DEFINITIONS.—For purposes of this section, the following 

definitions shall apply: 

‘‘(1) NATIONAL BANK.—The term ‘national bank’ includes— 

‘‘(A) any bank organized under the laws of the United 

States; and 

‘‘(B) any Federal branch established in accordance with 

the International Banking Act of 1978. 

‘‘(2) STATE CONSUMER FINANCIAL LAWS.—The term ‘State 

consumer financial law’ means a State law that does not directly or indirectly discriminate against national banks and 

that directly and specifically regulates the manner, content, or 

terms and conditions of any financial transaction (as may be 

authorized for national banks to engage in), or any account related thereto, with respect to a consumer. 

‘‘(3) OTHER DEFINITIONS.—The terms ‘affiliate’, ‘subsidiary’, 

‘includes’, and ‘including’ have the same meanings as in section 

3 of the Federal Deposit Insurance Act. 

‘‘(b) PREEMPTION STANDARD.— 

‘‘(1) IN GENERAL.—State consumer financial laws are preempted, only if— 


sroberts on DSKD5P82C1PROD with HEARING
651 

‘‘(A) application of a State consumer financial law 

would have a discriminatory effect on national banks, in 

comparison with the effect of the law on a bank chartered 

by that State; 

‘‘(B) in accordance with the legal standard for preemption in the decision of the Supreme Court of the United 

States in Barnett Bank of Marion County, N. A. v. Nelson, 

Florida Insurance Commissioner, et al., 517 U.S. 25 (1996), 

the State consumer financial law prevents or significantly 

interferes with the exercise by the national bank of its powers; and any preemption determination under this subparagraph may be made by a court, or by regulation or order 

of the Comptroller of the Currency on a case-by-case basis, 

in accordance with applicable law; or 

‘‘(C) the State consumer financial law is preempted by 

a provision of Federal law other than this title. 

‘‘(2) SAVINGS CLAUSE.—This title and section 24 of the Federal Reserve Act (12 U.S.C. 371) do not preempt, annul, or affect the applicability of any State law to any subsidiary or affiliate of a national bank (other than a subsidiary or affiliate that 

is chartered as a national bank). 

‘‘(3) CASE-BY-CASE BASIS.— ‘‘(A) DEFINITION.—As used in this section the term 

‘case-by-case basis’ refers to a determination pursuant to 

this section made by the Comptroller concerning the impact 

of a particular State consumer financial law on any national bank that is subject to that law, or the law of any 

other State with substantively equivalent terms. 

‘‘(B) CONSULTATION.—When making a determination 

on a case-by-case basis that a State consumer financial law 

of another State has substantively equivalent terms as one 

that the Comptroller is preempting, the Comptroller shall 

first consult with the Bureau of Consumer Financial Protection and shall take the views of the Bureau into account 

when making the determination. 

‘‘(4) RULE OF CONSTRUCTION.—This title does not occupy 

the field in any area of State law. 

‘‘(5) STANDARDS OF REVIEW.— ‘‘(A) PREEMPTION.—A court reviewing any determinations made by the Comptroller regarding preemption of a 

State law by this title or section 24 of the Federal Reserve 

Act (12 U.S.C. 371) shall assess the validity of such determinations, depending upon the thoroughness evident in the 

consideration of the agency, the validity of the reasoning of 

the agency, the consistency with other valid determinations 

made by the agency, and other factors which the court finds 

persuasive and relevant to its decision. 

‘‘(B) SAVINGS CLAUSE.—Except as provided in subparagraph (A), nothing in this section shall affect the deference 

that a court may afford to the Comptroller in making determinations regarding the meaning or interpretation of title 

LXII of the Revised Statutes of the United States or other 

Federal laws. 

‘‘(6) COMPTROLLER DETERMINATION NOT DELEGABLE.—Any 

regulation, order, or determination made by the Comptroller of 


sroberts on DSKD5P82C1PROD with HEARING
652 

the Currency under paragraph (1)(B) shall be made by the 

Comptroller, and shall not be delegable to another officer or employee of the Comptroller of the Currency. 

‘‘(c) SUBSTANTIAL EVIDENCE.—No regulation or order of the 

Comptroller of the Currency prescribed under subsection (b)(1)(B), 

shall be interpreted or applied so as to invalidate, or otherwise declare inapplicable to a national bank, the provision of the State consumer financial law, unless substantial evidence, made on the 

record of the proceeding, supports the specific finding regarding the 

preemption of such provision in accordance with the legal standard 

of the decision of the Supreme Court of the United States in Barnett 

Bank of Marion County, N.A. v. Nelson, Florida Insurance Commissioner, et al., 517 U.S. 25 (1996). 

‘‘(d) PERIODIC REVIEW OF PREEMPTION DETERMINATIONS.— 

‘‘(1) IN GENERAL.—The Comptroller of the Currency shall 

periodically conduct a review, through notice and public comment, of each determination that a provision of Federal law 

preempts a State consumer financial law. The agency shall conduct such review within the 5-year period after prescribing or 

otherwise issuing such determination, and at least once during 

each 5-year period thereafter. After conducting the review of, 

and inspecting the comments made on, the determination, the 

agency shall publish a notice in the Federal Register announcing the decision to continue or rescind the determination or a 

proposal to amend the determination. Any such notice of a proposal to amend a determination and the subsequent resolution 

of such proposal shall comply with the procedures set forth in 

subsections (a) and (b) of section 5244 of the Revised Statutes 

of the United States (12 U.S.C. 43 (a), (b)). 

‘‘(2) REPORTS TO CONGRESS.—At the time of issuing a review conducted under paragraph (1), the Comptroller of the 

Currency shall submit a report regarding such review to the 

Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate. The report submitted to the respective committees shall address whether the agency intends to continue, 

rescind, or propose to amend any determination that a provision of Federal law preempts a State consumer financial law, 

and the reasons therefor. 

‘‘(e) APPLICATION OF STATE CONSUMER FINANCIAL LAW TO SUBSIDIARIES AND AFFILIATES.—Notwithstanding any provision of this 

title or section 24 of Federal Reserve Act (12 U.S.C. 371), a State 

consumer financial law shall apply to a subsidiary or affiliate of a 

national bank (other than a subsidiary or affiliate that is chartered 

as a national bank) to the same extent that the State consumer financial law applies to any person, corporation, or other entity subject to such State law. 

‘‘(f) PRESERVATION OF POWERS RELATED TO CHARGING INTEREST.—No provision of this title shall be construed as altering or otherwise affecting the authority conferred by section 5197 of the Revised Statutes of the United States (12 U.S.C. 85) for the charging 

of interest by a national bank at the rate allowed by the laws of the 

State, territory, or district where the bank is located, including with 

respect to the meaning of ‘interest’ under such provision. 


sroberts on DSKD5P82C1PROD with HEARING
653 

‘‘(g) TRANSPARENCY OF OCC PREEMPTION DETERMINATIONS.— 

The Comptroller of the Currency shall publish and update no less 

frequently than quarterly, a list of preemption determinations by the 

Comptroller of the Currency then in effect that identifies the activities and practices covered by each determination and the requirements and constraints determined to be preempted.’’. 

(b) CLERICAL AMENDMENT.—The table of sections for chapter 

one of title LXII of the Revised Statutes of the United States is 

amended by inserting after the item relating to section 5136B the 

following new item: 

‘‘Sec. 5136C. State law preemption standards for national banks and subsidiaries 

clarified.’’. 

SEC. 1045. CLARIFICATION OF LAW APPLICABLE TO NONDEPOSITORY 

INSTITUTION SUBSIDIARIES. 

Section 5136C of the Revised Statutes of the United States (as 

added by this subtitle) is amended by adding at the end the following: 

‘‘(h) CLARIFICATION OF LAW APPLICABLE TO NONDEPOSITORY INSTITUTION SUBSIDIARIES AND AFFILIATES OF NATIONAL BANKS.— 

‘‘(1) DEFINITIONS.—For purposes of this subsection, the 

terms ‘depository institution’, ‘subsidiary’, and ‘affiliate’ have 

the same meanings as in section 3 of the Federal Deposit Insurance Act. 

‘‘(2) RULE OF CONSTRUCTION.—No provision of this title or 

section 24 of the Federal Reserve Act (12 U.S.C. 371) shall be 

construed as preempting, annulling, or affecting the applicability of State law to any subsidiary, affiliate, or agent of a national bank (other than a subsidiary, affiliate, or agent that is 

chartered as a national bank).’’. 

SEC. 1046. STATE LAW PREEMPTION STANDARDS FOR FEDERAL SAVINGS ASSOCIATIONS AND SUBSIDIARIES CLARIFIED. 

(a) IN GENERAL.—The Home Owners’ Loan Act (12 U.S.C. 1461 

et seq.) is amended by inserting after section 5 the following new 

section: 

‘‘SEC. 6. STATE LAW PREEMPTION STANDARDS FOR FEDERAL SAVINGS 

ASSOCIATIONS CLARIFIED. 

‘‘(a) IN GENERAL.—Any determination by a court or by the Director or any successor officer or agency regarding the relation of 

State law to a provision of this Act or any regulation or order prescribed under this Act shall be made in accordance with the laws 

and legal standards applicable to national banks regarding the preemption of State law. 

‘‘(b) PRINCIPLES OF CONFLICT PREEMPTION APPLICABLE.—Notwithstanding the authorities granted under sections 4 and 5, this 

Act does not occupy the field in any area of State law.’’. 

(b) CLERICAL AMENDMENT.—The table of sections for the Home 

Owners’ Loan Act (12 U.S.C. 1461 et seq.) is amended by striking 

the item relating to section 6 and inserting the following new item: 

‘‘Sec. 6. State law preemption standards for Federal savings associations and 

subsidiaries clarified.’’. 


sroberts on DSKD5P82C1PROD with HEARING
654 

SEC. 1047. VISITORIAL STANDARDS FOR NATIONAL BANKS AND SAVINGS ASSOCIATIONS. 

(a) NATIONAL BANKS.—Section 5136C of the Revised Statutes of 

the United States (as added by this subtitle) is amended by adding 

at the end the following: 

‘‘(i) VISITORIAL POWERS.— 

‘‘(1) IN GENERAL.—In accordance with the decision of the 

Supreme Court of the United States in Cuomo v. Clearing 

House Assn., L. L. C. (129 S. Ct. 2710 (2009)), no provision of 

this title which relates to visitorial powers or otherwise limits 

or restricts the visitorial authority to which any national bank 

is subject shall be construed as limiting or restricting the authority of any attorney general (or other chief law enforcement 

officer) of any State to bring an action against a national bank 

in a court of appropriate jurisdiction to enforce an applicable 

law and to seek relief as authorized by such law. 

‘‘(j) ENFORCEMENT ACTIONS.—The ability of the Comptroller of 

the Currency to bring an enforcement action under this title or section 5 of the Federal Trade Commission Act does not preclude any 

private party from enforcing rights granted under Federal or State 

law in the courts.’’. 

(b) SAVINGS ASSOCIATIONS.—Section 6 of the Home Owners’ 

Loan Act (as added by this title) is amended by adding at the end 

the following: 

‘‘(c) VISITORIAL POWERS.—The provisions of sections 5136C(i) of 

the Revised Statutes of the United States shall apply to Federal savings associations, and any subsidiary thereof, to the same extent 

and in the same manner as if such savings associations, or subsidiaries thereof, were national banks or subsidiaries of national banks, 

respectively.’’ 

‘‘(d) ENFORCEMENT ACTIONS.—The ability of the Comptroller of 

the Currency to bring an enforcement action under this Act or section 5 of the Federal Trade Commission Act does not preclude any 

private party from enforcing rights granted under Federal or State 

law in the courts.’’. 

SEC. 1048. EFFECTIVE DATE. 

This subtitle shall become effective on the designated transfer 

date. 

Subtitle E—Enforcement Powers 

SEC. 1051. DEFINITIONS. 

For purposes of this subtitle, the following definitions shall 

apply: 

(1) BUREAU INVESTIGATION.—The term ‘‘Bureau investigation’’ means any inquiry conducted by a Bureau investigator for 

the purpose of ascertaining whether any person is or has been 

engaged in any conduct that is a violation, as defined in this 

section. 

(2) BUREAU INVESTIGATOR.—The term ‘‘Bureau investigator’’ means any attorney or investigator employed by the Bureau who is charged with the duty of enforcing or carrying into 

effect any Federal consumer financial law. 

(3) CUSTODIAN.—The term ‘‘custodian’’ means the custodian 

or any deputy custodian designated by the Bureau. 


sroberts on DSKD5P82C1PROD with HEARING
655 

(4) DOCUMENTARY MATERIAL.—The term ‘‘documentary material’’ includes the original or any copy of any book, document, 

record, report, memorandum, paper, communication, tabulation, chart, logs, electronic files, or other data or data compilations stored in any medium. 

(5) VIOLATION.—The term ‘‘violation’’ means any act or 

omission that, if proved, would constitute a violation of any 

provision of Federal consumer financial law. 

SEC. 1052. INVESTIGATIONS AND ADMINISTRATIVE DISCOVERY. 

(a) JOINT INVESTIGATIONS.— 

(1) IN GENERAL.—The Bureau or, where appropriate, a Bureau investigator, may engage in joint investigations and requests for information, as authorized under this title. 

(2) FAIR LENDING.—The authority under paragraph (1) includes matters relating to fair lending, and where appropriate, 

joint investigations with, and requests for information from, the 

Secretary of Housing and Urban Development, the Attorney 

General of the United States, or both. 

(b) SUBPOENAS.— 

(1) IN GENERAL.—The Bureau or a Bureau investigator may 

issue subpoenas for the attendance and testimony of witnesses 

and the production of relevant papers, books, documents, or 

other material in connection with hearings under this title. 

(2) FAILURE TO OBEY.—In the case of contumacy or refusal 

to obey a subpoena issued pursuant to this paragraph and 

served upon any person, the district court of the United States 

for any district in which such person is found, resides, or transacts business, upon application by the Bureau or a Bureau investigator and after notice to such person, may issue an order 

requiring such person to appear and give testimony or to appear and produce documents or other material. 

(3) CONTEMPT.—Any failure to obey an order of the court 

under this subsection may be punished by the court as a contempt thereof. 

(c) DEMANDS.— 

(1) IN GENERAL.—Whenever the Bureau has reason to believe that any person may be in possession, custody, or control 

of any documentary material or tangible things, or may have 

any information, relevant to a violation, the Bureau may, before 

the institution of any proceedings under the Federal consumer 

financial law, issue in writing, and cause to be served upon 

such person, a civil investigative demand requiring such person 

to— 

(A) produce such documentary material for inspection 

and copying or reproduction in the form or medium requested by the Bureau; 

(B) submit such tangible things; 

(C) file written reports or answers to questions; 

(D) give oral testimony concerning documentary material, tangible things, or other information; or 

(E) furnish any combination of such material, answers, 

or testimony. 

(2) REQUIREMENTS.—Each civil investigative demand shall 

state the nature of the conduct constituting the alleged violation 


sroberts on DSKD5P82C1PROD with HEARING
656 

which is under investigation and the provision of law applicable to such violation. 

(3) PRODUCTION OF DOCUMENTS.—Each civil investigative 

demand for the production of documentary material shall— 

(A) describe each class of documentary material to be 

produced under the demand with such definiteness and certainty as to permit such material to be fairly identified; 

(B) prescribe a return date or dates which will provide 

a reasonable period of time within which the material so 

demanded may be assembled and made available for inspection and copying or reproduction; and 

(C) identify the custodian to whom such material shall 

be made available. 

(4) PRODUCTION OF THINGS.—Each civil investigative demand for the submission of tangible things shall— 

(A) describe each class of tangible things to be submitted under the demand with such definiteness and certainty as to permit such things to be fairly identified; 

(B) prescribe a return date or dates which will provide 

a reasonable period of time within which the things so demanded may be assembled and submitted; and 

(C) identify the custodian to whom such things shall be 

submitted. 

(5) DEMAND FOR WRITTEN REPORTS OR ANSWERS.—Each 

civil investigative demand for written reports or answers to 

questions shall— 

(A) propound with definiteness and certainty the reports to be produced or the questions to be answered; 

(B) prescribe a date or dates at which time written reports or answers to questions shall be submitted; and 

(C) identify the custodian to whom such reports or answers shall be submitted. 

(6) ORAL TESTIMONY.—Each civil investigative demand for 

the giving of oral testimony shall— 

(A) prescribe a date, time, and place at which oral testimony shall be commenced; and 

(B) identify a Bureau investigator who shall conduct 

the investigation and the custodian to whom the transcript 

of such investigation shall be submitted. 

(7) SERVICE.—Any civil investigative demand issued, and 

any enforcement petition filed, under this section may be 

served— 

(A) by any Bureau investigator at any place within the 

territorial jurisdiction of any court of the United States; 

and 

(B) upon any person who is not found within the territorial jurisdiction of any court of the United States— 

(i) in such manner as the Federal Rules of Civil 

Procedure prescribe for service in a foreign nation; and 

(ii) to the extent that the courts of the United 

States have authority to assert jurisdiction over such 

person, consistent with due process, the United States 

District Court for the District of Columbia shall have 

the same jurisdiction to take any action respecting compliance with this section by such person that such disVerDate Mar 15 2010 04:29 Jul 07, 2010 Jkt 057098 PO 00000 Frm 00660 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
657 

trict court would have if such person were personally 

within the jurisdiction of such district court. 

(8) METHOD OF SERVICE.—Service of any civil investigative 

demand or any enforcement petition filed under this section 

may be made upon a person, including any legal entity, by— 

(A) delivering a duly executed copy of such demand or 

petition to the individual or to any partner, executive officer, managing agent, or general agent of such person, or to 

any agent of such person authorized by appointment or by 

law to receive service of process on behalf of such person; 

(B) delivering a duly executed copy of such demand or 

petition to the principal office or place of business of the 

person to be served; or 

(C) depositing a duly executed copy in the United 

States mails, by registered or certified mail, return receipt 

requested, duly addressed to such person at the principal 

office or place of business of such person. 

(9) PROOF OF SERVICE.— (A) IN GENERAL.—A verified return by the individual 

serving any civil investigative demand or any enforcement 

petition filed under this section setting forth the manner of 

such service shall be proof of such service. 

(B) RETURN RECEIPTS.—In the case of service by registered or certified mail, such return shall be accompanied 

by the return post office receipt of delivery of such demand 

or enforcement petition. 

(10) PRODUCTION OF DOCUMENTARY MATERIAL.—The production of documentary material in response to a civil investigative demand shall be made under a sworn certificate, in 

such form as the demand designates, by the person, if a natural 

person, to whom the demand is directed or, if not a natural person, by any person having knowledge of the facts and circumstances relating to such production, to the effect that all of 

the documentary material required by the demand and in the 

possession, custody, or control of the person to whom the demand is directed has been produced and made available to the 

custodian. 

(11) SUBMISSION OF TANGIBLE THINGS.—The submission of 

tangible things in response to a civil investigative demand shall 

be made under a sworn certificate, in such form as the demand 

designates, by the person to whom the demand is directed or, 

if not a natural person, by any person having knowledge of the 

facts and circumstances relating to such production, to the effect that all of the tangible things required by the demand and 

in the possession, custody, or control of the person to whom the 

demand is directed have been submitted to the custodian. 

(12) SEPARATE ANSWERS.—Each reporting requirement or 

question in a civil investigative demand shall be answered separately and fully in writing under oath, unless it is objected to, 

in which event the reasons for the objection shall be stated in 

lieu of an answer, and it shall be submitted under a sworn certificate, in such form as the demand designates, by the person, 

if a natural person, to whom the demand is directed or, if not 

a natural person, by any person responsible for answering each 

reporting requirement or question, to the effect that all informaVerDate Mar 15 2010 04:29 Jul 07, 2010 Jkt 057098 PO 00000 Frm 00661 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
658 

tion required by the demand and in the possession, custody, 

control, or knowledge of the person to whom the demand is directed has been submitted. 

(13) TESTIMONY.— (A) IN GENERAL.— (i) OATH AND RECORDATION.—The examination of 

any person pursuant to a demand for oral testimony 

served under this subsection shall be taken before an 

officer authorized to administer oaths and affirmations 

by the laws of the United States or of the place at 

which the examination is held. The officer before whom 

oral testimony is to be taken shall put the witness on 

oath or affirmation and shall personally, or by any individual acting under the direction of and in the presence of the officer, record the testimony of the witness. 

(ii) TRANSCRIPTION.—The testimony shall be taken 

stenographically and transcribed. 

(iii) TRANSMISSION TO CUSTODIAN.—After the testimony is fully transcribed, the officer investigator before 

whom the testimony is taken shall promptly transmit 

a copy of the transcript of the testimony to the custodian. 

(B) PARTIES PRESENT.—Any Bureau investigator before 

whom oral testimony is to be taken shall exclude from the 

place where the testimony is to be taken all other persons, 

except the person giving the testimony, the attorney for that 

person, the officer before whom the testimony is to be taken, 

an investigator or representative of an agency with which 

the Bureau is engaged in a joint investigation, and any stenographer taking such testimony. 

(C) LOCATION.—The oral testimony of any person taken 

pursuant to a civil investigative demand shall be taken in 

the judicial district of the United States in which such person resides, is found, or transacts business, or in such other 

place as may be agreed upon by the Bureau investigator before whom the oral testimony of such person is to be taken 

and such person. 

(D) ATTORNEY REPRESENTATION.— (i) IN GENERAL.—Any person compelled to appear 

under a civil investigative demand for oral testimony 

pursuant to this section may be accompanied, represented, and advised by an attorney. 

(ii) AUTHORITY.—The attorney may advise a person 

described in clause (i), in confidence, either upon the 

request of such person or upon the initiative of the attorney, with respect to any question asked of such person. 

(iii) OBJECTIONS.—A person described in clause (i), 

or the attorney for that person, may object on the 

record to any question, in whole or in part, and such 

person shall briefly state for the record the reason for 

the objection. An objection may properly be made, received, and entered upon the record when it is claimed 

that such person is entitled to refuse to answer the 

question on grounds of any constitutional or other legal 


sroberts on DSKD5P82C1PROD with HEARING
659 

right or privilege, including the privilege against selfincrimination, but such person shall not otherwise object to or refuse to answer any question, and such person or attorney shall not otherwise interrupt the oral 

examination. 

(iv) REFUSAL TO ANSWER.—If a person described in 

clause (i) refuses to answer any question— 

(I) the Bureau may petition the district court 

of the United States pursuant to this section for an 

order compelling such person to answer such question; and 

(II) if the refusal is on grounds of the privilege 

against self-incrimination, the testimony of such 

person may be compelled in accordance with the 

provisions of section 6004 of title 18, United States 

Code. 

(E) TRANSCRIPTS.—For purposes of this subsection— 

(i) after the testimony of any witness is fully transcribed, the Bureau investigator shall afford the witness (who may be accompanied by an attorney) a reasonable opportunity to examine the transcript; 

(ii) the transcript shall be read to or by the witness, unless such examination and reading are waived 

by the witness; 

(iii) any changes in form or substance which the 

witness desires to make shall be entered and identified 

upon the transcript by the Bureau investigator, with a 

statement of the reasons given by the witness for making such changes; 

(iv) the transcript shall be signed by the witness, 

unless the witness in writing waives the signing, is ill, 

cannot be found, or refuses to sign; and 

(v) if the transcript is not signed by the witness 

during the 30-day period following the date on which 

the witness is first afforded a reasonable opportunity to 

examine the transcript, the Bureau investigator shall 

sign the transcript and state on the record the fact of 

the waiver, illness, absence of the witness, or the refusal to sign, together with any reasons given for the 

failure to sign. 

(F) CERTIFICATION BY INVESTIGATOR.—The Bureau investigator shall certify on the transcript that the witness 

was duly sworn by him or her and that the transcript is 

a true record of the testimony given by the witness, and the 

Bureau investigator shall promptly deliver the transcript or 

send it by registered or certified mail to the custodian. 

(G) COPY OF TRANSCRIPT.—The Bureau investigator 

shall furnish a copy of the transcript (upon payment of reasonable charges for the transcript) to the witness only, except that the Bureau may for good cause limit such witness 

to inspection of the official transcript of his testimony. 

(H) WITNESS FEES.—Any witness appearing for the taking of oral testimony pursuant to a civil investigative demand shall be entitled to the same fees and mileage which 


sroberts on DSKD5P82C1PROD with HEARING
660 

are paid to witnesses in the district courts of the United 

States. 

(d) CONFIDENTIAL TREATMENT OF DEMAND MATERIAL.— (1) IN GENERAL.—Documentary materials and tangible 

things received as a result of a civil investigative demand shall 

be subject to requirements and procedures regarding confidentiality, in accordance with rules established by the Bureau. 

(2) DISCLOSURE TO CONGRESS.—No rule established by the 

Bureau regarding the confidentiality of materials submitted to, 

or otherwise obtained by, the Bureau shall be intended to prevent disclosure to either House of Congress or to an appropriate 

committee of the Congress, except that the Bureau is permitted 

to adopt rules allowing prior notice to any party that owns or 

otherwise provided the material to the Bureau and had designated such material as confidential. 

(e) PETITION FOR ENFORCEMENT.— (1) IN GENERAL.—Whenever any person fails to comply with 

any civil investigative demand duly served upon him under this 

section, or whenever satisfactory copying or reproduction of material requested pursuant to the demand cannot be accomplished and such person refuses to surrender such material, the 

Bureau, through such officers or attorneys as it may designate, 

may file, in the district court of the United States for any judicial district in which such person resides, is found, or transacts 

business, and serve upon such person, a petition for an order 

of such court for the enforcement of this section. 

(2) SERVICE OF PROCESS.—All process of any court to which 

application may be made as provided in this subsection may be 

served in any judicial district. 

(f) PETITION FOR ORDER MODIFYING OR SETTING ASIDE DE- MAND.— (1) IN GENERAL.—Not later than 20 days after the service 

of any civil investigative demand upon any person under subsection (b), or at any time before the return date specified in the 

demand, whichever period is shorter, or within such period exceeding 20 days after service or in excess of such return date as 

may be prescribed in writing, subsequent to service, by any Bureau investigator named in the demand, such person may file 

with the Bureau a petition for an order by the Bureau modifying or setting aside the demand. 

(2) COMPLIANCE DURING PENDENCY.—The time permitted 

for compliance with the demand in whole or in part, as determined proper and ordered by the Bureau, shall not run during 

the pendency of a petition under paragraph (1) at the Bureau, 

except that such person shall comply with any portions of the 

demand not sought to be modified or set aside. 

(3) SPECIFIC GROUNDS.—A petition under paragraph (1) 

shall specify each ground upon which the petitioner relies in 

seeking relief, and may be based upon any failure of the demand to comply with the provisions of this section, or upon any 

constitutional or other legal right or privilege of such person. 

(g) CUSTODIAL CONTROL.—At any time during which any custodian is in custody or control of any documentary material, tangible 

things, reports, answers to questions, or transcripts of oral testimony given by any person in compliance with any civil investigative 


sroberts on DSKD5P82C1PROD with HEARING
661 

demand, such person may file, in the district court of the United 

States for the judicial district within which the office of such custodian is situated, and serve upon such custodian, a petition for an 

order of such court requiring the performance by such custodian of 

any duty imposed upon him by this section or rule promulgated by 

the Bureau. 

(h) JURISDICTION OF COURT.— (1) IN GENERAL.—Whenever any petition is filed in any district court of the United States under this section, such court 

shall have jurisdiction to hear and determine the matter so presented, and to enter such order or orders as may be required 

to carry out the provisions of this section. 

(2) APPEAL.—Any final order entered as described in paragraph (1) shall be subject to appeal pursuant to section 1291 of 

title 28, United States Code. 

SEC. 1053. HEARINGS AND ADJUDICATION PROCEEDINGS. 

(a) IN GENERAL.—The Bureau is authorized to conduct hearings 

and adjudication proceedings with respect to any person in the 

manner prescribed by chapter 5 of title 5, United States Code in 

order to ensure or enforce compliance with— 

(1) the provisions of this title, including any rules prescribed by the Bureau under this title; and 

(2) any other Federal law that the Bureau is authorized to 

enforce, including an enumerated consumer law, and any regulations or order prescribed thereunder, unless such Federal law 

specifically limits the Bureau from conducting a hearing or adjudication proceeding and only to the extent of such limitation. 

(b) SPECIAL RULES FOR CEASE-AND-DESIST PROCEEDINGS.— (1) ORDERS AUTHORIZED.— (A) IN GENERAL.—If, in the opinion of the Bureau, any 

covered person or service provider is engaging or has engaged in an activity that violates a law, rule, or any condition imposed in writing on the person by the Bureau, the 

Bureau may, subject to sections 1024, 1025, and 1026, issue 

and serve upon the covered person or service provider a notice of charges in respect thereof. 

(B) CONTENT OF NOTICE.—The notice under subparagraph (A) shall contain a statement of the facts constituting 

the alleged violation or violations, and shall fix a time and 

place at which a hearing will be held to determine whether 

an order to cease and desist should issue against the covered person or service provider, such hearing to be held not 

earlier than 30 days nor later than 60 days after the date 

of service of such notice, unless an earlier or a later date 

is set by the Bureau, at the request of any party so served. 

(C) CONSENT.—Unless the party or parties served 

under subparagraph (B) appear at the hearing personally 

or by a duly authorized representative, such person shall be 

deemed to have consented to the issuance of the cease-anddesist order. 

(D) PROCEDURE.—In the event of consent under subparagraph (C), or if, upon the record, made at any such 

hearing, the Bureau finds that any violation specified in 

the notice of charges has been established, the Bureau may 

issue and serve upon the covered person or service provider 


sroberts on DSKD5P82C1PROD with HEARING
662 

an order to cease and desist from the violation or practice. 

Such order may, by provisions which may be mandatory or 

otherwise, require the covered person or service provider to 

cease and desist from the subject activity, and to take affirmative action to correct the conditions resulting from any 

such violation. 

(2) EFFECTIVENESS OF ORDER.—A cease-and-desist order 

shall become effective at the expiration of 30 days after the date 

of service of an order under paragraph (1) upon the covered person or service provider concerned (except in the case of a ceaseand-desist order issued upon consent, which shall become effective at the time specified therein), and shall remain effective 

and enforceable as provided therein, except to such extent as the 

order is stayed, modified, terminated, or set aside by action of 

the Bureau or a reviewing court. 

(3) DECISION AND APPEAL.—Any hearing provided for in 

this subsection shall be held in the Federal judicial district or 

in the territory in which the residence or principal office or 

place of business of the person is located unless the person consents to another place, and shall be conducted in accordance 

with the provisions of chapter 5 of title 5 of the United States 

Code. After such hearing, and within 90 days after the Bureau 

has notified the parties that the case has been submitted to the 

Bureau for final decision, the Bureau shall render its decision 

(which shall include findings of fact upon which its decision is 

predicated) and shall issue and serve upon each party to the 

proceeding an order or orders consistent with the provisions of 

this section. Judicial review of any such order shall be exclusively as provided in this subsection. Unless a petition for review is timely filed in a court of appeals of the United States, 

as provided in paragraph (4), and thereafter until the record in 

the proceeding has been filed as provided in paragraph (4), the 

Bureau may at any time, upon such notice and in such manner 

as the Bureau shall determine proper, modify, terminate, or set 

aside any such order. Upon filing of the record as provided, the 

Bureau may modify, terminate, or set aside any such order with 

permission of the court. 

(4) APPEAL TO COURT OF APPEALS.—Any party to any proceeding under this subsection may obtain a review of any order 

served pursuant to this subsection (other than an order issued 

with the consent of the person concerned) by the filing in the 

court of appeals of the United States for the circuit in which the 

principal office of the covered person is located, or in the United 

States Court of Appeals for the District of Columbia Circuit, 

within 30 days after the date of service of such order, a written 

petition praying that the order of the Bureau be modified, terminated, or set aside. A copy of such petition shall be forthwith 

transmitted by the clerk of the court to the Bureau, and thereupon the Bureau shall file in the court the record in the proceeding, as provided in section 2112 of title 28 of the United 

States Code. Upon the filing of such petition, such court shall 

have jurisdiction, which upon the filing of the record shall except as provided in the last sentence of paragraph (3) be exclusive, to affirm, modify, terminate, or set aside, in whole or in 

part, the order of the Bureau. Review of such proceedings shall 


sroberts on DSKD5P82C1PROD with HEARING
663 

be had as provided in chapter 7 of title 5 of the United States 

Code. The judgment and decree of the court shall be final, except that the same shall be subject to review by the Supreme 

Court of the United States, upon certiorari, as provided in section 1254 of title 28 of the United States Code. 

(5) NO STAY.—The commencement of proceedings for judicial review under paragraph (4) shall not, unless specifically ordered by the court, operate as a stay of any order issued by the 

Bureau. 

(c) SPECIAL RULES FOR TEMPORARY CEASE-AND-DESIST PRO- CEEDINGS.— 

(1) IN GENERAL.—Whenever the Bureau determines that the 

violation specified in the notice of charges served upon a person, 

including a service provider, pursuant to subsection (b), or the 

continuation thereof, is likely to cause the person to be insolvent 

or otherwise prejudice the interests of consumers before the completion of the proceedings conducted pursuant to subsection (b), 

the Bureau may issue a temporary order requiring the person 

to cease and desist from any such violation or practice and to 

take affirmative action to prevent or remedy such insolvency or 

other condition pending completion of such proceedings. Such 

order may include any requirement authorized under this subtitle. Such order shall become effective upon service upon the 

person and, unless set aside, limited, or suspended by a court 

in proceedings authorized by paragraph (2), shall remain effective and enforceable pending the completion of the administrative proceedings pursuant to such notice and until such time as 

the Bureau shall dismiss the charges specified in such notice, 

or if a cease-and-desist order is issued against the person, until 

the effective date of such order. 

(2) APPEAL.—Not later than 10 days after the covered person or service provider concerned has been served with a temporary cease-and-desist order, the person may apply to the 

United States district court for the judicial district in which the 

residence or principal office or place of business of the person 

is located, or the United States District Court for the District 

of Columbia, for an injunction setting aside, limiting, or suspending the enforcement, operation, or effectiveness of such 

order pending the completion of the administrative proceedings 

pursuant to the notice of charges served upon the person under 

subsection (b), and such court shall have jurisdiction to issue 

such injunction. 

(3) INCOMPLETE OR INACCURATE RECORDS.— 

(A) TEMPORARY ORDER.—If a notice of charges served 

under subsection (b) specifies, on the basis of particular 

facts and circumstances, that the books and records of a 

covered person or service provider are so incomplete or inaccurate that the Bureau is unable to determine the financial condition of that person or the details or purpose of 

any transaction or transactions that may have a material 

effect on the financial condition of that person, the Bureau 

may issue a temporary order requiring— 

(i) the cessation of any activity or practice which 

gave rise, whether in whole or in part, to the incomplete or inaccurate state of the books or records; or 


sroberts on DSKD5P82C1PROD with HEARING
664 

(ii) affirmative action to restore such books or 

records to a complete and accurate state, until the completion of the proceedings under subsection (b)(1). 

(B) EFFECTIVE PERIOD.—Any temporary order issued 

under subparagraph (A)— 

(i) shall become effective upon service; and 

(ii) unless set aside, limited, or suspended by a 

court in proceedings under paragraph (2), shall remain 

in effect and enforceable until the earlier of— 

(I) the completion of the proceeding initiated 

under subsection (b) in connection with the notice 

of charges; or 

(II) the date the Bureau determines, by examination or otherwise, that the books and records of 

the covered person or service provider are accurate 

and reflect the financial condition thereof. 

(d) SPECIAL RULES FOR ENFORCEMENT OF ORDERS.— 

(1) IN GENERAL.—The Bureau may in its discretion apply 

to the United States district court within the jurisdiction of 

which the principal office or place of business of the person is 

located, for the enforcement of any effective and outstanding notice or order issued under this section, and such court shall 

have jurisdiction and power to order and require compliance 

herewith. 

(2) EXCEPTION.—Except as otherwise provided in this subsection, no court shall have jurisdiction to affect by injunction 

or otherwise the issuance or enforcement of any notice or order 

or to review, modify, suspend, terminate, or set aside any such 

notice or order. 

(e) RULES.—The Bureau shall prescribe rules establishing such 

procedures as may be necessary to carry out this section. 

SEC. 1054. LITIGATION AUTHORITY. 

(a) IN GENERAL.—If any person violates a Federal consumer financial law, the Bureau may, subject to sections 1024, 1025, and 

1026, commence a civil action against such person to impose a civil 

penalty or to seek all appropriate legal and equitable relief including a permanent or temporary injunction as permitted by law. 

(b) REPRESENTATION.—The Bureau may act in its own name 

and through its own attorneys in enforcing any provision of this 

title, rules thereunder, or any other law or regulation, or in any action, suit, or proceeding to which the Bureau is a party. 

(c) COMPROMISE OF ACTIONS.—The Bureau may compromise or 

settle any action if such compromise is approved by the court. 

(d) NOTICE TO THE ATTORNEY GENERAL.— 

(1) IN GENERAL.—When commencing a civil action under 

Federal consumer financial law, or any rule thereunder, the 

Bureau shall notify the Attorney General and, with respect to 

a civil action against an insured depository institution or insured credit union, the appropriate prudential regulator. 

(2) NOTICE AND COORDINATION.— 

(A) NOTICE OF OTHER ACTIONS.—In addition to any notice required under paragraph (1), the Bureau shall notify 

the Attorney General concerning any action, suit, or proceeding to which the Bureau is a party, except an action, 


sroberts on DSKD5P82C1PROD with HEARING
665 

suit, or proceeding that involves the offering or provision of 

consumer financial products or services. 

(B) COORDINATION.—In order to avoid conflicts and 

promote consistency regarding litigation of matters under 

Federal law, the Attorney General and the Bureau shall 

consult regarding the coordination of investigations and 

proceedings, including by negotiating an agreement for coordination by not later than 180 days after the designated 

transfer date. The agreement under this subparagraph 

shall include provisions to ensure that parallel investigations and proceedings involving the Federal consumer financial laws are conducted in a manner that avoids conflicts and does not impede the ability of the Attorney General to prosecute violations of Federal criminal laws. 

(C) RULE OF CONSTRUCTION.—Nothing in this paragraph shall be construed to limit the authority of the Bureau under this title, including the authority to interpret 

Federal consumer financial law. 

(e) APPEARANCE BEFORE THE SUPREME COURT.—The Bureau 

may represent itself in its own name before the Supreme Court of 

the United States, provided that the Bureau makes a written request to the Attorney General within the 10-day period which begins 

on the date of entry of the judgment which would permit any party 

to file a petition for writ of certiorari, and the Attorney General concurs with such request or fails to take action within 60 days of the 

request of the Bureau. 

(f) FORUM.—Any civil action brought under this title may be 

brought in a United States district court or in any court of competent jurisdiction of a state in a district in which the defendant is 

located or resides or is doing business, and such court shall have 

jurisdiction to enjoin such person and to require compliance with 

any Federal consumer financial law. 

(g) TIME FOR BRINGING ACTION.— (1) IN GENERAL.—Except as otherwise permitted by law or 

equity, no action may be brought under this title more than 3 

years after the date of discovery of the violation to which an action relates. 

(2) LIMITATIONS UNDER OTHER FEDERAL LAWS.— (A) IN GENERAL.—An action arising under this title 

does not include claims arising solely under enumerated 

consumer laws. 

(B) BUREAU AUTHORITY.—In any action arising solely 

under an enumerated consumer law, the Bureau may commence, defend, or intervene in the action in accordance 

with the requirements of that provision of law, as applicable. 

(C) TRANSFERRED AUTHORITY.—In any action arising 

solely under laws for which authorities were transferred 

under subtitles F and H, the Bureau may commence, defend, or intervene in the action in accordance with the requirements of that provision of law, as applicable. 

SEC. 1055. RELIEF AVAILABLE. 

(a) ADMINISTRATIVE PROCEEDINGS OR COURT ACTIONS.— 

(1) JURISDICTION.—The court (or the Bureau, as the case 

may be) in an action or adjudication proceeding brought under 


sroberts on DSKD5P82C1PROD with HEARING
666 

Federal consumer financial law, shall have jurisdiction to grant 

any appropriate legal or equitable relief with respect to a violation of Federal consumer financial law, including a violation of 

a rule or order prescribed under a Federal consumer financial 

law. 

(2) RELIEF.—Relief under this section may include, without 

limitation— 

(A) rescission or reformation of contracts; 

(B) refund of moneys or return of real property; 

(C) restitution; 

(D) disgorgement or compensation for unjust enrichment; 

(E) payment of damages or other monetary relief; 

(F) public notification regarding the violation, including the costs of notification; 

(G) limits on the activities or functions of the person; 

and 

(H) civil money penalties, as set forth more fully in 

subsection (c). 

(3) NO EXEMPLARY OR PUNITIVE DAMAGES.—Nothing in this 

subsection shall be construed as authorizing the imposition of 

exemplary or punitive damages. 

(b) RECOVERY OF COSTS.—In any action brought by the Bureau, 

a State attorney general, or any State regulator to enforce any Federal consumer financial law, the Bureau, the State attorney general, 

or the State regulator may recover its costs in connection with prosecuting such action if the Bureau, the State attorney general, or the 

State regulator is the prevailing party in the action. 

(c) CIVIL MONEY PENALTY IN COURT AND ADMINISTRATIVE AC- TIONS.— (1) IN GENERAL.—Any person that violates, through any act 

or omission, any provision of Federal consumer financial law 

shall forfeit and pay a civil penalty pursuant to this subsection. 

(2) PENALTY AMOUNTS.— 

(A) FIRST TIER.—For any violation of a law, rule, or 

final order or condition imposed in writing by the Bureau, 

a civil penalty may not exceed $5,000 for each day during 

which such violation or failure to pay continues. 

(B) SECOND TIER.—Notwithstanding paragraph (A), for 

any person that recklessly engages in a violation of a Federal consumer financial law, a civil penalty may not exceed 

$25,000 for each day during which such violation continues. 

(C) THIRD TIER.—Notwithstanding subparagraphs (A) 

and (B), for any person that knowingly violates a Federal 

consumer financial law, a civil penalty may not exceed 

$1,000,000 for each day during which such violation continues. 

(3) MITIGATING FACTORS.—In determining the amount of 

any penalty assessed under paragraph (2), the Bureau or the 

court shall take into account the appropriateness of the penalty 

with respect to— 

(A) the size of financial resources and good faith of the 

person charged; 

(B) the gravity of the violation or failure to pay; 


sroberts on DSKD5P82C1PROD with HEARING
667 

(C) the severity of the risks to or losses of the consumer, 

which may take into account the number of products or 

services sold or provided; 

(D) the history of previous violations; and 

(E) such other matters as justice may require. 

(4) AUTHORITY TO MODIFY OR REMIT PENALTY.—The Bureau 

may compromise, modify, or remit any penalty which may be 

assessed or had already been assessed under paragraph (2). 

The amount of such penalty, when finally determined, shall be 

exclusive of any sums owed by the person to the United States 

in connection with the costs of the proceeding, and may be deducted from any sums owing by the United States to the person 

charged. 

(5) NOTICE AND HEARING.—No civil penalty may be assessed under this subsection with respect to a violation of any 

Federal consumer financial law, unless— 

(A) the Bureau gives notice and an opportunity for a 

hearing to the person accused of the violation; or 

(B) the appropriate court has ordered such assessment 

and entered judgment in favor of the Bureau. 

SEC. 1056. REFERRALS FOR CRIMINAL PROCEEDINGS. 

If the Bureau obtains evidence that any person, domestic or foreign, has engaged in conduct that may constitute a violation of Federal criminal law, the Bureau shall transmit such evidence to the 

Attorney General of the United States, who may institute criminal 

proceedings under appropriate law. Nothing in this section affects 

any other authority of the Bureau to disclose information. 

SEC. 1057. EMPLOYEE PROTECTION. 

(a) IN GENERAL.—No covered person or service provider shall 

terminate or in any other way discriminate against, or cause to be 

terminated or discriminated against, any covered employee or any 

authorized representative of covered employees by reason of the fact 

that such employee or representative, whether at the initiative of the 

employee or in the ordinary course of the duties of the employee (or 

any person acting pursuant to a request of the employee), has— 

(1) provided, caused to be provided, or is about to provide 

or cause to be provided, information to the employer, the Bureau, or any other State, local, or Federal, government authority 

or law enforcement agency relating to any violation of, or any 

act or omission that the employee reasonably believes to be a 

violation of, any provision of this title or any other provision of 

law that is subject to the jurisdiction of the Bureau, or any rule, 

order, standard, or prohibition prescribed by the Bureau; 

(2) testified or will testify in any proceeding resulting from 

the administration or enforcement of any provision of this title 

or any other provision of law that is subject to the jurisdiction 

of the Bureau, or any rule, order, standard, or prohibition prescribed by the Bureau; 

(3) filed, instituted, or caused to be filed or instituted any 

proceeding under any Federal consumer financial law; or 

(4) objected to, or refused to participate in, any activity, policy, practice, or assigned task that the employee (or other such 

person) reasonably believed to be in violation of any law, rule, 


sroberts on DSKD5P82C1PROD with HEARING
668 

order, standard, or prohibition, subject to the jurisdiction of, or 

enforceable by, the Bureau. 

(b) DEFINITION OF COVERED EMPLOYEE.—For the purposes of 

this section, the term ‘‘covered employee’’ means any individual performing tasks related to the offering or provision of a consumer financial product or service. 

(c) PROCEDURES AND TIMETABLES.— (1) COMPLAINT.— (A) IN GENERAL.—A person who believes that he or she 

has been discharged or otherwise discriminated against by 

any person in violation of subsection (a) may, not later 

than 180 days after the date on which such alleged violation occurs, file (or have any person file on his or her behalf) a complaint with the Secretary of Labor alleging such 

discharge or discrimination and identifying the person responsible for such act. 

(B) ACTIONS OF SECRETARY OF LABOR.—Upon receipt of 

such a complaint, the Secretary of Labor shall notify, in 

writing, the person named in the complaint who is alleged 

to have committed the violation, of— 

(i) the filing of the complaint; 

(ii) the allegations contained in the complaint; 

(iii) the substance of evidence supporting the complaint; and 

(iv) opportunities that will be afforded to such person under paragraph (2). 

(2) INVESTIGATION BY SECRETARY OF LABOR.— (A) IN GENERAL.—Not later than 60 days after the date 

of receipt of a complaint filed under paragraph (1), and 

after affording the complainant and the person named in 

the complaint who is alleged to have committed the violation that is the basis for the complaint an opportunity to 

submit to the Secretary of Labor a written response to the 

complaint and an opportunity to meet with a representative 

of the Secretary of Labor to present statements from witnesses, the Secretary of Labor shall— 

(i) initiate an investigation and determine whether 

there is reasonable cause to believe that the complaint 

has merit; and 

(ii) notify the complainant and the person alleged 

to have committed the violation of subsection (a), in 

writing, of such determination. 

(B) NOTICE OF RELIEF AVAILABLE.—If the Secretary of 

Labor concludes that there is reasonable cause to believe 

that a violation of subsection (a) has occurred, the Secretary of Labor shall, together with the notice under subparagraph (A)(ii), issue a preliminary order providing the 

relief prescribed by paragraph (4)(B). 

(C) REQUEST FOR HEARING.—Not later than 30 days 

after the date of receipt of notification of a determination 

of the Secretary of Labor under this paragraph, either the 

person alleged to have committed the violation or the complainant may file objections to the findings or preliminary 

order, or both, and request a hearing on the record. The filing of such objections shall not operate to stay any reinVerDate Mar 15 2010 04:29 Jul 07, 2010 Jkt 057098 PO 00000 Frm 00672 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
669 

statement remedy contained in the preliminary order. Any 

such hearing shall be conducted expeditiously, and if a 

hearing is not requested in such 30-day period, the preliminary order shall be deemed a final order that is not subject 

to judicial review. 

(3) GROUNDS FOR DETERMINATION OF COMPLAINTS.— 

(A) IN GENERAL.—The Secretary of Labor shall dismiss 

a complaint filed under this subsection, and shall not conduct an investigation otherwise required under paragraph 

(2), unless the complainant makes a prima facie showing 

that any behavior described in paragraphs (1) through (4) 

of subsection (a) was a contributing factor in the unfavorable personnel action alleged in the complaint. 

(B) REBUTTAL EVIDENCE.—Notwithstanding a finding 

by the Secretary of Labor that the complainant has made 

the showing required under subparagraph (A), no investigation otherwise required under paragraph (2) shall be 

conducted, if the employer demonstrates, by clear and convincing evidence, that the employer would have taken the 

same unfavorable personnel action in the absence of that 

behavior. 

(C) EVIDENTIARY STANDARDS.—The Secretary of Labor 

may determine that a violation of subsection (a) has occurred only if the complainant demonstrates that any behavior described in paragraphs (1) through (4) of subsection (a) was a contributing factor in the unfavorable personnel action alleged in the complaint. Relief may not be 

ordered under subparagraph (A) if the employer demonstrates by clear and convincing evidence that the employer would have taken the same unfavorable personnel 

action in the absence of that behavior. 

(4) ISSUANCE OF FINAL ORDERS; REVIEW PROCEDURES.— 

(A) TIMING.—Not later than 120 days after the date of 

conclusion of any hearing under paragraph (2), the Secretary of Labor shall issue a final order providing the relief 

prescribed by this paragraph or denying the complaint. At 

any time before issuance of a final order, a proceeding 

under this subsection may be terminated on the basis of a 

settlement agreement entered into by the Secretary of 

Labor, the complainant, and the person alleged to have 

committed the violation. 

(B) PENALTIES.— 

(i) ORDER OF SECRETARY OF LABOR.—If, in response to a complaint filed under paragraph (1), the 

Secretary of Labor determines that a violation of subsection (a) has occurred, the Secretary of Labor shall 

order the person who committed such violation— 

(I) to take affirmative action to abate the violation; 

(II) to reinstate the complainant to his or her 

former position, together with compensation (including back pay) and restore the terms, conditions, and privileges associated with his or her employment; and 


sroberts on DSKD5P82C1PROD with HEARING
670 

(III) to provide compensatory damages to the 

complainant. 

(ii) PENALTY.—If an order is issued under clause 

(i), the Secretary of Labor, at the request of the complainant, shall assess against the person against whom 

the order is issued, a sum equal to the aggregate 

amount of all costs and expenses (including attorney 

fees and expert witness fees) reasonably incurred, as 

determined by the Secretary of Labor, by the complainant for, or in connection with, the bringing of the complaint upon which the order was issued. 

(C) PENALTY FOR FRIVOLOUS CLAIMS.—If the Secretary 

of Labor finds that a complaint under paragraph (1) is 

frivolous or has been brought in bad faith, the Secretary of 

Labor may award to the prevailing employer a reasonable 

attorney fee, not exceeding $1,000, to be paid by the complainant. 

(D) DE NOVO REVIEW.— (i) FAILURE OF THE SECRETARY TO ACT.—If the Secretary of Labor has not issued a final order within 210 

days after the date of filing of a complaint under this 

subsection, or within 90 days after the date of receipt 

of a written determination, the complainant may bring 

an action at law or equity for de novo review in the appropriate district court of the United States having jurisdiction, which shall have jurisdiction over such an 

action without regard to the amount in controversy, 

and which action shall, at the request of either party 

to such action, be tried by the court with a jury. 

(ii) PROCEDURES.—A proceeding under clause (i) 

shall be governed by the same legal burdens of proof 

specified in paragraph (3). The court shall have jurisdiction to grant all relief necessary to make the employee whole, including injunctive relief and compensatory damages, including— 

(I) reinstatement with the same seniority status that the employee would have had, but for the 

discharge or discrimination; 

(II) the amount of back pay, with interest; and 

(III) compensation for any special damages 

sustained as a result of the discharge or discrimination, including litigation costs, expert witness 

fees, and reasonable attorney fees. 

(E) OTHER APPEALS.—Unless the complainant brings 

an action under subparagraph (D), any person adversely 

affected or aggrieved by a final order issued under subparagraph (A) may file a petition for review of the order in 

the United States Court of Appeals for the circuit in which 

the violation with respect to which the order was issued, allegedly occurred or the circuit in which the complainant resided on the date of such violation, not later than 60 days 

after the date of the issuance of the final order of the Secretary of Labor under subparagraph (A). Review shall conform to chapter 7 of title 5, United States Code. The commencement of proceedings under this subparagraph shall 


sroberts on DSKD5P82C1PROD with HEARING
671 

not, unless ordered by the court, operate as a stay of the 

order. An order of the Secretary of Labor with respect to 

which review could have been obtained under this subparagraph shall not be subject to judicial review in any criminal or other civil proceeding. 

(5) FAILURE TO COMPLY WITH ORDER.— 

(A) ACTIONS BY THE SECRETARY.—If any person has 

failed to comply with a final order issued under paragraph 

(4), the Secretary of Labor may file a civil action in the 

United States district court for the district in which the violation was found to have occurred, or in the United States 

district court for the District of Columbia, to enforce such 

order. In actions brought under this paragraph, the district 

courts shall have jurisdiction to grant all appropriate relief 

including injunctive relief and compensatory damages. 

(B) CIVIL ACTIONS TO COMPEL COMPLIANCE.—A person 

on whose behalf an order was issued under paragraph (4) 

may commence a civil action against the person to whom 

such order was issued to require compliance with such 

order. The appropriate United States district court shall 

have jurisdiction, without regard to the amount in controversy or the citizenship of the parties, to enforce such 

order. 

(C) AWARD OF COSTS AUTHORIZED.—The court, in 

issuing any final order under this paragraph, may award 

costs of litigation (including reasonable attorney and expert 

witness fees) to any party, whenever the court determines 

such award is appropriate. 

(D) MANDAMUS PROCEEDINGS.—Any nondiscretionary 

duty imposed by this section shall be enforceable in a mandamus proceeding brought under section 1361 of title 28, 

United States Code. 

(d) UNENFORCEABILITY OF CERTAIN AGREEMENTS.— 

(1) NO WAIVER OF RIGHTS AND REMEDIES.—Except as provided under paragraph (3), and notwithstanding any other provision of law, the rights and remedies provided for in this section may not be waived by any agreement, policy, form, or condition of employment, including by any predispute arbitration 

agreement. 

(2) NO PREDISPUTE ARBITRATION AGREEMENTS.—Except as 

provided under paragraph (3), and notwithstanding any other 

provision of law, no predispute arbitration agreement shall be 

valid or enforceable to the extent that it requires arbitration of 

a dispute arising under this section. 

(3) EXCEPTION.—Notwithstanding paragraphs (1) and (2), 

an arbitration provision in a collective bargaining agreement 

shall be enforceable as to disputes arising under subsection 

(a)(4), unless the Bureau determines, by rule, that such provision is inconsistent with the purposes of this title. 

SEC. 1058. EFFECTIVE DATE. 

This subtitle shall become effective on the designated transfer 

date. 


sroberts on DSKD5P82C1PROD with HEARING
672 

Subtitle F—Transfer of Functions and Personnel; 

Transitional Provisions 

SEC. 1061. TRANSFER OF CONSUMER FINANCIAL PROTECTION FUNCTIONS. 

(a) DEFINED TERMS.—For purposes of this subtitle— 

(1) the term ‘‘consumer financial protection functions’’ 

means— 

(A) all authority to prescribe rules or issue orders or 

guidelines pursuant to any Federal consumer financial law, 

including performing appropriate functions to promulgate 

and review such rules, orders, and guidelines; and 

(B) the examination authority described in subsection 

(c)(1), with respect to a person described in subsection 

1025(a); and 

(2) the terms ‘‘transferor agency’’ and ‘‘transferor agencies’’ 

mean, respectively— 

(A) the Board of Governors (and any Federal reserve 

bank, as the context requires), the Federal Deposit Insurance Corporation, the Federal Trade Commission, the National Credit Union Administration, the Office of the 

Comptroller of the Currency, the Office of Thrift Supervision, and the Department of Housing and Urban Development, and the heads of those agencies; and 

(B) the agencies listed in subparagraph (A), collectively. 

(b) IN GENERAL.—Except as provided in subsection (c), consumer financial protection functions are transferred as follows: 

(1) BOARD OF GOVERNORS.— 

(A) TRANSFER OF FUNCTIONS.—All consumer financial 

protection functions of the Board of Governors are transferred to the Bureau. 

(B) BOARD OF GOVERNORS AUTHORITY.—The Bureau 

shall have all powers and duties that were vested in the 

Board of Governors, relating to consumer financial protection functions, on the day before the designated transfer 

date. 

(2) COMPTROLLER OF THE CURRENCY.— 

(A) TRANSFER OF FUNCTIONS.—All consumer financial 

protection functions of the Comptroller of the Currency are 

transferred to the Bureau. 

(B) COMPTROLLER AUTHORITY.—The Bureau shall have 

all powers and duties that were vested in the Comptroller 

of the Currency, relating to consumer financial protection 

functions, on the day before the designated transfer date. 

(3) DIRECTOR OF THE OFFICE OF THRIFT SUPERVISION.— 

(A) TRANSFER OF FUNCTIONS.—All consumer financial 

protection functions of the Director of the Office of Thrift 

Supervision are transferred to the Bureau. 

(B) DIRECTOR AUTHORITY.—The Bureau shall have all 

powers and duties that were vested in the Director of the 

Office of Thrift Supervision, relating to consumer financial 

protection functions, on the day before the designated transfer date. 

(4) FEDERAL DEPOSIT INSURANCE CORPORATION.— 


sroberts on DSKD5P82C1PROD with HEARING
673 

(A) TRANSFER OF FUNCTIONS.—All consumer financial 

protection functions of the Federal Deposit Insurance Corporation are transferred to the Bureau. 

(B) CORPORATION AUTHORITY.—The Bureau shall have 

all powers and duties that were vested in the Federal Deposit Insurance Corporation, relating to consumer financial 

protection functions, on the day before the designated transfer date. 

(5) FEDERAL TRADE COMMISSION.— (A) TRANSFER OF FUNCTIONS.—The authority of the 

Federal Trade Commission under an enumerated consumer 

law to prescribe rules, issue guidelines, or conduct a study 

or issue a report mandated under such law shall be transferred to the Bureau on the designated transfer date. Nothing in this title shall be construed to require a mandatory 

transfer of any employee of the Federal Trade Commission. 

(B) BUREAU AUTHORITY.— (i) IN GENERAL.—The Bureau shall have all powers 

and duties under the enumerated consumer laws to 

prescribe rules, issue guidelines, or to conduct studies 

or issue reports mandated by such laws, that were vested in the Federal Trade Commission on the day before 

the designated transfer date. 

(ii) FEDERAL TRADE COMMISSION ACT.—Subject to 

subtitle B, the Bureau may enforce a rule prescribed 

under the Federal Trade Commission Act by the Federal Trade Commission with respect to an unfair or deceptive act or practice to the extent that such rule applies to a covered person or service provider with respect to the offering or provision of a consumer financial product or service as if it were a rule prescribed 

under section 1031 of this title. 

(C) AUTHORITY OF THE FEDERAL TRADE COMMISSION.— (i) IN GENERAL.—No provision of this title shall be 

construed as modifying, limiting, or otherwise affecting 

the authority of the Federal Trade Commission (including its authority with respect to affiliates described in 

section 1025(a)(1)) under the Federal Trade Commission Act or any other law, other than the authority 

under an enumerated consumer law to prescribe rules, 

issue official guidelines, or conduct a study or issue a 

report mandated under such law. 

(ii) COMMISSION AUTHORITY RELATING TO RULES

PRESCRIBED BY THE BUREAU.—Subject to subtitle B, the 

Federal Trade Commission shall have authority to enforce under the Federal Trade Commission Act (15 

U.S.C. 41 et seq.) a rule prescribed by the Bureau 

under this title with respect to a covered person subject 

to the jurisdiction of the Federal Trade Commission 

under that Act, and a violation of such a rule by such 

a person shall be treated as a violation of a rule issued 

under section 18 of that Act (15 U.S.C. 57a) with respect to unfair or deceptive acts or practices. 

(D) COORDINATION.—To avoid duplication of or conflict 

between rules prescribed by the Bureau under section 1031 


sroberts on DSKD5P82C1PROD with HEARING
674 

of this title and the Federal Trade Commission under section 18(a)(1)(B) of the Federal Trade Commission Act that 

apply to a covered person or service provider with respect 

to the offering or provision of consumer financial products 

or services, the agencies shall negotiate an agreement with 

respect to rulemaking by each agency, including consultation with the other agency prior to proposing a rule and 

during the comment period. 

(E) DEFERENCE.—No provision of this title shall be 

construed as altering, limiting, expanding, or otherwise affecting the deference that a court affords to the— 

(i) Federal Trade Commission in making determinations regarding the meaning or interpretation of 

any provision of the Federal Trade Commission Act, or 

of any other Federal law for which the Commission has 

authority to prescribe rules; or 

(ii) Bureau in making determinations regarding 

the meaning or interpretation of any provision of a 

Federal consumer financial law (other than any law 

described in clause (i)). 

(6) NATIONAL CREDIT UNION ADMINISTRATION.— (A) TRANSFER OF FUNCTIONS.—All consumer financial 

protection functions of the National Credit Union Administration are transferred to the Bureau. 

(B) NATIONAL CREDIT UNION ADMINISTRATION AUTHOR- ITY.—The Bureau shall have all powers and duties that 

were vested in the National Credit Union Administration, 

relating to consumer financial protection functions, on the 

day before the designated transfer date. 

(7) DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT.— (A) TRANSFER OF FUNCTIONS.—All consumer protection 

functions of the Secretary of the Department of Housing 

and Urban Development relating to the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2601 et seq.), the 

Secure and Fair Enforcement for Mortgage Licensing Act of 

2008 (12 U.S.C. 5102 et seq.), and the Interstate Land 

Sales Full Disclosure Act (15 U.S.C. 1701 et seq.) are transferred to the Bureau. 

(B) AUTHORITY OF THE DEPARTMENT OF HOUSING AND

URBAN DEVELOPMENT.—The Bureau shall have all powers 

and duties that were vested in the Secretary of the Department of Housing and Urban Development relating to the 

Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 

2601 et seq.), the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (12 U.S.C. 5101 et seq.), and the 

Interstate Land Sales Full Disclosure Act (15 U.S.C. 1701 

et seq.), on the day before the designated transfer date. 

(c) AUTHORITIES OF THE PRUDENTIAL REGULATORS.— 

(1) EXAMINATION.—A transferor agency that is a prudential 

regulator shall have— 

(A) authority to require reports from and conduct examinations for compliance with Federal consumer financial 

laws with respect to a person described in section 1025(a), 

that is incidental to the backup and enforcement procedures 

provided to the regulator under section 1025(c); and 


sroberts on DSKD5P82C1PROD with HEARING
675 

(B) exclusive authority (relative to the Bureau) to require reports from and conduct examinations for compliance with Federal consumer financial laws with respect to 

a person described in section 1026(a), except as provided to 

the Bureau under subsections (b) and (c) of section 1026. 

(2) ENFORCEMENT.— (A) LIMITATION.—The authority of a transferor agency 

that is a prudential regulator to enforce compliance with 

Federal consumer financial laws with respect to a person 

described in section 1025(a), shall be limited to the backup 

and enforcement procedures in described in section 1025(c). 

(B) EXCLUSIVE AUTHORITY.—A transferor agency that 

is a prudential regulator shall have exclusive authority (relative to the Bureau) to enforce compliance with Federal 

consumer financial laws with respect to a person described 

in section 1026(a), except as provided to the Bureau under 

subsections (b) and (c) of section 1026. 

(C) STATUTORY ENFORCEMENT.—For purposes of carrying out the authorities under, and subject to the limitations of, subtitle B, each prudential regulator may enforce 

compliance with the requirements imposed under this title, 

and any rule or order prescribed by the Bureau under this 

title, under— 

(i) the Federal Credit Union Act (12 U.S.C. 1751 

et seq.), by the National Credit Union Administration 

Board with respect to any covered person or service 

provider that is an insured credit union, or service provider thereto, or any affiliate of an insured credit 

union, who is subject to the jurisdiction of the Board 

under that Act; and 

(ii) section 8 of the Federal Deposit Insurance Act 

(12 U.S.C. 1818), by the appropriate Federal banking 

agency, as defined in section 3(q) of the Federal Deposit 

Insurance Act (12 U.S.C. 1813(q)), with respect to a 

covered person or service provider that is a person described in section 3(q) of that Act and who is subject 

to the jurisdiction of that agency, as set forth in sections 3(q) and 8 of the Federal Deposit Insurance Act; 

or 

(iii) the Bank Service Company Act (12 U.S.C. 

1861 et seq.). 

(d) EFFECTIVE DATE.—Subsections (b) and (c) shall become effective on the designated transfer date. 

SEC. 1062. DESIGNATED TRANSFER DATE. 

(a) IN GENERAL.—Not later than 60 days after the date of enactment of this Act, the Secretary shall— 

(1) in consultation with the Chairman of the Board of Governors, the Chairperson of the Corporation, the Chairman of the 

Federal Trade Commission, the Chairman of the National 

Credit Union Administration Board, the Comptroller of the 

Currency, the Director of the Office of Thrift Supervision, the 

Secretary of the Department of Housing and Urban Development, and the Director of the Office of Management and Budget, designate a single calendar date for the transfer of functions 

to the Bureau under section 1061; and 


sroberts on DSKD5P82C1PROD with HEARING
676 

(2) publish notice of that designated date in the Federal 

Register. 

(b) CHANGING DESIGNATION.—The Secretary— 

(1) may, in consultation with the Chairman of the Board 

of Governors, the Chairperson of the Federal Deposit Insurance 

Corporation, the Chairman of the Federal Trade Commission, 

the Chairman of the National Credit Union Administration 

Board, the Comptroller of the Currency, the Director of the Office of Thrift Supervision, the Secretary of the Department of 

Housing and Urban Development, and the Director of the Office 

of Management and Budget, change the date designated under 

subsection (a); and 

(2) shall publish notice of any changed designated date in 

the Federal Register. 

(c) PERMISSIBLE DATES.— 

(1) IN GENERAL.—Except as provided in paragraph (2), any 

date designated under this section shall be not earlier than 180 

days, nor later than 12 months, after the date of enactment of 

this Act. 

(2) EXTENSION OF TIME.—The Secretary may designate a 

date that is later than 12 months after the date of enactment 

of this Act if the Secretary transmits to appropriate committees 

of Congress— 

(A) a written determination that orderly implementation of this title is not feasible before the date that is 12 

months after the date of enactment of this Act; 

(B) an explanation of why an extension is necessary for 

the orderly implementation of this title; and 

(C) a description of the steps that will be taken to effect 

an orderly and timely implementation of this title within 

the extended time period. 

(3) EXTENSION LIMITED.—In no case may any date designated under this section be later than 18 months after the 

date of enactment of this Act. 

SEC. 1063. SAVINGS PROVISIONS. 

(a) BOARD OF GOVERNORS.— 

(1) EXISTING RIGHTS, DUTIES, AND OBLIGATIONS NOT AFFECTED.—Section 1061(b)(1) does not affect the validity of any 

right, duty, or obligation of the United States, the Board of 

Governors (or any Federal reserve bank), or any other person 

that— 

(A) arises under any provision of law relating to any 

consumer financial protection function of the Board of Governors transferred to the Bureau by this title; and 

(B) existed on the day before the designated transfer 

date. 

(2) CONTINUATION OF SUITS.—No provision of this Act shall 

abate any proceeding commenced by or against the Board of 

Governors (or any Federal reserve bank) before the designated 

transfer date with respect to any consumer financial protection 

function of the Board of Governors (or any Federal reserve 

bank) transferred to the Bureau by this title, except that the Bureau, subject to sections 1024, 1025, and 1026, shall be substituted for the Board of Governors (or Federal reserve bank) as 


sroberts on DSKD5P82C1PROD with HEARING
677 

a party to any such proceeding as of the designated transfer 

date. 

(b) FEDERAL DEPOSIT INSURANCE CORPORATION.— (1) EXISTING RIGHTS, DUTIES, AND OBLIGATIONS NOT AF- FECTED.—Section 1061(b)(4) does not affect the validity of any 

right, duty, or obligation of the United States, the Federal Deposit Insurance Corporation, the Board of Directors of that Corporation, or any other person, that— 

(A) arises under any provision of law relating to any 

consumer financial protection function of the Federal Deposit Insurance Corporation transferred to the Bureau by 

this title; and 

(B) existed on the day before the designated transfer 

date. 

(2) CONTINUATION OF SUITS.—No provision of this Act shall 

abate any proceeding commenced by or against the Federal Deposit Insurance Corporation (or the Board of Directors of that 

Corporation) before the designated transfer date with respect to 

any consumer financial protection function of the Federal Deposit Insurance Corporation transferred to the Bureau by this 

title, except that the Bureau, subject to sections 1024, 1025, and 

1026, shall be substituted for the Federal Deposit Insurance 

Corporation (or Board of Directors) as a party to any such proceeding as of the designated transfer date. 

(c) FEDERAL TRADE COMMISSION.—Section 1061(b)(5) does not 

affect the validity of any right, duty, or obligation of the United 

States, the Federal Trade Commission, or any other person, that— 

(1) arises under any provision of law relating to any consumer financial protection function of the Federal Trade Commission transferred to the Bureau by this title; and 

(2) existed on the day before the designated transfer date. 

(d) NATIONAL CREDIT UNION ADMINISTRATION.— 

(1) EXISTING RIGHTS, DUTIES, AND OBLIGATIONS NOT AF- FECTED.—Section 1061(b)(6) does not affect the validity of any 

right, duty, or obligation of the United States, the National 

Credit Union Administration, the National Credit Union Administration Board, or any other person, that— 

(A) arises under any provision of law relating to any 

consumer financial protection function of the National 

Credit Union Administration transferred to the Bureau by 

this title; and 

(B) existed on the day before the designated transfer 

date. 

(2) CONTINUATION OF SUITS.—No provision of this Act shall 

abate any proceeding commenced by or against the National 

Credit Union Administration (or the National Credit Union Administration Board) before the designated transfer date with respect to any consumer financial protection function of the National Credit Union Administration transferred to the Bureau 

by this title, except that the Bureau, subject to sections 1024, 

1025, and 1026, shall be substituted for the National Credit 

Union Administration (or National Credit Union Administration Board) as a party to any such proceeding as of the designated transfer date. 

(e) OFFICE OF THE COMPTROLLER OF THE CURRENCY.— 


sroberts on DSKD5P82C1PROD with HEARING
678 

(1) EXISTING RIGHTS, DUTIES, AND OBLIGATIONS NOT AF- FECTED.—Section 1061(b)(2) does not affect the validity of any 

right, duty, or obligation of the United States, the Comptroller 

of the Currency, the Office of the Comptroller of the Currency, 

or any other person, that— 

(A) arises under any provision of law relating to any 

consumer financial protection function of the Comptroller of 

the Currency transferred to the Bureau by this title; and 

(B) existed on the day before the designated transfer 

date. 

(2) CONTINUATION OF SUITS.—No provision of this Act shall 

abate any proceeding commenced by or against the Comptroller 

of the Currency (or the Office of the Comptroller of the Currency) with respect to any consumer financial protection function of the Comptroller of the Currency transferred to the Bureau by this title before the designated transfer date, except that 

the Bureau, subject to sections 1024, 1025, and 1026, shall be 

substituted for the Comptroller of the Currency (or the Office of 

the Comptroller of the Currency) as a party to any such proceeding as of the designated transfer date. 

(f) OFFICE OF THRIFT SUPERVISION.— (1) EXISTING RIGHTS, DUTIES, AND OBLIGATIONS NOT AF- FECTED.—Section 1061(b)(3) does not affect the validity of any 

right, duty, or obligation of the United States, the Director of 

the Office of Thrift Supervision, the Office of Thrift Supervision, or any other person, that— 

(A) arises under any provision of law relating to any 

consumer financial protection function of the Director of the 

Office of Thrift Supervision transferred to the Bureau by 

this title; and 

(B) that existed on the day before the designated transfer date. 

(2) CONTINUATION OF SUITS.—No provision of this Act shall 

abate any proceeding commenced by or against the Director of 

the Office of Thrift Supervision (or the Office of Thrift Supervision) with respect to any consumer financial protection function of the Director of the Office of Thrift Supervision transferred to the Bureau by this title before the designated transfer 

date, except that the Bureau, subject to sections 1024, 1025, and 

1026, shall be substituted for the Director (or the Office of 

Thrift Supervision) as a party to any such proceeding as of the 

designated transfer date. 

(g) DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT.— 

(1) EXISTING RIGHTS, DUTIES, AND OBLIGATIONS NOT AFFECTED.—Section 1061(b)(7) shall not affect the validity of any 

right, duty, or obligation of the United States, the Secretary of 

the Department of Housing and Urban Development (or the Department of Housing and Urban Development), or any other 

person, that— 

(A) arises under any provision of law relating to any 

function of the Secretary of the Department of Housing and 

Urban Development with respect to the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2601 et seq.), the 

Secure and Fair Enforcement for Mortgage Licensing Act of 

2008 (12 U.S.C. 5102 et seq.), or the Interstate Land Sales 


sroberts on DSKD5P82C1PROD with HEARING
679 

Full Disclosure Act (15 U.S.C. 1701 et seq.) transferred to 

the Bureau by this title; and 

(B) existed on the day before the designated transfer 

date. 

(2) CONTINUATION OF SUITS.—This title shall not abate any 

proceeding commenced by or against the Secretary of the Department of Housing and Urban Development (or the Department of Housing and Urban Development) with respect to any 

consumer financial protection function of the Secretary of the 

Department of Housing and Urban Development transferred to 

the Bureau by this title before the designated transfer date, except that the Bureau, subject to sections 1024, 1025, and 1026, 

shall be substituted for the Secretary of the Department of 

Housing and Urban Development (or the Department of Housing and Urban Development) as a party to any such proceeding 

as of the designated transfer date. 

(h) CONTINUATION OF EXISTING ORDERS, RULINGS, DETERMINATIONS, AGREEMENTS, AND RESOLUTIONS.— 

(1) IN GENERAL.—Except as provided in paragraph (2) and 

under subsection (i), all orders, resolutions, determinations, 

agreements, and rulings that have been issued, made, prescribed, or allowed to become effective by any transferor agency 

or by a court of competent jurisdiction, in the performance of 

consumer financial protection functions that are transferred by 

this title and that are in effect on the day before the designated 

transfer date, shall continue in effect, and shall continue to be 

enforceable by the appropriate transferor agency, according to 

the terms of those orders, resolutions, determinations, agreements, and rulings, and shall not be enforceable by or against 

the Bureau. 

(2) EXCEPTION FOR ORDERS APPLICABLE TO PERSONS DESCRIBED IN SECTION 1025(a).—All orders, resolutions, determinations, agreements, and rulings that have been issued, 

made, prescribed, or allowed to become effective by any transferor agency or by a court of competent jurisdiction, in the performance of consumer financial protection functions that are 

transferred by this title and that are in effect on the day before 

the designated transfer date with respect to any person described in section 1025(a), shall continue in effect, according to 

the terms of those orders, resolutions, determinations, agreements, and rulings, and shall be enforceable by or against the 

Bureau or transferor agency. 

(i) IDENTIFICATION OF RULES AND ORDERS CONTINUED.—Not 

later than the designated transfer date, the Bureau— 

(1) shall, after consultation with the head of each transferor 

agency, identify the rules and orders that will be enforced by 

the Bureau; and 

(2) shall publish a list of such rules and orders in the Federal Register. 

(j) STATUS OF RULES PROPOSED OR NOT YET EFFECTIVE.— 

(1) PROPOSED RULES.—Any proposed rule of a transferor 

agency which that agency, in performing consumer financial 

protection functions transferred by this title, has proposed before the designated transfer date, but has not been published as 


sroberts on DSKD5P82C1PROD with HEARING
680 

a final rule before that date, shall be deemed to be a proposed 

rule of the Bureau. 

(2) RULES NOT YET EFFECTIVE.—Any interim or final rule 

of a transferor agency which that agency, in performing consumer financial protection functions transferred by this title, 

has published before the designated transfer date, but which 

has not become effective before that date, shall become effective 

as a rule of the Bureau according to its terms. 

SEC. 1064. TRANSFER OF CERTAIN PERSONNEL. 

(a) IN GENERAL.— 

(1) CERTAIN FEDERAL RESERVE SYSTEM EMPLOYEES TRANSFERRED.— 

(A) IDENTIFYING EMPLOYEES FOR TRANSFER.—The Bureau and the Board of Governors shall— 

(i) jointly determine the number of employees of the 

Board of Governors necessary to perform or support the 

consumer financial protection functions of the Board of 

Governors that are transferred to the Bureau by this 

title; and 

(ii) consistent with the number determined under 

clause (i), jointly identify employees of the Board of 

Governors for transfer to the Bureau, in a manner that 

the Bureau and the Board of Governors, in their sole 

discretion, determine equitable. 

(B) IDENTIFIED EMPLOYEES TRANSFERRED.—All employees of the Board of Governors identified under subparagraph (A)(ii) shall be transferred to the Bureau for employment. 

(C) FEDERAL RESERVE BANK EMPLOYEES.—Employees of 

any Federal reserve bank who are performing consumer financial protection functions on behalf of the Board of Governors shall be treated as employees of the Board of Governors for purposes of subparagraphs (A) and (B). 

(2) CERTAIN FDIC EMPLOYEES TRANSFERRED.— 

(A) IDENTIFYING EMPLOYEES FOR TRANSFER.—The Bureau and the Board of Directors of the Federal Deposit Insurance Corporation shall— 

(i) jointly determine the number of employees of 

that Corporation necessary to perform or support the 

consumer financial protection functions of the Corporation that are transferred to the Bureau by this title; 

and 

(ii) consistent with the number determined under 

clause (i), jointly identify employees of the Corporation 

for transfer to the Bureau, in a manner that the Bureau and the Board of Directors of the Corporation, in 

their sole discretion, determine equitable. 

(B) IDENTIFIED EMPLOYEES TRANSFERRED.—All employees of the Corporation identified under subparagraph (A)(ii) 

shall be transferred to the Bureau for employment. 

(3) CERTAIN NCUA EMPLOYEES TRANSFERRED.— 

(A) IDENTIFYING EMPLOYEES FOR TRANSFER.—The Bureau and the National Credit Union Administration Board 

shall— 


sroberts on DSKD5P82C1PROD with HEARING
681 

(i) jointly determine the number of employees of the 

National Credit Union Administration necessary to 

perform or support the consumer financial protection 

functions of the National Credit Union Administration 

that are transferred to the Bureau by this title; and 

(ii) consistent with the number determined under 

clause (i), jointly identify employees of the National 

Credit Union Administration for transfer to the Bureau, in a manner that the Bureau and the National 

Credit Union Administration Board, in their sole discretion, determine equitable. 

(B) IDENTIFIED EMPLOYEES TRANSFERRED.—All employees of the National Credit Union Administration identified 

under subparagraph (A)(ii) shall be transferred to the Bureau for employment. 

(4) CERTAIN OFFICE OF THE COMPTROLLER OF THE CURRENCY EMPLOYEES TRANSFERRED.— 

(A) IDENTIFYING EMPLOYEES FOR TRANSFER.—The Bureau and the Comptroller of the Currency shall— 

(i) jointly determine the number of employees of the 

Office of the Comptroller of the Currency necessary to 

perform or support the consumer financial protection 

functions of the Office of the Comptroller of the Currency that are transferred to the Bureau by this title; 

and 

(ii) consistent with the number determined under 

clause (i), jointly identify employees of the Office of the 

Comptroller of the Currency for transfer to the Bureau, 

in a manner that the Bureau and the Office of the 

Comptroller of the Currency, in their sole discretion, 

determine equitable. 

(B) IDENTIFIED EMPLOYEES TRANSFERRED.—All employees of the Office of the Comptroller of the Currency identified under subparagraph (A)(ii) shall be transferred to the 

Bureau for employment. 

(5) CERTAIN OFFICE OF THRIFT SUPERVISION EMPLOYEES

TRANSFERRED.— 

(A) IDENTIFYING EMPLOYEES FOR TRANSFER.—The Bureau and the Director of the Office of Thrift Supervision 

shall— 

(i) jointly determine the number of employees of the 

Office of Thrift Supervision necessary to perform or 

support the consumer financial protection functions of 

the Office of Thrift Supervision that are transferred to 

the Bureau by this title; and 

(ii) consistent with the number determined under 

clause (i), jointly identify employees of the Office of 

Thrift Supervision for transfer to the Bureau, in a 

manner that the Bureau and the Office of Thrift Supervision, in their sole discretion, determine equitable. 

(B) IDENTIFIED EMPLOYEES TRANSFERRED.—All employees of the Office of Thrift Supervision identified under subparagraph (A)(ii) shall be transferred to the Bureau for employment. 


sroberts on DSKD5P82C1PROD with HEARING
682 

(6) CERTAIN EMPLOYEES OF DEPARTMENT OF HOUSING AND

URBAN DEVELOPMENT TRANSFERRED.— (A) IDENTIFYING EMPLOYEES FOR TRANSFER.—The Bureau and the Secretary of the Department of Housing and 

Urban Development shall— 

(i) jointly determine the number of employees of the 

Department of Housing and Urban Development necessary to perform or support the consumer protection 

functions of the Department that are transferred to the 

Bureau by this title; and 

(ii) consistent with the number determined under 

clause (i), jointly identify employees of the Department 

of Housing and Urban Development for transfer to the 

Bureau in a manner that the Bureau and the Secretary 

of the Department of Housing and Urban Development, 

in their sole discretion, deem equitable. 

(B) IDENTIFIED EMPLOYEES TRANSFERRED.—All employees of the Department of Housing and Urban Development 

identified under subparagraph (A)(ii) shall be transferred 

to the Bureau for employment. 

(7) CONSUMER EDUCATION, FINANCIAL LITERACY, CONSUMER

COMPLAINTS, AND RESEARCH FUNCTIONS.—The Bureau and 

each of the transferor agencies (except the Federal Trade Commission) shall jointly determine the number of employees and 

the types and grades of employees necessary to perform the 

functions of the Bureau under subtitle A, including consumer 

education, financial literacy, policy analysis, responses to consumer complaints and inquiries, research, and similar functions. All employees jointly identified under this paragraph 

shall be transferred to the Bureau for employment. 

(8) AUTHORITY OF THE PRESIDENT TO RESOLVE DISPUTES.— (A) ACTION AUTHORIZED.—In the event that the Bureau 

and a transferor agency are unable to reach an agreement 

under paragraphs (1) through (7) by the designated transfer date, the President, or the designee thereof, may issue 

an order or directive to the transferor agency to effect the 

transfer of personnel and property under this subtitle. 

(B) TRANSMITTAL TO CONGRESS REQUIRED.—If an order 

or directive is issued under subparagraph (A), the President shall transmit a copy of the written determination 

made with respect to such order or directive, including an 

explanation for the need for the order or directive, to the 

Committee on Banking, Housing, and Urban Affairs and 

the Committee on Appropriations of the Senate and the 

Committee on Financial Services and the Committee on Appropriations of the House of Representatives. 

(C) SUNSET.—The authority provided in this paragraph shall terminate 3 years after the designated transfer 

date. 

(9) APPOINTMENT AUTHORITY FOR EXCEPTED SERVICE AND

SENIOR EXECUTIVE SERVICE TRANSFERRED.— 

(A) IN GENERAL.—In the case of an employee occupying 

a position in the excepted service or the Senior Executive 

Service, any appointment authority established pursuant to 

law or regulations of the Office of Personnel Management 


sroberts on DSKD5P82C1PROD with HEARING
683 

for filling such positions shall be transferred, subject to 

subparagraph (B). 

(B) DECLINING TRANSFERS ALLOWED.—An agency or entity may decline to make a transfer of authority under subparagraph (A) (and the employees appointed pursuant 

thereto) to the extent that such authority relates to positions 

excepted from the competitive service because of their confidential, policy-making, policy-determining, or policy-advocating character, and non-career positions in the Senior Executive Service (within the meaning of section 3132(a)(7) of 

title 5, United States Code). 

(b) TIMING OF TRANSFERS AND POSITION ASSIGNMENTS.—Each 

employee to be transferred under this section shall— 

(1) be transferred not later than 90 days after the designated transfer date; and 

(2) receive notice of a position assignment not later than 

120 days after the effective date of his or her transfer. 

(c) TRANSFER OF FUNCTION.— 

(1) IN GENERAL.—Notwithstanding any other provision of 

law, the transfer of employees shall be deemed a transfer of 

functions for the purpose of section 3503 of title 5, United 

States Code. 

(2) PRIORITY OF THIS TITLE.—If any provisions of this title 

conflict with any protection provided to transferred employees 

under section 3503 of title 5, United States Code, the provisions 

of this title shall control. 

(d) EQUAL STATUS AND TENURE POSITIONS.— 

(1) EMPLOYEES TRANSFERRED FROM THE FEDERAL RESERVE

SYSTEM, FDIC, HUD, NCUA, OCC, AND OTS.—Each employee transferred to the Bureau from the Board of Governors, a Federal reserve bank, the Federal Deposit Insurance Corporation, the Department of Housing and Urban Development, the National 

Credit Union Administration, the Office of the Comptroller of 

the Currency, or the Office of Thrift Supervision shall be placed 

in a position at the Bureau with the same status and tenure as 

that employee held on the day before the designated transfer 

date. 

(2) EMPLOYEES TRANSFERRED FROM THE FEDERAL RESERVE

SYSTEM.—For purposes of determining the status and position 

placement of a transferred employee, any period of service with 

the Board of Governors or a Federal reserve bank shall be credited as a period of service with a Federal agency. 

(e) ADDITIONAL CERTIFICATION REQUIREMENTS LIMITED.—Examiners transferred to the Bureau are not subject to any additional 

certification requirements before being placed in a comparable examiner position at the Bureau examining the same types of institutions as they examined before they were transferred. 

(f) PERSONNEL ACTIONS LIMITED.— 

(1) 2-YEAR PROTECTION.—Except as provided in paragraph 

(2), each transferred employee holding a permanent position on 

the day before the designated transfer date may not, during the 

2-year period beginning on the designated transfer date, be involuntarily separated, or involuntarily reassigned outside his or 

her locality pay area. 


sroberts on DSKD5P82C1PROD with HEARING
684 

(2) EXCEPTIONS.—Paragraph (1) does not limit the right of 

the Bureau— 

(A) to separate an employee for cause or for unacceptable performance; 

(B) to terminate an appointment to a position excepted 

from the competitive service because of its confidential policy-making, policy-determining, or policy-advocating character; or 

(C) to reassign a supervisory employee outside of his or 

her locality pay area when the Bureau determines that the 

reassignment is necessary for the efficient operation of the 

Bureau. 

(g) PAY.— 

(1) 2-YEAR PROTECTION.— 

(A) IN GENERAL.—Except as provided in paragraph (2), 

each transferred employee shall, during the 2-year period 

beginning on the designated transfer date, receive pay at a 

rate equal to not less than the basic rate of pay (including 

any geographic differential) that the employee received during the pay period immediately preceding the date of transfer. 

(B) LIMITATION.—Notwithstanding subparagraph (A), 

if the employee was receiving a higher rate of basic pay on 

a temporary basis (because of a temporary assignment, temporary promotion, or other temporary action) immediately 

before the date of transfer, the Bureau may reduce the rate 

of basic pay on the date on which the rate would have been 

reduced but for the transfer, and the protected rate for the 

remainder of the 2-year period shall be the reduced rate 

that would have applied, but for the transfer. 

(2) EXCEPTIONS.—Paragraph (1) does not limit the right of 

the Bureau to reduce the rate of basic pay of a transferred employee— 

(A) for cause; 

(B) for unacceptable performance; or 

(C) with the consent of the employee. 

(3) PROTECTION ONLY WHILE EMPLOYED.—Paragraph (1) 

applies to a transferred employee only while that employee remains employed by the Bureau. 

(4) PAY INCREASES PERMITTED.—Paragraph (1) does not 

limit the authority of the Bureau to increase the pay of a transferred employee. 

(h) REORGANIZATION.— 

(1) BETWEEN 1ST AND 3RD YEAR.— 

(A) IN GENERAL.—If the Bureau determines, during the 

2-year period beginning 1 year after the designated transfer 

date, that a reorganization of the staff of the Bureau is required— 

(i) that reorganization shall be deemed a ‘‘substantial reorganization’’ for purposes of affording affected 

employees retirement under section 8336(d)(2) or 

8414(b)(1)(B) of title 5, United States Code; 

(ii) before the reorganization occurs, all employees 

in the same locality pay area as defined by the Office 


sroberts on DSKD5P82C1PROD with HEARING
685 

of Personnel Management shall be placed in a uniform 

position classification system; and 

(iii) any resulting reduction in force shall be governed by the provisions of chapter 35 of title 5, United 

States Code, except that the Bureau shall— 

(I) establish competitive areas (as that term is 

defined in regulations issued by the Office of Personnel Management) to include at a minimum all 

employees in the same locality pay area as defined 

by the Office of Personnel Management; 

(II) establish competitive levels (as that term is 

defined in regulations issued by the Office of Personnel Management) without regard to whether the 

particular employees have been appointed to positions in the competitive service or the excepted 

service; and 

(III) afford employees appointed to positions in 

the excepted service (other than to a position excepted from the competitive service because of its 

confidential policy-making, policy-determining, or 

policy-advocating character) the same assignment 

rights to positions within the Bureau as employees 

appointed to positions in the competitive service. 

(B) SERVICE CREDIT FOR REDUCTIONS IN FORCE.—For 

purposes of this paragraph, periods of service with a Federal home loan bank, a joint office of the Federal home loan 

banks, the Board of Governors, a Federal reserve bank, the 

Federal Deposit Insurance Corporation, or the National 

Credit Union Administration shall be credited as periods of 

service with a Federal agency. 

(2) AFTER 3RD YEAR.— (A) IN GENERAL.—If the Bureau determines, at any 

time after the 3-year period beginning on the designated 

transfer date, that a reorganization of the staff of the Bureau is required, any resulting reduction in force shall be 

governed by the provisions of chapter 35 of title 5, United 

States Code, except that the Bureau shall establish competitive levels (as that term is defined in regulations issued by 

the Office of Personnel Management) without regard to 

types of appointment held by particular employees transferred under this section. 

(B) SERVICE CREDIT FOR REDUCTIONS IN FORCE.—For 

purposes of this paragraph, periods of service with a Federal home loan bank, a joint office of the Federal home loan 

banks, the Board of Governors, a Federal reserve bank, the 

Federal Deposit Insurance Corporation, or the National 

Credit Union Administration shall be credited as periods of 

service with a Federal agency. 

(i) BENEFITS.— (1) RETIREMENT BENEFITS FOR TRANSFERRED EMPLOYEES.— (A) IN GENERAL.— 

(i) CONTINUATION OF EXISTING RETIREMENT

PLAN.—Unless an election is made under clause (iii) or 

subparagraph (B), each employee transferred pursuant 

to this subtitle shall remain enrolled in the existing reVerDate Mar 15 2010 04:29 Jul 07, 2010 Jkt 057098 PO 00000 Frm 00689 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
686 

tirement plan of that employee as of the date of transfer, through any period of continuous employment with 

the Bureau. 

(ii) EMPLOYER CONTRIBUTION.—The Bureau shall 

pay any employer contributions to the existing retirement plan of each transferred employee, as required 

under that plan. 

(iii) OPTION TO ELECT INTO THE FEDERAL RESERVE

SYSTEM RETIREMENT PLAN AND FEDERAL RESERVE SYS- TEM THRIFT PLAN.—Any employee transferred pursuant 

to this subtitle may, during the 1-year period beginning 

6 months after the designated transfer date, elect to 

end their participation and benefit accruals under their 

existing retirement plan or plans and elect to participate in both the Federal Reserve System Retirement 

Plan and the Federal Reserve System Thrift Plan, 

through any period of continuous employment with the 

Bureau, under the same terms as are applicable to 

Federal Reserve System transferred employees, as provided in subparagraph (C). An election of coverage by 

the Federal Reserve System Retirement Plan and the 

Federal Reserve System Thrift Plan shall begin on the 

day following the end of the 18-month period beginning 

on the designated transfer date, and benefit accruals 

under the existing retirement plan of the transferred 

employee shall end on the last day of the 18-month period beginning on the designated transfer date. If an 

employee elects to participate in the Federal Reserve 

System Retirement Plan and the Federal Reserve System Thrift Plan, all of the service of the employee that 

was creditable under their existing retirement plan 

shall be transferred to the Federal Reserve System Retirement Plan on the day following the end of the 18- 

month period beginning on the designated transfer 

date. 

(iv) BUREAU CONTRIBUTION.—The Bureau shall 

pay an employer contribution to the Federal Reserve 

System Retirement Plan, in the amount established as 

an employer contribution under the Federal Employees 

Retirement System, as established under chapter 84 of 

title 5, United States Code, for each Bureau employee 

who elects to participate in the Federal Reserve System 

Retirement Plan under this subparagraph. The Bureau 

shall pay an employer contribution to the Federal Reserve System Thrift Plan for each Bureau employee 

who elects to participate in such plan, as required 

under the terms of the Federal Reserve System Thrift 

Plan. 

(v) ADDITIONAL FUNDING.—The Bureau shall 

transfer to the Federal Reserve System Retirement Plan 

an amount determined by the Board of Governors, in 

consultation with the Bureau, to be necessary to reimburse the Federal Reserve System Retirement Plan for 

the costs to such plan of providing benefits to employees electing coverage under the Federal Reserve System 


sroberts on DSKD5P82C1PROD with HEARING
687 

Retirement Plan under subparagraph (iii), and who 

were transferred to the Bureau from outside of the Federal Reserve System. 

(vi) OPTION TO ELECT INTO THRIFT PLAN CREATED

BY THE BUREAU.—If the Bureau chooses to establish a 

thrift plan, the employees transferred pursuant to this 

subtitle shall have the option to elect, under such terms 

and conditions as the Bureau may establish, coverage 

under such a thrift plan established by the Bureau. 

Transferred employees may not remain in the thrift 

plan of the agency from which the employee transferred 

under this subtitle, if the employee elects to participate 

in a thrift plan established by the Bureau. 

(B) OPTION FOR EMPLOYEES TRANSFERRED FROM FEDERAL RESERVE SYSTEM TO BE SUBJECT TO THE FEDERAL EMPLOYEE RETIREMENT PROGRAM.— 

(i) ELECTION.—Any Federal Reserve System transferred employee who was enrolled in the Federal Reserve System Retirement Plan on the day before the 

date of his or her transfer to the Bureau may, during 

the 1-year period beginning 6 months after the designated transfer date, elect to be subject to the Federal 

Employee Retirement Program. 

(ii) EFFECTIVE DATE OF COVERAGE.—An election of 

coverage by the Federal Employee Retirement Program 

under this subparagraph shall begin on the day following the end of the 18-month period beginning on the 

designated transfer date, and benefit accruals under 

the existing retirement plan of the Federal Reserve System transferred employee shall end on the last day of 

the 18-month period beginning on the designated 

transfer date. 

(C) BUREAU PARTICIPATION IN FEDERAL RESERVE SYSTEM RETIREMENT PLAN.— 

(i) BENEFITS PROVIDED.—Federal Reserve System 

employees transferred pursuant to this subtitle shall 

continue to be eligible to participate in the Federal Reserve System Retirement Plan and Federal Reserve 

System Thrift Plan through any period of continuous 

employment with the Bureau, unless the employee 

makes an election under subparagraph (A)(vi) or (B). 

The retirement benefits, formulas, and features offered 

to the Federal Reserve System transferred employees 

shall be the same as those offered to employees of the 

Board of Governors who participate in the Federal Reserve System Retirement Plan and the Federal Reserve 

System Thrift Plan, as amended from time to time. 

(ii) LIMITATION.—The Bureau shall not have responsibility or authority— 

(I) to amend an existing retirement plan (including the Federal Reserve System Retirement 

Plan or Federal Reserve System Thrift Plan); 

(II) for administering an existing retirement 

plan (including the Federal Reserve System RetireVerDate Mar 15 2010 04:29 Jul 07, 2010 Jkt 057098 PO 00000 Frm 00691 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
688 

ment Plan or Federal Reserve System Thrift Plan); 

or 

(III) for ensuring the plans comply with applicable laws, fiduciary rules, and related responsibilities. 

(iii) TAX QUALIFIED STATUS.—Notwithstanding any 

other provision of law, providing benefits to Federal 

Reserve System employees transferred to the Bureau 

pursuant to this subtitle, and to employees who elect 

coverage pursuant to subparagraph (A)(iii) or under 

section 1013(a)(2)(B), shall not cause any existing retirement plan (including the Federal Reserve System 

Retirement Plan and the Federal Reserve System Thrift 

Plan) to lose its tax-qualified status under sections 

401(a) and 501(a) of the Internal Revenue Code of 

1986. 

(iv) BUREAU CONTRIBUTION.—The Bureau shall 

pay any employer contributions to the existing retirement plan (including the Federal Reserve System Retirement Plan and the Federal Reserve System Thrift 

Plan) for each Federal Reserve System transferred employee participating in those plans, as required under 

the plan, after the designated transfer date. 

(v) CONTROLLED GROUP STATUS.—The Bureau is 

the same employer as the Federal Reserve System (as 

comprised of the Board of Governors and each of the 

12 Federal reserve banks prior to the date of enactment 

of this Act) for purposes of subsections (b), (c), (m), and 

(o) of section 414 of the Internal Revenue Code of 1986 

(26 U.S.C. 414). 

(D) DEFINITIONS.—For purposes of this paragraph— 

(i) the term ‘‘existing retirement plan’’ means, with 

respect to an employee transferred pursuant to this 

subtitle, the retirement plan (including the Financial 

Institutions Retirement Fund) and any associated 

thrift savings plan, of the agency from which the employee was transferred under this subtitle, in which the 

employee was enrolled on the day before the date on 

which the employee was transferred; 

(ii) the term ‘‘Federal Employee Retirement Program’’ means either the Civil Service Retirement System established under chapter 83 of title 5, United 

States Code, or the Federal Employees Retirement System established under chapter 84 of title 5, United 

States Code, depending upon the service history of the 

individual; 

(iii) the term ‘‘Federal Reserve System transferred 

employee’’ means a transferred employee who is an employee of the Board of Governors or a Federal reserve 

bank on the day before the designated transfer date, 

and who is transferred to the Bureau on the designated 

transfer date pursuant to this subtitle; 

(iv) the term ‘‘Federal Reserve System Retirement 

Plan’’ means the Retirement Plan for Employees of the 

Federal Reserve System; and 


sroberts on DSKD5P82C1PROD with HEARING
689 

(v) the term ‘‘Federal Reserve System Thrift Plan’’ 

means the Thrift Plan for Employees of the Federal Reserve System. 

(2) BENEFITS OTHER THAN RETIREMENT BENEFITS FOR

TRANSFERRED EMPLOYEES.— 

(A) DURING 1ST YEAR.— 

(i) EXISTING PLANS CONTINUE.—Each employee 

transferred pursuant to this subtitle may, for 1 year 

after the designated transfer date, retain membership 

in any other employee benefit program of the agency or 

bank from which the employee transferred, including a 

medical, dental, vision, long term care, or life insurance program, to which the employee belonged on the 

day before the designated transfer date. 

(ii) EMPLOYER CONTRIBUTION.—The Bureau shall 

reimburse the agency or bank from which an employee 

was transferred for any cost incurred by that agency or 

bank in continuing to extend coverage in the benefit 

program to the employee, as required under that program or negotiated agreements. 

(B) MEDICAL, DENTAL, VISION, OR LIFE INSURANCE

AFTER FIRST YEAR.—If, at the end of the 1-year period beginning on the designated transfer date, the Bureau has 

not established its own, or arranged for participation in another entity’s, medical, dental, vision, or life insurance program, an employee transferred pursuant to this subtitle 

who was a member of such a program at the agency or 

Federal reserve bank from which the employee transferred 

may, before the coverage of that employee ends under subparagraph (A)(i), elect to enroll, without regard to any regularly scheduled open season, in— 

(i) the enhanced dental benefits program established under chapter 89A of title 5, United States Code; 

(ii) the enhanced vision benefits established under 

chapter 89B of title 5, United States Code; 

(iii) the Federal Employees Group Life Insurance 

Program established under chapter 87 of title 5, United 

States Code, without regard to any requirement of insurability; and 

(iv) the Federal Employees Health Benefits Program established under chapter 89 of title 5, United 

States Code. 

(C) LONG TERM CARE INSURANCE AFTER 1ST YEAR.—If, 

at the end of the 1-year period beginning on the designated 

transfer date, the Bureau has not established its own, or 

arranged for participation in another entity’s, long term 

care insurance program, an employee transferred pursuant 

to this subtitle who was a member of such a program at the 

agency or Federal reserve bank from which the employee 

transferred may, before the coverage of that employee ends 

under subparagraph (A)(i), elect to apply for coverage 

under the Federal Long Term Care Insurance Program established under chapter 90 of title 5, United States Code, 

under the underwriting requirements applicable to a new 


sroberts on DSKD5P82C1PROD with HEARING
690 

active workforce member (as defined in part 875 of title 5, 

Code of Federal Regulations). 

(D) EMPLOYEE CONTRIBUTION.—An individual enrolled 

in the Federal Employees Health Benefits program shall 

pay any employee contribution required by the plan. 

(E) ADDITIONAL FUNDING.—The Bureau shall transfer 

to the Federal Employees Health Benefits Fund established 

under section 8909 of title 5, United States Code, an 

amount determined by the Director of the Office of Personnel Management, after consultation with the Bureau 

and the Office of Management and Budget, to be necessary 

to reimburse the Fund for the cost to the Fund of providing 

benefits under this paragraph. 

(F) CREDIT FOR TIME ENROLLED IN OTHER PLANS.—For 

employees transferred under this title, enrollment in a 

health benefits plan administered by a transferor agency or 

a Federal reserve bank, as the case may be, immediately before enrollment in a health benefits plan under chapter 89 

of title 5, United States Code, shall be considered as enrollment in a health benefits plan under that chapter for purposes of section 8905(b)(1)(A) of title 5, United States Code. 

(G) SPECIAL PROVISIONS TO ENSURE CONTINUATION OF

LIFE INSURANCE BENEFITS.— (i) IN GENERAL.—An annuitant (as defined in section 8901(3) of title 5, United States Code) who is enrolled in a life insurance plan administered by a transferor agency on the day before the designated transfer 

date shall be eligible for coverage by a life insurance 

plan under sections 8706(b), 8714a, 8714b, and 8714c 

of title 5, United States Code, or in a life insurance 

plan established by the Bureau, without regard to any 

regularly scheduled open season and requirement of insurability. 

(ii) EMPLOYEE CONTRIBUTION.—An individual enrolled in a life insurance plan under this subparagraph shall pay any employee contribution required by 

the plan. 

(iii) ADDITIONAL FUNDING.—The Bureau shall 

transfer to the Employees’ Life Insurance Fund established under section 8714 of title 5, United States 

Code, an amount determined by the Director of the Office of Personnel Management, after consultation with 

the Bureau and the Office of Management and Budget, 

to be necessary to reimburse the Fund for the cost to 

the Fund of providing benefits under this subparagraph not otherwise paid for by the employee under 

clause (ii). 

(iv) CREDIT FOR TIME ENROLLED IN OTHER

PLANS.—For employees transferred under this title, enrollment in a life insurance plan administered by a 

transferor agency immediately before enrollment in a 

life insurance plan under chapter 87 of title 5, United 

States Code, shall be considered as enrollment in a life 

insurance plan under that chapter for purposes of section 8706(b)(1)(A) of title 5, United States Code. 


sroberts on DSKD5P82C1PROD with HEARING
691 

(3) OPM RULES.—The Office of Personnel Management 

shall issue such rules as are necessary to carry out this subsection. 

(j) IMPLEMENTATION OF UNIFORM PAY AND CLASSIFICATION

SYSTEM.—Not later than 2 years after the designated transfer date, 

the Bureau shall implement a uniform pay and classification system for all employees transferred under this title. 

(k) EQUITABLE TREATMENT.—In administering the provisions of 

this section, the Bureau— 

(1) shall take no action that would unfairly disadvantage 

transferred employees relative to each other based on their prior 

employment by the Board of Governors, the Federal Deposit Insurance Corporation, the Department of Housing and Urban 

Development, the National Credit Union Administration, the 

Office of the Comptroller of the Currency, the Office of Thrift 

Supervision, a Federal reserve bank, a Federal home loan bank, 

or a joint office of the Federal home loan banks; and 

(2) may take such action as is appropriate in individual 

cases so that employees transferred under this section receive 

equitable treatment, with respect to the status, tenure, pay, benefits (other than benefits under programs administered by the 

Office of Personnel Management), and accrued leave or vacation 

time of those employees, for prior periods of service with any 

Federal agency, including the Board of Governors, the Corporation, the Department of Housing and Urban Development, the 

National Credit Union Administration, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, a Federal reserve bank, a Federal home loan bank, or a joint office 

of the Federal home loan banks. 

(l) IMPLEMENTATION.—In implementing the provisions of this 

section, the Bureau shall coordinate with the Office of Personnel 

Management and other entities having expertise in matters related 

to employment to ensure a fair and orderly transition for affected 

employees. 

SEC. 1065. INCIDENTAL TRANSFERS. 

(a) INCIDENTAL TRANSFERS AUTHORIZED.—The Director of the 

Office of Management and Budget, in consultation with the Secretary, shall make such additional incidental transfers and dispositions of assets and liabilities held, used, arising from, available, or 

to be made available, in connection with the functions transferred 

by this title, as the Director may determine necessary to accomplish 

the purposes of this title. 

(b) SUNSET.—The authority provided in this section shall terminate 5 years after the date of enactment of this Act. 

SEC. 1066. INTERIM AUTHORITY OF THE SECRETARY. 

(a) IN GENERAL.—The Secretary is authorized to perform the 

functions of the Bureau under this subtitle until the Director of the 

Bureau is confirmed by the Senate in accordance with section 1011. 

(b) INTERIM ADMINISTRATIVE SERVICES BY THE DEPARTMENT OF

THE TREASURY.—The Department of the Treasury may provide administrative services necessary to support the Bureau before the designated transfer date. 


sroberts on DSKD5P82C1PROD with HEARING
692 

SEC. 1067. TRANSITION OVERSIGHT. 

(a) PURPOSE.—The purpose of this section is to ensure that the 

Bureau— 

(1) has an orderly and organized startup; 

(2) attracts and retains a qualified workforce; and 

(3) establishes comprehensive employee training and benefits programs. 

(b) REPORTING REQUIREMENT.— 

(1) IN GENERAL.—The Bureau shall submit an annual report to the Committee on Banking, Housing, and Urban Affairs 

of the Senate and the Committee on Financial Services of the 

House of Representatives that includes the plans described in 

paragraph (2). 

(2) PLANS.—The plans described in this paragraph are as 

follows: 

(A) TRAINING AND WORKFORCE DEVELOPMENT PLAN.— 

The Bureau shall submit a training and workforce development plan that includes, to the extent practicable— 

(i) identification of skill and technical expertise 

needs and actions taken to meet those requirements; 

(ii) steps taken to foster innovation and creativity; 

(iii) leadership development and succession planning; and 

(iv) effective use of technology by employees. 

(B) WORKPLACE FLEXIBILITIES PLAN.—The Bureau 

shall submit a workforce flexibility plan that includes, to 

the extent practicable— 

(i) telework; 

(ii) flexible work schedules; 

(iii) phased retirement; 

(iv) reemployed annuitants; 

(v) part-time work; 

(vi) job sharing; 

(vii) parental leave benefits and childcare assistance; 

(viii) domestic partner benefits; 

(ix) other workplace flexibilities; or 

(x) any combination of the items described in 

clauses (i) through (ix). 

(C) RECRUITMENT AND RETENTION PLAN.—The Bureau 

shall submit a recruitment and retention plan that includes, to the extent practicable, provisions relating to— 

(i) the steps necessary to target highly qualified applicant pools with diverse backgrounds; 

(ii) streamlined employment application processes; 

(iii) the provision of timely notification of the status of employment applications to applicants; and 

(iv) the collection of information to measure indicators of hiring effectiveness. 

(c) EXPIRATION.—The reporting requirement under subsection 

(b) shall terminate 5 years after the date of enactment of this Act. 

(d) RULE OF CONSTRUCTION.—Nothing in this section may be 

construed to affect— 


sroberts on DSKD5P82C1PROD with HEARING
693 

(1) a collective bargaining agreement, as that term is defined in section 7103(a)(8) of title 5, United States Code, that 

is in effect on the date of enactment of this Act; or 

(2) the rights of employees under chapter 71 of title 5, 

United States Code. 

(e) PARTICIPATION IN EXAMINATIONS.—In order to prepare the 

Bureau to conduct examinations under section 1025 upon the designated transfer date, the Bureau and the applicable prudential regulator may agree to include, on a sampling basis, examiners on examinations of the compliance with Federal consumer financial law 

of institutions described in section 1025(a) conducted by the prudential regulators prior to the designated transfer date. 

Subtitle G—Regulatory Improvements 

SEC. 1071. SMALL BUSINESS DATA COLLECTION. 

(a) IN GENERAL.—The Equal Credit Opportunity Act (15 U.S.C. 

1691 et seq.) is amended by inserting after section 704A the following: 

‘‘SEC. 704B. SMALL BUSINESS LOAN DATA COLLECTION. 

‘‘(a) PURPOSE.—The purpose of this section is to facilitate enforcement of fair lending laws and enable communities, governmental entities, and creditors to identify business and community 

development needs and opportunities of women-owned, minorityowned, and small businesses. 

‘‘(b) INFORMATION GATHERING.—Subject to the requirements of 

this section, in the case of any application to a financial institution 

for credit for women-owned, minority-owned, or small business, the 

financial institution shall— 

‘‘(1) inquire whether the business is a women-owned, minority-owned, or small business, without regard to whether 

such application is received in person, by mail, by telephone, by 

electronic mail or other form of electronic transmission, or by 

any other means, and whether or not such application is in response to a solicitation by the financial institution; and 

‘‘(2) maintain a record of the responses to such inquiry, separate from the application and accompanying information. 

‘‘(c) RIGHT TO REFUSE.—Any applicant for credit may refuse to 

provide any information requested pursuant to subsection (b) in connection with any application for credit. 

‘‘(d) NO ACCESS BY UNDERWRITERS.— ‘‘(1) LIMITATION.—Where feasible, no loan underwriter or 

other officer or employee of a financial institution, or any affiliate of a financial institution, involved in making any determination concerning an application for credit shall have access 

to any information provided by the applicant pursuant to a request under subsection (b) in connection with such application. 

‘‘(2) LIMITED ACCESS.—If a financial institution determines 

that a loan underwriter or other officer or employee of a financial institution, or any affiliate of a financial institution, involved in making any determination concerning an application 

for credit should have access to any information provided by the 

applicant pursuant to a request under subsection (b), the financial institution shall provide notice to the applicant of the access of the underwriter to such information, along with notice 


sroberts on DSKD5P82C1PROD with HEARING
694 

that the financial institution may not discriminate on the basis 

of such information. 

‘‘(e) FORM AND MANNER OF INFORMATION.— 

‘‘(1) IN GENERAL.—Each financial institution shall compile 

and maintain, in accordance with regulations of the Bureau, a 

record of the information provided by any loan applicant pursuant to a request under subsection (b). 

‘‘(2) ITEMIZATION.—Information compiled and maintained 

under paragraph (1) shall be itemized in order to clearly and 

conspicuously disclose— 

‘‘(A) the number of the application and the date on 

which the application was received; 

‘‘(B) the type and purpose of the loan or other credit 

being applied for; 

‘‘(C) the amount of the credit or credit limit applied for, 

and the amount of the credit transaction or the credit limit 

approved for such applicant; 

‘‘(D) the type of action taken with respect to such application, and the date of such action; 

‘‘(E) the census tract in which is located the principal 

place of business of the women-owned, minority-owned, or 

small business loan applicant; 

‘‘(F) the gross annual revenue of the business in the 

last fiscal year of the women-owned, minority-owned, or 

small business loan applicant preceding the date of the application; 

‘‘(G) the race, sex, and ethnicity of the principal owners 

of the business; and 

‘‘(H) any additional data that the Bureau determines 

would aid in fulfilling the purposes of this section. 

‘‘(3) NO PERSONALLY IDENTIFIABLE INFORMATION.—In compiling and maintaining any record of information under this 

section, a financial institution may not include in such record 

the name, specific address (other than the census tract required 

under paragraph (1)(E)), telephone number, electronic mail address, or any other personally identifiable information concerning any individual who is, or is connected with, the womenowned, minority-owned, or small business loan applicant. 

‘‘(4) DISCRETION TO DELETE OR MODIFY PUBLICLY AVAILABLE

DATA.—The Bureau may, at its discretion, delete or modify data 

collected under this section which is or will be available to the 

public, if the Bureau determines that the deletion or modification of the data would advance a privacy interest. 

‘‘(f) AVAILABILITY OF INFORMATION.— 

‘‘(1) SUBMISSION TO BUREAU.—The data required to be compiled and maintained under this section by any financial institution shall be submitted annually to the Bureau. 

‘‘(2) AVAILABILITY OF INFORMATION.—Information compiled 

and maintained under this section shall be— 

‘‘(A) retained for not less than 3 years after the date of 

preparation; 

‘‘(B) made available to any member of the public, upon 

request, in the form required under regulations prescribed 

by the Bureau; 


sroberts on DSKD5P82C1PROD with HEARING
695 

‘‘(C) annually made available to the public generally by 

the Bureau, in such form and in such manner as is determined by the Bureau, by regulation. 

‘‘(3) COMPILATION OF AGGREGATE DATA.—The Bureau may, 

at its discretion— 

‘‘(A) compile and aggregate data collected under this 

section for its own use; and 

‘‘(B) make public such compilations of aggregate data. 

‘‘(g) BUREAU ACTION.— ‘‘(1) IN GENERAL.—The Bureau shall prescribe such rules 

and issue such guidance as may be necessary to carry out, enforce, and compile data pursuant to this section. 

‘‘(2) EXCEPTIONS.—The Bureau, by rule or order, may adopt 

exceptions to any requirement of this section and may, conditionally or unconditionally, exempt any financial institution or 

class of financial institutions from the requirements of this section, as the Bureau deems necessary or appropriate to carry out 

the purposes of this section. 

‘‘(3) GUIDANCE.—The Bureau shall issue guidance designed 

to facilitate compliance with the requirements of this section, including assisting financial institutions in working with applicants to determine whether the applicants are women-owned, 

minority-owned, or small businesses for purposes of this section. 

‘‘(h) DEFINITIONS.—For purposes of this section, the following 

definitions shall apply: 

‘‘(1) FINANCIAL INSTITUTION.—The term ‘financial institution’ means any partnership, company, corporation, association 

(incorporated or unincorporated), trust, estate, cooperative organization, or other entity that engages in any financial activity. 

‘‘(2) SMALL BUSINESS.—The term ‘small business’ has the 

same meaning as the term ‘small business concern’ in section 3 

of the Small Business Act (15 U.S.C. 632). 

‘‘(3) SMALL BUSINESS LOAN.—The term ‘small business loan’ 

means a loan made to a small business. 

‘‘(4) MINORITY.—The term ‘minority’ has the same meaning 

as in section 1204(c)(3) of the Financial Institutions Reform, 

Recovery, and Enforcement Act of 1989. 

‘‘(5) MINORITY-OWNED BUSINESS.—The term ‘minorityowned business’ means a business— 

‘‘(A) more than 50 percent of the ownership or control 

of which is held by 1 or more minority individuals; and 

‘‘(B) more than 50 percent of the net profit or loss of 

which accrues to 1 or more minority individuals. 

‘‘(6) WOMEN-OWNED BUSINESS.—The term ‘women-owned 

business’ means a business— 

‘‘(A) more than 50 percent of the ownership or control 

of which is held by 1 or more women; and 

‘‘(B) more than 50 percent of the net profit or loss of 

which accrues to 1 or more women.’’. 

(b) TECHNICAL AND CONFORMING AMENDMENTS.—Section 

701(b) of the Equal Credit Opportunity Act (15 U.S.C. 1691(b)) is 

amended— 

(1) in paragraph (3), by striking ‘‘or’’ at the end; 

(2) in paragraph (4), by striking the period at the end and 

inserting ‘‘; or’’; and 


sroberts on DSKD5P82C1PROD with HEARING
696 

(3) by inserting after paragraph (4), the following: 

‘‘(5) to make an inquiry under section 704B, in accordance 

with the requirements of that section.’’. 

(c) CLERICAL AMENDMENT.—The table of sections for title VII of 

the Consumer Credit Protection Act is amended by inserting after 

the item relating to section 704A the following new item: 

‘‘704B. Small business loan data collection.’’. 

(d) EFFECTIVE DATE.—This section shall become effective on the 

designated transfer date. 

SEC. 1072. ASSISTANCE FOR ECONOMICALLY VULNERABLE INDIVIDUALS AND FAMILIES. 

(a) HERA AMENDMENTS.—Section 1132 of the Housing and 

Economic Recovery Act of 2008 (12 U.S.C. 1701x note) is amended— 

(1) in subsection (a), by inserting in each of paragraphs (1), 

(2), (3), and (4) ‘‘or economically vulnerable individuals and 

families’’ after ‘‘homebuyers’’ each place that term appears; 

(2) in subsection (b)(1), by inserting ‘‘or economically vulnerable individuals and families’’ after ‘‘homebuyers’’; 

(3) in subsection (c)(1)— 

(A) in subparagraph (A), by striking ‘‘or’’ at the end; 

(B) in subparagraph (B), by striking the period at the 

end and inserting ‘‘; or’’; and 

(C) by adding at the end the following: 

‘‘(C) a nonprofit corporation that— 

‘‘(i) is exempt from taxation under section 501(c)(3) 

of the Internal Revenue Code of 1986; and 

‘‘(ii) specializes or has expertise in working with 

economically vulnerable individuals and families, but 

whose primary purpose is not provision of credit counseling services.’’; and 

(4) in subsection (d)(1), by striking ‘‘not more than 5’’. 

(b) APPLICABILITY.—Amendments made by subsection (a) shall 

not apply to programs authorized by section 1132 of the Housing 

and Economic Recovery Act of 2008 (12 U.S.C. 1701x note) that are 

funded with appropriations prior to fiscal year 2011. 

SEC. 1073. REMITTANCE TRANSFERS. 

(a) TREATMENT OF REMITTANCE TRANSFERS.—The Electronic 

Fund Transfer Act (15 U.S.C. 1693 et seq.) is amended— 

(1) in section 902(b) (15 U.S.C. 1693(b)), by inserting ‘‘and 

remittance’’ after ‘‘electronic fund’’; 

(2) in section 904(c) (15 U.S.C. 1693b(c)), in the first sentence, by inserting ‘‘or remittance transfers’’ after ‘‘electronic 

fund transfers’’; 

(3) by redesignating sections 919, 920, 921, and 922 as sections 920, 921, 922, and 923, respectively; and 

(4) by inserting after section 918 the following: 

‘‘SEC. 919. REMITTANCE TRANSFERS. 

‘‘(a) DISCLOSURES REQUIRED FOR REMITTANCE TRANSFERS.— 

‘‘(1) IN GENERAL.—Each remittance transfer provider shall 

make disclosures as required under this section and in accordance with rules prescribed by the Board. Disclosures required 

under this section shall be in addition to any other disclosures 

applicable under this title. 


sroberts on DSKD5P82C1PROD with HEARING
697 

‘‘(2) DISCLOSURES.—Subject to rules prescribed by the 

Board, a remittance transfer provider shall provide, in writing 

and in a form that the sender may keep, to each sender requesting a remittance transfer, as applicable to the transaction— 

‘‘(A) at the time at which the sender requests a remittance transfer to be initiated, and prior to the sender making any payment in connection with the remittance transfer, a disclosure describing— 

‘‘(i) the amount of currency that will be received by 

the designated recipient, using the values of the currency into which the funds will be exchanged; 

‘‘(ii) the amount of transfer and any other fees 

charged by the remittance transfer provider for the remittance transfer; and 

‘‘(iii) any exchange rate to be used by the remittance transfer provider for the remittance transfer, to 

the nearest 1/100th of a point; and 

‘‘(B) at the time at which the sender makes payment in 

connection with the remittance transfer— 

‘‘(i) a receipt showing— 

‘‘(I) the information described in subparagraph (A); 

‘‘(II) the promised date of delivery to the designated recipient; and 

‘‘(III) the name and either the telephone number or the address of the designated recipient, if either the telephone number or the address of the 

designated recipient is provided by the sender; and 

‘‘(ii) a statement containing— 

‘‘(I) information about the rights of the sender 

under this section regarding the resolution of errors; and 

‘‘(II) appropriate contact information for— 

‘‘(aa) the remittance transfer provider; and 

‘‘(bb) the State agency that regulates the 

remittance transfer provider and the Board, 

including the toll-free telephone number established under section 1013 of the Consumer Financial Protection Act of 2010. 

‘‘(3) REQUIREMENTS RELATING TO DISCLOSURES.—With respect to each disclosure required to be provided under paragraph (2) a remittance transfer provider shall— 

‘‘(A) provide an initial notice and receipt, as required 

by subparagraphs (A) and (B) of paragraph (2), and an 

error resolution statement, as required by subsection (d), 

that clearly and conspicuously describe the information required to be disclosed therein; and 

‘‘(B) with respect to any transaction that a sender conducts electronically, comply with the Electronic Signatures 

in Global and National Commerce Act (15 U.S.C. 7001 et 

seq.). 

‘‘(4) EXCEPTION FOR DISCLOSURES OF AMOUNT RECEIVED.— ‘‘(A) IN GENERAL.—Subject to the rules prescribed by 

the Board, and except as provided under subparagraph (B), 

the disclosures required regarding the amount of currency 


sroberts on DSKD5P82C1PROD with HEARING
698 

that will be received by the designated recipient shall be 

deemed to be accurate, so long as the disclosures provide a 

reasonably accurate estimate of the foreign currency to be 

received. This paragraph shall apply only to a remittance 

transfer provider who is an insured depository institution, 

as defined in section 3 of the Federal Deposit Insurance Act 

(12 U.S.C. 1813), or an insured credit union, as defined in 

section 101 of the Federal Credit Union Act (12 U.S.C. 

1752), and if— 

‘‘(i) a remittance transfer is conducted through a 

demand deposit, savings deposit, or other asset account 

that the sender holds with such remittance transfer 

provider; and 

‘‘(ii) at the time at which the sender requests the 

transaction, the remittance transfer provider is unable 

to know, for reasons beyond its control, the amount of 

currency that will be made available to the designated 

recipient. 

‘‘(B) DEADLINE.—The application of subparagraph (A) 

shall terminate 5 years after the date of enactment of the 

Consumer Financial Protection Act of 2010, unless the 

Board determines that termination of such provision would 

negatively affect the ability of remittance transfer providers 

described in subparagraph (A) to send remittances to locations in foreign countries, in which case, the Board may, by 

rule, extend the application of subparagraph (A) to not 

longer than 10 years after the date of enactment of the Consumer Financial Protection Act of 2010. 

‘‘(5) EXEMPTION AUTHORITY.—The Board may, by rule, permit a remittance transfer provider to satisfy the requirements 

of— 

‘‘(A) paragraph (2)(A) orally, if the transaction is conducted entirely by telephone; 

‘‘(B) paragraph (2)(B), in the case of a transaction conducted entirely by telephone, by mailing the disclosures required under such subparagraph to the sender, not later 

than 1 business day after the date on which the transaction 

is conducted, or by including such documents in the next 

periodic statement, if the telephone transaction is conducted 

through a demand deposit, savings deposit, or other asset 

account that the sender holds with the remittance transfer 

provider; 

‘‘(C) subparagraphs (A) and (B) of paragraph (2) together in one written disclosure, but only to the extent that 

the information provided in accordance with paragraph 

(3)(A) is accurate at the time at which payment is made in 

connection with the subject remittance transfer; and 

‘‘(D) paragraph (2)(A), without compliance with section 

101(c) of the Electronic Signatures in Global Commerce 

Act, if a sender initiates the transaction electronically and 

the information is displayed electronically in a manner that 

the sender can keep. 

‘‘(6) STOREFRONT AND INTERNET NOTICES.— 

‘‘(A) IN GENERAL.— 


sroberts on DSKD5P82C1PROD with HEARING
699 

‘‘(i) PROMINENT POSTING.—Subject to subparagraph (B), the Board may prescribe rules to require a 

remittance transfer provider to prominently post, and 

timely update, a notice describing a model remittance 

transfer for one or more amounts, as the Board may 

determine, which notice shall show the amount of currency that will be received by the designated recipient, 

using the values of the currency into which the funds 

will be exchanged. 

‘‘(ii) ONSITE DISPLAYS.—The Board may require 

the notice prescribed under this subparagraph to be 

displayed in every physical storefront location owned or 

controlled by the remittance transfer provider. 

‘‘(iii) INTERNET NOTICES.—Subject to paragraph 

(3), the Board shall prescribe rules to require a remittance transfer provider that provides remittance transfers via the Internet to provide a notice, comparable to 

a storefront notice described in this subparagraph, located on the home page or landing page (with respect 

to such remittance transfer services) owned or controlled by the remittance transfer provider. 

‘‘(iv) RULEMAKING AUTHORITY.—In prescribing 

rules under this subparagraph, the Board may impose 

standards or requirements regarding the provision of 

the storefront and Internet notices required under this 

subparagraph and the provision of the disclosures required under paragraphs (2) and (3). 

‘‘(B) STUDY AND ANALYSIS.—Prior to proposing rules 

under subparagraph (A), the Board shall undertake appropriate studies and analyses, which shall be consistent with 

section 904(a)(2), and may include an advanced notice of 

proposed rulemaking, to determine whether a storefront notice or Internet notice facilitates the ability of a consumer— 

‘‘(i) to compare prices for remittance transfers; and 

‘‘(ii) to understand the types and amounts of any 

fees or costs imposed on remittance transfers. 

‘‘(b) FOREIGN LANGUAGE DISCLOSURES.—The disclosures required under this section shall be made in English and in each of 

the foreign languages principally used by the remittance transfer 

provider, or any of its agents, to advertise, solicit, or market, either 

orally or in writing, at that office. 

‘‘(c) REGULATIONS REGARDING TRANSFERS TO CERTAIN NATIONS.—If the Board determines that a recipient nation does not legally allow, or the method by which transactions are made in the 

recipient country do not allow, a remittance transfer provider to 

know the amount of currency that will be received by the designated 

recipient, the Board may prescribe rules (not later than 18 months 

after the date of enactment of the Consumer Financial Protection 

Act of 2010) addressing the issue, which rules shall include standards for a remittance transfer provider to provide— 

‘‘(1) a receipt that is consistent with subsections (a) and (b); 

and 

‘‘(2) a reasonably accurate estimate of the foreign currency 

to be received, based on the rate provided to the sender by the 


sroberts on DSKD5P82C1PROD with HEARING
700 

remittance transfer provider at the time at which the transaction was initiated by the sender. 

‘‘(d) REMITTANCE TRANSFER ERRORS.— ‘‘(1) ERROR RESOLUTION.— ‘‘(A) IN GENERAL.—If a remittance transfer provider receives oral or written notice from the sender within 180 

days of the promised date of delivery that an error occurred 

with respect to a remittance transfer, including the amount 

of currency designated in subsection (a)(3)(A) that was to be 

sent to the designated recipient of the remittance transfer, 

using the values of the currency into which the funds 

should have been exchanged, but was not made available 

to the designated recipient in the foreign country, the remittance transfer provider shall resolve the error pursuant to 

this subsection and investigate the reason for the error. 

‘‘(B) REMEDIES.—Not later than 90 days after the date 

of receipt of a notice from the sender pursuant to subparagraph (A), the remittance transfer provider shall, as applicable to the error and as designated by the sender— 

‘‘(i) refund to the sender the total amount of funds 

tendered by the sender in connection with the remittance transfer which was not properly transmitted; 

‘‘(ii) make available to the designated recipient, 

without additional cost to the designated recipient or to 

the sender, the amount appropriate to resolve the error; 

‘‘(iii) provide such other remedy, as determined appropriate by rule of the Board for the protection of 

senders; or 

‘‘(iv) provide written notice to the sender that there 

was no error with an explanation responding to the 

specific complaint of the sender. 

‘‘(2) RULES.—The Board shall establish, by rule issued not 

later than 18 months after the date of enactment of the Consumer Financial Protection Act of 2010, clear and appropriate 

standards for remittance transfer providers with respect to error 

resolution relating to remittance transfers, to protect senders 

from such errors. Standards prescribed under this paragraph 

shall include appropriate standards regarding record keeping, 

as required, including documentation— 

‘‘(A) of the complaint of the sender; 

‘‘(B) that the sender provides the remittance transfer 

provider with respect to the alleged error; and 

‘‘(C) of the findings of the remittance transfer provider 

regarding the investigation of the alleged error that the 

sender brought to their attention. 

‘‘(3) CANCELLATION AND REFUND POLICY RULES.—Not later 

than 18 months after the date of enactment of the Consumer Financial Protection Act of 2010, the Board shall issue final rules 

regarding appropriate remittance transfer cancellation and refund policies for consumers. 

‘‘(e) APPLICABILITY OF THIS TITLE.— 

‘‘(1) IN GENERAL.—A remittance transfer that is not an electronic fund transfer, as defined in section 903, shall not be subject to any of the provisions of sections 905 through 913. A remittance transfer that is an electronic fund transfer, as defined 


sroberts on DSKD5P82C1PROD with HEARING
701 

in section 903, shall be subject to all provisions of this title, except for section 908, that are otherwise applicable to electronic 

fund transfers under this title. 

‘‘(2) RULE OF CONSTRUCTION.—Nothing in this section shall 

be construed— 

‘‘(A) to affect the application to any transaction, to any 

remittance provider, or to any other person of any of the 

provisions of subchapter II of chapter 53 of title 31, United 

States Code, section 21 of the Federal Deposit Insurance 

Act (12 U.S.C. 1829b), or chapter 2 of title I of Public Law 

91–508 (12 U.S.C. 1951–1959), or any regulations promulgated thereunder; or 

‘‘(B) to cause any fund transfer that would not otherwise be treated as such under paragraph (1) to be treated 

as an electronic fund transfer, or as otherwise subject to 

this title, for the purposes of any of the provisions referred 

to in subparagraph (A) or any regulations promulgated 

thereunder. 

‘‘(f) ACTS OF AGENTS.— ‘‘(1) IN GENERAL.—A remittance transfer provider shall be 

liable for any violation of this section by any agent, authorized 

delegate, or person affiliated with such provider, when such 

agent, authorized delegate, or affiliate acts for that remittance 

transfer provider. 

‘‘(2) OBLIGATIONS OF REMITTANCE TRANSFER PROVIDERS.— The Board shall prescribe rules to implement appropriate 

standards or conditions of, liability of a remittance transfer 

provider, including a provider who acts through an agent or 

authorized delegate. An agency charged with enforcing the requirements of this section, or rules prescribed by the Board 

under this section, may consider, in any action or other proceeding against a remittance transfer provider, the extent to 

which the provider had established and maintained policies or 

procedures for compliance, including policies, procedures, or 

other appropriate oversight measures designed to assure compliance by an agent or authorized delegate acting for such provider. 

‘‘(g) DEFINITIONS.—As used in this section— 

‘‘(1) the term ‘designated recipient’ means any person located in a foreign country and identified by the sender as the 

authorized recipient of a remittance transfer to be made by a remittance transfer provider, except that a designated recipient 

shall not be deemed to be a consumer for purposes of this Act; 

‘‘(2) the term ‘remittance transfer’— 

‘‘(A) means the electronic (as defined in section 106(2) 

of the Electronic Signatures in Global and National Commerce Act (15 U.S.C. 7006(2))) transfer of funds requested 

by a sender located in any State to a designated recipient 

that is initiated by a remittance transfer provider, whether 

or not the sender holds an account with the remittance 

transfer provider or whether or not the remittance transfer 

is also an electronic fund transfer, as defined in section 

903; and 

‘‘(B) does not include a transfer described in subparagraph (A) in an amount that is equal to or lesser than the 


sroberts on DSKD5P82C1PROD with HEARING
702 

amount of a small-value transaction determined, by rule, to 

be excluded from the requirements under section 906(a); 

‘‘(3) the term ‘remittance transfer provider’ means any person or financial institution that provides remittance transfers 

for a consumer in the normal course of its business, whether or 

not the consumer holds an account with such person or financial institution; and 

‘‘(4) the term ‘sender’ means a consumer who requests a remittance provider to send a remittance transfer for the consumer to a designated recipient.’’. 

(b) AUTOMATED CLEARINGHOUSE SYSTEM.— (1) EXPANSION OF SYSTEM.—The Board of Governors shall 

work with the Federal reserve banks and the Department of the 

Treasury to expand the use of the automated clearinghouse system and other payment mechanisms for remittance transfers to 

foreign countries, with a focus on countries that receive significant remittance transfers from the United States, based on— 

(A) the number, volume, and size of such transfers; 

(B) the significance of the volume of such transfers relative to the external financial flows of the receiving country, 

including— 

(i) the total amount transferred; and 

(ii) the total volume of payments made by United 

States Government agencies to beneficiaries and retirees living abroad; 

(C) the feasibility of such an expansion; and 

(D) the ability of the Federal Reserve System to establish payment gateways in different geographic regions and 

currency zones to receive remittance transfers and route 

them through the payments systems in the destination 

countries. 

(2) REPORT TO CONGRESS.—Not later than one calendar 

year after the date of enactment of this Act, and on April 30 biennially thereafter during the 10-year period beginning on that 

date of enactment, the Board of Governors shall submit a report 

to the Committee on Banking, Housing, and Urban Affairs of 

the Senate and the Committee on Financial Services of the 

House of Representatives on the status of the automated clearinghouse system and its progress in complying with the requirements of this subsection. The report shall include an analysis 

of adoption rates of International ACH Transactions rules and 

formats, the efficacy of increasing adoption rates, and potential 

recommendations to increase adoption. 

(c) EXPANSION OF FINANCIAL INSTITUTION PROVISION OF REMITTANCE TRANSFERS.— 

(1) PROVISION OF GUIDELINES TO INSTITUTIONS.—Each of 

the Federal banking agencies and the National Credit Union 

Administration shall provide guidelines to financial institutions 

under the jurisdiction of the agency regarding the offering of 

low-cost remittance transfers and no-cost or low-cost basic consumer accounts, as well as agency services to remittance transfer providers. 

(2) ASSISTANCE TO FINANCIAL LITERACY COMMISSION.—As 

part of its duties as members of the Financial Literacy and 

Education Commission, the Bureau, the Federal banking agenVerDate Mar 15 2010 04:29 Jul 07, 2010 Jkt 057098 PO 00000 Frm 00706 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
703 

cies, and the National Credit Union Administration shall assist 

the Financial Literacy and Education Commission in executing 

the Strategy for Assuring Financial Empowerment (or the 

‘‘SAFE Strategy’’), as it relates to remittances. 

(d) FEDERAL CREDIT UNION ACT CONFORMING AMENDMENT.— Paragraph (12) of section 107 of the Federal Credit Union Act (12 

U.S.C. 1757) is amended to read as follows: 

‘‘(12) in accordance with regulations prescribed by the 

Board— 

‘‘(A) to sell, to persons in the field of membership, negotiable checks (including travelers checks), money orders, 

and other similar money transfer instruments (including 

international and domestic electronic fund transfers and 

remittance transfers, as defined in section 919 of the Electronic Fund Transfer Act); and 

‘‘(B) to cash checks and money orders for persons in the 

field of membership for a fee;’’. 

(e) REPORT ON FEASIBILITY OF AND IMPEDIMENTS TO USE OF

REMITTANCE HISTORY IN CALCULATION OF CREDIT SCORE.—Before 

the end of the 365-day period beginning on the date of enactment 

of this Act, the Director shall submit a report to the President, the 

Committee on Banking, Housing, and Urban Affairs of the Senate, 

and the Committee on Financial Services of the House of Representatives regarding— 

(1) the manner in which the remittance history of a consumer could be used to enhance the credit score of the consumer; 

(2) the current legal and business model barriers and impediments that impede the use of the remittance history of the 

consumer to enhance the credit score of the consumer; and 

(3) recommendations on the manner in which maximum 

transparency and disclosure to consumers of exchange rates for 

remittance transfers subject to this title and the amendments 

made by this title may be accomplished, whether or not such exchange rates are known at the time of origination or payment 

by the consumer for the remittance transfer, including disclosure to the sender of the actual exchange rate used and the 

amount of currency that the recipient of the remittance transfer 

received, using the values of the currency into which the funds 

were exchanged, as contained in sections 919(a)(2)(D) and 

919(a)(3) of the Electronic Fund Transfer Act (as amended by 

this section). 

SEC. 1074. DEPARTMENT OF THE TREASURY STUDY ON ENDING THE 

CONSERVATORSHIP OF FANNIE MAE, FREDDIE MAC, AND 

REFORMING THE HOUSING FINANCE SYSTEM. 

(a) STUDY REQUIRED.— 

(1) IN GENERAL.—The Secretary of the Treasury shall conduct a study of and develop recommendations regarding the options for ending the conservatorship of the Federal National 

Mortgage Association (in this section referred to as ‘‘Fannie 

Mae’’) and the Federal Home Loan Mortgage Corporation (in 

this section referred to as ‘‘Freddie Mac’’), while minimizing the 

cost to taxpayers, including such options as— 

(A) the gradual wind-down and liquidation of such entities; 


sroberts on DSKD5P82C1PROD with HEARING
704 

(B) the privatization of such entities; 

(C) the incorporation of the functions of such entities 

into a Federal agency; 

(D) the dissolution of Fannie Mae and Freddie Mac 

into smaller companies; or 

(E) any other measures the Secretary determines appropriate. 

(2) ANALYSES.—The study required under paragraph (1) 

shall include an analysis of— 

(A) the role of the Federal Government in supporting a 

stable, well-functioning housing finance system, and whether and to what extent the Federal Government should bear 

risks in meeting Federal housing finance objectives; 

(B) how the current structure of the housing finance 

system can be improved; 

(C) how the housing finance system should support the 

continued availability of mortgage credit to all segments of 

the market; 

(D) how the housing finance system should be structured to ensure that consumers continue to have access to 

30-year, fixed rate, pre-payable mortgages and other mortgage products that have simple terms that can be easily understood; 

(E) the role of the Federal Housing Administration and 

the Department of Veterans Affairs in a future housing system; 

(F) the impact of reforms of the housing finance system 

on the financing of rental housing; 

(G) the impact of reforms of the housing finance system 

on secondary market liquidity; 

(H) the role of standardization in the housing finance 

system; 

(I) how housing finance systems in other countries offer 

insights that can help inform options for reform in the 

United States; and 

(J) the options for transition to a reformed housing finance system. 

(b) REPORT AND RECOMMENDATIONS.—Not later than January 

31, 2011, the Secretary of the Treasury shall submit the report and 

recommendations required under subsection (a) to the Committee on 

Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives. 

SEC. 1075. REASONABLE FEES AND RULES FOR PAYMENT CARD TRANSACTIONS. 

(a) IN GENERAL.—The Electronic Fund Transfer Act (15 U.S.C. 

1693 et seq.) is amended— 

(1) by redesignating sections 920 and 921 as sections 921 

and 922, respectively; and 

(2) by inserting after section 919 the following: 

‘‘SEC. 920. REASONABLE FEES AND RULES FOR PAYMENT CARD TRANSACTIONS. 

‘‘(a) REASONABLE INTERCHANGE TRANSACTION FEES FOR ELECTRONIC DEBIT TRANSACTIONS.— 

‘‘(1) REGULATORY AUTHORITY OVER INTERCHANGE TRANSACTION FEES.—The Board may prescribe regulations, pursuant 


sroberts on DSKD5P82C1PROD with HEARING
705 

to section 553 of title 5, United States Code, regarding any 

interchange transaction fee that an issuer may receive or charge 

with respect to an electronic debit transaction, to implement 

this subsection (including related definitions), and to prevent 

circumvention or evasion of this subsection. 

‘‘(2) REASONABLE INTERCHANGE TRANSACTION FEES.—The 

amount of any interchange transaction fee that an issuer may 

receive or charge with respect to an electronic debit transaction 

shall be reasonable and proportional to the cost incurred by the 

issuer with respect to the transaction. 

‘‘(3) RULEMAKING REQUIRED.— ‘‘(A) IN GENERAL.—The Board shall prescribe regulations in final form not later than 9 months after the date 

of enactment of the Consumer Financial Protection Act of 

2010, to establish standards for assessing whether the 

amount of any interchange transaction fee described in 

paragraph (2) is reasonable and proportional to the cost incurred by the issuer with respect to the transaction. 

‘‘(B) INFORMATION COLLECTION.—The Board may require any issuer (or agent of an issuer) or payment card 

network to provide the Board with such information as 

may be necessary to carry out the provisions of this subsection and the Board, in issuing rules under subparagraph (A) and on at least a bi-annual basis thereafter, 

shall disclose such aggregate or summary information concerning the costs incurred, and interchange transaction fees 

charged or received, by issuers or payment card networks 

in connection with the authorization, clearance or settlement of electronic debit transactions as the Board considers 

appropriate and in the public interest. 

‘‘(4) CONSIDERATIONS; CONSULTATION.—In prescribing regulations under paragraph (3)(A), the Board shall— 

‘‘(A) consider the functional similarity between— 

‘‘(i) electronic debit transactions; and 

‘‘(ii) checking transactions that are required within 

the Federal Reserve bank system to clear at par; 

‘‘(B) distinguish between— 

‘‘(i) the incremental cost incurred by an issuer for 

the role of the issuer in the authorization, clearance, or 

settlement of a particular electronic debit transaction, 

which cost shall be considered under paragraph (2); 

and 

‘‘(ii) other costs incurred by an issuer which are 

not specific to a particular electronic debit transaction, 

which costs shall not be considered under paragraph 

(2); and 

‘‘(C) consult, as appropriate, with the Comptroller of 

the Currency, the Board of Directors of the Federal Deposit 

Insurance Corporation, the Director of the Office of Thrift 

Supervision, the National Credit Union Administration 

Board, the Administrator of the Small Business Administration, and the Director of the Bureau of Consumer Financial Protection. 

‘‘(5) ADJUSTMENTS TO INTERCHANGE TRANSACTION FEES

FOR FRAUD PREVENTION COSTS.— 


sroberts on DSKD5P82C1PROD with HEARING
706 

‘‘(A) ADJUSTMENTS.—The Board may allow for an adjustment to the fee amount received or charged by an issuer 

under paragraph (2), if— 

‘‘(i) such adjustment is reasonably necessary to 

make allowance for costs incurred by the issuer in preventing fraud in relation to electronic debit transactions involving that issuer; and 

‘‘(ii) the issuer complies with the fraud-related 

standards established by the Board under subparagraph (B), which standards shall— 

‘‘(I) be designed to ensure that any fraud-related adjustment of the issuer is limited to the 

amount described in clause (i) and takes into account any fraud-related reimbursements (including 

amounts from charge-backs) received from consumers, merchants, or payment card networks in 

relation to electronic debit transactions involving 

the issuer; and 

‘‘(II) require issuers to take effective steps to reduce the occurrence of, and costs from, fraud in relation to electronic debit transactions, including 

through the development and implementation of 

cost-effective fraud prevention technology. 

‘‘(B) RULEMAKING REQUIRED.— ‘‘(i) IN GENERAL.—The Board shall prescribe regulations in final form not later than 9 months after the 

date of enactment of the Consumer Financial Protection Act of 2010, to establish standards for making adjustments under this paragraph. 

‘‘(ii) FACTORS FOR CONSIDERATION.—In issuing the 

standards and prescribing regulations under this paragraph, the Board shall consider— 

‘‘(I) the nature, type, and occurrence of fraud 

in electronic debit transactions; 

‘‘(II) the extent to which the occurrence of 

fraud depends on whether authorization in an electronic debit transaction is based on signature, 

PIN, or other means; 

‘‘(III) the available and economical means by 

which fraud on electronic debit transactions may 

be reduced; 

‘‘(IV) the fraud prevention and data security 

costs expended by each party involved in electronic 

debit transactions (including consumers, persons 

who accept debit cards as a form of payment, financial institutions, retailers and payment card 

networks); 

‘‘(V) the costs of fraudulent transactions absorbed by each party involved in such transactions 

(including consumers, persons who accept debit 

cards as a form of payment, financial institutions, 

retailers and payment card networks); 

‘‘(VI) the extent to which interchange transaction fees have in the past reduced or increased 

incentives for parties involved in electronic debit 


sroberts on DSKD5P82C1PROD with HEARING
707 

transactions to reduce fraud on such transactions; 

and 

‘‘(VII) such other factors as the Board considers appropriate. 

‘‘(6) EXEMPTION FOR SMALL ISSUERS.— ‘‘(A) IN GENERAL.—This subsection shall not apply to 

any issuer that, together with its affiliates, has assets of 

less than $10,000,000,000, and the Board shall exempt 

such issuers from regulations prescribed under paragraph 

(3)(A). 

‘‘(B) DEFINITION.—For purposes of this paragraph, the 

term ‘‘issuer’’ shall be limited to the person holding the 

asset account that is debited through an electronic debit 

transaction. 

‘‘(7) EXEMPTION FOR GOVERNMENT-ADMINISTERED PAYMENT

PROGRAMS AND RELOADABLE PREPAID CARDS.— ‘‘(A) IN GENERAL.—This subsection shall not apply to 

an interchange transaction fee charged or received with respect to an electronic debit transaction in which a person 

uses— 

‘‘(i) a debit card or general-use prepaid card that 

has been provided to a person pursuant to a Federal, 

State or local government-administered payment program, in which the person may only use the debit card 

or general-use prepaid card to transfer or debit funds, 

monetary value, or other assets that have been provided pursuant to such program; or 

‘‘(ii) a plastic card, payment code, or device that 

is— 

‘‘(I) linked to funds, monetary value, or assets 

which are purchased or loaded on a prepaid basis; 

‘‘(II) not issued or approved for use to access or 

debit any account held by or for the benefit of the 

card holder (other than a subaccount or other 

method of recording or tracking funds purchased 

or loaded on the card on a prepaid basis); 

‘‘(III) redeemable at multiple, unaffiliated merchants or service providers, or automated teller 

machines; 

‘‘(IV) used to transfer or debit funds, monetary 

value, or other assets; and 

‘‘(V) reloadable and not marketed or labeled as 

a gift card or gift certificate. 

‘‘(B) EXCEPTION.—Notwithstanding subparagraph (A), 

after the end of the 1-year period beginning on the effective 

date provided in paragraph (9), this subsection shall apply 

to an interchange transaction fee charged or received with 

respect to an electronic debit transaction described in subparagraph (A)(i) in which a person uses a general-use prepaid card, or an electronic debit transaction described in 

subparagraph (A)(ii), if any of the following fees may be 

charged to a person with respect to the card: 

‘‘(i) A fee for an overdraft, including a shortage of 

funds or a transaction processed for an amount exceeding the account balance. 


sroberts on DSKD5P82C1PROD with HEARING
708 

‘‘(ii) A fee imposed by the issuer for the first withdrawal per month from an automated teller machine 

that is part of the issuer’s designated automated teller 

machine network. 

‘‘(C) DEFINITION.—For purposes of subparagraph (B), 

the term ‘designated automated teller machine network’ 

means either— 

‘‘(i) all automated teller machines identified in the 

name of the issuer; or 

‘‘(ii) any network of automated teller machines 

identified by the issuer that provides reasonable and 

convenient access to the issuer’s customers. 

‘‘(D) REPORTING.—Beginning 12 months after the date 

of enactment of the Consumer Financial Protection Act of 

2010, the Board shall annually provide a report to the Congress regarding— 

‘‘(i) the prevalence of the use of general-use prepaid 

cards in Federal, State or local government-administered payment programs; and 

‘‘(ii) the interchange transaction fees and cardholder fees charged with respect to the use of such general-use prepaid cards. 

‘‘(8) REGULATORY AUTHORITY OVER NETWORK FEES.— ‘‘(A) IN GENERAL.—The Board may prescribe regulations, pursuant to section 553 of title 5, United States Code, 

regarding any network fee. 

‘‘(B) LIMITATION.—The authority under subparagraph 

(A) to prescribe regulations shall be limited to regulations 

to ensure that— 

‘‘(i) a network fee is not used to directly or indirectly compensate an issuer with respect to an electronic debit transaction; and 

‘‘(ii) a network fee is not used to circumvent or 

evade the restrictions of this subsection and regulations 

prescribed under such subsection. 

‘‘(C) RULEMAKING REQUIRED.—The Board shall prescribe regulations in final form before the end of the 9- 

month period beginning on the date of the enactment of the 

Consumer Financial Protection Act of 2010, to carry out the 

authorities provided under subparagraph (A). 

‘‘(9) EFFECTIVE DATE.—This subsection shall take effect at 

the end of the 12-month period beginning on the date of the enactment of the Consumer Financial Protection Act of 2010. 

‘‘(b) LIMITATION ON PAYMENT CARD NETWORK RESTRICTIONS.— 

‘‘(1) PROHIBITIONS AGAINST EXCLUSIVITY ARRANGEMENTS.— 

‘‘(A) NO EXCLUSIVE NETWORK.—The Board shall, before 

the end of the 1-year period beginning on the date of the 

enactment of the Consumer Financial Protection Act of 

2010, prescribe regulations providing that an issuer or payment card network shall not directly or through any agent, 

processor, or licensed member of a payment card network, 

by contract, requirement, condition, penalty, or otherwise, 

restrict the number of payment card networks on which an 

electronic debit transaction may be processed to— 

‘‘(i) 1 such network; or 


sroberts on DSKD5P82C1PROD with HEARING
709 

‘‘(ii) 2 or more such networks which are owned, 

controlled, or otherwise operated by— 

‘‘(I) affiliated persons; or 

‘‘(II) networks affiliated with such issuer. 

‘‘(B) NO ROUTING RESTRICTIONS.—The Board shall, before the end of the 1-year period beginning on the date of 

the enactment of the Consumer Financial Protection Act of 

2010, prescribe regulations providing that an issuer or payment card network shall not, directly or through any agent, 

processor, or licensed member of the network, by contract, 

requirement, condition, penalty, or otherwise, inhibit the 

ability of any person who accepts debit cards for payments 

to direct the routing of electronic debit transactions for 

processing over any payment card network that may process such transactions. 

‘‘(2) LIMITATION ON RESTRICTIONS ON OFFERING DISCOUNTS

FOR USE OF A FORM OF PAYMENT.— 

‘‘(A) IN GENERAL.—A payment card network shall not, 

directly or through any agent, processor, or licensed member of the network, by contract, requirement, condition, penalty, or otherwise, inhibit the ability of any person to provide a discount or in-kind incentive for payment by the use 

of cash, checks, debit cards, or credit cards to the extent 

that— 

‘‘(i) in the case of a discount or in-kind incentive 

for payment by the use of debit cards, the discount or 

in-kind incentive does not differentiate on the basis of 

the issuer or the payment card network; 

‘‘(ii) in the case of a discount or in-kind incentive 

for payment by the use of credit cards, the discount or 

in-kind incentive does not differentiate on the basis of 

the issuer or the payment card network; and 

‘‘(iii) to the extent required by Federal law and applicable State law, such discount or in-kind incentive 

is offered to all prospective buyers and disclosed clearly 

and conspicuously. 

‘‘(B) LAWFUL DISCOUNTS.—For purposes of this paragraph, the network may not penalize any person for the 

providing of a discount that is in compliance with Federal 

law and applicable State law. 

‘‘(3) LIMITATION ON RESTRICTIONS ON SETTING TRANSACTION MINIMUMS OR MAXIMUMS.— 

‘‘(A) IN GENERAL.—A payment card network shall not, 

directly or through any agent, processor, or licensed member of the network, by contract, requirement, condition, penalty, or otherwise, inhibit the ability— 

‘‘(i) of any person to set a minimum dollar value 

for the acceptance by that person of credit cards, to the 

extent that— 

‘‘(I) such minimum dollar value does not differentiate between issuers or between payment card 

networks; and 

‘‘(II) such minimum dollar value does not exceed $10.00; or 


sroberts on DSKD5P82C1PROD with HEARING
710 

‘‘(ii) of any Federal agency or institution of higher 

education to set a maximum dollar value for the acceptance by that Federal agency or institution of higher 

education of credit cards, to the extent that such maximum dollar value does not differentiate between 

issuers or between payment card networks. 

‘‘(B) INCREASE IN MINIMUM DOLLAR AMOUNT.—The 

Board may, by regulation prescribed pursuant to section 

553 of title 5, United States Code, increase the amount of 

the dollar value listed in subparagraph (A)(i)(II). 

‘‘(4) RULE OF CONSTRUCTION.—No provision of this subsection shall be construed to authorize any person— 

‘‘(A) to discriminate between debit cards within a payment card network on the basis of the issuer that issued the 

debit card; or 

‘‘(B) to discriminate between credit cards within a payment card network on the basis of the issuer that issued the 

credit card. 

‘‘(c) DEFINITIONS.—For purposes of this section, the following 

definitions shall apply: 

‘‘(1) AFFILIATE.—The term ‘affiliate’ means any company 

that controls, is controlled by, or is under common control with 

another company. 

‘‘(2) DEBIT CARD.—The term ‘debit card’— 

‘‘(A) means any card, or other payment code or device, 

issued or approved for use through a payment card network 

to debit an asset account (regardless of the purpose for 

which the account is established), whether authorization is 

based on signature, PIN, or other means; 

‘‘(B) includes a general-use prepaid card, as that term 

is defined in section 915(a)(2)(A); and 

‘‘(C) does not include paper checks. 

‘‘(3) CREDIT CARD.—The term ‘credit card’ has the same 

meaning as in section 103 of the Truth in Lending Act. 

‘‘(4) DISCOUNT.—The term ‘discount’— 

‘‘(A) means a reduction made from the price that customers are informed is the regular price; and 

‘‘(B) does not include any means of increasing the price 

that customers are informed is the regular price. 

‘‘(5) ELECTRONIC DEBIT TRANSACTION.—The term ‘electronic 

debit transaction’ means a transaction in which a person uses 

a debit card. 

‘‘(6) FEDERAL AGENCY.—The term ‘Federal agency’ means— 

‘‘(A) an agency (as defined in section 101 of title 31, 

United States Code); and 

‘‘(B) a Government corporation (as defined in section 

103 of title 5, United States Code). 

‘‘(7) INSTITUTION OF HIGHER EDUCATION.—The term ‘institution of higher education’ has the same meaning as in 101 and 

102 of the Higher Education Act of 1965 (20 U.S.C. 1001, 

1002). 

‘‘(8) INTERCHANGE TRANSACTION FEE.—The term ‘interchange transaction fee’ means any fee established, charged or 

received by a payment card network for the purpose of compenVerDate Mar 15 2010 04:29 Jul 07, 2010 Jkt 057098 PO 00000 Frm 00714 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
711 

sating an issuer for its involvement in an electronic debit transaction. 

‘‘(9) ISSUER.—The term ‘issuer’ means any person who 

issues a debit card, or credit card, or the agent of such person 

with respect to such card. 

‘‘(10) NETWORK FEE.—The term ‘network fee’ means any fee 

charged and received by a payment card network with respect 

to an electronic debit transaction, other than an interchange 

transaction fee. 

‘‘(11) PAYMENT CARD NETWORK.—The term ‘payment card 

network’ means an entity that directly, or through licensed 

members, processors, or agents, provides the proprietary services, infrastructure, and software that route information and 

data to conduct debit card or credit card transaction authorization, clearance, and settlement, and that a person uses in order 

to accept as a form of payment a brand of debit card, credit 

card or other device that may be used to carry out debit or credit transactions. 

‘‘(d) ENFORCEMENT.— ‘‘(1) IN GENERAL.—Compliance with the requirements imposed under this section shall be enforced under section 918. 

‘‘(2) EXCEPTION.—Sections 916 and 917 shall not apply 

with respect to this section or the requirements imposed pursuant to this section.’’. 

(b) AMENDMENT TO THE FOOD AND NUTRITION ACT OF 2008.— 

Section 7(h)(10) of the Food and Nutrition Act of 2008 (7 U.S.C. 

2016(h)(10)) is amended to read as follows: 

‘‘(10) FEDERAL LAW NOT APPLICABLE.—Section 920 of the 

Electronic Fund Transfer Act shall not apply to electronic benefit transfer or reimbursement systems under this Act.’’. 

(c) AMENDMENT TO THE FARM SECURITY AND RURAL INVEST- MENT ACT OF 2002.—Section 4402 of the Farm Security and Rural 

Investment Act of 2002 (7 U.S.C. 3007) is amended by adding at the 

end the following new subsection: 

‘‘(f) FEDERAL LAW NOT APPLICABLE.—Section 920 of the Electronic Fund Transfer Act shall not apply to electronic benefit transfer systems established under this section.’’. 

(d) AMENDMENT TO THE CHILD NUTRITION ACT OF 1966.—Section 11 of the Child Nutrition Act of 1966 (42 U.S.C. 1780) is 

amended by adding at the end the following: 

‘‘(c) FEDERAL LAW NOT APPLICABLE.—Section 920 of the Electronic Fund Transfer Act shall not apply to electronic benefit transfer systems established under this Act or the Richard B. Russell National School Lunch Act (42 U.S.C. 1751 et seq.).’’. 

SEC. 1076. REVERSE MORTGAGE STUDY AND REGULATIONS. 

(a) STUDY.—Not later than 1 year after the designated transfer 

date, the Bureau shall conduct a study on reverse mortgage transactions. 

(b) REGULATIONS.— 

(1) IN GENERAL.—If the Bureau determines through the 

study required under subsection (a) that conditions or limitations on reverse mortgage transactions are necessary or appropriate for accomplishing the purposes and objectives of this 

title, including protecting borrowers with respect to the obtaining of reverse mortgage loans for the purpose of funding investVerDate Mar 15 2010 04:29 Jul 07, 2010 Jkt 057098 PO 00000 Frm 00715 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
712 

ments, annuities, and other investment products and the suitability of a borrower in obtaining a reverse mortgage for such 

purpose. 

(2) IDENTIFIED PRACTICES AND INTEGRATED DISCLOSURES.— 

The regulations prescribed under paragraph (1) may, as the 

Bureau may so determine— 

(A) identify any practice as unfair, deceptive, or abusive in connection with a reverse mortgage transaction; and 

(B) provide for an integrated disclosure standard and 

model disclosures for reverse mortgage transactions, consistent with section 4302(d), that combines the relevant disclosures required under the Truth in Lending Act (15 

U.S.C. 1601 et seq.) and the Real Estate Settlement Procedures Act, with the disclosures required to be provided to 

consumers for Home Equity Conversion Mortgages under 

section 255 of the National Housing Act. 

(c) RULE OF CONSTRUCTION.—This section shall not be construed as limiting the authority of the Bureau to issue regulations, 

orders, or guidance that apply to reverse mortgages prior to the 

completion of the study required under subsection (a). 

SEC. 1077. REPORT ON PRIVATE EDUCATION LOANS AND PRIVATE 

EDUCATIONAL LENDERS. 

(a) REPORT.—Not later than 2 years after the date of enactment 

of this Act, the Director and the Secretary of Education, in consultation with the Commissioners of the Federal Trade Commission, and 

the Attorney General of the United States, shall submit a report to 

the Committee on Banking, Housing, and Urban Affairs and the 

Committee on Health, Education, Labor, and Pensions of the Senate 

and the Committee on Financial Services and the Committee on 

Education and Labor of the House of Representatives, on private 

education loans (as that term is defined in section 140 of the Truth 

in Lending Act (15 U.S.C. 1650)) and private educational lenders 

(as that term is defined in such section). 

(b) CONTENT.—The report required by this section shall examine, at a minimum— 

(1) the growth and changes of the private education loan 

market in the United States; 

(2) factors influencing such growth and changes; 

(3) the extent to which students and parents of students rely 

on private education loans to finance postsecondary education 

and the private education loan indebtedness of borrowers; 

(4) the characteristics of private education loan borrowers, 

including— 

(A) the types of institutions of higher education that 

they attend; 

(B) socioeconomic characteristics (including income 

and education levels, racial characteristics, geographical 

background, age, and gender); 

(C) what other forms of financing borrowers use to pay 

for education; 

(D) whether they exhaust their Federal loan options before taking out a private loan; 

(E) whether such borrowers are dependent or independent students (as determined under part F of title IV of 


sroberts on DSKD5P82C1PROD with HEARING
713 

the Higher Education Act of 1965) or parents of such students; 

(F) whether such borrowers are students enrolled in a 

program leading to a certificate, license, or credential other 

than a degree, an associates degree, a baccalaureate degree, 

or a graduate or professional degree; and 

(G) if practicable, employment and repayment behaviors; 

(5) the characteristics of private educational lenders, including whether such creditors are for-profit, non-profit, or institutions of higher education; 

(6) the underwriting criteria used by private educational 

lenders, including the use of cohort default rate (as such term 

is defined in section 435(m) of the Higher Education Act of 

1965); 

(7) the terms, conditions, and pricing of private education 

loans; 

(8) the consumer protections available to private education 

loan borrowers, including the effectiveness of existing disclosures and requirements and borrowers’ awareness and understanding about terms and conditions of various financial products; 

(9) whether Federal regulators and the public have access 

to information sufficient to provide them with assurances that 

private education loans are provided in accord with the Nation’s fair lending laws and that allows public officials to determine lender compliance with fair lending laws; and 

(10) any statutory or legislative recommendations necessary 

to improve consumer protections for private education loan borrowers and to better enable Federal regulators and the public 

to ascertain private educational lender compliance with fair 

lending laws. 

SEC. 1078. STUDY AND REPORT ON CREDIT SCORES. 

(a) STUDY.—The Bureau shall conduct a study on the nature, 

range, and size of variations between the credit scores sold to creditors and those sold to consumers by consumer reporting agencies 

that compile and maintain files on consumers on a nationwide basis 

(as defined in section 603(p) of the Fair Credit Reporting Act; 15 

U.S.C. 1681a(p)), and whether such variations disadvantage consumers. 

(b) REPORT TO CONGRESS.—The Bureau shall submit a report 

to Congress on the results of the study conducted under subsection 

(a) not later than 1 year after the date of enactment of this Act. 

SEC. 1079. REVIEW, REPORT, AND PROGRAM WITH RESPECT TO EXCHANGE FACILITATORS. 

(a) REVIEW.—The Director shall review all Federal laws and 

regulations relating to the protection of consumers who use exchange facilitators for transactions primarily for personal, family, 

or household purposes. 

(b) REPORT.—Not later than 1 year after the designated transfer 

date, the Director shall submit to Congress a report describing— 

(1) recommendations for legislation to ensure the appropriate protection of consumers who use exchange facilitators for 


sroberts on DSKD5P82C1PROD with HEARING
714 

transactions primarily for personal, family, or household purposes; 

(2) recommendations for updating the regulations of Federal departments and agencies to ensure the appropriate protection of such consumers; and 

(3) recommendations for regulations to ensure the appropriate protection of such consumers. 

(c) PROGRAM.—Not later than 2 years after the date of the submission of the report under subsection (b), the Bureau shall, consistent with subtitle B, propose regulations or otherwise establish a 

program to protect consumers who use exchange facilitators. 

(d) EXCHANGE FACILITATOR DEFINED.—In this section, the term 

‘‘exchange facilitator’’ means a person that— 

(1) facilitates, for a fee, an exchange of like kind property 

by entering into an agreement with a taxpayer by which the exchange facilitator acquires from the taxpayer the contractual 

rights to sell the taxpayer’s relinquished property and transfers 

a replacement property to the taxpayer as a qualified intermediary (within the meaning of Treasury Regulations section 

1.1031(k)–1(g)(4)) or enters into an agreement with the taxpayer 

to take title to a property as an exchange accommodation titleholder (within the meaning of Revenue Procedure 2000–37) or 

enters into an agreement with a taxpayer to act as a qualified 

trustee or qualified escrow holder (within the meaning of Treasury Regulations section 1.1031(k)–1(g)(3)); 

(2) maintains an office for the purpose of soliciting business 

to perform the services described in paragraph (1); or 

(3) advertises any of the services described in paragraph (1) 

or solicits clients in printed publications, direct mail, television 

or radio advertisements, telephone calls, facsimile transmissions, or other electronic communications directed to the 

general public for purposes of providing any such services. 

SEC. 1079A. FINANCIAL FRAUD PROVISIONS. 

(a) SENTENCING GUIDELINES.— (1) SECURITIES FRAUD.— (A) DIRECTIVE.—Pursuant to its authority under section 994 of title 28, United States Code, and in accordance 

with this paragraph, the United States Sentencing Commission shall review and, if appropriate, amend the Federal Sentencing Guidelines and policy statements applicable to persons convicted of offenses relating to securities 

fraud or any other similar provision of law, in order to reflect the intent of Congress that penalties for the offenses 

under the guidelines and policy statements appropriately 

account for the potential and actual harm to the public and 

the financial markets from the offenses. 

(B) REQUIREMENTS.—In making any amendments to 

the Federal Sentencing Guidelines and policy statements 

under subparagraph (A), the United States Sentencing 

Commission shall— 

(i) ensure that the guidelines and policy statements, particularly section 2B1.1(b)(14) and section 

2B1.1(b)(17) (and any successors thereto), reflect— 

(I) the serious nature of the offenses described 

in subparagraph (A); 


sroberts on DSKD5P82C1PROD with HEARING
715 

(II) the need for an effective deterrent and appropriate punishment to prevent the offenses; and 

(III) the effectiveness of incarceration in furthering the objectives described in subclauses (I) 

and (II); 

(ii) consider the extent to which the guidelines appropriately account for the potential and actual harm 

to the public and the financial markets resulting from 

the offenses; 

(iii) ensure reasonable consistency with other relevant directives and guidelines and Federal statutes; 

(iv) make any necessary conforming changes to 

guidelines; and 

(v) ensure that the guidelines adequately meet the 

purposes of sentencing, as set forth in section 

3553(a)(2) of title 18, United States Code. 

(2) FINANCIAL INSTITUTION FRAUD.— (A) DIRECTIVE.—Pursuant to its authority under section 994 of title 28, United States Code, and in accordance 

with this paragraph, the United States Sentencing Commission shall review and, if appropriate, amend the Federal Sentencing Guidelines and policy statements applicable to persons convicted of fraud offenses relating to financial institutions or federally related mortgage loans and 

any other similar provisions of law, to reflect the intent of 

Congress that the penalties for the offenses under the guidelines and policy statements ensure appropriate terms of imprisonment for offenders involved in substantial bank 

frauds or other frauds relating to financial institutions. 

(B) REQUIREMENTS.—In making any amendments to 

the Federal Sentencing Guidelines and policy statements 

under subparagraph (A), the United States Sentencing 

Commission shall— 

(i) ensure that the guidelines and policy statements 

reflect— 

(I) the serious nature of the offenses described 

in subparagraph (A); 

(II) the need for an effective deterrent and appropriate punishment to prevent the offenses; and 

(III) the effectiveness of incarceration in furthering the objectives described in subclauses (I) 

and (II); 

(ii) consider the extent to which the guidelines appropriately account for the potential and actual harm 

to the public and the financial markets resulting from 

the offenses; 

(iii) ensure reasonable consistency with other relevant directives and guidelines and Federal statutes; 

(iv) make any necessary conforming changes to 

guidelines; and 

(v) ensure that the guidelines adequately meet the 

purposes of sentencing, as set forth in section 

3553(a)(2) of title 18, United States Code. 

(b) EXTENSION OF STATUTE OF LIMITATIONS FOR SECURITIES

FRAUD VIOLATIONS.— 


sroberts on DSKD5P82C1PROD with HEARING
716 

(1) IN GENERAL.—Chapter 213 of title 18, United States 

Code, is amended by adding at the end the following: 

‘‘§ 3301. Securities fraud offenses 

‘‘(a) DEFINITION.—In this section, the term ‘securities fraud offense’ means a violation of, or a conspiracy or an attempt to violate— 

‘‘(1) section 1348; 

‘‘(2) section 32(a) of the Securities Exchange Act of 1934 (15 

U.S.C. 78ff(a)); 

‘‘(3) section 24 of the Securities Act of 1933 (15 U.S.C. 77x); 

‘‘(4) section 217 of the Investment Advisers Act of 1940 (15 

U.S.C. 80b–17); 

‘‘(5) section 49 of the Investment Company Act of 1940 (15 

U.S.C. 80a–48); or 

‘‘(6) section 325 of the Trust Indenture Act of 1939 (15 

U.S.C. 77yyy). 

‘‘(b) LIMITATION.—No person shall be prosecuted, tried, or punished for a securities fraud offense, unless the indictment is found 

or the information is instituted within 6 years after the commission 

of the offense.’’. 

(2) TECHNICAL AND CONFORMING AMENDMENT.—The table 

of sections for chapter 213 of title 18, United States Code, is 

amended by adding at the end the following: 

‘‘3301. Securities fraud offenses.’’. 

(c) AMENDMENTS TO THE FALSE CLAIMS ACT RELATING TO LIMI- TATIONS ON ACTIONS.—Section 3730(h) of title 31, United States 

Code, is amended— 

(1) in paragraph (1), by striking ‘‘or agent on behalf of the 

employee, contractor, or agent or associated others in furtherance of other efforts to stop 1 or more violations of this subchapter’’ and inserting ‘‘agent or associated others in furtherance of an action under this section or other efforts to stop 1 

or more violations of this subchapter’’; and 

(2) by adding at the end the following: 

‘‘(3) LIMITATION ON BRINGING CIVIL ACTION.—A civil action 

under this subsection may not be brought more than 3 years 

after the date when the retaliation occurred.’’. 

Subtitle H—Conforming Amendments 

SEC. 1081. AMENDMENTS TO THE INSPECTOR GENERAL ACT. 

Effective on the date of enactment of this Act, the Inspector General Act of 1978 (5 U.S.C. App. 3) is amended— 

(1) in section 8G(a)(2), by inserting ‘‘and the Bureau of 

Consumer Financial Protection’’ after ‘‘Board of Governors of 

the Federal Reserve System’’; 

(2) in section 8G(c), by adding at the end the following: 

‘‘For purposes of implementing this section, the Chairman of the 

Board of Governors of the Federal Reserve System shall appoint 

the Inspector General of the Board of Governors of the Federal 

Reserve System and the Bureau of Consumer Financial Protection. The Inspector General of the Board of Governors of the 

Federal Reserve System and the Bureau of Consumer Financial 

Protection shall have all of the authorities and responsibilities 


sroberts on DSKD5P82C1PROD with HEARING
717 

provided by this Act with respect to the Bureau of Consumer Financial Protection, as if the Bureau were part of the Board of 

Governors of the Federal Reserve System.’’; and 

(3) in section 8G(g)(3), by inserting ‘‘and the Bureau of 

Consumer Financial Protection’’ after ‘‘Board of Governors of 

the Federal Reserve System’’ the first place that term appears. 

SEC. 1082. AMENDMENTS TO THE PRIVACY ACT OF 1974. 

Effective on the date of enactment of this Act, section 552a of 

title 5, United States Code, is amended by adding at the end the 

following: 

‘‘(w) APPLICABILITY TO BUREAU OF CONSUMER FINANCIAL PROTECTION.—Except as provided in the Consumer Financial Protection 

Act of 2010, this section shall apply with respect to the Bureau of 

Consumer Financial Protection.’’. 

SEC. 1083. AMENDMENTS TO THE ALTERNATIVE MORTGAGE TRANSACTION PARITY ACT OF 1982. 

(a) IN GENERAL.—The Alternative Mortgage Transaction Parity 

Act of 1982 (12 U.S.C. 3801 et seq.) is amended— 

(1) in section 803 (12 U.S.C. 3802(1)), by striking ‘‘1974’’ 

and all that follows through ‘‘described and defined’’ and inserting the following: ‘‘1974), in which the interest rate or finance charge may be adjusted or renegotiated, described and 

defined’’; and 

(2) in section 804 (12 U.S.C. 3803)— 

(A) in subsection (a)— 

(i) in each of paragraphs (1), (2), and (3), by inserting after ‘‘transactions made’’ each place that term 

appears ‘‘on or before the designated transfer date, as 

determined under section 1062 of the Consumer Financial Protection Act of 2010,’’; 

(ii) in paragraph (2), by striking ‘‘and’’ at the end; 

(iii) in paragraph (3), by striking the period at the 

end and inserting ‘‘; and’’; and 

(iv) by adding at the end the following new paragraph: 

‘‘(4) with respect to transactions made after the designated 

transfer date, only in accordance with regulations governing alternative mortgage transactions, as issued by the Bureau of 

Consumer Financial Protection for federally chartered housing 

creditors, in accordance with the rulemaking authority granted 

to the Bureau of Consumer Financial Protection with regard to 

federally chartered housing creditors under provisions of law 

other than this section.’’; 

(B) by striking subsection (c) and inserting the following: 

‘‘(c) PREEMPTION OF STATE LAW.—An alternative mortgage 

transaction may be made by a housing creditor in accordance with 

this section, notwithstanding any State constitution, law, or regulation that prohibits an alternative mortgage transaction. For purposes of this subsection, a State constitution, law, or regulation that 

prohibits an alternative mortgage transaction does not include any 

State constitution, law, or regulation that regulates mortgage transactions generally, including any restriction on prepayment penalties 

or late charges.’’; and 


sroberts on DSKD5P82C1PROD with HEARING
718 

(C) by adding at the end the following: 

‘‘(d) BUREAU ACTIONS.—The Bureau of Consumer Financial 

Protection shall— 

‘‘(1) review the regulations identified by the Comptroller of 

the Currency and the National Credit Union Administration, 

(as those rules exist on the designated transfer date), as applicable under paragraphs (1) through (3) of subsection (a); 

‘‘(2) determine whether such regulations are fair and not 

deceptive and otherwise meet the objectives of the Consumer Financial Protection Act of 2010; and 

‘‘(3) promulgate regulations under subsection (a)(4) after 

the designated transfer date. 

‘‘(e) DESIGNATED TRANSFER DATE.—As used in this section, the 

term ‘designated transfer date’ means the date determined under 

section 1062 of the Consumer Financial Protection Act of 2010.’’. 

(b) EFFECTIVE DATE.—This section and the amendments made 

by this section shall become effective on the designated transfer 

date. 

(c) RULE OF CONSTRUCTION.—The amendments made by subsection (a) shall not affect any transaction covered by the Alternative Mortgage Transaction Parity Act of l982 (12 U.S.C. 3801 et 

seq.) and entered into on or before the designated transfer date. 

SEC. 1084. AMENDMENTS TO THE ELECTRONIC FUND TRANSFER ACT. 

The Electronic Fund Transfer Act (15 U.S.C. 1693 et seq.) is 

amended— 

(1) by striking ‘‘Board’’ each place that term appears and 

inserting ‘‘Bureau’’, except in subsections (a) and (e) of section 

904 (as amended in paragraph (3) of this section) and in 918 

(15 U.S.C. 1693o) (as so designated by the Credit Card Act of 

2009) and section 920 (as added by section 1076); 

(2) in section 903 (15 U.S.C. 1693a)— 

(A) by redesignating paragraphs (3) through (11) as 

paragraphs (4) through (12), respectively; and 

(B) by inserting after paragraph (3) the following: 

‘‘(4) the term ‘Bureau’ means the Bureau of Consumer Financial Protection;’’; 

(3) in section 904 (15 U.S.C. 1693b)— 

(A) in subsection (a), by striking ‘‘(a) PRESCRIPTION BY

BOARD.—The Board shall prescribe regulations to carry out 

the purposes of this title.’’ and inserting the following: 

‘‘(a) PRESCRIPTION BY THE BUREAU AND THE BOARD.— 

‘‘(1) IN GENERAL.—Except as provided in paragraph (2), the 

Bureau shall prescribe rules to carry out the purposes of this 

title. 

‘‘(2) AUTHORITY OF THE BOARD.—The Board shall have sole 

authority to prescribe rules— 

‘‘(A) to carry out the purposes of this title with respect 

to a person described in section 1029(a) of the Consumer 

Financial Protection Act of 2010; and 

‘‘(B) to carry out the purposes of section 920.’’; and 

(B) by adding at the end the following new subsection: 

‘‘(e) DEFERENCE.—No provision of this title may be construed as 

altering, limiting, or otherwise affecting the deference that a court 

affords to— 


sroberts on DSKD5P82C1PROD with HEARING
719 

‘‘(1) the Bureau in making determinations regarding the 

meaning or interpretation of any provision of this title for 

which the Bureau has authority to prescribe regulations; or 

‘‘(2) the Board in making determinations regarding the 

meaning or interpretation of section 920.’’. 

(4) in section 916(d) (15 U.S.C. 1693m) (as so designated 

by the Credit CARD Act of 2009)— 

(A) in the subsection heading, by striking ‘‘OF BOARD

OR APPROVAL OF DULY AUTHORIZED OFFICIAL OR EMPLOYEE OF FEDERAL RESERVE SYSTEM’’; 

(B) by inserting ‘‘Bureau or the’’ before ‘‘Board’’ each 

place that term appears; and 

(C) by inserting ‘‘Bureau of Consumer Financial Protection or the’’ before ‘‘Federal Reserve System’’; and 

(5) in section 918 (15 U.S.C. 1693o) (as so designated by 

the Credit CARD Act of 2009)— 

(A) in subsection (a)— 

(i) by striking ‘‘Compliance’’ and inserting ‘‘Subject 

to subtitle B of the Consumer Financial Protection Act 

of 2010, compliance’’; 

(ii) by striking paragraphs (1) and (2), and inserting the following: 

‘‘(1) section 8 of the Federal Deposit Insurance Act, by the 

appropriate Federal banking agency, as defined in section 3(q) 

of the Federal Deposit Insurance Act (12 U.S.C. 1813(q)), with 

respect to— 

‘‘(A) national banks, Federal savings associations, and 

Federal branches and Federal agencies of foreign banks; 

‘‘(B) member banks of the Federal Reserve System 

(other than national banks), branches and agencies of foreign banks (other than Federal branches, Federal agencies, 

and insured State branches of foreign banks), commercial 

lending companies owned or controlled by foreign banks, 

and organizations operating under section 25 or 25A of the 

Federal Reserve Act; and 

‘‘(C) banks and State savings associations insured by 

the Federal Deposit Insurance Corporation (other than 

members of the Federal Reserve System), and insured State 

branches of foreign banks;’’; 

(iii) by redesignating paragraphs (3) through (5) as 

paragraphs (2) through (4), respectively; 

(iv) in paragraph (2) (as so redesignated), by striking the period at the end and inserting a semicolon; 

(v) in paragraph (3) (as so redesignated), by striking ‘‘and’’ at the end; 

(vi) in paragraph (4) (as so redesignated), by striking the period at the end and inserting ‘‘and’’; and 

(vii) by adding at the end the following: 

‘‘(5) subtitle E of the Consumer Financial Protection Act of 

2010, by the Bureau, with respect to any person subject to this 

title, except that the Bureau shall not have authority to enforce 

the requirements of section 920 or any regulations prescribed by 

the Board under section 920.’’; 


sroberts on DSKD5P82C1PROD with HEARING
720 

(B) in subsection (b), by inserting ‘‘any of paragraphs 

(1) through (4) of’’ before ‘‘subsection (a)’’ each place that 

term appears; and 

(C) by striking subsection (c) and inserting the following: 

‘‘(c) OVERALL ENFORCEMENT AUTHORITY OF THE FEDERAL

TRADE COMMISSION.—Except to the extent that enforcement of the 

requirements imposed under this title is specifically committed to 

some other Government agency under any of paragraphs (1) through 

(4) of subsection (a), and subject to subtitle B of the Consumer Financial Protection Act of 2010, the Federal Trade Commission shall 

be authorized to enforce such requirements. For the purpose of the 

exercise by the Federal Trade Commission of its functions and powers under the Federal Trade Commission Act, a violation of any requirement imposed under this title shall be deemed a violation of 

a requirement imposed under that Act. All of the functions and powers of the Federal Trade Commission under the Federal Trade Commission Act are available to the Federal Trade Commission to enforce compliance by any person subject to the jurisdiction of the Federal Trade Commission with the requirements imposed under this 

title, irrespective of whether that person is engaged in commerce or 

meets any other jurisdictional tests under the Federal Trade Commission Act.’’. 

SEC. 1085. AMENDMENTS TO THE EQUAL CREDIT OPPORTUNITY ACT. 

The Equal Credit Opportunity Act (15 U.S.C. 1691 et seq.) is 

amended— 

(1) by striking ‘‘Board’’ each place that term appears, other 

than in section 703(f) (as added by this section) and section 

704(a)(4) (15 U.S.C. 1691c(a)(4)), and inserting ‘‘Bureau’’; 

(2) in section 702 (15 U.S.C. 1691a), by striking subsection 

(c) and inserting the following: 

‘‘(c) The term ‘Bureau’ means the Bureau of Consumer Financial Protection.’’; 

(3) in section 703 (15 U.S.C. 1691b)— 

(A) by striking the section heading and inserting the 

following: 

‘‘SEC. 703. PROMULGATION OF REGULATIONS BY THE BUREAU.’’; 

(B) by striking ‘‘(a) REGULATIONS.—’’; 

(C) by striking subsection (b); 

(D) by redesignating paragraphs (1) through (5) as 

subsections (a) through (e), respectively; 

(E) in subsection (c), as so redesignated, by striking 

‘‘paragraph (2)’’ and inserting ‘‘subsection (b)’’; and 

(F) by adding at the end the following: 

‘‘(f) BOARD AUTHORITY.—Notwithstanding subsection (a), the 

Board shall prescribe regulations to carry out the purposes of this 

title with respect to a person described in section 1029(a) of the Consumer Financial Protection Act of 2010. These regulations may contain but are not limited to such classifications, differentiation, or 

other provision, and may provide for such adjustments and exceptions for any class of transactions, as in the judgment of the Board 

are necessary or proper to effectuate the purposes of this title, to prevent circumvention or evasion thereof, or to facilitate or substantiate 

compliance therewith. 


sroberts on DSKD5P82C1PROD with HEARING
721 

‘‘(g) DEFERENCE.—Notwithstanding any power granted to any 

Federal agency under this title, the deference that a court affords to 

a Federal agency with respect to a determination made by such 

agency relating to the meaning or interpretation of any provision of 

this title that is subject to the jurisdiction of such agency shall be 

applied as if that agency were the only agency authorized to apply, 

enforce, interpret, or administer the provisions of this title’’; 

(4) in section 704 (15 U.S.C. 1691c)— 

(A) in subsection (a)— 

(i) by striking ‘‘Compliance’’ and inserting ‘‘Subject 

to subtitle B of the Consumer Protection Financial Protection Act of 2010’’; 

(ii) by striking paragraphs (1) and (2) and inserting the following: 

‘‘(1) section 8 of the Federal Deposit Insurance Act, by the 

appropriate Federal banking agency, as defined in section 3(q) 

of the Federal Deposit Insurance Act (12 U.S.C. 1813(q)), with 

respect to— 

‘‘(A) national banks, Federal savings associations, and 

Federal branches and Federal agencies of foreign banks; 

‘‘(B) member banks of the Federal Reserve System 

(other than national banks), branches and agencies of foreign banks (other than Federal branches, Federal agencies, 

and insured State branches of foreign banks), commercial 

lending companies owned or controlled by foreign banks, 

and organizations operating under section 25 or 25A of the 

Federal Reserve Act; and 

‘‘(C) banks and State savings associations insured by 

the Federal Deposit Insurance Corporation (other than 

members of the Federal Reserve System), and insured State 

branches of foreign banks;’’; 

(iii) by redesignating paragraphs (3) through (9) as 

paragraphs (2) through (8), respectively; 

(iv) in paragraph (7) (as so redesignated), by striking ‘‘and’’ at the end; 

(v) in paragraph (8) (as so redesignated), by striking the period at the end, and inserting ‘‘; and’’; and 

(vi) by adding at the end the following: 

‘‘(9) Subtitle E of the Consumer Financial Protection Act of 

2010, by the Bureau, with respect to any person subject to this 

title.’’; 

(B) by striking subsection (c) and inserting the following: 

‘‘(c) OVERALL ENFORCEMENT AUTHORITY OF FEDERAL TRADE

COMMISSION.—Except to the extent that enforcement of the requirements imposed under this title is specifically committed to some 

other Government agency under any of paragraphs (1) through (8) 

of subsection (a), and subject to subtitle B of the Consumer Financial Protection Act of 2010, the Federal Trade Commission shall be 

authorized to enforce such requirements. For the purpose of the exercise by the Federal Trade Commission of its functions and powers 

under the Federal Trade Commission Act (15 U.S.C. 41 et seq.), a 

violation of any requirement imposed under this subchapter shall be 

deemed a violation of a requirement imposed under that Act. All of 

the functions and powers of the Federal Trade Commission under 


sroberts on DSKD5P82C1PROD with HEARING
722 

the Federal Trade Commission Act are available to the Federal 

Trade Commission to enforce compliance by any person with the requirements imposed under this title, irrespective of whether that 

person is engaged in commerce or meets any other jurisdictional 

tests under the Federal Trade Commission Act, including the power 

to enforce any rule prescribed by the Bureau under this title in the 

same manner as if the violation had been a violation of a Federal 

Trade Commission trade regulation rule.’’; and 

(C) in subsection (d), by striking ‘‘Board’’ and inserting 

‘‘Bureau’’; 

(5) in section 706(e) (15 U.S.C. 1691e(e))— 

(A) in the subsection heading— 

(i) by striking ‘‘BOARD’’ each place that term appears and inserting ‘‘BUREAU’’; and 

(ii) by striking ‘‘FEDERAL RESERVE SYSTEM’’ and 

inserting ‘‘BUREAU OF CONSUMER FINANCIAL PROTEC- TION’’; and 

(B) by striking ‘‘Federal Reserve System’’ and inserting 

‘‘Bureau of Consumer Financial Protection’’; 

(6) in section 706(g) (15 U.S.C. 1691e(g)), by striking ‘‘(3)’’ 

and inserting ‘‘(9)’’; and 

(7) in section 706(f) (15 U.S.C. 1691e(f)), by striking ‘‘two 

years from’’ each place that term appears and inserting ‘‘5 years 

after’’. 

SEC. 1086. AMENDMENTS TO THE EXPEDITED FUNDS AVAILABILITY 

ACT. 

(a) AMENDMENT TO SECTION 603.—Section 603(d)(1) of the Expedited Funds Availability Act (12 U.S.C. 4002) is amended by inserting after ‘‘Board’’ the following ‘‘, jointly with the Director of the 

Bureau of Consumer Financial Protection,’’. 

(b) AMENDMENTS TO SECTION 604.—Section 604 of the Expedited Funds Availability Act (12 U.S.C. 4003) is amended— 

(1) by inserting after ‘‘Board’’ each place that term appears, 

other than in subsection (f), the following: ‘‘, jointly with the Director of the Bureau of Consumer Financial Protection,’’; and 

(2) in subsection (f), by striking ‘‘Board.’’ each place that 

term appears and inserting the following: ‘‘Board, jointly with 

the Director of the Bureau of Consumer Financial Protection.’’. 

(c) AMENDMENTS TO SECTION 605.—Section 605 of the Expedited Funds Availability Act (12 U.S.C. 4004) is amended— 

(1) by inserting after ‘‘Board’’ each place that term appears, 

other than in the heading for section 605(f)(1), the following: ‘‘, 

jointly with the Director of the Bureau of Consumer Financial 

Protection,’’; and 

(2) in subsection (f)(1), in the paragraph heading, by inserting ‘‘AND BUREAU’’ after ‘‘BOARD’’. 

(d) AMENDMENTS TO SECTION 609.—Section 609 of the Expedited Funds Availability Act (12 U.S.C. 4008) is amended: 

(1) in subsection (a), by inserting after ‘‘Board’’ the following ‘‘, jointly with the Director of the Bureau of Consumer 

Financial Protection,’’; and 

(2) by striking subsection (e) and inserting the following: 

‘‘(e) CONSULTATIONS.—In prescribing regulations under subsections (a) and (b), the Board and the Director of the Bureau of 

Consumer Financial Protection, in the case of subsection (a), and 


sroberts on DSKD5P82C1PROD with HEARING
723 

the Board, in the case of subsection (b), shall consult with the 

Comptroller of the Currency, the Board of Directors of the Federal 

Deposit Insurance Corporation, and the National Credit Union Administration Board.’’. 

(e) EXPEDITED FUNDS AVAILABILITY IMPROVEMENTS.—Section 

603 of the Expedited Funds Availability Act (12 U.S.C. 4002) is 

amended— 

(1) in subsection (a)(2)(D), by striking ‘‘$100’’ and inserting ‘‘$200’’; and 

(2) in subsection (b)(3)(C), in the subparagraph heading, by 

striking ‘‘$100’’ and inserting ‘‘$200’’; and 

(3) in subsection (c)(1)(B)(iii), in the clause heading, by 

striking ‘‘$100’’ and inserting ‘‘$200’’. 

(f) REGULAR ADJUSTMENTS FOR INFLATION.—Section 607 of the 

Expedited Funds Availability Act (12 U.S.C. 4006) is amended by 

adding at the end the following: 

‘‘(f) ADJUSTMENTS TO DOLLAR AMOUNTS FOR INFLATION.—The 

dollar amounts under this title shall be adjusted every 5 years after 

December 31, 2011, by the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers, 

as published by the Bureau of Labor Statistics, rounded to the nearest multiple of $25.’’. 

SEC. 1087. AMENDMENTS TO THE FAIR CREDIT BILLING ACT. 

The Fair Credit Billing Act (15 U.S.C. 1666–1666j) is amended 

by striking ‘‘Board’’ each place that term appears, other than in section 105(i) (as added by this subtitle) and inserting ‘‘Bureau’’. 

SEC. 1088. AMENDMENTS TO THE FAIR CREDIT REPORTING ACT AND 

THE FAIR AND ACCURATE CREDIT TRANSACTIONS ACT OF 

2003. 

(a) FAIR CREDIT REPORTING ACT.—The Fair Credit Reporting 

Act (15 U.S.C. 1681 et seq.) is amended— 

(1) in section 603 (15 U.S.C. 1681a)— 

(A) by redesignating subsections (w) and (x) as subsections (x) and (y), respectively; and 

(B) by inserting after subsection (v) the following: 

‘‘(w) The term ‘Bureau’ means the Bureau of Consumer Financial Protection.’’; and 

(2) except as otherwise specifically provided in this subsection— 

(A) by striking ‘‘Federal Trade Commission’’ each place 

that term appears and inserting ‘‘Bureau’’; 

(B) by striking ‘‘FTC’’ each place that term appears and 

inserting ‘‘Bureau’’; 

(C) by striking ‘‘the Commission’’ each place that term 

appears, other than sections 615(e) (15 U.S.C. 1681m(e)) 

and 628(a)(1) (15 U.S.C. 1681w(a)(1)), and inserting ‘‘the 

Bureau’’; and 

(D) by striking ‘‘The Federal banking agencies, the National Credit Union Administration, and the Commission 

shall jointly’’ each place that term appears, other than section 615(e)(1) (15 U.S.C. 1681m(e)) and section 628(a)(1) 

(15 U.S.C. 1681w(a)(1)), and inserting ‘‘The Bureau shall’’; 

(3) in section 603(k)(2) (15 U.S.C. 1681a(k)(2)), by striking 

‘‘Board of Governors of the Federal Reserve System’’ and inserting ‘‘Bureau’’; 


sroberts on DSKD5P82C1PROD with HEARING
724 

(4) in section 604(g) (15 U.S.C. 1681b(g))— 

(A) in paragraph (3), by striking subparagraph (C) and 

inserting the following: 

‘‘(C) as otherwise determined to be necessary and appropriate, by regulation or order, by the Bureau or the applicable State insurance authority (with respect to any person engaged in providing insurance or annuities).’’; and 

(B) by striking paragraph (5) and inserting the following: 

‘‘(5) REGULATIONS AND EFFECTIVE DATE FOR PARAGRAPH

(2).— ‘‘(A) REGULATIONS REQUIRED.—The Bureau may, after 

notice and opportunity for comment, prescribe regulations 

that permit transactions under paragraph (2) that are determined to be necessary and appropriate to protect legitimate operational, transactional, risk, consumer, and other 

needs (and which shall include permitting actions necessary for administrative verification purposes), consistent 

with the intent of paragraph (2) to restrict the use of medical information for inappropriate purposes.’’; 

(5) in section 605(h)(2)(A) (15 U.S.C. 1681c(h)(2)(A)), by 

striking ‘‘with respect to the entities that are subject to their respective enforcement authority under section 621’’ and inserting 

‘‘, in consultation with the Federal banking agencies, the National Credit Union Administration, and the Federal Trade 

Commission,’’. 

(6) in section 611(e)(2) (15 U.S.C. 1681i(e)), by striking 

paragraph (2) and inserting the following: 

‘‘(2) EXCLUSION.—Complaints received or obtained by the 

Bureau pursuant to its investigative authority under the Consumer Financial Protection Act of 2010 shall not be subject to 

paragraph (1).’’; 

(7) in section 615(d)(2)(B) (15 U.S.C. 1681m(d)(2)(B)), by 

striking ‘‘the Federal banking agencies’’ and inserting ‘‘the Federal Trade Commission, the Federal banking agencies,’’; 

(8) in section 615(e)(1) (15 U.S.C. 1681m(e)(1)), by striking 

‘‘and the Commission’’ and inserting ‘‘the Federal Trade Commission, the Commodity Futures Trading Commission, and the 

Securities and Exchange Commission’’; 

(9) in section 615(h)(6) (15 U.S.C. 1681m(h)(6)), by striking 

subparagraph (A) and inserting the following: 

‘‘(A) RULES REQUIRED.—The Bureau shall prescribe 

rules to carry out this subsection.’’; 

(10) in section 621 (15 U.S.C. 1681s)— 

(A) by striking subsection (a) and inserting the following: 

‘‘(a) ENFORCEMENT BY FEDERAL TRADE COMMISSION.— 

‘‘(1) IN GENERAL.—The Federal Trade Commission shall be 

authorized to enforce compliance with the requirements imposed 

by this title under the Federal Trade Commission Act (15 

U.S.C. 41 et seq.), with respect to consumer reporting agencies 

and all other persons subject thereto, except to the extent that 

enforcement of the requirements imposed under this title is specifically committed to some other Government agency under any 

of subparagraphs (A) through (G) of subsection (b)(1), and subVerDate Mar 15 2010 04:29 Jul 07, 2010 Jkt 057098 PO 00000 Frm 00728 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
725 

ject to subtitle B of the Consumer Financial Protection Act of 

2010, subsection (b). For the purpose of the exercise by the Federal Trade Commission of its functions and powers under the 

Federal Trade Commission Act, a violation of any requirement 

or prohibition imposed under this title shall constitute an unfair or deceptive act or practice in commerce, in violation of section 5(a) of the Federal Trade Commission Act (15 U.S.C. 

45(a)), and shall be subject to enforcement by the Federal Trade 

Commission under section 5(b) of that Act with respect to any 

consumer reporting agency or person that is subject to enforcement by the Federal Trade Commission pursuant to this subsection, irrespective of whether that person is engaged in commerce or meets any other jurisdictional tests under the Federal 

Trade Commission Act. The Federal Trade Commission shall 

have such procedural, investigative, and enforcement powers, 

including the power to issue procedural rules in enforcing compliance with the requirements imposed under this title and to 

require the filing of reports, the production of documents, and 

the appearance of witnesses, as though the applicable terms and 

conditions of the Federal Trade Commission Act were part of 

this title. Any person violating any of the provisions of this title 

shall be subject to the penalties and entitled to the privileges 

and immunities provided in the Federal Trade Commission Act 

as though the applicable terms and provisions of such Act are 

part of this title. 

‘‘(2) PENALTIES.— ‘‘(A) KNOWING VIOLATIONS.—Except as otherwise provided by subtitle B of the Consumer Financial Protection 

Act of 2010, in the event of a knowing violation, which constitutes a pattern or practice of violations of this title, the 

Federal Trade Commission may commence a civil action to 

recover a civil penalty in a district court of the United 

States against any person that violates this title. In such 

action, such person shall be liable for a civil penalty of not 

more than $2,500 per violation. 

‘‘(B) DETERMINING PENALTY AMOUNT.—In determining 

the amount of a civil penalty under subparagraph (A), the 

court shall take into account the degree of culpability, any 

history of such prior conduct, ability to pay, effect on ability 

to continue to do business, and such other matters as justice may require. 

‘‘(C) LIMITATION.—Notwithstanding paragraph (2), a 

court may not impose any civil penalty on a person for a 

violation of section 623(a)(1), unless the person has been enjoined from committing the violation, or ordered not to 

commit the violation, in an action or proceeding brought by 

or on behalf of the Federal Trade Commission, and has violated the injunction or order, and the court may not impose 

any civil penalty for any violation occurring before the date 

of the violation of the injunction or order.’’; 

(B) by striking subsection (b) and inserting the following: 

‘‘(b) ENFORCEMENT BY OTHER AGENCIES.— 

‘‘(1) IN GENERAL.—Subject to subtitle B of the Consumer Financial Protection Act of 2010, compliance with the requireVerDate Mar 15 2010 04:29 Jul 07, 2010 Jkt 057098 PO 00000 Frm 00729 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
726 

ments imposed under this title with respect to consumer reporting agencies, persons who use consumer reports from such agencies, persons who furnish information to such agencies, and 

users of information that are subject to section 615(d) shall be 

enforced under— 

‘‘(A) section 8 of the Federal Deposit Insurance Act (12 

U.S.C. 1818), by the appropriate Federal banking agency, 

as defined in section 3(q) of the Federal Deposit Insurance 

Act (12 U.S.C. 1813(q)), with respect to— 

‘‘(i) any national bank or State savings association, 

and any Federal branch or Federal agency of a foreign 

bank; 

‘‘(ii) any member bank of the Federal Reserve System (other than a national bank), a branch or agency 

of a foreign bank (other than a Federal branch, Federal agency, or insured State branch of a foreign bank), 

a commercial lending company owned or controlled by 

a foreign bank, and any organization operating under 

section 25 or 25A of the Federal Reserve Act; and 

‘‘(iii) any bank or Federal savings association insured by the Federal Deposit Insurance Corporation 

(other than a member of the Federal Reserve System) 

and any insured State branch of a foreign bank; 

‘‘(B) the Federal Credit Union Act (12 U.S.C. 1751 et 

seq.), by the Administrator of the National Credit Union 

Administration with respect to any Federal credit union; 

‘‘(C) subtitle IV of title 49, United States Code, by the 

Secretary of Transportation, with respect to all carriers 

subject to the jurisdiction of the Surface Transportation 

Board; 

‘‘(D) the Federal Aviation Act of 1958 (49 U.S.C. App. 

1301 et seq.), by the Secretary of Transportation, with respect to any air carrier or foreign air carrier subject to that 

Act; 

‘‘(E) the Packers and Stockyards Act, 1921 (7 U.S.C. 

181 et seq.) (except as provided in section 406 of that Act), 

by the Secretary of Agriculture, with respect to any activities subject to that Act; 

‘‘(F) the Commodity Exchange Act, with respect to a 

person subject to the jurisdiction of the Commodity Futures 

Trading Commission; 

‘‘(G) the Federal securities laws, and any other laws 

that are subject to the jurisdiction of the Securities and Exchange Commission, with respect to a person that is subject 

to the jurisdiction of the Securities and Exchange Commission; and 

‘‘(H) subtitle E of the Consumer Financial Protection 

Act of 2010, by the Bureau, with respect to any person subject to this title. 

‘‘(2) INCORPORATED DEFINITIONS.—The terms used in paragraph (1) that are not defined in this title or otherwise defined 

in section 3(s) of the Federal Deposit Insurance Act (12 U.S.C. 

1813(s)) have the same meanings as in section 1(b) of the International Banking Act of 1978 (12 U.S.C. 3101).’’; 

(C) in subsection (c)(2)— 


sroberts on DSKD5P82C1PROD with HEARING
727 

(i) by inserting ‘‘and the Federal Trade Commission’’ before ‘‘or the appropriate’’; and 

(ii) by inserting ‘‘and the Federal Trade Commission’’ before ‘‘or appropriate’’ each place that term appears; 

(D) in subsection (c)(4), by inserting before ‘‘or the appropriate’’ each place that term appears the following: ‘‘, the 

Federal Trade Commission,’’; 

(E) by striking subsection (e) and inserting the following: 

‘‘(e) REGULATORY AUTHORITY.— 

‘‘(1) IN GENERAL.—The Bureau shall prescribe such regulations as are necessary to carry out the purposes of this title, except with respect to sections 615(e) and 628. The Bureau may 

prescribe regulations as may be necessary or appropriate to administer and carry out the purposes and objectives of this title, 

and to prevent evasions thereof or to facilitate compliance therewith. Except as provided in section 1029(a) of the Consumer Financial Protection Act of 2010, the regulations prescribed by the 

Bureau under this title shall apply to any person that is subject 

to this title, notwithstanding the enforcement authorities granted to other agencies under this section. 

‘‘(2) DEFERENCE.—Notwithstanding any power granted to 

any Federal agency under this title, the deference that a court 

affords to a Federal agency with respect to a determination 

made by such agency relating to the meaning or interpretation 

of any provision of this title that is subject to the jurisdiction 

of such agency shall be applied as if that agency were the only 

agency authorized to apply, enforce, interpret, or administer the 

provisions of this title. The regulations prescribed by the Bureau under this title shall apply to any person that is subject 

to this title, notwithstanding the enforcement authorities granted to other agencies under this section.’’; and 

(F) in subsection (f)(2), by striking ‘‘the Federal banking agencies’’ and insert ‘‘the Federal Trade Commission, 

the Federal banking agencies,’’; 

(11) in section 623 (15 U.S.C. 1681s–2)— 

(A) in subsection (a)(7), by striking subparagraph (D) 

and inserting the following: 

‘‘(D) MODEL DISCLOSURE.— 

‘‘(i) DUTY OF BUREAU.—The Bureau shall prescribe 

a brief model disclosure that a financial institution 

may use to comply with subparagraph (A), which shall 

not exceed 30 words. 

‘‘(ii) USE OF MODEL NOT REQUIRED.—No provision 

of this paragraph may be construed to require a financial institution to use any such model form prescribed 

by the Bureau. 

‘‘(iii) COMPLIANCE USING MODEL.—A financial institution shall be deemed to be in compliance with subparagraph (A) if the financial institution uses any 

model form prescribed by the Bureau under this subparagraph, or the financial institution uses any such 

model form and rearranges its format.’’; 


sroberts on DSKD5P82C1PROD with HEARING
728 

(B) in subsection (a)(8), by inserting ‘‘, in consultation 

with the Federal Trade Commission, the Federal banking 

agencies, and the National Credit Union Administration,’’ 

before ‘‘shall jointly’’; and 

(C) by striking subsection (e) and inserting the following: 

‘‘(e) ACCURACY GUIDELINES AND REGULATIONS REQUIRED.— 

‘‘(1) GUIDELINES.—The Bureau shall, with respect to persons or entities that are subject to the enforcement authority of 

the Bureau under section 621— 

‘‘(A) establish and maintain guidelines for use by each 

person that furnishes information to a consumer reporting 

agency regarding the accuracy and integrity of the information relating to consumers that such entities furnish to consumer reporting agencies, and update such guidelines as 

often as necessary; and 

‘‘(B) prescribe regulations requiring each person that 

furnishes information to a consumer reporting agency to establish reasonable policies and procedures for implementing the guidelines established pursuant to subparagraph (A). 

‘‘(2) CRITERIA.—In developing the guidelines required by 

paragraph (1)(A), the Bureau shall— 

‘‘(A) identify patterns, practices, and specific forms of 

activity that can compromise the accuracy and integrity of 

information furnished to consumer reporting agencies; 

‘‘(B) review the methods (including technological 

means) used to furnish information relating to consumers 

to consumer reporting agencies; 

‘‘(C) determine whether persons that furnish information to consumer reporting agencies maintain and enforce 

policies to ensure the accuracy and integrity of information 

furnished to consumer reporting agencies; and 

‘‘(D) examine the policies and processes that persons 

that furnish information to consumer reporting agencies 

employ to conduct reinvestigations and correct inaccurate 

information relating to consumers that has been furnished 

to consumer reporting agencies.’’; 

(12) in section 628(a)(1) (15 U.S.C. 1681w(a)(1)), by striking ‘‘Not later than’’ and all that follows through ‘‘Exchange 

Commission,’’ and inserting ‘‘The Federal Trade Commission, 

the Securities and Exchange Commission, the Commodity Futures Trading Commission, the Federal banking agencies, and 

the National Credit Union Administration, with respect to the 

entities that are subject to their respective enforcement authority 

under section 621,’’; and 

(13) in section 628(a)(3) (15 U.S.C. 1681w(a)(3)), by striking ‘‘the Federal banking agencies, the National Credit Union 

Administration, the Commission, and the Securities and Exchange Commission’’ and inserting ‘‘the agencies identified in 

paragraph (1)’’. 

(b) FAIR AND ACCURATE CREDIT TRANSACTIONS ACT OF 2003.— 

The Fair and Accurate Credit Transactions Act of 2003 (Public Law 

108–159) is amended— 


sroberts on DSKD5P82C1PROD with HEARING
729 

(1) in section 112(b) (15 U.S.C. 1681c–1 note), by striking 

‘‘Commission’’ and inserting ‘‘Bureau’’; 

(2) in section 211(d) (15 U.S.C. 1681j note), by striking 

‘‘Commission’’ each place that term appears and inserting ‘‘Bureau’’; 

(3) in section 214(b) (15 U.S.C. 1681s–3 note), by striking 

paragraph (1) and inserting the following: 

‘‘(1) IN GENERAL.—Regulations to carry out section 624 of 

the Fair Credit Reporting Act (15 U.S.C. 1681s–3), shall be prescribed, as described in paragraph (2), by— 

‘‘(A) the Commodity Futures Trading Commission, 

with respect to entities subject to its enforcement authorities; 

‘‘(B) the Securities and Exchange Commission, with respect to entities subject to its enforcement authorities; and 

‘‘(C) the Bureau, with respect to other entities subject to 

this Act.’’; and 

(4) in section 214(e)(1) (15 U.S.C. 1681s–3 note), by striking 

‘‘Commission’’ and inserting ‘‘Bureau’’. 

SEC. 1089. AMENDMENTS TO THE FAIR DEBT COLLECTION PRACTICES 

ACT. 

The Fair Debt Collection Practices Act (15 U.S.C. 1692 et seq.) 

is amended— 

(1) by striking ‘‘Commission’’ each place that term appears 

and inserting ‘‘Bureau’’; 

(2) in section 803 (15 U.S.C. 1692a)— 

(A) by striking paragraph (1) and inserting the following: 

‘‘(1) The term ‘Bureau’ means the Bureau of Consumer Financial Protection.’’; 

(3) in section 814 (15 U.S.C. 1692l)— 

(A) by striking subsection (a) and inserting the following: 

‘‘(a) FEDERAL TRADE COMMISSION.—The Federal Trade Commission shall be authorized to enforce compliance with this title, except to the extent that enforcement of the requirements imposed 

under this title is specifically committed to another Government 

agency under any of paragraphs (1) through (5) of subsection (b), 

subject to subtitle B of the Consumer Financial Protection Act of 

2010. For purpose of the exercise by the Federal Trade Commission 

of its functions and powers under the Federal Trade Commission 

Act (15 U.S.C. 41 et seq.), a violation of this title shall be deemed 

an unfair or deceptive act or practice in violation of that Act. All 

of the functions and powers of the Federal Trade Commission under 

the Federal Trade Commission Act are available to the Federal 

Trade Commission to enforce compliance by any person with this 

title, irrespective of whether that person is engaged in commerce or 

meets any other jurisdictional tests under the Federal Trade Commission Act, including the power to enforce the provisions of this 

title, in the same manner as if the violation had been a violation 

of a Federal Trade Commission trade regulation rule.’’; and 

(B) in subsection (b)— 

(i) by striking ‘‘Compliance’’ and inserting ‘‘Subject 

to subtitle B of the Consumer Financial Protection Act 

of 2010, compliance’’; 


sroberts on DSKD5P82C1PROD with HEARING
730 

(ii) by striking paragraphs (1) and (2) and inserting the following: 

‘‘(1) section 8 of the Federal Deposit Insurance Act, by the 

appropriate Federal banking agency, as defined in section 3(q) 

of the Federal Deposit Insurance Act (12 U.S.C. 1813(q)), with 

respect to— 

‘‘(A) national banks, Federal savings associations, and 

Federal branches and Federal agencies of foreign banks; 

‘‘(B) member banks of the Federal Reserve System 

(other than national banks), branches and agencies of foreign banks (other than Federal branches, Federal agencies, 

and insured State branches of foreign banks), commercial 

lending companies owned or controlled by foreign banks, 

and organizations operating under section 25 or 25A of the 

Federal Reserve Act; and 

‘‘(C) banks and State savings associations insured by 

the Federal Deposit Insurance Corporation (other than 

members of the Federal Reserve System), and insured State 

branches of foreign banks;’’; 

(iii) by redesignating paragraphs (3) through (6), 

as paragraphs (2) through (5), respectively; 

(iv) in paragraph (4) (as so redesignated), by striking ‘‘and’’ at the end; 

(v) in paragraph (5) (as so redesignated), by striking the period at the end and inserting ‘‘; and’’; and 

(vi) by inserting before the undesignated matter at 

the end the following: 

‘‘(6) subtitle E of the Consumer Financial Protection Act of 

2010, by the Bureau, with respect to any person subject to this 

title.’’. 

(4) in subsection (d), by striking ‘‘Neither the Commission’’ 

and all that follows through the end of the subsection and inserting the following: ‘‘Except as provided in section 1029(a) of 

the Consumer Financial Protection Act of 2010, the Bureau may 

prescribe rules with respect to the collection of debts by debt collectors, as defined in this title.’’. 

SEC. 1090. AMENDMENTS TO THE FEDERAL DEPOSIT INSURANCE ACT. 

The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.) is 

amended— 

(1) in section 8(t) (12 U.S.C. 1818(t)), by adding at the end 

the following: 

‘‘(6) REFERRAL TO BUREAU OF CONSUMER FINANCIAL PROTECTION.—Subject to subtitle B of the Consumer Financial Protection Act of 2010, each appropriate Federal banking agency 

shall make a referral to the Bureau of Consumer Financial Protection when the Federal banking agency has a reasonable belief that a violation of an enumerated consumer law, as defined 

in the Consumer Financial Protection Act of 2010, has been 

committed by any insured depository institution or institutionaffiliated party within the jurisdiction of that appropriate Federal banking agency.’’; and 

(2) in section 43 (12 U.S.C. 1831t)— 

(A) in subsection (c), by striking ‘‘Federal Trade Commission’’ and inserting ‘‘Bureau’’; 


sroberts on DSKD5P82C1PROD with HEARING
731 

(B) in subsection (d), by striking ‘‘Federal Trade Commission’’ and inserting ‘‘Bureau’’; 

(C) in subsection (e)— 

(i) in paragraph (2), by striking ‘‘Federal Trade 

Commission’’ and inserting ‘‘Bureau’’; and 

(ii) by adding at the end the following new paragraph: 

‘‘(5) BUREAU.—The term ‘Bureau’ means the Bureau of Consumer Financial Protection.’’; and 

(D) in subsection (f)— 

(i) by striking paragraph (1) and inserting the following: 

‘‘(1) LIMITED ENFORCEMENT AUTHORITY.—Compliance with 

the requirements of subsections (b), (c), and (e), and any regulation prescribed or order issued under such subsection, shall be 

enforced under the Consumer Financial Protection Act of 2010, 

by the Bureau, subject to subtitle B of the Consumer Financial 

Protection Act of 2010, and under the Federal Trade Commission Act (15 U.S.C. 41 et seq.) by the Federal Trade Commission.’’; and 

(ii) in paragraph (2), by striking subparagraph (C) 

and inserting the following: 

‘‘(C) LIMITATION ON STATE ACTION WHILE FEDERAL ACTION PENDING.—If the Bureau or Federal Trade Commission has instituted an enforcement action for a violation of 

this section, no appropriate State supervisory agency may, 

during the pendency of such action, bring an action under 

this section against any defendant named in the complaint 

of the Bureau or Federal Trade Commission for any violation of this section that is alleged in that complaint.’’. 

SEC. 1091. AMENDMENT TO FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL ACT OF 1978. 

Section 1004(a)(4) of the Federal Financial Institutions Examination Council Act of 1978 (12 U.S.C. 3303(a)(4)) is amended by 

striking ‘‘Director, Office of Thrift Supervision’’ and inserting ‘‘Director of the Consumer Financial Protection Bureau’’. 

SEC. 1092. AMENDMENTS TO THE FEDERAL TRADE COMMISSION ACT. 

Section 18(f) of the Federal Trade Commission Act (15 U.S.C. 

57a(f)) is amended— 

(1) by striking the subsection heading and inserting the following: 

‘‘(f) DEFINITIONS OF BANKS, SAVINGS AND LOAN INSTITUTIONS, 

AND FEDERAL CREDIT UNIONS.—’’. 

(2) by striking paragraph (1) and inserting the following: 

‘‘(1) [Repealed.]’’; 

(3) by striking paragraphs (5) through (7); 

(4) in paragraph (2)— 

(A) by striking ‘‘(2) ENFORCEMENT’’ and all that follows 

through ‘‘in the case of’’ and inserting the following: 

‘‘(2) DEFINITION.—For purposes of this Act, the term ‘bank’ 

means’’; 

(B) in subparagraph (A), by striking ‘‘, by the division’’ 

and all that follows through ‘‘Currency’’; 

(C) in subparagraph (B)— 


sroberts on DSKD5P82C1PROD with HEARING
732 

(i) by striking ‘‘, by the division’’ and all that follows through ‘‘System’’; and 

(ii) by striking ‘‘25(a)’’ and inserting ‘‘25A’’; and 

(D) in subparagraph (C)— 

(i) by striking ‘‘(other’’ and inserting ‘‘(other than’’; 

and 

(ii) by striking ‘‘, by the division’’ and all that follows through ‘‘Corporation’’; 

(5) in paragraph (3), by striking ‘‘Compliance’’ and all that 

follows through ‘‘as defined in’’ and inserting the following: 

‘‘For purposes of this Act, the term ‘‘savings and loan institution’’ has the same meaning as in’’; and 

(6) in paragraph (4), by striking ‘‘Compliance’’ and all that 

follows through ‘‘credit unions under’’ and inserting the following: ‘‘For purposes of this Act, the term ‘‘Federal credit 

union’’ has the same meaning as in’’. 

SEC. 1093. AMENDMENTS TO THE GRAMM-LEACH-BLILEY ACT. 

Title V of the Gramm-Leach-Bliley Act (15 U.S.C. 6801 et seq.) 

is amended— 

(1) in section 501(b) (15 U.S.C. 6801(b)), by inserting ‘‘, 

other than the Bureau of Consumer Financial Protection,’’ after 

‘‘505(a)’’; 

(2) in section 502(e)(5) (15 U.S.C. 6802(e)(5)), by inserting 

‘‘the Bureau of Consumer Financial Protection’’ after ‘‘(including’’; 

(3) in section 504(a) (15 U.S.C. 6804(a))— 

(A) by striking paragraphs (1) and (2) and inserting 

the following: 

‘‘(1) RULEMAKING.— ‘‘(A) IN GENERAL.—Except as provided in subparagraph 

(C), the Bureau of Consumer Financial Protection and the 

Securities and Exchange Commission shall have authority 

to prescribe such regulations as may be necessary to carry 

out the purposes of this subtitle with respect to financial institutions and other persons subject to their respective jurisdiction under section 505 (and notwithstanding subtitle B 

of the Consumer Financial Protection Act of 2010), except 

that the Bureau of Consumer Financial Protection shall not 

have authority to prescribe regulations with respect to the 

standards under section 501. 

‘‘(B) CFTC.—The Commodity Futures Trading Commission shall have authority to prescribe such regulations 

as may be necessary to carry out the purposes of this subtitle with respect to financial institutions and other persons 

subject to the jurisdiction of the Commodity Futures Trading Commission under section 5g of the Commodity Exchange Act. 

‘‘(C) FEDERAL TRADE COMMISSION AUTHORITY.—Notwithstanding the authority of the Bureau of Consumer Financial Protection under subparagraph (A), the Federal 

Trade Commission shall have authority to prescribe such 

regulations as may be necessary to carry out the purposes 

of this subtitle with respect to any financial institution that 

is a person described in section 1029(a) of the Consumer Financial Protection Act of 2010. 


sroberts on DSKD5P82C1PROD with HEARING
733 

‘‘(D) RULE OF CONSTRUCTION.—Nothing in this paragraph shall be construed to alter, affect, or otherwise limit 

the authority of a State insurance authority to adopt regulations to carry out this subtitle. 

‘‘(2) COORDINATION, CONSISTENCY, AND COMPARABILITY.— 

Each of the agencies authorized under paragraph (1) to prescribe regulations shall consult and coordinate with the other 

such agencies and, as appropriate, and with representatives of 

State insurance authorities designated by the National Association of Insurance Commissioners, for the purpose of assuring, 

to the extent possible, that the regulations prescribed by each 

such agency are consistent and comparable with the regulations 

prescribed by the other such agencies.’’; and 

(B) in paragraph (3), by striking ‘‘, and shall be issued 

in final form not later than 6 months after the date of enactment of this Act’’; 

(4) in section 505(a) (15 U.S.C. 6805(a))— 

(A) by striking ‘‘This subtitle’’ and all that follows 

through ‘‘as follows:’’ and inserting ‘‘Subject to subtitle B of 

the Consumer Financial Protection Act of 2010, this subtitle and the regulations prescribed thereunder shall be enforced by the Bureau of Consumer Financial Protection, the 

Federal functional regulators, the State insurance authorities, and the Federal Trade Commission with respect to financial institutions and other persons subject to their jurisdiction under applicable law, as follows:’’; 

(B) in paragraph (1)— 

(i) in the matter preceding subparagraph (A), by 

inserting ‘‘by the appropriate Federal banking agency, 

as defined in section 3(q) of the Federal Deposit Insurance Act,’’ after ‘‘Act,’’; 

(ii) in subparagraph (A), by striking ‘‘, by the Office of the Comptroller of the Currency’’; 

(iii) in subparagraph (B), by striking ‘‘, by the 

Board of Governors of the Federal Reserve System’’; 

(iv) in subparagraph (C), by striking ‘‘, by the 

Board of Directors of the Federal Deposit Insurance 

Corporation’’; and 

(v) in subparagraph (D), by striking ‘‘, by the Director of the Office of Thrift Supervision’’; and 

(C) by adding at the end the following: 

‘‘(8) Under subtitle E of the Consumer Financial Protection 

Act of 2010, by the Bureau of Consumer Financial Protection, 

in the case of any financial institution and other covered person 

or service provider that is subject to the jurisdiction of the Bureau and any person subject to this subtitle, but not with respect to the standards under section 501.’’; 

(5) in section 505(b)(1) (15 U.S.C. 6805(b)(1)), by inserting 

‘‘, other than the Bureau of Consumer Financial Protection,’’ 

after ‘‘subsection (a)’’; and 

(6) in section 507(b) (15 U.S.C. 6807), by striking ‘‘Federal 

Trade Commission’’ and inserting ‘‘Bureau of Consumer Financial Protection’’. 


sroberts on DSKD5P82C1PROD with HEARING
734 

SEC. 1094. AMENDMENTS TO THE HOME MORTGAGE DISCLOSURE ACT 

OF 1975. 

The Home Mortgage Disclosure Act of 1975 (12 U.S.C. 2801 et 

seq.) is amended— 

(1) by striking ‘‘Board’’ each place that term appears, other 

than in sections 303, 304(h), 305(b) (as amended by this section), and 307(a) (as amended by this section) and inserting 

‘‘Bureau’’. 

(2) in section 303 (12 U.S.C. 2802)— 

(A) by redesignating paragraphs (1) through (6) as 

paragraphs (2) through (7), respectively; and 

(B) by inserting before paragraph (2) the following: 

‘‘(1) the term ‘Bureau’ means the Bureau of Consumer Financial Protection;’’; 

(3) in section 304 (12 U.S.C. 2803)— 

(A) in subsection (b)— 

(i) in paragraph (4), by inserting ‘‘age,’’ before ‘‘and 

gender’’; 

(ii) in paragraph (3), by striking ‘‘and’’ at the end; 

(iii) in paragraph (4), by striking the period at the 

end and inserting a semicolon; and 

(iv) by adding at the end the following: 

‘‘(5) the number and dollar amount of mortgage loans 

grouped according to measurements of— 

‘‘(A) the total points and fees payable at origination in 

connection with the mortgage as determined by the Bureau, 

taking into account 15 U.S.C. 1602(aa)(4); 

‘‘(B) the difference between the annual percentage rate 

associated with the loan and a benchmark rate or rates for 

all loans; 

‘‘(C) the term in months of any prepayment penalty or 

other fee or charge payable on repayment of some portion 

of principal or the entire principal in advance of scheduled 

payments; and 

‘‘(D) such other information as the Bureau may require; 

and 

‘‘(6) the number and dollar amount of mortgage loans and 

completed applications grouped according to measurements of— 

‘‘(A) the value of the real property pledged or proposed 

to be pledged as collateral; 

‘‘(B) the actual or proposed term in months of any introductory period after which the rate of interest may 

change; 

‘‘(C) the presence of contractual terms or proposed contractual terms that would allow the mortgagor or applicant 

to make payments other than fully amortizing payments 

during any portion of the loan term; 

‘‘(D) the actual or proposed term in months of the mortgage loan; 

‘‘(E) the channel through which application was made, 

including retail, broker, and other relevant categories; 

‘‘(F) as the Bureau may determine to be appropriate, a 

unique identifier that identifies the loan originator as set 

forth in section 1503 of the S.A.F.E. Mortgage Licensing 

Act of 2008; 


sroberts on DSKD5P82C1PROD with HEARING
735 

‘‘(G) as the Bureau may determine to be appropriate, a 

universal loan identifier; 

‘‘(H) as the Bureau may determine to be appropriate, 

the parcel number that corresponds to the real property 

pledged or proposed to be pledged as collateral; 

‘‘(I) the credit score of mortgage applicants and mortgagors, in such form as the Bureau may prescribe; and 

‘‘(J) such other information as the Bureau may require.’’; 

(B) by striking subsection (h) and inserting the following: 

‘‘(h) SUBMISSION TO AGENCIES.— ‘‘(1) IN GENERAL.—The data required to be disclosed under 

subsection (b) shall be submitted to the Bureau or to the appropriate agency for the institution reporting under this title, in accordance with rules prescribed by the Bureau. Notwithstanding 

the requirement of subsection (a)(2)(A) for disclosure by census 

tract, the Bureau, in consultation with other appropriate agencies described in paragraph (2) and, after notice and comment, 

shall develop regulations that— 

‘‘(A) prescribe the format for such disclosures, the method for submission of the data to the appropriate agency, 

and the procedures for disclosing the information to the 

public; 

‘‘(B) require the collection of data required to be disclosed under subsection (b) with respect to loans sold by 

each institution reporting under this title; 

‘‘(C) require disclosure of the class of the purchaser of 

such loans; 

‘‘(D) permit any reporting institution to submit in writing to the Bureau or to the appropriate agency such additional data or explanations as it deems relevant to the decision to originate or purchase mortgage loans; and 

‘‘(E) modify or require modification of itemized information, for the purpose of protecting the privacy interests 

of the mortgage applicants or mortgagors, that is or will be 

available to the public. 

‘‘(2) OTHER APPROPRIATE AGENCIES.—The appropriate agencies described in this paragraph are— 

‘‘(A) the appropriate Federal banking agencies, as defined in section 3(q) of the Federal Deposit Insurance Act 

(12 U.S.C. 1813(q)), with respect to the entities that are 

subject to the jurisdiction of each such agency, respectively; 

‘‘(B) the Federal Deposit Insurance Corporation for 

banks insured by the Federal Deposit Insurance Corporation (other than members of the Federal Reserve System), 

mutual savings banks, insured State branches of foreign 

banks, and any other depository institution described in 

section 303(2)(A) which is not otherwise referred to in this 

paragraph; 

‘‘(C) the National Credit Union Administration Board 

with respect to credit unions; and 

‘‘(D) the Secretary of Housing and Urban Development 

with respect to other lending institutions not regulated by 

the agencies referred to in subparagraph (A) or (B). 


sroberts on DSKD5P82C1PROD with HEARING
736 

‘‘(3) RULES FOR MODIFICATIONS UNDER PARAGRAPH (1).— 

‘‘(A) APPLICATION.—A modification under paragraph 

(1)(E) shall apply to information concerning— 

‘‘(i) credit score data described in subsection 

(b)(6)(I), in a manner that is consistent with the purpose described in paragraph (1)(E); and 

‘‘(ii) age or any other category of data described in 

paragraph (5) or (6) of subsection (b), as the Bureau 

determines to be necessary to satisfy the purpose described in paragraph (1)(E), and in a manner consistent with that purpose. 

‘‘(B) STANDARDS.—The Bureau shall prescribe standards for any modification under paragraph (1)(E) to effectuate the purposes of this title, in light of the privacy interests of mortgage applicants or mortgagors. Where necessary 

to protect the privacy interests of mortgage applicants or 

mortgagors, the Bureau shall provide for the disclosure of 

information described in subparagraph (A) in aggregate or 

other reasonably modified form, in order to effectuate the 

purposes of this title.’’; 

(C) in subsection (i), by striking ‘‘subsection (b)(4)’’ and 

inserting ‘‘subsections (b)(4), (b)(5), and (b)(6)’’; 

(D) in subsection (j)— 

(i) by striking paragraph (3) and inserting the following: 

‘‘(3) CHANGE OF FORM NOT REQUIRED.—A depository institution meets the disclosure requirement of paragraph (1) if the 

institution provides the information required under such paragraph in such formats as the Bureau may require’’; and 

(ii) in paragraph (2)(A), by striking ‘‘in the format 

in which such information is maintained by the institution’’ and inserting ‘‘in such formats as the Bureau 

may require’’; 

(E) in subsection (m), by striking paragraph (2) and inserting the following: 

‘‘(2) FORM OF INFORMATION.—In complying with paragraph 

(1), a depository institution shall provide the person requesting 

the information with a copy of the information requested in 

such formats as the Bureau may require.’’; and 

(F) by adding at the end the following: 

‘‘(n) TIMING OF CERTAIN DISCLOSURES.—The data required to 

be disclosed under subsection (b) shall be submitted to the Bureau 

or to the appropriate agency for any institution reporting under this 

title, in accordance with regulations prescribed by the Bureau. Institutions shall not be required to report new data under paragraph 

(5) or (6) of subsection (b) before the first January 1 that occurs 

after the end of the 9-month period beginning on the date on which 

regulations are issued by the Bureau in final form with respect to 

such disclosures.’’; 

(4) in section 305 (12 U.S.C. 2804)— 

(A) by striking subsection (b) and inserting the following: 

‘‘(b) POWERS OF CERTAIN OTHER AGENCIES.— 


sroberts on DSKD5P82C1PROD with HEARING
737 

‘‘(1) IN GENERAL.—Subject to subtitle B of the Consumer Financial Protection Act of 2010, compliance with the requirements of this title shall be enforced— 

‘‘(A) under section 8 of the Federal Deposit Insurance 

Act, the appropriate Federal banking agency, as defined in 

section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. 

1813(q)), with respect to— 

‘‘(i) any national bank or Federal savings association, and any Federal branch or Federal agency of a 

foreign bank; 

‘‘(ii) any member bank of the Federal Reserve System (other than a national bank), branch or agency of 

a foreign bank (other than a Federal branch, Federal 

agency, and insured State branch of a foreign bank), 

commercial lending company owned or controlled by a 

foreign bank, and any organization operating under 

section 25 or 25A of the Federal Reserve Act; and 

‘‘(iii) any bank or State savings association insured 

by the Federal Deposit Insurance Corporation (other 

than a member of the Federal Reserve System), any 

mutual savings bank as, defined in section 3(f) of the 

Federal Deposit Insurance Act (12 U.S.C. 1813(f)), any 

insured State branch of a foreign bank, and any other 

depository institution not referred to in this paragraph 

or subparagraph (B) or (C); 

‘‘(B) under subtitle E of the Consumer Financial Protection Act of 2010, by the Bureau, with respect to any person subject to this subtitle; 

‘‘(C) under the Federal Credit Union Act, by the Administrator of the National Credit Union Administration 

with respect to any insured credit union; and 

‘‘(D) with respect to other lending institutions, by the 

Secretary of Housing and Urban Development. 

‘‘(2) INCORPORATED DEFINITIONS.—The terms used in paragraph (1) that are not defined in this title or otherwise defined 

in section 3(s) of the Federal Deposit Insurance Act (12 U.S.C. 

1813(s)) shall have the same meanings as in section 1(b) of the 

International Banking Act of 1978 (12 U.S.C. 3101).’’; and 

(B) by adding at the end the following: 

‘‘(d) OVERALL ENFORCEMENT AUTHORITY OF THE BUREAU OF

CONSUMER FINANCIAL PROTECTION.—Subject to subtitle B of the 

Consumer Financial Protection Act of 2010, enforcement of the requirements imposed under this title is committed to each of the 

agencies under subsection (b). To facilitate research, examinations, 

and enforcement, all data collected pursuant to section 304 shall be 

available to the entities listed under subsection (b). The Bureau may 

exercise its authorities under the Consumer Financial Protection Act 

of 2010 to exercise principal authority to examine and enforce compliance by any person with the requirements of this title.’’; 

(5) in section 306 (12 U.S.C. 2805(b)), by striking subsection (b) and inserting the following: 

‘‘(b) EXEMPTION AUTHORITY.—The Bureau may, by regulation, 

exempt from the requirements of this title any State-chartered depository institution within any State or subdivision thereof, if the 

agency determines that, under the law of such State or subdivision, 


sroberts on DSKD5P82C1PROD with HEARING
738 

that institution is subject to requirements that are substantially 

similar to those imposed under this title, and that such law contains adequate provisions for enforcement. Notwithstanding any 

other provision of this subsection, compliance with the requirements 

imposed under this subsection shall be enforced by the Office of the 

Comptroller of the Currency under section 8 of the Federal Deposit 

Insurance Act, in the case of national banks and Federal savings 

associations, the deposits of which are insured by the Federal Deposit Insurance Corporation.’’; and 

(6) by striking section 307 (12 U.S.C. 2806) and inserting 

the following: 

‘‘SEC. 307. COMPLIANCE IMPROVEMENT METHODS. 

‘‘(a) IN GENERAL.— 

‘‘(1) CONSULTATION REQUIRED.—The Director of the Bureau 

of Consumer Financial Protection, with the assistance of the 

Secretary, the Director of the Bureau of the Census, the Board 

of Governors of the Federal Reserve System, the Federal Deposit 

Insurance Corporation, and such other persons as the Bureau 

deems appropriate, shall develop or assist in the improvement 

of, methods of matching addresses and census tracts to facilitate compliance by depository institutions in as economical a 

manner as possible with the requirements of this title. 

‘‘(2) AUTHORIZATION OF APPROPRIATIONS.—There are authorized to be appropriated, such sums as may be necessary to 

carry out this subsection. 

‘‘(3) CONTRACTING AUTHORITY.—The Director of the Bureau 

of Consumer Financial Protection is authorized to utilize, contract with, act through, or compensate any person or agency in 

order to carry out this subsection. 

‘‘(b) RECOMMENDATIONS TO CONGRESS.—The Director of the Bureau of Consumer Financial Protection shall recommend to the 

Committee on Banking, Housing, and Urban Affairs of the Senate 

and the Committee on Financial Services of the House of Representatives, such additional legislation as the Director of the Bureau of 

Consumer Financial Protection deems appropriate to carry out the 

purpose of this title.’’. 

SEC. 1095. AMENDMENTS TO THE HOMEOWNERS PROTECTION ACT OF 

1998. 

Section 10 of the Homeowners Protection Act of 1998 (12 U.S.C. 

4909) is amended— 

(1) in subsection (a)— 

(A) by striking ‘‘Compliance’’ and all that follows 

through the end of paragraph (1) and inserting the following: ‘‘Subject to subtitle B of the Consumer Financial 

Protection Act of 2010, compliance with the requirements 

imposed under this Act shall be enforced under— 

‘‘(1) section 8 of the Federal Deposit Insurance Act, by the 

appropriate Federal banking agency (as defined in section 3(q) 

of that Act), with respect to— 

‘‘(A) insured depository institutions (as defined in section 3(c)(2) of that Act); 

‘‘(B) depository institutions described in clause (i), (ii), 

or (iii) of section 19(b)(1)(A) of the Federal Reserve Act 


sroberts on DSKD5P82C1PROD with HEARING
739 

which are not insured depository institutions (as defined in 

section 3(c)(2) of the Federal Deposit Insurance Act); and 

‘‘(C) depository institutions described in clause (v) or 

(vi) of section 19(b)(1)(A) of the Federal Reserve Act which 

are not insured depository institutions (as defined in section 3(c)(2) of the Federal Deposit Insurance Act);’’; 

(B) in paragraph (2), by striking ‘‘and’’ at the end; 

(C) in paragraph (3), by striking the period at the end 

and inserting ‘‘; and’’; and 

(D) by adding at the end the following: 

‘‘(4) subtitle E of the Consumer Financial Protection Act of 

2010, by the Bureau of Consumer Financial Protection, with respect to any person subject to this Act.’’; and 

(2) in subsection (b)(2), by inserting before the period at the 

end the following: ‘‘, subject to subtitle B of the Consumer Financial Protection Act of 2010’’. 

SEC. 1096. AMENDMENTS TO THE HOME OWNERSHIP AND EQUITY PROTECTION ACT OF 1994. 

The Home Ownership and Equity Protection Act of 1994 (15 

U.S.C. 1601 note) is amended— 

(1) in section 158(a), by striking ‘‘Board of Governors of the 

Federal Reserve System, in consultation with the Consumer Advisory Council of the Board’’ and inserting ‘‘Bureau, in consultation with the Advisory Board to the Bureau’’; and 

(2) in section 158(b), by striking ‘‘Board of Governors of the 

Federal Reserve System’’ and inserting ‘‘Bureau’’. 

SEC. 1097. AMENDMENTS TO THE OMNIBUS APPROPRIATIONS ACT, 

2009. 

Section 626 of the Omnibus Appropriations Act, 2009 (15 

U.S.C. 1638 note) is amended— 

(1) by striking subsection (a) and inserting the following: 

‘‘(a)(1) The Bureau of Consumer Financial Protection shall have 

authority to prescribe rules with respect to mortgage loans in accordance with section 553 of title 5, United States Code. Such rulemaking shall relate to unfair or deceptive acts or practices regarding mortgage loans, which may include unfair or deceptive acts or 

practices involving loan modification and foreclosure rescue services. Any violation of a rule prescribed under this paragraph shall 

be treated as a violation of a rule prohibiting unfair, deceptive, or 

abusive acts or practices under the Consumer Financial Protection 

Act of 2010 and a violation of a rule under section 18 of the Federal 

Trade Commission Act (15 U.S.C. 57a) regarding unfair or deceptive acts or practices. 

‘‘(2) The Bureau of Consumer Financial Protection shall enforce 

the rules issued under paragraph (1) in the same manner, by the 

same means, and with the same jurisdiction, powers, and duties, as 

though all applicable terms and provisions of the Consumer Financial Protection Act of 2010 were incorporated into and made part 

of this subsection. 

‘‘(3) Subject to subtitle B of the Consumer Financial Protection 

Act of 2010, the Federal Trade Commission shall enforce the rules 

issued under paragraph (1), in the same manner, by the same 

means, and with the same jurisdiction, as though all applicable 

terms and provisions of the Federal Trade Commission Act were incorporated into and made part of this section.’’; and 


sroberts on DSKD5P82C1PROD with HEARING
740 

(2) in subsection (b)— 

(A) by striking paragraph (1) and inserting the following: 

‘‘(1) Except as provided in paragraph (6), in any case in 

which the attorney general of a State has reason to believe that 

an interest of the residents of the State has been or is threatened or adversely affected by the engagement of any person subject to a rule prescribed under subsection (a) in practices that 

violate such rule, the State, as parens patriae, may bring a civil 

action on behalf of its residents in an appropriate district court 

of the United States or other court of competent jurisdiction— 

‘‘(A) to enjoin that practice; 

‘‘(B) to enforce compliance with the rule; 

‘‘(C) to obtain damages, restitution, or other compensation on behalf of the residents of the State; or 

‘‘(D) to obtain penalties and relief provided under the 

Consumer Financial Protection Act of 2010, the Federal 

Trade Commission Act, and such other relief as the court 

deems appropriate.’’; 

(B) in paragraphs (2) and (3), by striking ‘‘the primary 

Federal regulator’’ each time the term appears and inserting ‘‘the Bureau of Consumer Financial Protection or the 

Commission, as appropriate’’; 

(C) in paragraph (3), by inserting ‘‘and subject to subtitle B of the Consumer Financial Protection Act of 2010,’’ 

after ‘‘paragraph (2),’’; and 

(D) in paragraph (6), by striking ‘‘the primary Federal 

regulator’’ each place that term appears and inserting ‘‘the 

Bureau of Consumer Financial Protection or the Commission’’. 

SEC. 1098. AMENDMENTS TO THE REAL ESTATE SETTLEMENT PROCEDURES ACT OF 1974. 

The Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 

2601 et seq.) is amended— 

(1) in section 3 (12 U.S.C. 2602)— 

(A) in paragraph (7), by striking ‘‘and’’ at the end; 

(B) in paragraph (8), by striking the period at the end 

and inserting ‘‘; and’’; and 

(C) by adding at the end the following: 

‘‘(9) the term ‘Bureau’ means the Bureau of Consumer Financial Protection.’’; 

(2) in section 4 (12 U.S.C. 2603)— 

(A) in subsection (a), by striking the first sentence and 

inserting the following: ‘‘The Bureau shall publish a single, 

integrated disclosure for mortgage loan transactions (including real estate settlement cost statements) which includes the disclosure requirements of this section and section 5, in conjunction with the disclosure requirements of 

the Truth in Lending Act that, taken together, may apply 

to a transaction that is subject to both or either provisions 

of law. The purpose of such model disclosure shall be to facilitate compliance with the disclosure requirements of this 

title and the Truth in Lending Act, and to aid the borrower 

or lessee in understanding the transaction by utilizing 


sroberts on DSKD5P82C1PROD with HEARING
741 

readily understandable language to simplify the technical 

nature of the disclosures.’’; 

(B) by striking ‘‘Secretary’’ each place that term appears and inserting ‘‘Bureau’’; and 

(C) by striking ‘‘form’’ each place that term appears 

and inserting ‘‘forms’’; 

(3) in section 5 (12 U.S.C. 2604)— 

(A) by striking ‘‘Secretary’’ each place that term appears and inserting ‘‘Bureau’’; and 

(B) in subsection (a), by striking the first sentence and 

inserting the following: ‘‘The Bureau shall prepare and distribute booklets jointly addressing compliance with the requirements of the Truth in Lending Act and the provisions 

of this title, in order to help persons borrowing money to finance the purchase of residential real estate better to understand the nature and costs of real estate settlement services.’’; 

(4) in section 6(j)(3) (12 U.S.C. 2605(j)(3))— 

(A) by striking ‘‘Secretary’’ and inserting ‘‘Bureau’’; and 

(B) by striking ‘‘, by regulations that shall take effect 

not later than April 20, 1991,’’; 

(5) in section 7(b) (12 U.S.C. 2606(b)) by striking ‘‘Secretary’’ and inserting ‘‘Bureau’’; 

(6) in section 8(c)(5) (12 U.S.C. 2607(c)(5)), by striking ‘‘Secretary’’ and inserting ‘‘Bureau’’; 

(7) in section 8(d) (12 U.S.C. 2607(d))— 

(A) in the subsection heading, by inserting ‘‘BUREAU

AND’’ before ‘‘SECRETARY’’; and 

(B) by striking paragraph (4), and inserting the following: 

‘‘(4) The Bureau, the Secretary, or the attorney general or 

the insurance commissioner of any State may bring an action 

to enjoin violations of this section. Except, to the extent that a 

person is subject to the jurisdiction of the Bureau, the Secretary, 

or the attorney general or the insurance commissioner of any 

State, the Bureau shall have primary authority to enforce or administer this section, subject to subtitle B of the Consumer Financial Protection Act of 2010.’’; 

(8) in section 10(c) (12 U.S.C. 2609(c) and (d)), by striking 

‘‘Secretary’’ and inserting ‘‘Bureau’’; 

(9) in section 16 (12 U.S.C. 2614), by inserting ‘‘the Bureau,’’ before ‘‘the Secretary’’; 

(10) in section 18 (12 U.S.C. 2616), by striking ‘‘Secretary’’ 

each place that term appears and inserting ‘‘Bureau’’; and 

(11) in section 19 (12 U.S.C. 2617)— 

(A) in the section heading by striking ‘‘SECRETARY’’ 

and inserting ‘‘BUREAU’’; 

(B) in subsection (a), by striking ‘‘Secretary’’ each place 

that term appears and inserting ‘‘Bureau’’; and 

(C) in subsections (b) and (c), by striking ‘‘the Secretary’’ each place that term appears and inserting ‘‘the Bureau’’. 


sroberts on DSKD5P82C1PROD with HEARING
742 

SEC. 1098A. AMENDMENTS TO THE INTERSTATE LAND SALES FULL 

DISCLOSURE ACT. 

The Interstate Land Sales Full Disclosure Act (15 U.S.C. 1701 

et seq.) is amended— 

(1) by striking ‘‘Secretary’’ each place that term appears 

and inserting ‘‘Director’’; 

(2) by striking ‘‘Department of Housing and Urban Development’’ each place that term appears and inserting ‘‘Bureau of 

Consumer Financial Protection’’; 

(3) by striking ‘‘Department’’ each place that term appears 

and inserting ‘‘Bureau’’; 

(4) in section 1402 (15 U.S.C. 1701)— 

(A) by striking paragraph (1) and inserting the following: 

‘‘(1) ‘Director’ means the Director of the Bureau of Consumer Financial Protection;’’; 

(B) in paragraph (10), by striking ‘‘and’’ at the end; 

(C) in paragraph (11), by striking the period at the end 

and inserting ‘‘; and’’; and 

(D) by adding at the end the following: 

‘‘(12) ‘Bureau’ means the Bureau of Consumer Financial 

Protection.’’; and 

(5) in section 1416(a) (15 U.S.C. 1715(a)), by striking ‘‘Secretary of Housing and Urban Development’’ and inserting ‘‘Director of the Bureau of Consumer Financial Protection’’. 

SEC. 1099. AMENDMENTS TO THE RIGHT TO FINANCIAL PRIVACY ACT 

OF 1978. 

The Right to Financial Privacy Act of 1978 (12 U.S.C. 3401 et 

seq.) is amended— 

(1) in section 1101— 

(A) in paragraph (6)— 

(i) in subparagraph (A), by inserting ‘‘and’’ after 

the semicolon; 

(ii) in subparagraph (B), by striking ‘‘and’’ at the 

end; and 

(iii) by striking subparagraph (C); and 

(B) in paragraph (7), by striking subparagraph (B), 

and inserting the following: 

‘‘(B) the Bureau of Consumer Financial Protection;’’; 

(2) in section 1112(e) (12 U.S.C. 3412(e)), by striking ‘‘and 

the Commodity Futures Trading Commission is permitted’’ and 

inserting ‘‘the Commodity Futures Trading Commission, and 

the Bureau of Consumer Financial Protection is permitted’’; and 

(3) in section 1113 (12 U.S.C. 3413), by adding at the end 

the following new subsection: 

‘‘(r) DISCLOSURE TO THE BUREAU OF CONSUMER FINANCIAL

PROTECTION.—Nothing in this title shall apply to the examination 

by or disclosure to the Bureau of Consumer Financial Protection of 

financial records or information in the exercise of its authority with 

respect to a financial institution.’’. 

SEC. 1100. AMENDMENTS TO THE SECURE AND FAIR ENFORCEMENT 

FOR MORTGAGE LICENSING ACT OF 2008. 

The S.A.F.E. Mortgage Licensing Act of 2008 (12 U.S.C. 5101 

et seq.) is amended— 


sroberts on DSKD5P82C1PROD with HEARING
743 

(1) by striking ‘‘a Federal banking agency’’ each place that 

term appears, other than in paragraphs (7) and (11) of section 

1503 and section 1507(a)(1), and inserting ‘‘the Bureau’’; 

(2) by striking ‘‘Federal banking agencies’’ each place that 

term appears and inserting ‘‘Bureau’’; and 

(3) by striking ‘‘Secretary’’ each place that term appears 

and inserting ‘‘Director’’; 

(4) in section 1503 (12 U.S.C. 5102)— 

(A) by redesignating paragraphs (2) through (12) as (3) 

through (13), respectively; 

(B) by striking paragraph (1) and inserting the following: 

‘‘(1) BUREAU.—The term ‘Bureau’ means the Bureau of Consumer Financial Protection. 

‘‘(2) FEDERAL BANKING AGENCY.—The term ‘Federal banking agency’ means the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the 

National Credit Union Administration, and the Federal Deposit 

Insurance Corporation.’’; and 

(C) by striking paragraph (10), as so designated by this 

section, and inserting the following: 

‘‘(10) DIRECTOR.—The term ‘Director’ means the Director of 

the Bureau of Consumer Financial Protection.’’; and 

(5) in section 1507 (12 U.S.C. 5106)— 

(A) in subsection (a)— 

(i) by striking paragraph (1) and inserting the following: 

‘‘(1) IN GENERAL.—The Bureau shall develop and maintain 

a system for registering employees of a depository institution, 

employees of a subsidiary that is owned and controlled by a depository institution and regulated by a Federal banking agency, 

or employees of an institution regulated by the Farm Credit Administration, as registered loan originators with the Nationwide 

Mortgage Licensing System and Registry. The system shall be 

implemented before the end of the 1-year period beginning on 

the date of enactment of the Consumer Financial Protection Act 

of 2010.’’; and 

(ii) in paragraph (2)— 

(I) by striking ‘‘appropriate Federal banking 

agency and the Farm Credit Administration’’ and 

inserting ‘‘Bureau’’; and 

(II) by striking ‘‘employees’s identity’’ and inserting ‘‘identity of the employee’’; and 

(B) in subsection (b), by striking ‘‘through the Financial Institutions Examination Council, and the Farm Credit Administration’’, and inserting ‘‘and the Bureau of Consumer Financial Protection’’; 

(6) in section 1508 (12 U.S.C. 5107)— 

(A) by striking the section heading and inserting the 

following: ‘‘SEC. 1508. BUREAU OF CONSUMER FINANCIAL PROTECTION BACKUP AUTHORITY TO 

ESTABLISH LOAN ORIGINATOR LICENSING SYSTEM.’’; and 

(B) by adding at the end the following: 

‘‘(f) REGULATION AUTHORITY.— 


sroberts on DSKD5P82C1PROD with HEARING
744 

‘‘(1) IN GENERAL.—The Bureau is authorized to promulgate 

regulations setting minimum net worth or surety bond requirements for residential mortgage loan originators and minimum 

requirements for recovery funds paid into by loan originators. 

‘‘(2) CONSIDERATIONS.—In issuing regulations under paragraph (1), the Bureau shall take into account the need to provide originators adequate incentives to originate affordable and 

sustainable mortgage loans, as well as the need to ensure a 

competitive origination market that maximizes consumer access 

to affordable and sustainable mortgage loans.’’; 

(7) by striking section 1510 (12 U.S.C. 5109) and inserting 

the following: 

‘‘SEC. 1510. FEES. 

‘‘The Bureau, the Farm Credit Administration, and the Nationwide Mortgage Licensing System and Registry may charge reasonable fees to cover the costs of maintaining and providing access to 

information from the Nationwide Mortgage Licensing System and 

Registry, to the extent that such fees are not charged to consumers 

for access to such system and registry.’’; 

(8) by striking section 1513 (12 U.S.C. 5112) and inserting 

the following: 

‘‘SEC. 1513. LIABILITY PROVISIONS. 

‘‘The Bureau, any State official or agency, or any organization 

serving as the administrator of the Nationwide Mortgage Licensing 

System and Registry or a system established by the Director under 

section 1509, or any officer or employee of any such entity, shall not 

be subject to any civil action or proceeding for monetary damages 

by reason of the good faith action or omission of any officer or employee of any such entity, while acting within the scope of office or 

employment, relating to the collection, furnishing, or dissemination 

of information concerning persons who are loan originators or are 

applying for licensing or registration as loan originators.’’; and 

(9) in section 1514 (12 U.S.C. 5113) in the section heading, 

by striking ‘‘UNDER HUD BACKUP LICENSING SYSTEM’’ 

and inserting ‘‘BY THE BUREAU’’. 

SEC. 1100A. AMENDMENTS TO THE TRUTH IN LENDING ACT. 

The Truth in Lending Act (15 U.S.C. 1601 et seq.) is amended— 

(1) in section 103 (15 U.S.C. 1602)— 

(A) by redesignating subsections (b) through (bb) as 

subsections (c) through (cc), respectively; and 

(B) by inserting after subsection (a) the following: 

‘‘(b) BUREAU.—The term ‘Bureau’ means the Bureau of Consumer Financial Protection.’’; 

(2) by striking ‘‘Board’’ each place that term appears, other 

than in section 140(d) and sections 105(i) and 108(a), as 

amended by this section, and inserting ‘‘Bureau’’; 

(3) by striking ‘‘Federal Trade Commission’’ each place that 

term appears, other than in section 108(c) and section 129(m), 

as amended by this Act, and other than in the context of a reference to the Federal Trade Commission Act, and inserting ‘‘Bureau’’; 

(4) in section 105(a) (15 U.S.C. 1604(a)), in the second sentence— 


sroberts on DSKD5P82C1PROD with HEARING
745 

(A) by striking ‘‘Except in the case of a mortgage referred to in section 103(aa), these regulations may contain 

such’’ and inserting ‘‘Except with respect to the provisions 

of section 129 that apply to a mortgage referred to in section 103(aa), such regulations may contain such additional 

requirements,’’; and 

(B) by inserting ‘‘all or’’ after ‘‘exceptions for’’; 

(5) in section 105(b) (15 U.S.C. 1604(b)), by striking the 

first sentence and inserting the following: ‘‘The Bureau shall 

publish a single, integrated disclosure for mortgage loan transactions (including real estate settlement cost statements) which 

includes the disclosure requirements of this title in conjunction 

with the disclosure requirements of the Real Estate Settlement 

Procedures Act of 1974 that, taken together, may apply to a 

transaction that is subject to both or either provisions of law. 

The purpose of such model disclosure shall be to facilitate compliance with the disclosure requirements of this title and the 

Real Estate Settlement Procedures Act of 1974, and to aid the 

borrower or lessee in understanding the transaction by utilizing 

readily understandable language to simplify the technical nature of the disclosures.’’; 

(6) in section 105(f)(1) (15 U.S.C. 1604(f)(1)), by inserting 

‘‘all or’’ after ‘‘from all or part of this title’’; 

(7) in section 105 (15 U.S.C. 1604), by adding at the end 

the following: 

‘‘(i) AUTHORITY OF THE BOARD TO PRESCRIBE

RULES.—Notwithstanding subsection (a), the Board 

shall have authority to prescribe rules under this title 

with respect to a person described in section 1029(a) of 

the Consumer Financial Protection Act of 2010. Regulations prescribed under this subsection may contain 

such classifications, differentiations, or other provisions, as in the judgment of the Board are necessary or 

proper to effectuate the purposes of this title, to prevent 

circumvention or evasion thereof, or to facilitate compliance therewith.’’; 

(8) in section 108 (15 U.S.C. 1604), by adding at the end 

the following: 

(A) by striking subsection (a) and inserting the following: 

‘‘(a) ENFORCING AGENCIES.—Subject to subtitle B of the Consumer Financial Protection Act of 2010, compliance with the requirements imposed under this title shall be enforced under— 

‘‘(1) section 8 of the Federal Deposit Insurance Act, by the 

appropriate Federal banking agency, as defined in section 3(q) 

of the Federal Deposit Insurance Act (12 U.S.C. 1813(q)), with 

respect to— 

‘‘(A) national banks, Federal savings associations, and 

Federal branches and Federal agencies of foreign banks; 

‘‘(B) member banks of the Federal Reserve System 

(other than national banks), branches and agencies of foreign banks (other than Federal branches, Federal agencies, 

and insured State branches of foreign banks), commercial 

lending companies owned or controlled by foreign banks, 


sroberts on DSKD5P82C1PROD with HEARING
746 

and organizations operating under section 25 or 25A of the 

Federal Reserve Act; and 

‘‘(C) banks and State savings associations insured by 

the Federal Deposit Insurance Corporation (other than 

members of the Federal Reserve System), and insured State 

branches of foreign banks; 

‘‘(2) the Federal Credit Union Act, by the Director of the 

National Credit Union Administration, with respect to any Federal credit union; 

‘‘(3) the Federal Aviation Act of 1958, by the Secretary of 

Transportation, with respect to any air carrier or foreign air 

carrier subject to that Act; 

‘‘(4) the Packers and Stockyards Act, 1921 (except as provided in section 406 of that Act), by the Secretary of Agriculture, with respect to any activities subject to that Act; 

‘‘(5) the Farm Credit Act of 1971, by the Farm Credit Administration with respect to any Federal land bank, Federal 

land bank association, Federal intermediate credit bank, or production credit association; and 

‘‘(6) subtitle E of the Consumer Financial Protection Act of 

2010, by the Bureau, with respect to any person subject to this 

title.’’; and 

(B) by striking subsection (c) and inserting the following: 

‘‘(c) OVERALL ENFORCEMENT AUTHORITY OF THE FEDERAL

TRADE COMMISSION.—Except to the extent that enforcement of the 

requirements imposed under this title is specifically committed to 

some other Government agency under any of paragraphs (1) through 

(5) of subsection (a), and subject to subtitle B of the Consumer Financial Protection Act of 2010, the Federal Trade Commission shall 

be authorized to enforce such requirements. For the purpose of the 

exercise by the Federal Trade Commission of its functions and powers under the Federal Trade Commission Act, a violation of any requirement imposed under this title shall be deemed a violation of 

a requirement imposed under that Act. All of the functions and powers of the Federal Trade Commission under the Federal Trade Commission Act are available to the Federal Trade Commission to enforce compliance by any person with the requirements under this 

title, irrespective of whether that person is engaged in commerce or 

meets any other jurisdictional tests under the Federal Trade Commission Act.’’; and 

(9) in section 129 (15 U.S.C. 1639), by striking subsection 

(m) and inserting the following: 

‘‘(m) CIVIL PENALTIES IN FEDERAL TRADE COMMISSION ENFORCEMENT ACTIONS.—For purposes of enforcement by the Federal 

Trade Commission, any violation of a regulation issued by the Bureau pursuant to subsection (l)(2) shall be treated as a violation of 

a rule promulgated under section 18 of the Federal Trade Commission Act (15 U.S.C. 57a) regarding unfair or deceptive acts or practices.’’; and 

(10) in chapter 5 (15 U.S.C. 1667 et seq.)— 

(A) by striking ‘‘the Board’’ each place that term appears and inserting ‘‘the Bureau’’; and 

(B) by striking ‘‘The Board’’ each place that term appears and inserting ‘‘The Bureau’’. 


sroberts on DSKD5P82C1PROD with HEARING
747 

SEC. 1100B. AMENDMENTS TO THE TRUTH IN SAVINGS ACT. 

The Truth in Savings Act (12 U.S.C. 4301 et seq.) is amended— 

(1) by striking ‘‘Board’’ each place that term appears, other 

than in section 272(b) (12 U.S.C. 4311), and inserting ‘‘Bureau’’; 

(2) in section 270(a) (12 U.S.C. 4309)— 

(A) by striking ‘‘Compliance’’ and all that follows 

through the end of paragraph (1) and inserting: ‘‘Subject to 

subtitle B of the Consumer Financial Protection Act of 

2010, compliance with the requirements imposed under this 

subtitle shall be enforced under— 

‘‘(1) section 8 of the Federal Deposit Insurance Act by the 

appropriate Federal banking agency (as defined in section 3(q) 

of that Act), with respect to— 

‘‘(A) insured depository institutions (as defined in section 3(c)(2) of that Act); 

‘‘(B) depository institutions described in clause (i), (ii), 

or (iii) of section 19(b)(1)(A) of the Federal Reserve Act 

which are not insured depository institutions (as defined in 

section 3(c)(2) of the Federal Deposit Insurance Act); and 

‘‘(C) depository institutions described in clause (v) or 

(vi) of section 19(b)(1)(A) of the Federal Reserve Act which 

are not insured depository institutions (as defined in section 3(c)(2) of the Federal Deposit Insurance Act);’’; 

(B) in paragraph (2), by striking the period at the end 

and inserting ‘‘; and’’; and 

(C) by adding at the end the following: 

‘‘(3) subtitle E of the Consumer Financial Protection Act of 

2010, by the Bureau, with respect to any person subject to this 

subtitle.’’; 

(3) in section 272(b) (12 U.S.C. 4311(b)), by striking ‘‘regulation prescribed by the Board’’ each place that term appears 

and inserting ‘‘regulation prescribed by the Bureau’’; and 

(4) in section 274 (12 U.S.C. 4313), by striking paragraph 

(4) and inserting the following: 

‘‘(4) BUREAU.—The term ‘Bureau’ means the Bureau of Consumer Financial Protection.’’. 

SEC. 1100C. AMENDMENTS TO THE TELEMARKETING AND CONSUMER 

FRAUD AND ABUSE PREVENTION ACT. 

(a) AMENDMENTS TO SECTION 3.—Section 3 of the Telemarketing and Consumer Fraud and Abuse Prevention Act (15 

U.S.C. 6102) is amended by striking subsections (b) and (c) and inserting the following: 

‘‘(b) RULEMAKING AUTHORITY.—The Commission shall have authority to prescribe rules under subsection (a), in accordance with 

section 553 of title 5, United States Code. In prescribing a rule 

under this section that relates to the provision of a consumer financial product or service that is subject to the Consumer Financial 

Protection Act of 2010, including any enumerated consumer law 

thereunder, the Commission shall consult with the Bureau of Consumer Financial Protection regarding the consistency of a proposed 

rule with standards, purposes, or objectives administered by the Bureau of Consumer Financial Protection. 

‘‘(c) VIOLATIONS.—Any violation of any rule prescribed under 

subsection (a)— 


sroberts on DSKD5P82C1PROD with HEARING
748 

‘‘(1) shall be treated as a violation of a rule under section 

18 of the Federal Trade Commission Act regarding unfair or 

deceptive acts or practices; and 

‘‘(2) that is committed by a person subject to the Consumer 

Financial Protection Act of 2010 shall be treated as a violation 

of a rule under section 1031 of that Act regarding unfair, deceptive, or abusive acts or practices.’’. 

(b) AMENDMENTS TO SECTION 4.—Section 4(d) of the Telemarketing and Consumer Fraud and Abuse Prevention Act (15 

U.S.C. 6103(d)) is amended by inserting after ‘‘Commission’’ each 

place that term appears the following: ‘‘or the Bureau of Consumer 

Financial Protection’’. 

(c) AMENDMENTS TO SECTION 5.—Section 5(c) of the Telemarketing and Consumer Fraud and Abuse Prevention Act (15 

U.S.C. 6104(c)) is amended by inserting after ‘‘Commission’’ each 

place that term appears the following: ‘‘or the Bureau of Consumer 

Financial Protection’’. 

(d) AMENDMENT TO SECTION 6.—Section 6 of the Telemarketing 

and Consumer Fraud and Abuse Prevention Act (15 U.S.C. 6105) 

is amended by adding at the end the following: 

‘‘(d) ENFORCEMENT BY BUREAU OF CONSUMER FINANCIAL PROTECTION.—Except as otherwise provided in sections 3(d), 3(e), 4, and 

5, and subject to subtitle B of the Consumer Financial Protection 

Act of 2010, this Act shall be enforced by the Bureau of Consumer 

Financial Protection under subtitle E of the Consumer Financial 

Protection Act of 2010, with respect to the offering or provision of 

a consumer financial product or service subject to that Act.’’. 

SEC. 1100D. AMENDMENTS TO THE PAPERWORK REDUCTION ACT. 

(a) DESIGNATION AS AN INDEPENDENT AGENCY.—Section 2(5) of 

the Paperwork Reduction Act (44 U.S.C. 3502(5)) is amended by inserting ‘‘the Bureau of Consumer Financial Protection, the Office of 

Financial Research,’’ after ‘‘the Securities and Exchange Commission,’’. 

(b) COMPARABLE TREATMENT.—Section 3513 of title 44, United 

States Code, is amended by adding at the end the following: 

‘‘(c) COMPARABLE TREATMENT.—Notwithstanding any other provision of law, the Director shall treat or review a rule or order prescribed or proposed by the Director of the Bureau of Consumer Financial Protection on the same terms and conditions as apply to 

any rule or order prescribed or proposed by the Board of Governors 

of the Federal Reserve System.’’. 

SEC. 1100E. ADJUSTMENTS FOR INFLATION IN THE TRUTH IN LENDING ACT. 

(a) CAPS.— 

(1) CREDIT TRANSACTIONS.—Section 104(3) of the Truth in 

Lending Act (15 U.S.C. 1603(3)) is amended by striking 

‘‘$25,000’’ and inserting ‘‘$50,000’’. 

(2) CONSUMER LEASES.—Section 181(1) of the Truth in 

Lending Act (15 U.S.C. 1667(1)) is amended by striking 

‘‘$25,000’’ and inserting ‘‘$50,000’’. 

(b) ADJUSTMENTS FOR INFLATION.—On and after December 31, 

2011, the Bureau shall adjust annually the dollar amounts described in sections 104(3) and 181(1) of the Truth in Lending Act 

(as amended by this section), by the annual percentage increase in 


sroberts on DSKD5P82C1PROD with HEARING
749 

the Consumer Price Index for Urban Wage Earners and Clerical 

Workers, as published by the Bureau of Labor Statistics, rounded 

to the nearest multiple of $100, or $1,000, as applicable. 

SEC. 1100F. USE OF CONSUMER REPORTS. 

Section 615 of the Fair Credit Reporting Act (15 U.S.C. 1681m) 

is amended— 

(1) in subsection (a)— 

(A) by redesignating paragraphs (2) and (3) as paragraphs (3) and (4), respectively; 

(B) by inserting after paragraph (1) the following: 

‘‘(2) provide to the consumer written or electronic disclosure— 

‘‘(A) of a numerical credit score as defined in section 

609(f)(2)(A) used by such person in taking any adverse action based in whole or in part on any information in a consumer report; and 

‘‘(B) of the information set forth in subparagraphs (B) 

through (E) of section 609(f)(1);’’; and 

(C) in paragraph (4) (as so redesignated), by striking 

‘‘paragraph (2)’’ and inserting ‘‘paragraph (3)’’; and 

(2) in subsection (h)(5)— 

(A) in subparagraph (C), by striking ‘‘; and’’ and inserting a semicolon; 

(B) in subparagraph (D), by striking the period and inserting ‘‘; and’’; and 

(C) by inserting at the end the following: 

‘‘(E) include a statement informing the consumer of— 

‘‘(i) a numerical credit score as defined in section 

609(f)(2)(A), used by such person in making the credit 

decision described in paragraph (1) based in whole or 

in part on any information in a consumer report; and 

‘‘(ii) the information set forth in subparagraphs (B) 

through (E) of section 609(f)(1).’’. 

SEC. 1100G. SMALL BUSINESS FAIRNESS AND REGULATORY TRANSPARENCY. 

(a) PANEL REQUIREMENT.—Section 609(d) of title 5, United 

States Code, is amended by striking ‘‘means the’’ and all that follows and inserting the following: ‘‘means— 

‘‘(1) the Environmental Protection Agency; 

‘‘(2) the Consumer Financial Protection Bureau of the Federal Reserve System; and 

‘‘(3) the Occupational Safety and Health Administration of 

the Department of Labor.’’. 

(b) INITIAL REGULATORY FLEXIBILITY ANALYSIS.—Section 603 of 

title 5, United States Code, is amended by adding at the end the 

following: 

‘‘(d)(1) For a covered agency, as defined in section 609(d)(2), 

each initial regulatory flexibility analysis shall include a description of— 

‘‘(A) any projected increase in the cost of credit for small entities; 

‘‘(B) any significant alternatives to the proposed rule which 

accomplish the stated objectives of applicable statutes and 


sroberts on DSKD5P82C1PROD with HEARING
750 

which minimize any increase in the cost of credit for small entities; and 

‘‘(C) advice and recommendations of representatives of 

small entities relating to issues described in subparagraphs (A) 

and (B) and subsection (b). 

‘‘(2) A covered agency, as defined in section 609(d)(2), shall, for 

purposes of complying with paragraph (1)(C)— 

‘‘(A) identify representatives of small entities in consultation 

with the Chief Counsel for Advocacy of the Small Business Administration; and 

‘‘(B) collect advice and recommendations from the representatives identified under subparagraph (A) relating to 

issues described in subparagraphs (A) and (B) of paragraph (1) 

and subsection (b).’’. 

(c) FINAL REGULATORY FLEXIBILITY ANALYSIS.—Section 604(a) 

of title 5, United States Code, is amended— 

(1) in paragraph (4), by striking ‘‘and’’ at the end; 

(2) in paragraph (5), by striking the period at the end and 

inserting ‘‘; and’’; and 

(3) by adding at the end the following: 

‘‘(6) for a covered agency, as defined in section 609(d)(2), a 

description of the steps the agency has taken to minimize any 

additional cost of credit for small entities.’’. 

SEC. 1100H. EFFECTIVE DATE. 

Except as otherwise provided in this subtitle and the amendments made by this subtitle, this subtitle and the amendments 

made by this subtitle, other than sections 1081 and 1082, shall become effective on the designated transfer date. 

TITLE XI—FEDERAL RESERVE SYSTEM PROVISIONS 

SEC. 1101. FEDERAL RESERVE ACT AMENDMENTS ON EMERGENCY 

LENDING AUTHORITY. 

(a) FEDERAL RESERVE ACT.—The third undesignated paragraph of section 13 of the Federal Reserve Act (12 U.S.C. 343) (relating to emergency lending authority) is amended— 

(1) by inserting ‘‘(3)(A)’’ before ‘‘In unusual’’; 

(2) by striking ‘‘individual, partnership, or corporation’’ the 

first place that term appears and inserting the following: ‘‘participant in any program or facility with broad-based eligibility’’; 

(3) by striking ‘‘exchange for an individual or a partnership 

or corporation’’ and inserting ‘‘exchange,’’; 

(4) by striking ‘‘such individual, partnership, or corporation’’ and inserting the following: ‘‘such participant in any program or facility with broad-based eligibility’’; 

(5) by striking ‘‘for individuals, partnerships, corporations’’ 

and inserting ‘‘for any participant in any program or facility 

with broad-based eligibility’’; and 

(6) by striking ‘‘may prescribe.’’ and inserting the following: 

‘‘may prescribe. 

‘‘(B)(i) As soon as is practicable after the date of enactment of this subparagraph, the Board shall establish, by 

regulation, in consultation with the Secretary of the Treasury, the policies and procedures governing emergency lending under this paragraph. Such policies and procedures 


sroberts on DSKD5P82C1PROD with HEARING
751 

shall be designed to ensure that any emergency lending 

program or facility is for the purpose of providing liquidity 

to the financial system, and not to aid a failing financial 

company, and that the security for emergency loans is sufficient to protect taxpayers from losses and that any such 

program is terminated in a timely and orderly fashion. The 

policies and procedures established by the Board shall require that a Federal reserve bank assign, consistent with 

sound risk management practices and to ensure protection 

for the taxpayer, a lendable value to all collateral for a 

loan executed by a Federal reserve bank under this paragraph in determining whether the loan is secured satisfactorily for purposes of this paragraph. 

‘‘(ii) The Board shall establish procedures to prohibit 

borrowing from programs and facilities by borrowers that 

are insolvent. Such procedures may include a certification 

from the chief executive officer (or other authorized officer) 

of the borrower, at the time the borrower initially borrows 

under the program or facility (with a duty by the borrower 

to update the certification if the information in the certification materially changes), that the borrower is not insolvent. A borrower shall be considered insolvent for purposes 

of this subparagraph, if the borrower is in bankruptcy, resolution under title II of the Dodd-Frank Wall Street Reform 

and Consumer Protection Act, or any other Federal or State 

insolvency proceeding. 

‘‘(iii) A program or facility that is structured to remove 

assets from the balance sheet of a single and specific company, or that is established for the purpose of assisting a 

single and specific company avoid bankruptcy, resolution 

under title II of the Dodd-Frank Wall Street Reform and 

Consumer Protection Act, or any other Federal or State insolvency proceeding, shall not be considered a program or 

facility with broad-based eligibility. 

‘‘(iv) The Board may not establish any program or facility under this paragraph without the prior approval of 

the Secretary of the Treasury. 

‘‘(C) The Board shall provide to the Committee on 

Banking, Housing, and Urban Affairs of the Senate and 

the Committee on Financial Services of the House of Representatives— 

‘‘(i) not later than 7 days after the Board authorizes any loan or other financial assistance under this 

paragraph, a report that includes— 

‘‘(I) the justification for the exercise of authority to provide such assistance; 

‘‘(II) the identity of the recipients of such assistance; 

‘‘(III) the date and amount of the assistance, 

and form in which the assistance was provided; 

and 

‘‘(IV) the material terms of the assistance, including— 

‘‘(aa) duration; 


sroberts on DSKD5P82C1PROD with HEARING
752 

‘‘(bb) collateral pledged and the value 

thereof; 

‘‘(cc) all interest, fees, and other revenue or 

items of value to be received in exchange for 

the assistance; 

‘‘(dd) any requirements imposed on the recipient with respect to employee compensation, 

distribution of dividends, or any other corporate decision in exchange for the assistance; 

and 

‘‘(ee) the expected costs to the taxpayers of 

such assistance; and 

‘‘(ii) once every 30 days, with respect to any outstanding loan or other financial assistance under this 

paragraph, written updates on— 

‘‘(I) the value of collateral; 

‘‘(II) the amount of interest, fees, and other 

revenue or items of value received in exchange for 

the assistance; and 

‘‘(III) the expected or final cost to the taxpayers 

of such assistance. 

‘‘(D) The information required to be submitted to Congress under subparagraph (C) related to— 

‘‘(i) the identity of the participants in an emergency 

lending program or facility commenced under this 

paragraph; 

‘‘(ii) the amounts borrowed by each participant in 

any such program or facility; 

‘‘(iii) identifying details concerning the assets or 

collateral held by, under, or in connection with such a 

program or facility, 

shall be kept confidential, upon the written request of the 

Chairman of the Board, in which case such information 

shall be made available only to the Chairpersons or Ranking Members of the Committees described in subparagraph 

(C). 

‘‘(E) If an entity to which a Federal reserve bank has 

provided a loan under this paragraph becomes a covered financial company, as defined in section 201 of the DoddFrank Wall Street Reform and Consumer Protection Act, at 

any time while such loan is outstanding, and the Federal 

reserve bank incurs a realized net loss on the loan, then the 

Federal reserve bank shall have a claim equal to the 

amount of the net realized loss against the covered entity, 

with the same priority as an obligation to the Secretary of 

the Treasury under section 210(b) of the Dodd-Frank Wall 

Street Reform and Consumer Protection Act.’’. 

(b) CONFORMING AMENDMENT.—Section 507(a)(2) of title 11, 

United States Code, is amended by inserting ‘‘unsecured claims of 

any Federal reserve bank related to loans made through programs 

or facilities authorized under section 13(3) of the Federal Reserve 

Act (12 U.S.C. 343),’’ after ‘‘this title,’’. 

(c) REFERENCES.—On and after the date of enactment of this 

Act, any reference in any provision of Federal law to the third undesignated paragraph of section 13 of the Federal Reserve Act (12 


sroberts on DSKD5P82C1PROD with HEARING
753 

U.S.C. 343) shall be deemed to be a reference to section 13(3) of the 

Federal Reserve Act, as so designated by this section. 

SEC. 1102. AUDITS OF SPECIAL FEDERAL RESERVE CREDIT FACILITIES. 

(a) AUDITS.—Section 714 of title 31, United States Code, is 

amended by adding at the end the following: 

‘‘(f) AUDITS OF CREDIT FACILITIES OF THE FEDERAL RESERVE

SYSTEM.— 

‘‘(1) DEFINITIONS.—In this subsection, the following definitions shall apply: 

‘‘(A) CREDIT FACILITY.—The term ‘credit facility’ means 

a program or facility, including any special purpose vehicle 

or other entity established by or on behalf of the Board of 

Governors of the Federal Reserve System or a Federal reserve bank, authorized by the Board of Governors under 

section 13(3) of the Federal Reserve Act (12 U.S.C. 343), 

that is not subject to audit under subsection (e). 

‘‘(B) COVERED TRANSACTION.—The term ‘covered transaction’ means any open market transaction or discount 

window advance that meets the definition of ‘covered transaction’ in section 11(s) of the Federal Reserve Act. 

‘‘(2) AUTHORITY FOR AUDITS AND EXAMINATIONS.—Subject 

to paragraph (3), and notwithstanding any limitation in subsection (b) on the auditing and oversight of certain functions of 

the Board of Governors of the Federal Reserve System or any 

Federal reserve bank, the Comptroller General of the United 

States may conduct audits, including onsite examinations, of 

the Board of Governors, a Federal reserve bank, or a credit facility, if the Comptroller General determines that such audits 

are appropriate, solely for the purposes of assessing, with respect to a credit facility or a covered transaction— 

‘‘(A) the operational integrity, accounting, financial reporting, and internal controls governing the credit facility 

or covered transaction; 

‘‘(B) the effectiveness of the security and collateral policies established for the facility or covered transaction in 

mitigating risk to the relevant Federal reserve bank and 

taxpayers; 

‘‘(C) whether the credit facility or the conduct of a covered transaction inappropriately favors one or more specific 

participants over other institutions eligible to utilize the facility; and 

‘‘(D) the policies governing the use, selection, or payment of third-party contractors by or for any credit facility 

or to conduct any covered transaction. 

‘‘(3) REPORTS AND DELAYED DISCLOSURE.— 

‘‘(A) REPORTS REQUIRED.—A report on each audit conducted under paragraph (2) shall be submitted by the 

Comptroller General to the Congress before the end of the 

90-day period beginning on the date on which such audit 

is completed. 

‘‘(B) CONTENTS.—The report under subparagraph (A) 

shall include a detailed description of the findings and conclusions of the Comptroller General with respect to the matters described in paragraph (2) that were audited and are 


sroberts on DSKD5P82C1PROD with HEARING
754 

the subject of the report, together with such recommendations for legislative or administrative action relating to 

such matters as the Comptroller General may determine to 

be appropriate. 

‘‘(C) DELAYED RELEASE OF CERTAIN INFORMATION.— ‘‘(i) IN GENERAL.—The Comptroller General shall 

not disclose to any person or entity, including to Congress, the names or identifying details of specific participants in any credit facility or covered transaction, 

the amounts borrowed by or transferred by or to specific participants in any credit facility or covered transaction, or identifying details regarding assets or collateral held or transferred by, under, or in connection 

with any credit facility or covered transaction, and any 

report provided under subparagraph (A) shall be redacted to ensure that such names and details are not 

disclosed. 

‘‘(ii) DELAYED RELEASE.—The nondisclosure obligation under clause (i) shall expire with respect to any 

participant on the date on which the Board of Governors, directly or through a Federal reserve bank, publicly discloses the identity of the subject participant or 

the identifying details of the subject assets, collateral, 

or transaction. 

‘‘(iii) GENERAL RELEASE.—The Comptroller General shall release a nonredacted version of any report 

on a credit facility 1 year after the effective date of the 

termination by the Board of Governors of the authorization for the credit facility. For purposes of this 

clause, a credit facility shall be deemed to have terminated 24 months after the date on which the credit facility ceases to make extensions of credit and loans, unless the credit facility is otherwise terminated by the 

Board of Governors. 

‘‘(iv) EXCEPTIONS.—The nondisclosure obligation 

under clause (i) shall not apply to the credit facilities 

Maiden Lane, Maiden Lane II, and Maiden Lane III. 

‘‘(v) RELEASE OF COVERED TRANSACTION INFORMA- TION.—The Comptroller General shall release a nonredacted version of any report regarding covered transactions upon the release of the information regarding 

such covered transactions by the Board of Governors of 

the Federal Reserve System, as provided in section 

11(s) of the Federal Reserve Act.’’. 

(b) ACCESS TO RECORDS.—Section 714(d) of title 31, United 

States Code, is amended— 

(1) in paragraph (2), by inserting ‘‘or any person or entity 

described in paragraph (3)(A)’’ after ‘‘used by an agency’’; 

(2) in paragraph (3), by inserting ‘‘or (f)’’ after ‘‘subsection 

(e)’’ each place that term appears; 

(3) in clauses (i) and (ii) of paragraph (3)(A), by inserting 

‘‘or the Federal Reserve banks’’ after ‘‘by the Board’’ each place 

that term appears; 

(4) in paragraph (3)(A)(ii), by inserting ‘‘participating in 

or’’ after ‘‘any entity’’; and 


sroberts on DSKD5P82C1PROD with HEARING
755 

(5) in paragraph (3)(B), by adding at the end the following: 

‘‘The Comptroller General may make and retain copies of books, 

accounts, and other records provided under subparagraph (A) 

as the Comptroller General deems appropriate. The Comptroller 

General shall provide to any person or entity described in subparagraph (A) a current list of officers and employees to whom, 

with proper identification, records and property may be made 

available, and who may make notes or copies necessary to carry 

out a audit or examination under this subsection.’’. 

SEC. 1103. PUBLIC ACCESS TO INFORMATION. 

(a) IN GENERAL.—Section 2B of the Federal Reserve Act (12 

U.S.C. 225b) is amended by adding at the end the following: 

‘‘(c) PUBLIC ACCESS TO INFORMATION.—The Board shall place 

on its home Internet website, a link entitled ‘Audit’, which shall link 

to a webpage that shall serve as a repository of information made 

available to the public for a reasonable period of time, not less than 

6 months following the date of release of the relevant information, 

including— 

‘‘(1) the reports prepared by the Comptroller General under 

section 714 of title 31, United States Code; 

‘‘(2) the annual financial statements prepared by an independent auditor for the Board in accordance with section 11B; 

‘‘(3) the reports to the Committee on Banking, Housing, and 

Urban Affairs of the Senate required under section 13(3) (relating to emergency lending authority); and 

‘‘(4) such other information as the Board reasonably believes is necessary or helpful to the public in understanding the 

accounting, financial reporting, and internal controls of the 

Board and the Federal reserve banks.’’. 

(b) FEDERAL RESERVE TRANSPARENCY AND RELEASE OF INFORMATION.—Section 11 of the Federal Reserve Act (12 U.S.C. 248) is 

amended by adding at the end the following new subsection: 

‘‘(s) FEDERAL RESERVE TRANSPARENCY AND RELEASE OF INFORMATION.— 

‘‘(1) IN GENERAL.—In order to ensure the disclosure in a 

timely manner consistent with the purposes of this Act of information concerning the borrowers and counterparties participating in emergency credit facilities, discount window lending 

programs, and open market operations authorized or conducted 

by the Board or a Federal reserve bank, the Board of Governors 

shall disclose, as provided in paragraph (2)— 

‘‘(A) the names and identifying details of each borrower, participant, or counterparty in any credit facility or 

covered transaction; 

‘‘(B) the amount borrowed by or transferred by or to a 

specific borrower, participant, or counterparty in any credit 

facility or covered transaction; 

‘‘(C) the interest rate or discount paid by each borrower, participant, or counterparty in any credit facility or 

covered transaction; and 

‘‘(D) information identifying the types and amounts of 

collateral pledged or assets transferred in connection with 

participation in any credit facility or covered transaction. 

‘‘(2) MANDATORY RELEASE DATE.—In the case of— 


sroberts on DSKD5P82C1PROD with HEARING
756 

‘‘(A) a credit facility, the Board shall disclose the information described in paragraph (1) on the date that is 1 

year after the effective date of the termination by the Board 

of the authorization of the credit facility; and 

‘‘(B) a covered transaction, the Board shall disclose the 

information described in paragraph (1) on the last day of 

the eighth calendar quarter following the calendar quarter 

in which the covered transaction was conducted. 

‘‘(3) EARLIER RELEASE DATE AUTHORIZED.—The Chairman 

of the Board may publicly release the information described in 

paragraph (1) before the relevant date specified in paragraph 

(2), if the Chairman determines that such disclosure would be 

in the public interest and would not harm the effectiveness of 

the relevant credit facility or the purpose or conduct of covered 

transactions. 

‘‘(4) DEFINITIONS.—For purposes of this subsection, the following definitions shall apply: 

‘‘(A) CREDIT FACILITY.—The term ‘credit facility’ has 

the same meaning as in section 714(f)(1)(A) of title 31, 

United States Code. 

‘‘(B) COVERED TRANSACTION.—The term ‘covered transaction’ means— 

‘‘(i) any open market transaction with a nongovernmental third party conducted under the first undesignated paragraph of section 14 or subparagraph (a), (b), 

or (c) of the 2nd undesignated paragraph of such section, after the date of enactment of the Dodd-Frank 

Wall Street Reform and Consumer Protection Act; and 

‘‘(ii) any advance made under section 10B after the 

date of enactment of that Act. 

‘‘(5) TERMINATION OF CREDIT FACILITY BY OPERATION OF

LAW.—A credit facility shall be deemed to have terminated as 

of the end of the 24-month period beginning on the date on 

which the credit facility ceases to make extensions of credit and 

loans, unless the credit facility is otherwise terminated by the 

Board before such date. 

‘‘(6) CONSISTENT TREATMENT OF INFORMATION.—Except as 

provided in this subsection or section 13(3)(D), or in section 

714(f)(3)(C) of title 31, United States Code, the information described in paragraph (1) and information concerning the transactions described in section 714(f) of such title, shall be confidential, including for purposes of section 552(b)(3) of title 5 of 

such Code, until the relevant mandatory release date described 

in paragraph (2), unless the Chairman of the Board determines 

that earlier disclosure of such information would be in the public interest and would not harm the effectiveness of the relevant 

credit facility or the purpose of conduct of the relevant transactions. 

‘‘(7) PROTECTION OF PERSONAL PRIVACY.—This subsection 

and section 13(3)(C), section 714(f)(3)(C) of title 31, United 

States Code, and subsection (a) or (c) of section 1109 of the 

Dodd-Frank Wall Street Reform and Consumer Protection Act 

shall not be construed as requiring any disclosure of nonpublic 

personal information (as defined for purposes of section 502 of 

the Gramm-Leach-Bliley Act (12 U.S.C. 6802)) concerning any 


sroberts on DSKD5P82C1PROD with HEARING
757 

individual who is referenced in collateral pledged or assets 

transferred in connection with a credit facility or covered transaction, unless the person is a borrower, participant, or 

counterparty under the credit facility or covered transaction. 

‘‘(8) STUDY OF FOIA EXEMPTION IMPACT.— ‘‘(A) STUDY.—The Inspector General of the Board of 

Governors of the Federal Reserve System shall— 

‘‘(i) conduct a study on the impact that the exemption from section 552(b)(3) of title 5 (known as the 

Freedom of Information Act) established under paragraph (6) has had on the ability of the public to access 

information about the administration by the Board of 

Governors of emergency credit facilities, discount window lending programs, and open market operations; 

and 

‘‘(ii) make any recommendations on whether the exemption described in clause (i) should remain in effect. 

‘‘(B) REPORT.—Not later than 30 months after the date 

of enactment of this section, the Inspector General of the 

Board of Governors of the Federal Reserve System shall 

submit a report on the findings of the study required under 

subparagraph (A) to the Committee on Banking, Housing, 

and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives, and publish the report on the website of the Board. 

‘‘(9) RULE OF CONSTRUCTION.—Nothing in this section is 

meant to affect any pending litigation or lawsuit filed under 

section 552 of title 5, United States Code (popularly known as 

the Freedom of Information Act), on or before the date of enactment of the Dodd-Frank Wall Street Reform and Consumer 

Protection Act.’’. 

SEC. 1104. LIQUIDITY EVENT DETERMINATION. 

(a) DETERMINATION AND WRITTEN RECOMMENDATION.— (1) DETERMINATION REQUEST.—The Secretary may request 

the Corporation and the Board of Governors to determine 

whether a liquidity event exists that warrants use of the guarantee program authorized under section 1105. 

(2) REQUIREMENTS OF DETERMINATION.—Any determination pursuant to paragraph (1) shall— 

(A) be written; and 

(B) contain an evaluation of the evidence that— 

(i) a liquidity event exists; 

(ii) failure to take action would have serious adverse effects on financial stability or economic conditions in the United States; and 

(iii) actions authorized under section 1105 are 

needed to avoid or mitigate potential adverse effects on 

the United States financial system or economic conditions. 

(b) PROCEDURES.—Notwithstanding any other provision of Federal or State law, upon the determination of both the Corporation 

(upon a vote of not fewer than 2⁄3 of the members of the Corporation 

then serving) and the Board of Governors (upon a vote of not fewer 

than 2⁄3 of the members of the Board of Governors then serving) 

under subsection (a) that a liquidity event exists that warrants use 


sroberts on DSKD5P82C1PROD with HEARING
758 

of the guarantee program authorized under section 1105, and with 

the written consent of the Secretary— 

(1) the Corporation shall take action in accordance with 

section 1105(a); and 

(2) the Secretary (in consultation with the President) shall 

take action in accordance with section 1105(c). 

(c) DOCUMENTATION AND REVIEW.— (1) DOCUMENTATION.—The Secretary shall— 

(A) maintain the written documentation of each determination of the Corporation and the Board of Governors 

under this section; and 

(B) provide the documentation for review under paragraph (2). 

(2) GAO REVIEW.—The Comptroller General of the United 

States shall review and report to Congress on any determination of the Corporation and the Board of Governors under subsection (a), including— 

(A) the basis for the determination; and 

(B) the likely effect of the actions taken. 

(d) REPORT TO CONGRESS.—On the earlier of the date of a submission made to Congress under section 1105(c), or within 30 days 

of the date of a determination under subsection (a), the Secretary 

shall provide written notice of the determination of the Corporation 

and the Board of Governors to the Committee on Banking, Housing, 

and Urban Affairs of the Senate and the Committee on Financial 

Services of the House of Representatives, including a description of 

the basis for the determination. 

SEC. 1105. EMERGENCY FINANCIAL STABILIZATION. 

(a) IN GENERAL.—Upon the written determination of the Corporation and the Board of Governors under section 1104, the Corporation shall create a widely available program to guarantee obligations of solvent insured depository institutions or solvent depository institution holding companies (including any affiliates thereof) 

during times of severe economic distress, except that a guarantee of 

obligations under this section may not include the provision of equity in any form. 

(b) RULEMAKING AND TERMS AND CONDITIONS.— (1) POLICIES AND PROCEDURES.—As soon as is practicable 

after the date of enactment of this Act, the Corporation shall establish, by regulation, and in consultation with the Secretary, 

policies and procedures governing the issuance of guarantees 

authorized by this section. Such policies and procedures may 

include a requirement of collateral as a condition of any such 

guarantee. 

(2) TERMS AND CONDITIONS.—The terms and conditions of 

any guarantee program shall be established by the Corporation, 

with the concurrence of the Secretary. 

(c) DETERMINATION OF GUARANTEED AMOUNT.— 

(1) IN GENERAL.—In connection with any program established pursuant to subsection (a) and subject to paragraph (2) 

of this subsection, the Secretary (in consultation with the President) shall determine the maximum amount of debt outstanding that the Corporation may guarantee under this section, and the President may transmit to Congress a written report on the plan of the Corporation to exercise the authority 


sroberts on DSKD5P82C1PROD with HEARING
759 

under this section to issue guarantees up to that maximum 

amount and a request for approval of such plan. The Corporation shall exercise the authority under this section to issue guarantees up to that specified maximum amount upon passage of 

the joint resolution of approval, as provided in subsection (d). 

Absent such approval, the Corporation shall issue no such 

guarantees. 

(2) ADDITIONAL DEBT GUARANTEE AUTHORITY.—If the Secretary (in consultation with the President) determines, after a 

submission to Congress under paragraph (1), that the maximum guarantee amount should be raised, and the Council concurs with that determination, the President may transmit to 

Congress a written report on the plan of the Corporation to exercise the authority under this section to issue guarantees up to 

the increased maximum debt guarantee amount. The Corporation shall exercise the authority under this section to issue guarantees up to that specified maximum amount upon passage of 

the joint resolution of approval, as provided in subsection (d). 

Absent such approval, the Corporation shall issue no such 

guarantees. 

(d) RESOLUTION OF APPROVAL.— 

(1) ADDITIONAL DEBT GUARANTEE AUTHORITY.—A request by 

the President under this section shall be considered granted by 

Congress upon adoption of a joint resolution approving such request. Such joint resolution shall be considered in the Senate 

under expedited procedures. 

(2) FAST TRACK CONSIDERATION IN SENATE.— 

(A) RECONVENING.—Upon receipt of a request under 

subsection (c), if the Senate has adjourned or recessed for 

more than 2 days, the majority leader of the Senate, after 

consultation with the minority leader of the Senate, shall 

notify the Members of the Senate that, pursuant to this section, the Senate shall convene not later than the second calendar day after receipt of such message. 

(B) PLACEMENT ON CALENDAR.—Upon introduction in 

the Senate, the joint resolution shall be placed immediately 

on the calendar. 

(C) FLOOR CONSIDERATION.— 

(i) IN GENERAL.—Notwithstanding Rule XXII of 

the Standing Rules of the Senate, it is in order at any 

time during the period beginning on the 4th day after 

the date on which Congress receives a request under 

subsection (c), and ending on the 7th day after that 

date (even though a previous motion to the same effect 

has been disagreed to) to move to proceed to the consideration of the joint resolution, and all points of order 

against the joint resolution (and against consideration 

of the joint resolution) are waived. The motion to proceed is not debatable. The motion is not subject to a 

motion to postpone. A motion to reconsider the vote by 

which the motion is agreed to or disagreed to shall not 

be in order. If a motion to proceed to the consideration 

of the resolution is agreed to, the joint resolution shall 

remain the unfinished business until disposed of. 


sroberts on DSKD5P82C1PROD with HEARING
760 

(ii) DEBATE.—Debate on the joint resolution, and 

on all debatable motions and appeals in connection 

therewith, shall be limited to not more than 10 hours, 

which shall be divided equally between the majority 

and minority leaders or their designees. A motion further to limit debate is in order and not debatable. An 

amendment to, or a motion to postpone, or a motion to 

proceed to the consideration of other business, or a motion to recommit the joint resolution is not in order. 

(iii) VOTE ON PASSAGE.—The vote on passage shall 

occur immediately following the conclusion of the debate on the joint resolution, and a single quorum call 

at the conclusion of the debate if requested in accordance with the rules of the Senate. 

(iv) RULINGS OF THE CHAIR ON PROCEDURE.—Appeals from the decisions of the Chair relating to the application of the rules of the Senate, as the case may be, 

to the procedure relating to a joint resolution shall be 

decided without debate. 

(3) RULES.— (A) COORDINATION WITH ACTION BY HOUSE OF REP- RESENTATIVES.—If, before the passage by the Senate of a 

joint resolution of the Senate, the Senate receives a joint 

resolution, from the House of Representatives, then the following procedures shall apply: 

(i) The joint resolution of the House of Representatives shall not be referred to a committee. 

(ii) With respect to a joint resolution of the Senate— 

(I) the procedure in the Senate shall be the 

same as if no joint resolution had been received 

from the other House; but 

(II) the vote on passage shall be on the joint 

resolution of the House of Representatives. 

(B) TREATMENT OF JOINT RESOLUTION OF HOUSE OF

REPRESENTATIVES.—If the Senate fails to introduce or consider a joint resolution under this section, the joint resolution of the House of Representatives shall be entitled to expedited floor procedures under this subsection. 

(C) TREATMENT OF COMPANION MEASURES.—If, following passage of the joint resolution in the Senate, the 

Senate then receives the companion measure from the 

House of Representatives, the companion measure shall not 

be debatable. 

(D) RULES OF THE SENATE.—This subsection is enacted 

by Congress— 

(i) as an exercise of the rulemaking power of the 

Senate, and as such it is deemed a part of the rules of 

the Senate, but applicable only with respect to the procedure to be followed in the Senate in the case of a 

joint resolution, and it supersedes other rules, only to 

the extent that it is inconsistent with such rules; and 

(ii) with full recognition of the constitutional right 

of the Senate to change the rules (so far as relating to 

the procedure of the Senate) at any time, in the same 


sroberts on DSKD5P82C1PROD with HEARING
761 

manner, and to the same extent as in the case of any 

other rule of the Senate. 

(4) DEFINITION.—As used in this subsection, the term ‘‘joint 

resolution’’ means only a joint resolution— 

(A) that is introduced not later than 3 calendar days 

after the date on which the request referred to in subsection 

(c) is received by Congress; 

(B) that does not have a preamble; 

(C) the title of which is as follows: ‘‘Joint resolution relating to the approval of a plan to guarantee obligations 

under section 1105 of the Dodd-Frank Wall Street Reform 

and Consumer Protection Act’’; and 

(D) the matter after the resolving clause of which is as 

follows: ‘‘That Congress approves the obligation of any 

amount described in section 1105(c) of the Dodd-Frank 

Wall Street Reform and Consumer Protection Act.’’. 

(e) FUNDING.— (1) FEES AND OTHER CHARGES.—The Corporation shall 

charge fees and other assessments to all participants in the program established pursuant to this section, in such amounts as 

are necessary to offset projected losses and administrative expenses, including amounts borrowed pursuant to paragraph (3), 

and such amounts shall be available to the Corporation. 

(2) EXCESS FUNDS.—If, at the conclusion of the program established under this section, there are any excess funds collected 

from the fees associated with such program, the funds shall be 

deposited in the General Fund of the Treasury. 

(3) AUTHORITY OF CORPORATION.—The Corporation— 

(A) may borrow funds from the Secretary of the Treasury and issue obligations of the Corporation to the Secretary for amounts borrowed, and the amounts borrowed 

shall be available to the Corporation for purposes of carrying out a program established pursuant to this section, 

including the payment of reasonable costs of administering 

the program, and the obligations issued shall be repaid in 

full with interest through fees and charges paid by participants in accordance with paragraphs (1) and (4), as applicable; and 

(B) may not borrow funds from the Deposit Insurance 

Fund established pursuant to section 11(a)(4) of the Federal Deposit Insurance Act. 

(4) BACKUP SPECIAL ASSESSMENTS.—To the extent that the 

funds collected pursuant to paragraph (1) are insufficient to 

cover any losses or expenses, including amounts borrowed pursuant to paragraph (3), arising from a program established 

pursuant to this section, the Corporation shall impose a special 

assessment solely on participants in the program, in amounts 

necessary to address such insufficiency, and which shall be 

available to the Corporation to cover such losses or expenses. 

(5) AUTHORITY OF THE SECRETARY.—The Secretary may 

purchase any obligations issued under paragraph (3)(A). For 

such purpose, the Secretary may use the proceeds of the sale of 

any securities issued under chapter 31 of title 31, United States 

Code, and the purposes for which securities may be issued 

under that chapter 31 are extended to include such purchases, 


sroberts on DSKD5P82C1PROD with HEARING
762 

and the amount of any securities issued under that chapter 31 

for such purpose shall be treated in the same manner as securities issued under section 208(n)(5)(E). 

(f) RULE OF CONSTRUCTION.—For purposes of this section, a 

guarantee of deposits held by insured depository institutions shall 

not be treated as a debt guarantee program. 

(g) DEFINITIONS.—For purposes of this section, the following 

definitions shall apply: 

(1) COMPANY.—The term ‘‘company’’ means any entity other 

than a natural person that is incorporated or organized under 

Federal law or the laws of any State. 

(2) DEPOSITORY INSTITUTION HOLDING COMPANY.—The term 

‘‘depository institution holding company’’ has the same meaning 

as in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 

1813). 

(3) LIQUIDITY EVENT.—The term ‘‘liquidity event’’ means— 

(A) an exceptional and broad reduction in the general 

ability of financial market participants— 

(i) to sell financial assets without an unusual and 

significant discount; or 

(ii) to borrow using financial assets as collateral 

without an unusual and significant increase in margin; or 

(B) an unusual and significant reduction in the ability 

of financial market participants to obtain unsecured credit. 

(4) SOLVENT.—The term ‘‘solvent’’ means that the value of 

the assets of an entity exceed its obligations to creditors. 

SEC. 1106. ADDITIONAL RELATED AMENDMENTS. 

(a) SUSPENSION OF PARALLEL FEDERAL DEPOSIT INSURANCE

ACT AUTHORITY.—Effective upon the date of enactment of this section, the Corporation may not exercise its authority under section 

13(c)(4)(G)(i) of the Federal Deposit Insurance Act (12 U.S.C. 

1823(c)(4)(G)(i)) to establish any widely available debt guarantee 

program for which section 1105 would provide authority. 

(b) FEDERAL DEPOSIT INSURANCE ACT.—Section 13(c)(4)(G) of 

the Federal Deposit Insurance Act (12 U.S.C. 1823(c)(4)(G)) is 

amended— 

(1) in clause (i)— 

(A) in subclause (I), by inserting ‘‘for which the Corporation has been appointed receiver’’ before ‘‘would have 

serious’’; and 

(B) in the undesignated matter following subclause (II), 

by inserting ‘‘for the purpose of winding up the insured depository institution for which the Corporation has been appointed receiver’’ after ‘‘provide assistance under this section’’; and 

(2) in clause (v)(I), by striking ‘‘The’’ and inserting ‘‘Not 

later than 3 days after making a determination under clause 

(i), the’’. 

(c) EFFECT OF DEFAULT ON AN FDIC GUARANTEE.—If an insured depository institution or depository institution holding company (as those terms are defined in section 3 of the Federal Deposit 

Insurance Act) participating in a program under section 1105, or 

any participant in a debt guarantee program established pursuant 

to section 13(c)(4)(G)(i) of the Federal Deposit Insurance Act deVerDate Mar 15 2010 04:29 Jul 07, 2010 Jkt 057098 PO 00000 Frm 00766 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
763 

faults on any obligation guaranteed by the Corporation after the 

date of enactment of this Act, the Corporation shall— 

(1) appoint itself as receiver for the insured depository institution that defaults; and 

(2) with respect to any other participating company that is 

not an insured depository institution that defaults— 

(A) require— 

(i) consideration of whether a determination shall 

be made, as provided in section 203 to resolve the company under section 202; and 

(ii) the company to file a petition for bankruptcy 

under section 301 of title 11, United States Code, if the 

Corporation is not appointed receiver pursuant to section 202 within 30 days of the date of default; or 

(B) file a petition for involuntary bankruptcy on behalf 

of the company under section 303 of title 11, United States 

Code. 

SEC. 1107. FEDERAL RESERVE ACT AMENDMENTS ON FEDERAL RESERVE BANK GOVERNANCE. 

The 5th subparagraph of the 4th undesignated paragraph of 

section 4 of the Federal Reserve Act (12 U.S.C. 341) is amended by 

striking the 2nd sentence and inserting the following: ‘‘The president shall be the chief executive officer of the bank and shall be appointed by the Class B and Class C directors of the bank, with the 

approval of the Board of Governors of the Federal Reserve System, 

for a term of 5 years; and all other executive officers and all employees of the bank shall be directly responsible to the president.’’. 

SEC. 1108. FEDERAL RESERVE ACT AMENDMENTS ON SUPERVISION 

AND REGULATION POLICY. 

(a) ESTABLISHMENT OF THE POSITION OF VICE CHAIRMAN FOR

SUPERVISION.— 

(1) POSITION ESTABLISHED.—The second undesignated 

paragraph of section 10 of the Federal Reserve Act (12 U.S.C. 

242) (relating to the Chairman and Vice Chairman of the 

Board) is amended by striking the third sentence and inserting 

the following: ‘‘Of the persons thus appointed, 1 shall be designated by the President, by and with the advice and consent 

of the Senate, to serve as Chairman of the Board for a term of 

4 years, and 2 shall be designated by the President, by and 

with the advice and consent of the Senate, to serve as Vice 

Chairmen of the Board, each for a term of 4 years, 1 of whom 

shall serve in the absence of the Chairman, as provided in the 

fourth undesignated paragraph of this section, and 1 of whom 

shall be designated Vice Chairman for Supervision. The Vice 

Chairman for Supervision shall develop policy recommendations for the Board regarding supervision and regulation of depository institution holding companies and other financial 

firms supervised by the Board, and shall oversee the supervision and regulation of such firms.’’. 

(2) EFFECTIVE DATE.—The amendment made by subsection 

(a) takes effect on the date of enactment of this title and applies 

to individuals who are designated by the President on or after 

that date to serve as Vice Chairman of Supervision. 


sroberts on DSKD5P82C1PROD with HEARING
764 

(b) APPEARANCES BEFORE CONGRESS.—Section 10 of the Federal Reserve Act (12 U.S.C. 241 et seq.) is amended by adding at 

the end the following: 

‘‘(12) APPEARANCES BEFORE CONGRESS.—The Vice Chairman for Supervision shall appear before the Committee on 

Banking, Housing, and Urban Affairs of the Senate and the 

Committee on Financial Services of the House of Representatives and at semi-annual hearings regarding the efforts, activities, objectives, and plans of the Board with respect to the conduct of supervision and regulation of depository institution 

holding companies and other financial firms supervised by the 

Board.’’. 

(c) BOARD RESPONSIBILITY TO SET SUPERVISION AND REGULATORY POLICY.—Section 11 of the Federal Reserve Act (12 U.S.C. 

248) (relating to enumerated powers of the Board) is amended by 

adding at the end of subsection (k) (relating to delegation) the following: ‘‘The Board of Governors may not delegate to a Federal reserve bank its functions for the establishment of policies for the supervision and regulation of depository institution holding companies 

and other financial firms supervised by the Board of Governors.’’. 

(d) EXERCISE OF FEDERAL RESERVE AUTHORITY.— 

(1) NO DECISIONS BY FEDERAL RESERVE BANK PRESIDENTS.—No provision of title I relating to the authority of the 

Board of Governors shall be construed as conferring any decision-making authority on presidents of Federal reserve banks. 

(2) VOTING DECISIONS BY BOARD.—The Board of Governors 

shall not delegate the authority to make any voting decision 

that the Board of Governors is authorized or required to make 

under title I of this Act in contravention of section 11(k) of the 

Federal Reserve Act. 

SEC. 1109. GAO AUDIT OF THE FEDERAL RESERVE FACILITIES; PUBLICATION OF BOARD ACTIONS. 

(a) GAO AUDIT.— 

(1) IN GENERAL.—Notwithstanding section 714(b) of title 

31, United States Code, or any other provision of law, the 

Comptroller General of the United States (in this subsection referred to as the ‘‘Comptroller General’’) shall conduct a one-time 

audit of all loans and other financial assistance provided during the period beginning on December 1, 2007 and ending on 

the date of enactment of this Act by the Board of Governors or 

a Federal reserve bank under the Asset-Backed Commercial 

Paper Money Market Mutual Fund Liquidity Facility, the Term 

Asset-Backed Securities Loan Facility, the Primary Dealer 

Credit Facility, the Commercial Paper Funding Facility, the 

Term Securities Lending Facility, the Term Auction Facility, 

Maiden Lane, Maiden Lane II, Maiden Lane III, the agency 

Mortgage-Backed Securities program, foreign currency liquidity 

swap lines, and any other program created as a result of section 

13(3) of the Federal Reserve Act (as so designated by this title). 

(2) ASSESSMENTS.—In conducting the audit under paragraph (1), the Comptroller General shall assess— 

(A) the operational integrity, accounting, financial reporting, and internal controls of the credit facility; 


sroberts on DSKD5P82C1PROD with HEARING
765 

(B) the effectiveness of the security and collateral policies established for the facility in mitigating risk to the relevant Federal reserve bank and taxpayers; 

(C) whether the credit facility inappropriately favors 

one or more specific participants over other institutions eligible to utilize the facility; 

(D) the policies governing the use, selection, or payment 

of third-party contractors by or for any credit facility; and 

(E) whether there were conflicts of interest with respect 

to the manner in which such facility was established or operated. 

(3) TIMING.—The audit required by this subsection shall be 

commenced not later than 30 days after the date of enactment 

of this Act, and shall be completed not later than 12 months 

after that date of enactment. 

(4) REPORT REQUIRED.—The Comptroller General shall submit a report on the audit conducted under paragraph (1) to the 

Congress not later than 12 months after the date of enactment 

of this Act, and such report shall be made available to— 

(A) the Speaker of the House of Representatives; 

(B) the majority and minority leaders of the House of 

Representatives; 

(C) the majority and minority leaders of the Senate; 

(D) the Chairman and Ranking Member of the Committee on Banking, Housing, and Urban Affairs of the Senate and of the Committee on Financial Services of the 

House of Representatives; and 

(E) any member of Congress who requests it. 

(b) AUDIT OF FEDERAL RESERVE BANK GOVERNANCE.— 

(1) AUDIT.— 

(A) IN GENERAL.—Not later than 1 year after the date 

of enactment of this Act, the Comptroller General shall 

complete an audit of the governance of the Federal reserve 

bank system. 

(B) REQUIRED EXAMINATIONS.—The audit required 

under subparagraph (A) shall— 

(i) examine the extent to which the current system 

of appointing Federal reserve bank directors effectively 

represents ‘‘the public, without discrimination on the 

basis of race, creed, color, sex or national origin, and 

with due but not exclusive consideration to the interests 

of agriculture, commerce, industry, services, labor, and 

consumers’’ in the selection of bank directors, as such 

requirement is set forth under section 4 of the Federal 

Reserve Act; 

(ii) examine whether there are actual or potential 

conflicts of interest created when the directors of Federal reserve banks, which execute the supervisory functions of the Board of Governors of the Federal Reserve 

System, are elected by member banks; 

(iii) examine the establishment and operations of 

each facility described in subsection (a)(1) and each 

Federal reserve bank involved in the establishment and 

operations thereof; and 


sroberts on DSKD5P82C1PROD with HEARING
766 

(iv) identify changes to selection procedures for 

Federal reserve bank directors, or to other aspects of 

Federal reserve bank governance, that would— 

(I) improve how the public is represented; 

(II) eliminate actual or potential conflicts of 

interest in bank supervision; 

(III) increase the availability of information 

useful for the formation and execution of monetary 

policy; or 

(IV) in other ways increase the effectiveness or 

efficiency of reserve banks. 

(2) REPORT REQUIRED.—A report on the audit conducted 

under paragraph (1) shall be submitted by the Comptroller 

General to the Congress before the end of the 90-day period beginning on the date on which such audit is completed, and such 

report shall be made available to— 

(A) the Speaker of the House of Representatives; 

(B) the majority and minority leaders of the House of 

Representatives; 

(C) the majority and minority leaders of the Senate; 

(D) the Chairman and Ranking Member of the Committee on Banking, Housing, and Urban Affairs of the Senate and of the Committee on Financial Services of the 

House of Representatives; and 

(E) any member of Congress who requests it. 

(c) PUBLICATION OF BOARD ACTIONS.—Notwithstanding any 

other provision of law, the Board of Governors shall publish on its 

website, not later than December 1, 2010, with respect to all loans 

and other financial assistance provided during the period beginning 

on December 1, 2007 and ending on the date of enactment of this 

Act under the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, the Term Asset-Backed Securities 

Loan Facility, the Primary Dealer Credit Facility, the Commercial 

Paper Funding Facility, the Term Securities Lending Facility, the 

Term Auction Facility, Maiden Lane, Maiden Lane II, Maiden Lane 

III, the agency Mortgage-Backed Securities program, foreign currency liquidity swap lines, and any other program created as a result of section 13(3) of the Federal Reserve Act (as so designated by 

this title)— 

(1) the identity of each business, individual, entity, or foreign central bank to which the Board of Governors or a Federal 

reserve bank has provided such assistance; 

(2) the type of financial assistance provided to that business, individual, entity, or foreign central bank; 

(3) the value or amount of that financial assistance; 

(4) the date on which the financial assistance was provided; 

(5) the specific terms of any repayment expected, including 

the repayment time period, interest charges, collateral, limitations on executive compensation or dividends, and other material terms; and 

(6) the specific rationale for each such facility or program. 


sroberts on DSKD5P82C1PROD with HEARING
767 

TITLE XII—IMPROVING ACCESS TO MAINSTREAM 

FINANCIAL INSTITUTIONS 

SEC. 1201. SHORT TITLE. 

This title may be cited as the ‘‘Improving Access to Mainstream 

Financial Institutions Act of 2010’’. 

SEC. 1202. PURPOSE. 

The purpose of this title is to encourage initiatives for financial 

products and services that are appropriate and accessible for millions of Americans who are not fully incorporated into the financial 

mainstream. 

SEC. 1203. DEFINITIONS. 

In this title, the following definitions shall apply: 

(1) ACCOUNT.—The term ‘‘account’’ means an agreement between an individual and an eligible entity under which the individual obtains from or through the entity 1 or more banking 

products and services, and includes a deposit account, a savings account (including a money market savings account), an 

account for a closed-end loan, and other products or services, as 

the Secretary deems appropriate. 

(2) COMMUNITY DEVELOPMENT FINANCIAL INSTITUTION.— 

The term ‘‘community development financial institution’’ has 

the same meaning as in section 103(5) of the Community Development Banking and Financial Institutions Act of 1994 (12 

U.S.C. 4702(5)). 

(3) ELIGIBLE ENTITY.—The term ‘‘eligible entity’’ means— 

(A) an organization described in section 501(c)(3) of the 

Internal Revenue Code of 1986, and exempt from tax under 

section 501(a) of such Code; 

(B) a federally insured depository institution; 

(C) a community development financial institution; 

(D) a State, local, or tribal government entity; or 

(E) a partnership or other joint venture comprised of 1 

or more of the entities described in subparagraphs (A) 

through (D), in accordance with regulations prescribed by 

the Secretary under this title. 

(4) FEDERALLY INSURED DEPOSITORY INSTITUTION.—The 

term ‘‘federally insured depository institution’’ means any insured depository institution (as that term is defined in section 

3 of the Federal Deposit Insurance Act (12 U.S.C. 1813)) and 

any insured credit union (as that term is defined in section 101 

of the Federal Credit Union Act (12 U.S.C. 1752)). 

SEC. 1204. EXPANDED ACCESS TO MAINSTREAM FINANCIAL INSTITUTIONS. 

(a) IN GENERAL.—The Secretary is authorized to establish a 

multiyear program of grants, cooperative agreements, financial 

agency agreements, and similar contracts or undertakings to promote initiatives designed— 

(1) to enable low- and moderate-income individuals to establish one or more accounts in a federally insured depository 

institution that are appropriate to meet the financial needs of 

such individuals; and 

(2) to improve access to the provision of accounts, on reasonable terms, for low- and moderate-income individuals. 


sroberts on DSKD5P82C1PROD with HEARING
768 

(b) PROGRAM ELIGIBILITY AND ACTIVITIES.— (1) IN GENERAL.—The Secretary shall restrict participation 

in any program established under subsection (a) to an eligible 

entity. Subject to regulations prescribed by the Secretary under 

this title, 1 or more eligible entities may participate in 1 or several programs established under subsection (a). 

(2) ACCOUNT ACTIVITIES.—Subject to regulations prescribed 

by the Secretary, an eligible entity may, in participating in a 

program established under subsection (a), offer or provide to 

low- and moderate-income individuals products and services relating to accounts, including— 

(A) small-dollar value loans; and 

(B) financial education and counseling relating to conducting transactions in and managing accounts. 

SEC. 1205. LOW-COST ALTERNATIVES TO SMALL DOLLAR LOANS. 

(a) GRANTS AUTHORIZED.—The Secretary is authorized to establish multiyear demonstration programs by means of grants, cooperative agreements, financial agency agreements, and similar contracts or undertakings, with eligible entities to provide low-cost, 

small loans to consumers that will provide alternatives to more costly small dollar loans. 

(b) TERMS AND CONDITIONS.— 

(1) IN GENERAL.—Loans under this section shall be made 

on terms and conditions, and pursuant to lending practices, 

that are reasonable for consumers. 

(2) FINANCIAL LITERACY AND EDUCATION OPPORTUNITIES.— 

(A) IN GENERAL.—Each eligible entity awarded a grant 

under this section shall promote and take appropriate steps 

to ensure the provision of financial literacy and education 

opportunities, such as relevant counseling services, educational courses, or wealth building programs, to each consumer provided with a loan pursuant to this section. 

(B) AUTHORITY TO EXPAND ACCESS.—As part of the 

grants, agreements, and undertakings established under 

this section, the Secretary may implement reasonable measures or programs designed to expand access to financial literacy and education opportunities, including relevant counseling services, educational courses, or wealth building programs to be provided to individuals who obtain loans from 

eligible entities under this section. 

SEC. 1206. GRANTS TO ESTABLISH LOAN-LOSS RESERVE FUNDS. 

The Community Development Banking and Financial Institutions Act of 1994 (12 U.S.C. 4701 et seq.) is amended by adding at 

the end the following: 

‘‘SEC. 122. GRANTS TO ESTABLISH LOAN-LOSS RESERVE FUNDS. 

‘‘(a) PURPOSES.—The purposes of this section are— 

‘‘(1) to make financial assistance available from the Fund 

in order to help community development financial institutions 

defray the costs of operating small dollar loan programs, by 

providing the amounts necessary for such institutions to establish their own loan loss reserve funds to mitigate some of the 

losses on such small dollar loan programs; and 

‘‘(2) to encourage community development financial institutions to establish and maintain small dollar loan programs 


sroberts on DSKD5P82C1PROD with HEARING
769 

that would help give consumers access to mainstream financial 

institutions and combat high cost small dollar lending. 

‘‘(b) GRANTS.— 

‘‘(1) LOAN-LOSS RESERVE FUND GRANTS.—The Fund shall 

make grants to community development financial institutions or 

to any partnership between such community development financial institutions and any other federally insured depository institution with a primary mission to serve targeted investment 

areas, as such areas are defined under section 103(16), to enable such institutions or any partnership of such institutions to 

establish a loan-loss reserve fund in order to defray the costs of 

a small dollar loan program established or maintained by such 

institution. 

‘‘(2) MATCHING REQUIREMENT.—A community development 

financial institution or any partnership of institutions established pursuant to paragraph (1) shall provide non-Federal 

matching funds in an amount equal to 50 percent of the 

amount of any grant received under this section. 

‘‘(3) USE OF FUNDS.—Any grant amounts received by a community development financial institution or any partnership between or among such institutions under paragraph (1)— 

‘‘(A) may not be used by such institution to provide direct loans to consumers; 

‘‘(B) may be used by such institution to help recapture 

a portion or all of a defaulted loan made under the small 

dollar loan program of such institution; and 

‘‘(C) may be used to designate and utilize a fiscal agent 

for services normally provided by such an agent. 

‘‘(4) TECHNICAL ASSISTANCE GRANTS.—The Fund shall 

make technical assistance grants to community development financial institutions or any partnership between or among such 

institutions to support and maintain a small dollar loan program. Any grant amounts received under this paragraph may 

be used for technology, staff support, and other costs associated 

with establishing a small dollar loan program. 

‘‘(c) DEFINITIONS.—For purposes of this section— 

‘‘(1) the term ‘consumer reporting agency that compiles and 

maintains files on consumers on a nationwide basis’ has the 

same meaning given such term in section 603(p) of the Fair 

Credit Reporting Act (15 U.S.C. 1681a(p)); and 

‘‘(2) the term ‘small dollar loan program’ means a loan program wherein a community development financial institution or 

any partnership between or among such institutions offers loans 

to consumers that— 

‘‘(A) are made in amounts not exceeding $2,500; 

‘‘(B) must be repaid in installments; 

‘‘(C) have no pre-payment penalty; 

‘‘(D) the institution has to report payments regarding 

the loan to at least 1 of the consumer reporting agencies 

that compiles and maintains files on consumers on a nationwide basis; and 

‘‘(E) meet any other affordability requirements as may 

be established by the Administrator.’’. 


sroberts on DSKD5P82C1PROD with HEARING
770 

SEC. 1207. PROCEDURAL PROVISIONS. 

An eligible entity desiring to participate in a program or obtain 

a grant under this title shall submit an application to the Secretary, 

in such form and containing such information as the Secretary may 

require. 

SEC. 1208. AUTHORIZATION OF APPROPRIATIONS. 

(a) AUTHORIZATION TO THE SECRETARY.—There are authorized 

to be appropriated to the Secretary, such sums as are necessary to 

both administer and fund the programs and projects authorized by 

this title, to remain available until expended. 

(b) AUTHORIZATION TO THE FUND.—There is authorized to be 

appropriated to the Fund for each fiscal year beginning in fiscal 

year 2010, an amount equal to the amount of the administrative 

costs of the Fund for the operation of the grant program established 

under this title. 

SEC. 1209. REGULATIONS. 

(a) IN GENERAL.—The Secretary is authorized to promulgate 

regulations to implement and administer the grant programs and 

undertakings authorized by this title. 

(b) REGULATORY AUTHORITY.—Regulations prescribed under 

this section may contain such classifications, differentiations, or 

other provisions, and may provide for such adjustments and exceptions for any class of grant programs, undertakings, or eligible entities, as, in the judgment of the Secretary, are necessary or proper 

to effectuate the purposes of this title, to prevent circumvention or 

evasion of this title, or to facilitate compliance with this title. 

SEC. 1210. EVALUATION AND REPORTS TO CONGRESS. 

For each fiscal year in which a program or project is carried 

out under this title, the Secretary shall submit a report to the Committee on Banking, Housing, and Urban Affairs of the Senate and 

the Committee on Financial Services of the House of Representatives 

containing a description of the activities funded, amounts distributed, and measurable results, as appropriate and available. 

TITLE XIII—PAY IT BACK ACT 

SEC. 1301. SHORT TITLE. 

This title may be cited as the ‘‘Pay It Back Act’’. 

SEC. 1302. AMENDMENT TO REDUCE TARP AUTHORIZATION. 

Section 115(a) of the Emergency Economic Stabilization Act of 

2008 (12 U.S.C. 5225(a)) is amended— 

(1) in paragraph (3)— 

(A) by striking ‘‘, $700,000,000,000, as such amount is 

reduced by $1,259,000,000, as such amount is reduced by 

$1,244,000,000’’ and inserting ‘‘$475,000,000,000’’; and 

(B) by striking ‘‘outstanding at any one time’’; and 

(2) by adding at the end the following: 

‘‘(4) For purposes of this subsection, the amount of authority considered to be exercised by the Secretary shall not be reduced by— 

‘‘(A) any amounts received by the Secretary before, on, 

or after the date of enactment of the Pay It Back Act from 

repayment of the principal of financial assistance by an entity that has received financial assistance under the TARP 


sroberts on DSKD5P82C1PROD with HEARING
771 

or any other program enacted by the Secretary under the 

authorities granted to the Secretary under this Act; 

‘‘(B) any amounts committed for any guarantees pursuant to the TARP that became or become uncommitted; or 

‘‘(C) any losses realized by the Secretary. 

‘‘(5) No authority under this Act may be used to incur any 

obligation for a program or initiative that was not initiated 

prior to June 25, 2010.’’. 

SEC. 1303. REPORT. 

Section 106 of the Emergency Economic Stabilization Act of 

2008 (12 U.S.C. 5216) is amended by inserting at the end the following: 

‘‘(f) REPORT.—The Secretary of the Treasury shall report to Congress every 6 months on amounts received and transferred to the 

general fund under subsection (d).’’. 

SEC. 1304. AMENDMENTS TO HOUSING AND ECONOMIC RECOVERY ACT 

OF 2008. 

(a) SALE OF FANNIE MAE OBLIGATIONS AND SECURITIES BY THE

TREASURY; DEFICIT REDUCTION.—Section 304(g)(2) of the Federal 

National Mortgage Association Charter Act (12 U.S.C. 1719(g)(2)) is 

amended— 

(1) by redesignating subparagraph (C) as subparagraph 

(D); and 

(2) by inserting after subparagraph (B) the following: 

‘‘(C) DEFICIT REDUCTION.—The Secretary of the Treasury shall deposit in the General Fund of the Treasury any 

amounts received by the Secretary from the sale of any obligation acquired by the Secretary under this subsection, 

where such amounts shall be— 

‘‘(i) dedicated for the sole purpose of deficit reduction; and 

‘‘(ii) prohibited from use as an offset for other 

spending increases or revenue reductions.’’. 

(b) SALE OF FREDDIE MAC OBLIGATIONS AND SECURITIES BY

THE TREASURY; DEFICIT REDUCTION.—Section 306(l)(2) of the Federal Home Loan Mortgage Corporation Act (12 U.S.C. 1455(l)(2)) is 

amended— 

(1) by redesignating subparagraph (C) as subparagraph 

(D); and 

(2) by inserting after subparagraph (B) the following: 

‘‘(C) DEFICIT REDUCTION.—The Secretary of the Treasury shall deposit in the General Fund of the Treasury any 

amounts received by the Secretary from the sale of any obligation acquired by the Secretary under this subsection, 

where such amounts shall be— 

‘‘(i) dedicated for the sole purpose of deficit reduction; and 

‘‘(ii) prohibited from use as an offset for other 

spending increases or revenue reductions.’’. 

(c) SALE OF FEDERAL HOME LOAN BANKS OBLIGATIONS BY THE

TREASURY; DEFICIT REDUCTION.—Section 11(l)(2) of the Federal 

Home Loan Bank Act (12 U.S.C. 1431(l)(2)) is amended— 

(1) by redesignating subparagraph (C) as subparagraph 

(D); and 


sroberts on DSKD5P82C1PROD with HEARING
772 

(2) by inserting after subparagraph (B) the following: 

‘‘(C) DEFICIT REDUCTION.—The Secretary of the Treasury shall deposit in the General Fund of the Treasury any 

amounts received by the Secretary from the sale of any obligation acquired by the Secretary under this subsection, 

where such amounts shall be— 

‘‘(i) dedicated for the sole purpose of deficit reduction; and 

‘‘(ii) prohibited from use as an offset for other 

spending increases or revenue reductions.’’. 

(d) REPAYMENT OF FEES.—Any periodic commitment fee or any 

other fee or assessment paid by the Federal National Mortgage Association or Federal Home Loan Mortgage Corporation to the Secretary of the Treasury as a result of any preferred stock purchase 

agreement, mortgage-backed security purchase program, or any 

other program or activity authorized or carried out pursuant to the 

authorities granted to the Secretary of the Treasury under section 

1117 of the Housing and Economic Recovery Act of 2008 (Public 

Law 110–289; 122 Stat. 2683), including any fee agreed to by contract between the Secretary and the Association or Corporation, 

shall be deposited in the General Fund of the Treasury where such 

amounts shall be— 

(1) dedicated for the sole purpose of deficit reduction; and 

(2) prohibited from use as an offset for other spending increases or revenue reductions. 

SEC. 1305. FEDERAL HOUSING FINANCE AGENCY REPORT. 

The Director of the Federal Housing Finance Agency shall submit to Congress a report on the plans of the Agency to continue to 

support and maintain the Nation’s vital housing industry, while at 

the same time guaranteeing that the American taxpayer will not 

suffer unnecessary losses. 

SEC. 1306. REPAYMENT OF UNOBLIGATED ARRA FUNDS. 

(a) REJECTION OF ARRA FUNDS BY STATE.—Section 1607 of the 

American Recovery and Reinvestment Act of 2009 (Public Law 111– 

5; 123 Stat. 305) is amended by adding at the end the following: 

‘‘(d) STATEWIDE REJECTION OF FUNDS.—If funds provided to 

any State in any division of this Act are not accepted for use by the 

Governor of the State pursuant to subsection (a) or by the State legislature pursuant to subsection (b), then all such funds shall be— 

‘‘(1) rescinded; and 

‘‘(2) deposited in the General Fund of the Treasury where 

such amounts shall be— 

‘‘(A) dedicated for the sole purpose of deficit reduction; 

and 

‘‘(B) prohibited from use as an offset for other spending 

increases or revenue reductions.’’. 

(b) WITHDRAWAL OR RECAPTURE OF UNOBLIGATED FUNDS.— 

Title XVI of the American Recovery and Reinvestment Act of 2009 

(Public Law 111–5; 123 Stat. 302) is amended by adding at the end 

the following: 

‘‘SEC. 1613. WITHDRAWAL OR RECAPTURE OF UNOBLIGATED FUNDS. 

‘‘Notwithstanding any other provision of this Act, if the head of 

any executive agency withdraws or recaptures for any reason funds 

appropriated or otherwise made available under this division, and 


sroberts on DSKD5P82C1PROD with HEARING
773 

such funds have not been obligated by a State to a local government 

or for a specific project, such recaptured funds shall be— 

‘‘(1) rescinded; and 

‘‘(2) deposited in the General Fund of the Treasury where 

such amounts shall be— 

‘‘(A) dedicated for the sole purpose of deficit reduction; 

and 

‘‘(B) prohibited from use as an offset for other spending 

increases or revenue reductions.’’. 

(c) RETURN OF UNOBLIGATED FUNDS BY END OF 2012.—Section 

1603 of the American Recovery and Reinvestment Act of 2009 (Public Law 111–5; 123 Stat. 302) is amended by— 

(1) striking ‘‘All funds’’ and inserting ‘‘(a) IN GENERAL.— 

All funds’’; and 

(2) adding at the end the following: 

‘‘(b) REPAYMENT OF UNOBLIGATED FUNDS.—Any discretionary 

appropriations made available in this division that have not been 

obligated as of December 31, 2012, are hereby rescinded, and such 

amounts shall be deposited in the General Fund of the Treasury 

where such amounts shall be— 

‘‘(1) dedicated for the sole purpose of deficit reduction; and 

‘‘(2) prohibited from use as an offset for other spending increases or revenue reductions. 

‘‘(c) PRESIDENTIAL WAIVER AUTHORITY.— 

‘‘(1) IN GENERAL.—The President may waive the requirements under subsection (b), if the President determines that it 

is not in the best interest of the Nation to rescind a specific unobligated amount after December 31, 2012. 

‘‘(2) REQUESTS.—The head of an executive agency may also 

apply to the President for a waiver from the requirements under 

subsection (b).’’. 

TITLE XIV—MORTGAGE REFORM AND ANTI-PREDATORY 

LENDING ACT 

SEC. 1400. SHORT TITLE; DESIGNATION AS ENUMERATED CONSUMER 

LAW. 

(a) SHORT TITLE.—This title may be cited as the ‘‘Mortgage Reform and Anti-Predatory Lending Act’’. 

(b) DESIGNATION AS ENUMERATED CONSUMER LAW UNDER THE

PURVIEW OF THE BUREAU OF CONSUMER FINANCIAL PROTECTION.— 

Subtitles A, B, C, and E and sections 1471, 1472, 1475, and 1476, 

and the amendments made by such subtitles and sections, shall be 

enumerated consumer laws, as defined in section 1002, and come 

under the purview of the Bureau of Consumer Financial Protection 

for purposes of title X, including the transfer of functions and personnel under subtitle F of title X and the savings provisions of such 

subtitle. 

(c) REGULATIONS; EFFECTIVE DATE.— 

(1) REGULATIONS.—The regulations required to be prescribed under this title or the amendments made by this title 

shall— 

(A) be prescribed in final form before the end of the 18- 

month period beginning on the designated transfer date; 

and 


sroberts on DSKD5P82C1PROD with HEARING
774 

(B) take effect not later than 12 months after the date 

of issuance of the regulations in final form. 

(2) EFFECTIVE DATE ESTABLISHED BY RULE.—Except as provided in paragraph (3), a section, or provision thereof, of this 

title shall take effect on the date on which the final regulations 

implementing such section, or provision, take effect. 

(3) EFFECTIVE DATE.—A section of this title for which regulations have not been issued on the date that is 18 months after 

the designated transfer date shall take effect on such date. 

Subtitle A—Residential Mortgage Loan Origination 

Standards 

SEC. 1401. DEFINITIONS. 

Section 103 of the Truth in Lending Act (15 U.S.C. 1602) is 

amended by adding at the end the following new subsection: 

‘‘(cc) DEFINITIONS RELATING TO MORTGAGE ORIGINATION AND

RESIDENTIAL MORTGAGE LOANS.— ‘‘(1) COMMISSION.—Unless otherwise specified, the term 

‘Commission’ means the Federal Trade Commission. 

‘‘(2) MORTGAGE ORIGINATOR.—The term ‘mortgage originator’— 

‘‘(A) means any person who, for direct or indirect compensation or gain, or in the expectation of direct or indirect 

compensation or gain— 

‘‘(i) takes a residential mortgage loan application; 

‘‘(ii) assists a consumer in obtaining or applying to 

obtain a residential mortgage loan; or 

‘‘(iii) offers or negotiates terms of a residential 

mortgage loan; 

‘‘(B) includes any person who represents to the public, 

through advertising or other means of communicating or 

providing information (including the use of business cards, 

stationery, brochures, signs, rate lists, or other promotional 

items), that such person can or will provide any of the services or perform any of the activities described in subparagraph (A); 

‘‘(C) does not include any person who is (i) not otherwise described in subparagraph (A) or (B) and who performs purely administrative or clerical tasks on behalf of a 

person who is described in any such subparagraph, or (ii) 

an employee of a retailer of manufactured homes who is not 

described in clause (i) or (iii) of subparagraph (A) and who 

does not advise a consumer on loan terms (including rates, 

fees, and other costs); 

‘‘(D) does not include a person or entity that only performs real estate brokerage activities and is licensed or registered in accordance with applicable State law, unless 

such person or entity is compensated by a lender, a mortgage broker, or other mortgage originator or by any agent 

of such lender, mortgage broker, or other mortgage originator; 

‘‘(E) does not include, with respect to a residential 

mortgage loan, a person, estate, or trust that provides mortgage financing for the sale of 3 properties in any 12-month 

period to purchasers of such properties, each of which is 


sroberts on DSKD5P82C1PROD with HEARING
775 

owned by such person, estate, or trust and serves as security for the loan, provided that such loan— 

‘‘(i) is not made by a person, estate, or trust that 

has constructed, or acted as a contractor for the construction of, a residence on the property in the ordinary 

course of business of such person, estate, or trust; 

‘‘(ii) is fully amortizing; 

‘‘(iii) is with respect to a sale for which the seller 

determines in good faith and documents that the buyer 

has a reasonable ability to repay the loan; 

‘‘(iv) has a fixed rate or an adjustable rate that is 

adjustable after 5 or more years, subject to reasonable 

annual and lifetime limitations on interest rate increases; and 

‘‘(v) meets any other criteria the Board may prescribe; 

‘‘(F) does not include the creditor (except the creditor in 

a table-funded transaction) under paragraph (1), (2), or (4) 

of section 129B(c); and 

‘‘(G) does not include a servicer or servicer employees, 

agents and contractors, including but not limited to those 

who offer or negotiate terms of a residential mortgage loan 

for purposes of renegotiating, modifying, replacing and subordinating principal of existing mortgages where borrowers 

are behind in their payments, in default or have a reasonable likelihood of being in default or falling behind. 

‘‘(3) NATIONWIDE MORTGAGE LICENSING SYSTEM AND REG- ISTRY.—The term ‘Nationwide Mortgage Licensing System and 

Registry’ has the same meaning as in the Secure and Fair Enforcement for Mortgage Licensing Act of 2008. 

‘‘(4) OTHER DEFINITIONS RELATING TO MORTGAGE ORIGINATOR.—For purposes of this subsection, a person ‘assists a consumer in obtaining or applying to obtain a residential mortgage 

loan’ by, among other things, advising on residential mortgage 

loan terms (including rates, fees, and other costs), preparing 

residential mortgage loan packages, or collecting information 

on behalf of the consumer with regard to a residential mortgage 

loan. 

‘‘(5) RESIDENTIAL MORTGAGE LOAN.—The term ‘residential 

mortgage loan’ means any consumer credit transaction that is 

secured by a mortgage, deed of trust, or other equivalent consensual security interest on a dwelling or on residential real 

property that includes a dwelling, other than a consumer credit 

transaction under an open end credit plan or, for purposes of 

sections 129B and 129C and section 128(a) (16), (17), (18), and 

(19), and sections 128(f) and 130(k), and any regulations promulgated thereunder, an extension of credit relating to a plan 

described in section 101(53D) of title 11, United States Code. 

‘‘(6) SECRETARY.—The term ‘Secretary’, when used in connection with any transaction or person involved with a residential mortgage loan, means the Secretary of Housing and Urban 

Development. 

‘‘(7) SERVICER.—The term ‘servicer’ has the same meaning 

as in section 6(i)(2) of the Real Estate Settlement Procedures 

Act of 1974 (12 U.S.C. 2605(i)(2)).’’. 


sroberts on DSKD5P82C1PROD with HEARING
776 

SEC. 1402. RESIDENTIAL MORTGAGE LOAN ORIGINATION. 

(a) IN GENERAL.—Chapter 2 of the Truth in Lending Act (15 

U.S.C. 1631 et seq.) is amended— 

(1) by redesignating the 2nd of the 2 sections designated as 

section 129 (15 U.S.C. 1639a) (relating to duty of servicers of 

residential mortgages) as section 129A; and 

(2) by inserting after section 129A (as so redesignated) the 

following new section: 

‘‘§ 129B. Residential mortgage loan origination 

‘‘(a) FINDING AND PURPOSE.— ‘‘(1) FINDING.—The Congress finds that economic stabilization would be enhanced by the protection, limitation, and regulation of the terms of residential mortgage credit and the practices related to such credit, while ensuring that responsible, affordable mortgage credit remains available to consumers. 

‘‘(2) PURPOSE.—It is the purpose of this section and section 

129C to assure that consumers are offered and receive residential mortgage loans on terms that reasonably reflect their ability to repay the loans and that are understandable and not unfair, deceptive or abusive. 

‘‘(b) DUTY OF CARE.— ‘‘(1) STANDARD.—Subject to regulations prescribed under 

this subsection, each mortgage originator shall, in addition to 

the duties imposed by otherwise applicable provisions of State 

or Federal law— 

‘‘(A) be qualified and, when required, registered and licensed as a mortgage originator in accordance with applicable State or Federal law, including the Secure and Fair 

Enforcement for Mortgage Licensing Act of 2008; and 

‘‘(B) include on all loan documents any unique identifier of the mortgage originator provided by the Nationwide 

Mortgage Licensing System and Registry. 

‘‘(2) COMPLIANCE PROCEDURES REQUIRED.—The Board shall 

prescribe regulations requiring depository institutions to establish and maintain procedures reasonably designed to assure 

and monitor the compliance of such depository institutions, the 

subsidiaries of such institutions, and the employees of such institutions or subsidiaries with the requirements of this section 

and the registration procedures established under section 1507 

of the Secure and Fair Enforcement for Mortgage Licensing Act 

of 2008.’’. 

(b) CLERICAL AMENDMENT.—The table of sections for chapter 2 

of the Truth in Lending Act is amended by inserting after the item 

relating to section 129 the following new items: 

‘‘129A. Fiduciary duty of servicers of pooled residential mortgages. 

‘‘129B. Residential mortgage loan origination.’’. 

SEC. 1403. PROHIBITION ON STEERING INCENTIVES. 

Section 129B of the Truth in Lending Act (as added by section 

1402(a)) is amended by inserting after subsection (b) the following 

new subsection: 

‘‘(c) PROHIBITION ON STEERING INCENTIVES.— 

‘‘(1) IN GENERAL.—For any residential mortgage loan, no 

mortgage originator shall receive from any person and no person shall pay to a mortgage originator, directly or indirectly, 


sroberts on DSKD5P82C1PROD with HEARING
777 

compensation that varies based on the terms of the loan (other 

than the amount of the principal). 

‘‘(2) RESTRUCTURING OF FINANCING ORIGINATION FEE.— ‘‘(A) IN GENERAL.—For any mortgage loan, a mortgage 

originator may not receive from any person other than the 

consumer and no person, other than the consumer, who 

knows or has reason to know that a consumer has directly 

compensated or will directly compensate a mortgage originator may pay a mortgage originator any origination fee or 

charge except bona fide third party charges not retained by 

the creditor, mortgage originator, or an affiliate of the creditor or mortgage originator. 

‘‘(B) EXCEPTION.—Notwithstanding subparagraph (A), 

a mortgage originator may receive from a person other than 

the consumer an origination fee or charge, and a person 

other than the consumer may pay a mortgage originator an 

origination fee or charge, if— 

‘‘(i) the mortgage originator does not receive any 

compensation directly from the consumer; and 

‘‘(ii) the consumer does not make an upfront payment of discount points, origination points, or fees, 

however denominated (other than bona fide third party 

charges not retained by the mortgage originator, creditor, or an affiliate of the creditor or originator), except 

that the Board may, by rule, waive or provide exemptions to this clause if the Board determines that such 

waiver or exemption is in the interest of consumers and 

in the public interest. 

‘‘(3) REGULATIONS.—The Board shall prescribe regulations 

to prohibit— 

‘‘(A) mortgage originators from steering any consumer 

to a residential mortgage loan that— 

‘‘(i) the consumer lacks a reasonable ability to 

repay (in accordance with regulations prescribed under 

section 129C(a)); or 

‘‘(ii) has predatory characteristics or effects (such 

as equity stripping, excessive fees, or abusive terms); 

‘‘(B) mortgage originators from steering any consumer 

from a residential mortgage loan for which the consumer is 

qualified that is a qualified mortgage (as defined in section 

129C(b)(2)) to a residential mortgage loan that is not a 

qualified mortgage; 

‘‘(C) abusive or unfair lending practices that promote 

disparities among consumers of equal credit worthiness but 

of different race, ethnicity, gender, or age; and 

‘‘(D) mortgage originators from— 

‘‘(i) mischaracterizing the credit history of a consumer or the residential mortgage loans available to a 

consumer; 

‘‘(ii) mischaracterizing or suborning the 

mischaracterization of the appraised value of the property securing the extension of credit; or 

‘‘(iii) if unable to suggest, offer, or recommend to a 

consumer a loan that is not more expensive than a loan 

for which the consumer qualifies, discouraging a conVerDate Mar 15 2010 04:29 Jul 07, 2010 Jkt 057098 PO 00000 Frm 00781 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
778 

sumer from seeking a residential mortgage loan secured by a consumer’s principal dwelling from another 

mortgage originator. 

‘‘(4) RULES OF CONSTRUCTION.—No provision of this subsection shall be construed as— 

‘‘(A) permitting any yield spread premium or other 

similar compensation that would, for any residential mortgage loan, permit the total amount of direct and indirect 

compensation from all sources permitted to a mortgage 

originator to vary based on the terms of the loan (other 

than the amount of the principal); 

‘‘(B) limiting or affecting the amount of compensation 

received by a creditor upon the sale of a consummated loan 

to a subsequent purchaser; 

‘‘(C) restricting a consumer’s ability to finance, at the 

option of the consumer, including through principal or rate, 

any origination fees or costs permitted under this subsection, or the mortgage originator’s right to receive such 

fees or costs (including compensation) from any person, 

subject to paragraph (2)(B), so long as such fees or costs do 

not vary based on the terms of the loan (other than the 

amount of the principal) or the consumer’s decision about 

whether to finance such fees or costs; or 

‘‘(D) prohibiting incentive payments to a mortgage 

originator based on the number of residential mortgage 

loans originated within a specified period of time.’’. 

SEC. 1404. LIABILITY. 

Section 129B of the Truth in Lending Act is amended by inserting after subsection (c) (as added by section 1403) the following new 

subsection: 

‘‘(d) LIABILITY FOR VIOLATIONS.— 

‘‘(1) IN GENERAL.—For purposes of providing a cause of action for any failure by a mortgage originator, other than a creditor, to comply with any requirement imposed under this section 

and any regulation prescribed under this section, section 130 

shall be applied with respect to any such failure by substituting 

‘mortgage originator’ for ‘creditor’ each place such term appears 

in each such subsection. 

‘‘(2) MAXIMUM.—The maximum amount of any liability of 

a mortgage originator under paragraph (1) to a consumer for 

any violation of this section shall not exceed the greater of actual damages or an amount equal to 3 times the total amount 

of direct and indirect compensation or gain accruing to the 

mortgage originator in connection with the residential mortgage 

loan involved in the violation, plus the costs to the consumer of 

the action, including a reasonable attorney’s fee.’’. 

SEC. 1405. REGULATIONS. 

(a) DISCRETIONARY REGULATORY AUTHORITY.—Section 129B of 

the Truth in Lending Act is amended by inserting after subsection 

(d) (as added by section 1404) the following new subsection: 

‘‘(e) DISCRETIONARY REGULATORY AUTHORITY.— 

‘‘(1) IN GENERAL.—The Board shall, by regulations, prohibit 

or condition terms, acts or practices relating to residential mortgage loans that the Board finds to be abusive, unfair, deceptive, 


sroberts on DSKD5P82C1PROD with HEARING
779 

predatory, necessary or proper to ensure that responsible, affordable mortgage credit remains available to consumers in a 

manner consistent with the purposes of this section and section 

129C, necessary or proper to effectuate the purposes of this section and section 129C, to prevent circumvention or evasion 

thereof, or to facilitate compliance with such sections, or are not 

in the interest of the borrower. 

‘‘(2) APPLICATION.—The regulations prescribed under paragraph (1) shall be applicable to all residential mortgage loans 

and shall be applied in the same manner as regulations prescribed under section 105. 

‘‘(f) Section 129B and any regulations promulgated thereunder 

do not apply to an extension of credit relating to a plan described 

in section 101(53D) of title 11, United States Code.’’. 

(b) DISCLOSURES.—Notwithstanding any other provision of this 

title, in order to improve consumer awareness and understanding of 

transactions involving residential mortgage loans through the use of 

disclosures, the Board may, by rule, exempt from or modify disclosure requirements, in whole or in part, for any class of residential 

mortgage loans if the Board determines that such exemption or 

modification is in the interest of consumers and in the public interest. 

SEC. 1406. STUDY OF SHARED APPRECIATION MORTGAGES. 

(a) STUDY.—The Secretary of Housing and Urban Development, 

in consultation with the Secretary of the Treasury and other relevant agencies, shall conduct a comprehensive study to determine 

prudent statutory and regulatory requirements sufficient to provide 

for the widespread use of shared appreciation mortgages to 

strengthen local housing markets, provide new opportunities for affordable homeownership, and enable homeowners at risk of foreclosure to refinance or modify their mortgages. 

(b) REPORT.—Not later than the expiration of the 6-month period beginning on the date of the enactment of this Act, the Secretary of Housing and Urban Development shall submit a report to 

the Congress on the results of the study, which shall include recommendations for the regulatory and legislative requirements referred to in subsection (a). 

Subtitle B—Minimum Standards For Mortgages 

SEC. 1411. ABILITY TO REPAY. 

(a) IN GENERAL.— (1) RULE OF CONSTRUCTION.—No regulation, order, or guidance issued by the Bureau under this title shall be construed as 

requiring a depository institution to apply mortgage underwriting standards that do not meet the minimum underwriting 

standards required by the appropriate prudential regulator of 

the depository institution. 

(2) AMENDMENT TO TRUTH IN LENDING ACT.—Chapter 2 of 

the Truth in Lending Act (15 U.S.C. 1631 et seq.) is amended 

by inserting after section 129B (as added by section 1402(a)) the 

following new section: 

‘‘§ 129C. Minimum standards for residential mortgage loans 

‘‘(a) ABILITY TO REPAY.— 


sroberts on DSKD5P82C1PROD with HEARING
780 

‘‘(1) IN GENERAL.—In accordance with regulations prescribed by the Board, no creditor may make a residential mortgage loan unless the creditor makes a reasonable and good 

faith determination based on verified and documented information that, at the time the loan is consummated, the consumer 

has a reasonable ability to repay the loan, according to its 

terms, and all applicable taxes, insurance (including mortgage 

guarantee insurance), and assessments. 

‘‘(2) MULTIPLE LOANS.—If the creditor knows, or has reason 

to know, that 1 or more residential mortgage loans secured by 

the same dwelling will be made to the same consumer, the creditor shall make a reasonable and good faith determination, 

based on verified and documented information, that the consumer has a reasonable ability to repay the combined payments 

of all loans on the same dwelling according to the terms of 

those loans and all applicable taxes, insurance (including mortgage guarantee insurance), and assessments. 

‘‘(3) BASIS FOR DETERMINATION.—A determination under 

this subsection of a consumer’s ability to repay a residential 

mortgage loan shall include consideration of the consumer’s 

credit history, current income, expected income the consumer is 

reasonably assured of receiving, current obligations, debt-to-income ratio or the residual income the consumer will have after 

paying non-mortgage debt and mortgage-related obligations, 

employment status, and other financial resources other than the 

consumer’s equity in the dwelling or real property that secures 

repayment of the loan. A creditor shall determine the ability of 

the consumer to repay using a payment schedule that fully amortizes the loan over the term of the loan. 

‘‘(4) INCOME VERIFICATION.—A creditor making a residential mortgage loan shall verify amounts of income or assets that 

such creditor relies on to determine repayment ability, including expected income or assets, by reviewing the consumer’s Internal Revenue Service Form W–2, tax returns, payroll receipts, 

financial institution records, or other third-party documents 

that provide reasonably reliable evidence of the consumer’s income or assets. In order to safeguard against fraudulent reporting, any consideration of a consumer’s income history in making a determination under this subsection shall include the 

verification of such income by the use of— 

‘‘(A) Internal Revenue Service transcripts of tax returns; or 

‘‘(B) a method that quickly and effectively verifies income documentation by a third party subject to rules prescribed by the Board. 

‘‘(5) EXEMPTION.—With respect to loans made, guaranteed, 

or insured by Federal departments or agencies identified in subsection (b)(3)(B)(ii), such departments or agencies may exempt 

refinancings under a streamlined refinancing from this income 

verification requirement as long as the following conditions are 

met: 

‘‘(A) The consumer is not 30 days or more past due on 

the prior existing residential mortgage loan. 

‘‘(B) The refinancing does not increase the principal 

balance outstanding on the prior existing residential mortVerDate Mar 15 2010 04:29 Jul 07, 2010 Jkt 057098 PO 00000 Frm 00784 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
781 

gage loan, except to the extent of fees and charges allowed 

by the department or agency making, guaranteeing, or insuring the refinancing. 

‘‘(C) Total points and fees (as defined in section 

103(aa)(4), other than bona fide third party charges not retained by the mortgage originator, creditor, or an affiliate 

of the creditor or mortgage originator) payable in connection with the refinancing do not exceed 3 percent of the 

total new loan amount. 

‘‘(D) The interest rate on the refinanced loan is lower 

than the interest rate of the original loan, unless the borrower is refinancing from an adjustable rate to a fixed-rate 

loan, under guidelines that the department or agency shall 

establish for loans they make, guarantee, or issue. 

‘‘(E) The refinancing is subject to a payment schedule 

that will fully amortize the refinancing in accordance with 

the regulations prescribed by the department or agency 

making, guaranteeing, or insuring the refinancing. 

‘‘(F) The terms of the refinancing do not result in a balloon payment, as defined in subsection (b)(2)(A)(ii). 

‘‘(G) Both the residential mortgage loan being refinanced and the refinancing satisfy all requirements of the 

department or agency making, guaranteeing, or insuring 

the refinancing. 

‘‘(6) NONSTANDARD LOANS.— ‘‘(A) VARIABLE RATE LOANS THAT DEFER REPAYMENT OF

ANY PRINCIPAL OR INTEREST.—For purposes of determining, 

under this subsection, a consumer’s ability to repay a variable rate residential mortgage loan that allows or requires 

the consumer to defer the repayment of any principal or interest, the creditor shall use a fully amortizing repayment 

schedule. 

‘‘(B) INTEREST-ONLY LOANS.—For purposes of determining, under this subsection, a consumer’s ability to repay 

a residential mortgage loan that permits or requires the 

payment of interest only, the creditor shall use the payment 

amount required to amortize the loan by its final maturity. 

‘‘(C) CALCULATION FOR NEGATIVE AMORTIZATION.—In 

making any determination under this subsection, a creditor 

shall also take into consideration any balance increase that 

may accrue from any negative amortization provision. 

‘‘(D) CALCULATION PROCESS.—For purposes of making 

any determination under this subsection, a creditor shall 

calculate the monthly payment amount for principal and 

interest on any residential mortgage loan by assuming— 

‘‘(i) the loan proceeds are fully disbursed on the 

date of the consummation of the loan; 

‘‘(ii) the loan is to be repaid in substantially equal 

monthly amortizing payments for principal and interest over the entire term of the loan with no balloon payment, unless the loan contract requires more rapid repayment (including balloon payment), in which case 

the calculation shall be made (I) in accordance with 

regulations prescribed by the Board, with respect to 

any loan which has an annual percentage rate that 


sroberts on DSKD5P82C1PROD with HEARING
782 

does not exceed the average prime offer rate for a comparable transaction, as of the date the interest rate is 

set, by 1.5 or more percentage points for a first lien residential mortgage loan; and by 3.5 or more percentage 

points for a subordinate lien residential mortgage loan; 

or (II) using the contract’s repayment schedule, with respect to a loan which has an annual percentage rate, 

as of the date the interest rate is set, that is at least 

1.5 percentage points above the average prime offer rate 

for a first lien residential mortgage loan; and 3.5 percentage points above the average prime offer rate for a 

subordinate lien residential mortgage loan; and 

‘‘(iii) the interest rate over the entire term of the 

loan is a fixed rate equal to the fully indexed rate at 

the time of the loan closing, without considering the introductory rate. 

‘‘(E) REFINANCE OF HYBRID LOANS WITH CURRENT

LENDER.—In considering any application for refinancing an 

existing hybrid loan by the creditor into a standard loan to 

be made by the same creditor in any case in which there 

would be a reduction in monthly payment and the mortgagor has not been delinquent on any payment on the existing hybrid loan, the creditor may— 

‘‘(i) consider the mortgagor’s good standing on the 

existing mortgage; 

‘‘(ii) consider if the extension of new credit would 

prevent a likely default should the original mortgage 

reset and give such concerns a higher priority as an acceptable underwriting practice; and 

‘‘(iii) offer rate discounts and other favorable terms 

to such mortgagor that would be available to new customers with high credit ratings based on such underwriting practice. 

‘‘(7) FULLY-INDEXED RATE DEFINED.—For purposes of this 

subsection, the term ‘fully indexed rate’ means the index rate 

prevailing on a residential mortgage loan at the time the loan 

is made plus the margin that will apply after the expiration of 

any introductory interest rates. 

‘‘(8) REVERSE MORTGAGES AND BRIDGE LOANS.—This subsection shall not apply with respect to any reverse mortgage or 

temporary or bridge loan with a term of 12 months or less, including to any loan to purchase a new dwelling where the consumer plans to sell a different dwelling within 12 months. 

‘‘(9) SEASONAL INCOME.—If documented income, including 

income from a small business, is a repayment source for a residential mortgage loan, a creditor may consider the seasonality 

and irregularity of such income in the underwriting of and 

scheduling of payments for such credit.’’. 

(b) CLERICAL AMENDMENT.—The table of sections for chapter 2 

of the Truth in Lending Act is amended by inserting after the item 

relating to section 129B (as added by section 1402(b)) the following 

new item: 

‘‘129C. Minimum standards for residential mortgage loans.’’. 


sroberts on DSKD5P82C1PROD with HEARING
783 

SEC. 1412. SAFE HARBOR AND REBUTTABLE PRESUMPTION. 

Section 129C of the Truth in Lending Act is amended by inserting after subsection (a) (as added by section 1411) the following new 

subsection: 

‘‘(b) PRESUMPTION OF ABILITY TO REPAY.— 

‘‘(1) IN GENERAL.—Any creditor with respect to any residential mortgage loan, and any assignee of such loan subject to liability under this title, may presume that the loan has met the 

requirements of subsection (a), if the loan is a qualified mortgage. 

‘‘(2) DEFINITIONS.—For purposes of this subsection, the following definitions shall apply: 

‘‘(A) QUALIFIED MORTGAGE.—The term ‘qualified mortgage’ means any residential mortgage loan— 

‘‘(i) for which the regular periodic payments for the 

loan may not— 

‘‘(I) result in an increase of the principal balance; or 

‘‘(II) except as provided in subparagraph (E), 

allow the consumer to defer repayment of principal; 

‘‘(ii) except as provided in subparagraph (E), the 

terms of which do not result in a balloon payment, 

where a ‘balloon payment’ is a scheduled payment that 

is more than twice as large as the average of earlier 

scheduled payments; 

‘‘(iii) for which the income and financial resources 

relied upon to qualify the obligors on the loan are 

verified and documented; 

‘‘(iv) in the case of a fixed rate loan, for which the 

underwriting process is based on a payment schedule 

that fully amortizes the loan over the loan term and 

takes into account all applicable taxes, insurance, and 

assessments; 

‘‘(v) in the case of an adjustable rate loan, for 

which the underwriting is based on the maximum rate 

permitted under the loan during the first 5 years, and 

a payment schedule that fully amortizes the loan over 

the loan term and takes into account all applicable 

taxes, insurance, and assessments; 

‘‘(vi) that complies with any guidelines or regulations established by the Board relating to ratios of total 

monthly debt to monthly income or alternative measures of ability to pay regular expenses after payment of 

total monthly debt, taking into account the income levels of the borrower and such other factors as the Board 

may determine relevant and consistent with the purposes described in paragraph (3)(B)(i); 

‘‘(vii) for which the total points and fees (as defined in subparagraph (C)) payable in connection with 

the loan do not exceed 3 percent of the total loan 

amount; 

‘‘(viii) for which the term of the loan does not exceed 30 years, except as such term may be extended 

under paragraph (3), such as in high-cost areas; and 


sroberts on DSKD5P82C1PROD with HEARING
784 

‘‘(ix) in the case of a reverse mortgage (except for 

the purposes of subsection (a) of section 129C, to the extent that such mortgages are exempt altogether from 

those requirements), a reverse mortgage which meets 

the standards for a qualified mortgage, as set by the 

Board in rules that are consistent with the purposes of 

this subsection. 

‘‘(B) AVERAGE PRIME OFFER RATE.—The term ‘average 

prime offer rate’ means the average prime offer rate for a 

comparable transaction as of the date on which the interest 

rate for the transaction is set, as published by the Board. 

‘‘(C) POINTS AND FEES.— ‘‘(i) IN GENERAL.—For purposes of subparagraph 

(A), the term ‘points and fees’ means points and fees as 

defined by section 103(aa)(4) (other than bona fide 

third party charges not retained by the mortgage originator, creditor, or an affiliate of the creditor or mortgage originator). 

‘‘(ii) COMPUTATION.—For purposes of computing 

the total points and fees under this subparagraph, the 

total points and fees shall exclude either of the 

amounts described in the following subclauses, but not 

both: 

‘‘(I) Up to and including 2 bona fide discount 

points payable by the consumer in connection with 

the mortgage, but only if the interest rate from 

which the mortgage’s interest rate will be discounted does not exceed by more than 1 percentage 

point the average prime offer rate. 

‘‘(II) Unless 2 bona fide discount points have 

been excluded under subclause (I), up to and including 1 bona fide discount point payable by the 

consumer in connection with the mortgage, but 

only if the interest rate from which the mortgage’s 

interest rate will be discounted does not exceed by 

more than 2 percentage points the average prime 

offer rate. 

‘‘(iii) BONA FIDE DISCOUNT POINTS DEFINED.—For 

purposes of clause (ii), the term ‘bona fide discount 

points’ means loan discount points which are knowingly paid by the consumer for the purpose of reducing, 

and which in fact result in a bona fide reduction of, 

the interest rate or time-price differential applicable to 

the mortgage. 

‘‘(iv) INTEREST RATE REDUCTION.—Subclauses (I) 

and (II) of clause (ii) shall not apply to discount points 

used to purchase an interest rate reduction unless the 

amount of the interest rate reduction purchased is reasonably consistent with established industry norms 

and practices for secondary mortgage market transactions. 

‘‘(D) SMALLER LOANS.—The Board shall prescribe rules 

adjusting the criteria under subparagraph (A)(vii) in order 

to permit lenders that extend smaller loans to meet the requirements of the presumption of compliance under paraVerDate Mar 15 2010 04:29 Jul 07, 2010 Jkt 057098 PO 00000 Frm 00788 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
785 

graph (1). In prescribing such rules, the Board shall consider the potential impact of such rules on rural areas and 

other areas where home values are lower. 

‘‘(E) BALLOON LOANS.—The Board may, by regulation, 

provide that the term ‘qualified mortgage’ includes a balloon loan— 

‘‘(i) that meets all of the criteria for a qualified 

mortgage under subparagraph (A) (except clauses 

(i)(II), (ii), (iv), and (v) of such subparagraph); 

‘‘(ii) for which the creditor makes a determination 

that the consumer is able to make all scheduled payments, except the balloon payment, out of income or assets other than the collateral; 

‘‘(iii) for which the underwriting is based on a payment schedule that fully amortizes the loan over a period of not more than 30 years and takes into account 

all applicable taxes, insurance, and assessments; and 

‘‘(iv) that is extended by a creditor that— 

‘‘(I) operates predominantly in rural or underserved areas; 

‘‘(II) together with all affiliates, has total annual residential mortgage loan originations that 

do not exceed a limit set by the Board; 

‘‘(III) retains the balloon loans in portfolio; 

and 

‘‘(IV) meets any asset size threshold and any 

other criteria as the Board may establish, consistent with the purposes of this subtitle. 

‘‘(3) REGULATIONS.— ‘‘(A) IN GENERAL.—The Board shall prescribe regulations to carry out the purposes of this subsection. 

‘‘(B) REVISION OF SAFE HARBOR CRITERIA.— 

‘‘(i) IN GENERAL.—The Board may prescribe regulations that revise, add to, or subtract from the criteria 

that define a qualified mortgage upon a finding that 

such regulations are necessary or proper to ensure that 

responsible, affordable mortgage credit remains available to consumers in a manner consistent with the purposes of this section, necessary and appropriate to effectuate the purposes of this section and section 129B, to 

prevent circumvention or evasion thereof, or to facilitate compliance with such sections. 

‘‘(ii) LOAN DEFINITION.—The following agencies 

shall, in consultation with the Board, prescribe rules 

defining the types of loans they insure, guarantee, or 

administer, as the case may be, that are qualified 

mortgages for purposes of paragraph (2)(A), and such 

rules may revise, add to, or subtract from the criteria 

used to define a qualified mortgage under paragraph 

(2)(A), upon a finding that such rules are consistent 

with the purposes of this section and section 129B, to 

prevent circumvention or evasion thereof, or to facilitate compliance with such sections: 

‘‘(I) The Department of Housing and Urban 

Development, with regard to mortgages insured 


sroberts on DSKD5P82C1PROD with HEARING
786 

under the National Housing Act (12 U.S.C. 1707 et 

seq.). 

‘‘(II) The Department of Veterans Affairs, with 

regard to a loan made or guaranteed by the Secretary of Veterans Affairs. 

‘‘(III) The Department of Agriculture, with regard to loans guaranteed by the Secretary of Agriculture pursuant to 42 U.S.C. 1472(h). 

‘‘(IV) The Rural Housing Service, with regard 

to loans insured by the Rural Housing Service.’’. 

SEC. 1413. DEFENSE TO FORECLOSURE. 

Section 130 of the Truth in Lending Act (15 U.S.C. 1640) is 

amended by adding at the end the following new subsection: 

‘‘(k) DEFENSE TO FORECLOSURE.— 

‘‘(1) IN GENERAL.—Notwithstanding any other provision of 

law, when a creditor, assignee, or other holder of a residential 

mortgage loan or anyone acting on behalf of such creditor, assignee, or holder, initiates a judicial or nonjudicial foreclosure 

of the residential mortgage loan, or any other action to collect 

the debt in connection with such loan, a consumer may assert 

a violation by a creditor of paragraph (1) or (2) of section 

129B(c), or of section 129C(a), as a matter of defense by 

recoupment or set off without regard for the time limit on a private action for damages under subsection (e). 

‘‘(2) AMOUNT OF RECOUPMENT OR SETOFF.— 

‘‘(A) IN GENERAL.—The amount of recoupment or set-off 

under paragraph (1) shall equal the amount to which the 

consumer would be entitled under subsection (a) for damages for a valid claim brought in an original action against 

the creditor, plus the costs to the consumer of the action, including a reasonable attorney’s fee. 

‘‘(B) SPECIAL RULE.—Where such judgment is rendered 

after the expiration of the applicable time limit on a private 

action for damages under subsection (e), the amount of 

recoupment or set-off under paragraph (1) derived from 

damages under subsection (a)(4) shall not exceed the 

amount to which the consumer would have been entitled 

under subsection (a)(4) for damages computed up to the day 

preceding the expiration of the applicable time limit.’’. 

SEC. 1414. ADDITIONAL STANDARDS AND REQUIREMENTS. 

(a) IN GENERAL.—Section 129C of the Truth in Lending Act is 

amended by inserting after subsection (b) (as added by this title) the 

following new subsections: 

‘‘(c) PROHIBITION ON CERTAIN PREPAYMENT PENALTIES.— 

‘‘(1) PROHIBITED ON CERTAIN LOANS.— 

‘‘(A) IN GENERAL.—A residential mortgage loan that is 

not a ‘qualified mortgage’, as defined under subsection 

(b)(2), may not contain terms under which a consumer 

must pay a prepayment penalty for paying all or part of the 

principal after the loan is consummated. 

‘‘(B) EXCLUSIONS.—For purposes of this subsection, a 

‘qualified mortgage’ may not include a residential mortgage 

loan that— 

‘‘(i) has an adjustable rate; or 


sroberts on DSKD5P82C1PROD with HEARING
787 

‘‘(ii) has an annual percentage rate that exceeds 

the average prime offer rate for a comparable transaction, as of the date the interest rate is set— 

‘‘(I) by 1.5 or more percentage points, in the 

case of a first lien residential mortgage loan having an original principal obligation amount that is 

equal to or less than the amount of the maximum 

limitation on the original principal obligation of 

mortgage in effect for a residence of the applicable 

size, as of the date of such interest rate set, pursuant to the 6th sentence of section 305(a)(2) of the 

Federal Home Loan Mortgage Corporation Act (12 

U.S.C. 1454(a)(2)); 

‘‘(II) by 2.5 or more percentage points, in the 

case of a first lien residential mortgage loan having a original principal obligation amount that is 

more than the amount of the maximum limitation 

on the original principal obligation of mortgage in 

effect for a residence of the applicable size, as of 

the date of such interest rate set, pursuant to the 

6th sentence of section 305(a)(2) the Federal Home 

Loan Mortgage Corporation Act (12 U.S.C. 

1454(a)(2)); and 

‘‘(III) by 3.5 or more percentage points, in the 

case of a subordinate lien residential mortgage 

loan. 

‘‘(2) PUBLICATION OF AVERAGE PRIME OFFER RATE AND APR

THRESHOLDS.—The Board— 

‘‘(A) shall publish, and update at least weekly, average 

prime offer rates; 

‘‘(B) may publish multiple rates based on varying types 

of mortgage transactions; and 

‘‘(C) shall adjust the thresholds established under subclause (I), (II), and (III) of paragraph (1)(B)(ii) as necessary 

to reflect significant changes in market conditions and to 

effectuate the purposes of the Mortgage Reform and AntiPredatory Lending Act. 

‘‘(3) PHASED-OUT PENALTIES ON QUALIFIED MORTGAGES.—A 

qualified mortgage (as defined in subsection (b)(2)) may not 

contain terms under which a consumer must pay a prepayment 

penalty for paying all or part of the principal after the loan is 

consummated in excess of the following limitations: 

‘‘(A) During the 1-year period beginning on the date the 

loan is consummated, the prepayment penalty shall not exceed an amount equal to 3 percent of the outstanding balance on the loan. 

‘‘(B) During the 1-year period beginning after the period described in subparagraph (A), the prepayment penalty shall not exceed an amount equal to 2 percent of the 

outstanding balance on the loan. 

‘‘(C) During the 1-year period beginning after the 1- 

year period described in subparagraph (B), the prepayment 

penalty shall not exceed an amount equal to 1 percent of 

the outstanding balance on the loan. 


sroberts on DSKD5P82C1PROD with HEARING
788 

‘‘(D) After the end of the 3-year period beginning on the 

date the loan is consummated, no prepayment penalty may 

be imposed on a qualified mortgage. 

‘‘(4) OPTION FOR NO PREPAYMENT PENALTY REQUIRED.—A 

creditor may not offer a consumer a residential mortgage loan 

product that has a prepayment penalty for paying all or part 

of the principal after the loan is consummated as a term of the 

loan without offering the consumer a residential mortgage loan 

product that does not have a prepayment penalty as a term of 

the loan. 

‘‘(d) SINGLE PREMIUM CREDIT INSURANCE PROHIBITED.—No 

creditor may finance, directly or indirectly, in connection with any 

residential mortgage loan or with any extension of credit under an 

open end consumer credit plan secured by the principal dwelling of 

the consumer, any credit life, credit disability, credit unemployment, 

or credit property insurance, or any other accident, loss-of-income, 

life, or health insurance, or any payments directly or indirectly for 

any debt cancellation or suspension agreement or contract, except 

that— 

‘‘(1) insurance premiums or debt cancellation or suspension 

fees calculated and paid in full on a monthly basis shall not 

be considered financed by the creditor; and 

‘‘(2) this subsection shall not apply to credit unemployment 

insurance for which the unemployment insurance premiums are 

reasonable, the creditor receives no direct or indirect compensation in connection with the unemployment insurance premiums, 

and the unemployment insurance premiums are paid pursuant 

to another insurance contract and not paid to an affiliate of the 

creditor. 

‘‘(e) ARBITRATION.— ‘‘(1) IN GENERAL.—No residential mortgage loan and no extension of credit under an open end consumer credit plan secured by the principal dwelling of the consumer may include 

terms which require arbitration or any other nonjudicial procedure as the method for resolving any controversy or settling any 

claims arising out of the transaction. 

‘‘(2) POST-CONTROVERSY AGREEMENTS.—Subject to paragraph (3), paragraph (1) shall not be construed as limiting the 

right of the consumer and the creditor or any assignee to agree 

to arbitration or any other nonjudicial procedure as the method 

for resolving any controversy at any time after a dispute or 

claim under the transaction arises. 

‘‘(3) NO WAIVER OF STATUTORY CAUSE OF ACTION.—No provision of any residential mortgage loan or of any extension of 

credit under an open end consumer credit plan secured by the 

principal dwelling of the consumer, and no other agreement between the consumer and the creditor relating to the residential 

mortgage loan or extension of credit referred to in paragraph 

(1), shall be applied or interpreted so as to bar a consumer from 

bringing an action in an appropriate district court of the 

United States, or any other court of competent jurisdiction, pursuant to section 130 or any other provision of law, for damages 

or other relief in connection with any alleged violation of this 

section, any other provision of this title, or any other Federal 

law. 


sroberts on DSKD5P82C1PROD with HEARING
789 

‘‘(f) MORTGAGES WITH NEGATIVE AMORTIZATION.—No creditor 

may extend credit to a borrower in connection with a consumer 

credit transaction under an open or closed end consumer credit plan 

secured by a dwelling or residential real property that includes a 

dwelling, other than a reverse mortgage, that provides or permits a 

payment plan that may, at any time over the term of the extension 

of credit, result in negative amortization unless, before such transaction is consummated— 

‘‘(1) the creditor provides the consumer with a statement 

that— 

‘‘(A) the pending transaction will or may, as the case 

may be, result in negative amortization; 

‘‘(B) describes negative amortization in such manner as 

the Board shall prescribe; 

‘‘(C) negative amortization increases the outstanding 

principal balance of the account; and 

‘‘(D) negative amortization reduces the consumer’s equity in the dwelling or real property; and 

‘‘(2) in the case of a first-time borrower with respect to a 

residential mortgage loan that is not a qualified mortgage, the 

first-time borrower provides the creditor with sufficient documentation to demonstrate that the consumer received homeownership counseling from organizations or counselors certified by 

the Secretary of Housing and Urban Development as competent 

to provide such counseling.’’. 

(b) CONFORMING AMENDMENT RELATING TO ENFORCEMENT.— Section 108(a) of the Truth in Lending Act (15 U.S.C. 1607(a)) is 

amended by inserting after paragraph (6) the following new paragraph: 

‘‘(7) sections 21B and 21C of the Securities Exchange Act 

of 1934, in the case of a broker or dealer, other than a depository institution, by the Securities and Exchange Commission.’’. 

(c) PROTECTION AGAINST LOSS OF ANTI-DEFICIENCY PROTEC- TION.—Section 129C of the Truth in Lending Act is amended by inserting after subsection (f) (as added by subsection (a)) the following 

new subsection: 

‘‘(g) PROTECTION AGAINST LOSS OF ANTI-DEFICIENCY PROTEC- TION.— ‘‘(1) DEFINITION.—For purposes of this subsection, the term 

‘anti-deficiency law’ means the law of any State which provides 

that, in the event of foreclosure on the residential property of a 

consumer securing a mortgage, the consumer is not liable, in 

accordance with the terms and limitations of such State law, 

for any deficiency between the sale price obtained on such property through foreclosure and the outstanding balance of the 

mortgage. 

‘‘(2) NOTICE AT TIME OF CONSUMMATION.—In the case of 

any residential mortgage loan that is, or upon consummation 

will be, subject to protection under an anti-deficiency law, the 

creditor or mortgage originator shall provide a written notice to 

the consumer describing the protection provided by the anti-deficiency law and the significance for the consumer of the loss of 

such protection before such loan is consummated. 

‘‘(3) NOTICE BEFORE REFINANCING THAT WOULD CAUSE LOSS

OF PROTECTION.—In the case of any residential mortgage loan 


sroberts on DSKD5P82C1PROD with HEARING
790 

that is subject to protection under an anti-deficiency law, if a 

creditor or mortgage originator provides an application to a 

consumer, or receives an application from a consumer, for any 

type of refinancing for such loan that would cause the loan to 

lose the protection of such anti-deficiency law, the creditor or 

mortgage originator shall provide a written notice to the consumer describing the protection provided by the anti-deficiency 

law and the significance for the consumer of the loss of such 

protection before any agreement for any such refinancing is consummated.’’. 

(d) POLICY REGARDING ACCEPTANCE OF PARTIAL PAYMENT.— 

Section 129C of the Truth in Lending Act is amended by inserting 

after subsection (g) (as added by subsection (c)) the following new 

subsection: 

‘‘(h) POLICY REGARDING ACCEPTANCE OF PARTIAL PAYMENT.—In 

the case of any residential mortgage loan, a creditor shall disclose 

prior to settlement or, in the case of a person becoming a creditor 

with respect to an existing residential mortgage loan, at the time 

such person becomes a creditor— 

‘‘(1) the creditor’s policy regarding the acceptance of partial 

payments; and 

‘‘(2) if partial payments are accepted, how such payments 

will be applied to such mortgage and if such payments will be 

placed in escrow. 

‘‘(i) TIMESHARE PLANS.—This section and any regulations promulgated under this section do not apply to an extension of credit 

relating to a plan described in section 101(53D) of title 11, United 

States Code.’’. 

SEC. 1415. RULE OF CONSTRUCTION. 

Except as otherwise expressly provided in section 129B or 129C 

of the Truth in Lending Act (as added by this title), no provision 

of such section 129B or 129C shall be construed as superseding, repealing, or affecting any duty, right, obligation, privilege, or remedy 

of any person under any other provision of the Truth in Lending Act 

or any other provision of Federal or State law. 

SEC. 1416. AMENDMENTS TO CIVIL LIABILITY PROVISIONS. 

(a) INCREASE IN AMOUNT OF CIVIL MONEY PENALTIES FOR CERTAIN VIOLATIONS.—Section 130(a) of the Truth in Lending Act (15 

U.S.C. 1640(a)) is amended— 

(1) in paragraph (2)(A)(ii)— 

(A) by striking ‘‘$100’’ and inserting ‘‘$200’’; and 

(B) by striking ‘‘$1,000’’ and inserting ‘‘$2,000’’; 

(2) in paragraph (2)(B), by striking ‘‘$500,000’’ and inserting ‘‘$1,000,000’’; and 

(3) in paragraph (4), by inserting ‘‘, paragraph (1) or (2) of 

section 129B(c), or section 129C(a)’’ after ‘‘section 129’’. 

(b) STATUTE OF LIMITATIONS EXTENDED FOR SECTION 129 VIOLATIONS.—Section 130(e) of the Truth in Lending Act (15 U.S.C. 

1640(e)) is amended— 

(1) in the first sentence, by striking ‘‘Any action’’ and inserting ‘‘Except as provided in the subsequent sentence, any action’’; 

and 

(2) by inserting after the first sentence the following new 

sentence: ‘‘Any action under this section with respect to any vioVerDate Mar 15 2010 04:29 Jul 07, 2010 Jkt 057098 PO 00000 Frm 00794 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
791 

lation of section 129, 129B, or 129C may be brought in any 

United States district court, or in any other court of competent 

jurisdiction, before the end of the 3-year period beginning on the 

date of the occurrence of the violation.’’. 

SEC. 1417. LENDER RIGHTS IN THE CONTEXT OF BORROWER DECEPTION. 

Section 130 of the Truth in Lending Act (15 U.S.C. 1640) is 

amended by adding after subsection (k) (as added by this title) the 

following new subsection: 

‘‘(l) EXEMPTION FROM LIABILITY AND RESCISSION IN CASE OF

BORROWER FRAUD OR DECEPTION.—In addition to any other remedy 

available by law or contract, no creditor or assignee shall be liable 

to an obligor under this section, if such obligor, or co-obligor has 

been convicted of obtaining by actual fraud such residential mortgage loan.’’. 

SEC. 1418. SIX-MONTH NOTICE REQUIRED BEFORE RESET OF HYBRID 

ADJUSTABLE RATE MORTGAGES. 

(a) IN GENERAL.—Chapter 2 of the Truth in Lending Act (15 

U.S.C. 1631 et seq.) is amended by inserting after section 128 the 

following new section: 

‘‘§ 128A. Reset of hybrid adjustable rate mortgages 

‘‘(a) HYBRID ADJUSTABLE RATE MORTGAGES DEFINED.—For 

purposes of this section, the term ‘hybrid adjustable rate mortgage’ 

means a consumer credit transaction secured by the consumer’s 

principal residence with a fixed interest rate for an introductory period that adjusts or resets to a variable interest rate after such period. 

‘‘(b) NOTICE OF RESET AND ALTERNATIVES.—During the 1- 

month period that ends 6 months before the date on which the interest rate in effect during the introductory period of a hybrid adjustable rate mortgage adjusts or resets to a variable interest rate or, 

in the case of such an adjustment or resetting that occurs within the 

first 6 months after consummation of such loan, at consummation, 

the creditor or servicer of such loan shall provide a written notice, 

separate and distinct from all other correspondence to the consumer, 

that includes the following: 

‘‘(1) Any index or formula used in making adjustments to 

or resetting the interest rate and a source of information about 

the index or formula. 

‘‘(2) An explanation of how the new interest rate and payment would be determined, including an explanation of how the 

index was adjusted, such as by the addition of a margin. 

‘‘(3) A good faith estimate, based on accepted industry 

standards, of the creditor or servicer of the amount of the 

monthly payment that will apply after the date of the adjustment or reset, and the assumptions on which this estimate is 

based. 

‘‘(4) A list of alternatives consumers may pursue before the 

date of adjustment or reset, and descriptions of the actions consumers must take to pursue these alternatives, including— 

‘‘(A) refinancing; 

‘‘(B) renegotiation of loan terms; 

‘‘(C) payment forbearances; and 

‘‘(D) pre-foreclosure sales. 


sroberts on DSKD5P82C1PROD with HEARING
792 

‘‘(5) The names, addresses, telephone numbers, and Internet 

addresses of counseling agencies or programs reasonably available to the consumer that have been certified or approved and 

made publicly available by the Secretary of Housing and Urban 

Development or a State housing finance authority (as defined in 

section 1301 of the Financial Institutions Reform, Recovery, and 

Enforcement Act of 1989). 

‘‘(6) The address, telephone number, and Internet address 

for the State housing finance authority (as so defined) for the 

State in which the consumer resides. 

‘‘(c) SAVINGS CLAUSE.—The Board may require the notice in 

paragraph (b) or other notice consistent with this Act for adjustable 

rate mortgage loans that are not hybrid adjustable rate mortgage 

loans.’’. 

(b) CLERICAL AMENDMENT.—The table of sections for chapter 2 

of the Truth in Lending Act is amended by inserting after the item 

relating to section 128 the following new item: 

‘‘128A. Reset of hybrid adjustable rate mortgages.’’. 

SEC. 1419. REQUIRED DISCLOSURES. 

Section 128(a) of Truth in Lending Act (15 U.S.C. 1638(a)) is 

amended by adding at the end the following new paragraphs: 

‘‘(16) In the case of a variable rate residential mortgage 

loan for which an escrow or impound account will be established for the payment of all applicable taxes, insurance, and 

assessments— 

‘‘(A) the amount of initial monthly payment due under 

the loan for the payment of principal and interest, and the 

amount of such initial monthly payment including the 

monthly payment deposited in the account for the payment 

of all applicable taxes, insurance, and assessments; and 

‘‘(B) the amount of the fully indexed monthly payment 

due under the loan for the payment of principal and interest, and the amount of such fully indexed monthly payment 

including the monthly payment deposited in the account for 

the payment of all applicable taxes, insurance, and assessments. 

‘‘(17) In the case of a residential mortgage loan, the aggregate amount of settlement charges for all settlement services 

provided in connection with the loan, the amount of charges 

that are included in the loan and the amount of such charges 

the borrower must pay at closing, the approximate amount of 

the wholesale rate of funds in connection with the loan, and the 

aggregate amount of other fees or required payments in connection with the loan. 

‘‘(18) In the case of a residential mortgage loan, the aggregate amount of fees paid to the mortgage originator in connection with the loan, the amount of such fees paid directly by the 

consumer, and any additional amount received by the originator from the creditor. 

‘‘(19) In the case of a residential mortgage loan, the total 

amount of interest that the consumer will pay over the life of 

the loan as a percentage of the principal of the loan. Such 

amount shall be computed assuming the consumer makes each 


sroberts on DSKD5P82C1PROD with HEARING
793 

monthly payment in full and on-time, and does not make any 

over-payments.’’. 

SEC. 1420. DISCLOSURES REQUIRED IN MONTHLY STATEMENTS FOR 

RESIDENTIAL MORTGAGE LOANS. 

Section 128 of the Truth in Lending Act (15 U.S.C. 1638) is 

amended by adding at the end the following new subsection: 

‘‘(f) PERIODIC STATEMENTS FOR RESIDENTIAL MORTGAGE

LOANS.— 

‘‘(1) IN GENERAL.—The creditor, assignee, or servicer with 

respect to any residential mortgage loan shall transmit to the 

obligor, for each billing cycle, a statement setting forth each of 

the following items, to the extent applicable, in a conspicuous 

and prominent manner: 

‘‘(A) The amount of the principal obligation under the 

mortgage. 

‘‘(B) The current interest rate in effect for the loan. 

‘‘(C) The date on which the interest rate may next reset 

or adjust. 

‘‘(D) The amount of any prepayment fee to be charged, 

if any. 

‘‘(E) A description of any late payment fees. 

‘‘(F) A telephone number and electronic mail address 

that may be used by the obligor to obtain information regarding the mortgage. 

‘‘(G) The names, addresses, telephone numbers, and 

Internet addresses of counseling agencies or programs reasonably available to the consumer that have been certified 

or approved and made publicly available by the Secretary 

of Housing and Urban Development or a State housing finance authority (as defined in section 1301 of the Financial 

Institutions Reform, Recovery, and Enforcement Act of 

1989). 

‘‘(H) Such other information as the Board may prescribe in regulations. 

‘‘(2) DEVELOPMENT AND USE OF STANDARD FORM.—The 

Board shall develop and prescribe a standard form for the disclosure required under this subsection, taking into account that 

the statements required may be transmitted in writing or electronically. 

‘‘(3) EXCEPTION.—Paragraph (1) shall not apply to any 

fixed rate residential mortgage loan where the creditor, assignee, or servicer provides the obligor with a coupon book that 

provides the obligor with substantially the same information as 

required in paragraph (1).’’. 

SEC. 1421. REPORT BY THE GAO. 

(a) REPORT REQUIRED.—The Comptroller General of the United 

States shall conduct a study to determine the effects the enactment 

of this Act will have on the availability and affordability of credit 

for consumers, small businesses, homebuyers, and mortgage lending, including the effect— 

(1) on the mortgage market for mortgages that are not within the safe harbor provided in the amendments made by this 

subtitle; 


sroberts on DSKD5P82C1PROD with HEARING
794 

(2) on the ability of prospective homebuyers to obtain financing; 

(3) on the ability of homeowners facing resets or adjustments to refinance—for example, do they have fewer refinancing 

options due to the unavailability of certain loan products that 

were available before the enactment of this Act; 

(4) on minorities’ ability to access affordable credit compared with other prospective borrowers; 

(5) on home sales and construction; 

(6) of extending the rescission right, if any, on adjustable 

rate loans and its impact on litigation; 

(7) of State foreclosure laws and, if any, an investor’s ability to transfer a property after foreclosure; 

(8) of expanding the existing provisions of the Home Ownership and Equity Protection Act of 1994; 

(9) of prohibiting prepayment penalties on high-cost mortgages; and 

(10) of establishing counseling services under the Department of Housing and Urban Development and offered through 

the Office of Housing Counseling. 

(b) REPORT.—Before the end of the 1-year period beginning on 

the date of the enactment of this Act, the Comptroller General shall 

submit a report to the Congress containing the findings and conclusions of the Comptroller General with respect to the study conducted 

pursuant to subsection (a). 

(c) EXAMINATION RELATED TO CERTAIN CREDIT RISK RETENTION PROVISIONS.—The report required by subsection (b) shall also 

include an analysis by the Comptroller General of the effect on the 

capital reserves and funding of lenders of credit risk retention provisions for non-qualified mortgages, including an analysis of the exceptions and adjustments authorized in section 129C(b)(3) of the 

Truth in Lending Act and a recommendation on whether a uniform 

standard is needed. 

(d) ANALYSIS OF CREDIT RISK RETENTION PROVISIONS.—The report required by subsection (b) shall also include— 

(1) an analysis by the Comptroller General of whether the 

credit risk retention provisions have significantly reduced risks 

to the larger credit market of the repackaging and selling of 

securitized loans on a secondary market; and 

(2) recommendations to the Congress on adjustments that 

should be made, or additional measures that should be undertaken. 

SEC. 1422. STATE ATTORNEY GENERAL ENFORCEMENT AUTHORITY. 

Section 130(e) of the Truth in Lending Act (15 U.S.C. 1640(e)) 

is amended by striking ‘‘section 129 may also’’ and inserting ‘‘section 

129, 129B, 129C, 129D, 129E, 129F, 129G, or 129H of this Act may 

also’’. 

Subtitle C—High-Cost Mortgages 

SEC. 1431. DEFINITIONS RELATING TO HIGH-COST MORTGAGES. 

(a) HIGH-COST MORTGAGE DEFINED.—Section 103(aa) of the 

Truth in Lending Act (15 U.S.C. 1602(aa)) is amended by striking 

all that precedes paragraph (2) and inserting the following: 

‘‘(aa) HIGH-COST MORTGAGE.— 


sroberts on DSKD5P82C1PROD with HEARING
795 

‘‘(1) DEFINITION.— ‘‘(A) IN GENERAL.—The term ‘high-cost mortgage’, and 

a mortgage referred to in this subsection, means a consumer credit transaction that is secured by the consumer’s 

principal dwelling, other than a reverse mortgage transaction, if— 

‘‘(i) in the case of a credit transaction secured— 

‘‘(I) by a first mortgage on the consumer’s principal dwelling, the annual percentage rate at consummation of the transaction will exceed by more 

than 6.5 percentage points (8.5 percentage points, 

if the dwelling is personal property and the transaction is for less than $50,000) the average prime 

offer rate, as defined in section 129C(b)(2)(B), for 

a comparable transaction; or 

‘‘(II) by a subordinate or junior mortgage on 

the consumer’s principal dwelling, the annual percentage rate at consummation of the transaction 

will exceed by more than 8.5 percentage points the 

average prime offer rate, as defined in section 

129C(b)(2)(B), for a comparable transaction; 

‘‘(ii) the total points and fees payable in connection 

with the transaction, other than bona fide third party 

charges not retained by the mortgage originator, creditor, or an affiliate of the creditor or mortgage originator, exceed— 

‘‘(I) in the case of a transaction for $20,000 or 

more, 5 percent of the total transaction amount; or 

‘‘(II) in the case of a transaction for less than $20,000, the lesser of 8 percent of the total transaction amount or $1,000 (or such other dollar 

amount as the Board shall prescribe by regulation); or 

‘‘(iii) the credit transaction documents permit the 

creditor to charge or collect prepayment fees or penalties more than 36 months after the transaction closing or such fees or penalties exceed, in the aggregate, 

more than 2 percent of the amount prepaid. 

‘‘(B) INTRODUCTORY RATES TAKEN INTO ACCOUNT.—For 

purposes of subparagraph (A)(i), the annual percentage rate 

of interest shall be determined based on the following interest rate: 

‘‘(i) In the case of a fixed-rate transaction in which 

the annual percentage rate will not vary during the 

term of the loan, the interest rate in effect on the date 

of consummation of the transaction. 

‘‘(ii) In the case of a transaction in which the rate 

of interest varies solely in accordance with an index, 

the interest rate determined by adding the index rate 

in effect on the date of consummation of the transaction to the maximum margin permitted at any time 

during the loan agreement. 

‘‘(iii) In the case of any other transaction in which 

the rate may vary at any time during the term of the 

loan for any reason, the interest charged on the transVerDate Mar 15 2010 04:29 Jul 07, 2010 Jkt 057098 PO 00000 Frm 00799 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
796 

action at the maximum rate that may be charged during the term of the loan. 

‘‘(C) MORTGAGE INSURANCE.—For the purposes of computing the total points and fees under paragraph (4), the 

total points and fees shall exclude— 

‘‘(i) any premium provided by an agency of the 

Federal Government or an agency of a State; 

‘‘(ii) any amount that is not in excess of the 

amount payable under policies in effect at the time of 

origination under section 203(c)(2)(A) of the National 

Housing Act (12 U.S.C. 1709(c)(2)(A)), provided that 

the premium, charge, or fee is required to be refundable on a pro-rated basis and the refund is automatically issued upon notification of the satisfaction of the 

underlying mortgage loan; and 

‘‘(iii) any premium paid by the consumer after closing.’’. 

(b) ADJUSTMENT OF PERCENTAGE POINTS.—Section 103(aa)(2) 

of the Truth in Lending Act (15 U.S.C. 1602(aa)(2)) is amended by 

striking subparagraph (B) and inserting the following new subparagraph: 

‘‘(B) An increase or decrease under subparagraph (A)— 

‘‘(i) may not result in the number of percentage 

points referred to in paragraph (1)(A)(i)(I) being less 

than 6 percentage points or greater than 10 percentage 

points; and 

‘‘(ii) may not result in the number of percentage 

points referred to in paragraph (1)(A)(i)(II) being less 

than 8 percentage points or greater than 12 percentage 

points.’’. 

(c) POINTS AND FEES DEFINED.— (1) IN GENERAL.—Section 103(aa)(4) of the Truth in Lending Act (15 U.S.C. 1602(aa)(4)) is amended— 

(A) by striking subparagraph (B) and inserting the following: 

‘‘(B) all compensation paid directly or indirectly by a 

consumer or creditor to a mortgage originator from any 

source, including a mortgage originator that is also the 

creditor in a table-funded transaction;’’; 

(B) by redesignating subparagraph (D) as subparagraph (G); and 

(C) by inserting after subparagraph (C) the following 

new subparagraphs: 

‘‘(D) premiums or other charges payable at or before 

closing for any credit life, credit disability, credit unemployment, or credit property insurance, or any other accident, loss-of-income, life or health insurance, or any payments directly or indirectly for any debt cancellation or suspension agreement or contract, except that insurance premiums or debt cancellation or suspension fees calculated 

and paid in full on a monthly basis shall not be considered 

financed by the creditor; 

‘‘(E) the maximum prepayment fees and penalties 

which may be charged or collected under the terms of the 

credit transaction; 


sroberts on DSKD5P82C1PROD with HEARING
797 

‘‘(F) all prepayment fees or penalties that are incurred 

by the consumer if the loan refinances a previous loan 

made or currently held by the same creditor or an affiliate 

of the creditor; and’’. 

(2) CALCULATION OF POINTS AND FEES FOR OPEN-END CON- SUMER CREDIT PLANS.—Section 103(aa) of the Truth in Lending 

Act (15 U.S.C. 1602(aa)) is amended— 

(A) by redesignating paragraph (5) as paragraph (6); 

and 

(B) by inserting after paragraph (4) the following new 

paragraph: 

‘‘(5) CALCULATION OF POINTS AND FEES FOR OPEN-END CON- SUMER CREDIT PLANS.—In the case of open-end consumer credit 

plans, points and fees shall be calculated, for purposes of this 

section and section 129, by adding the total points and fees 

known at or before closing, including the maximum prepayment 

penalties which may be charged or collected under the terms of 

the credit transaction, plus the minimum additional fees the 

consumer would be required to pay to draw down an amount 

equal to the total credit line.’’. 

(d) BONA FIDE DISCOUNT LOAN DISCOUNT POINTS.—Section 

103 of the Truth in Lending Act (15 U.S.C. 1602) is amended by 

inserting after subsection (cc) (as added by section 1401) the following new subsection: 

‘‘(dd) BONA FIDE DISCOUNT POINTS AND PREPAYMENT PEN- ALTIES.—For the purposes of determining the amount of points and 

fees for purposes of subsection (aa), either the amounts described in 

paragraph (1) or (2) of the following paragraphs, but not both, shall 

be excluded: 

‘‘(1) Up to and including 2 bona fide discount points payable by the consumer in connection with the mortgage, but only 

if the interest rate from which the mortgage’s interest rate will 

be discounted does not exceed by more than 1 percentage 

point— 

‘‘(A) the average prime offer rate, as defined in section 

129C; or 

‘‘(B) if secured by a personal property loan, the average 

rate on a loan in connection with which insurance is provided under title I of the National Housing Act (12 U.S.C. 

1702 et seq.). 

‘‘(2) Unless 2 bona fide discount points have been excluded 

under paragraph (1), up to and including 1 bona fide discount 

point payable by the consumer in connection with the mortgage, 

but only if the interest rate from which the mortgage’s interest 

rate will be discounted does not exceed by more than 2 percentage points— 

‘‘(A) the average prime offer rate, as defined in section 

129C; or 

‘‘(B) if secured by a personal property loan, the average 

rate on a loan in connection with which insurance is provided under title I of the National Housing Act (12 U.S.C. 

1702 et seq.). 

‘‘(3) For purposes of paragraph (1), the term ‘bona fide discount points’ means loan discount points which are knowingly 

paid by the consumer for the purpose of reducing, and which 


sroberts on DSKD5P82C1PROD with HEARING
798 

in fact result in a bona fide reduction of, the interest rate or 

time-price differential applicable to the mortgage. 

‘‘(4) Paragraphs (1) and (2) shall not apply to discount 

points used to purchase an interest rate reduction unless the 

amount of the interest rate reduction purchased is reasonably 

consistent with established industry norms and practices for 

secondary mortgage market transactions.’’. 

SEC. 1432. AMENDMENTS TO EXISTING REQUIREMENTS FOR CERTAIN 

MORTGAGES. 

(a) PREPAYMENT PENALTY PROVISIONS.—Section 129(c)(2) of the 

Truth in Lending Act (15 U.S.C. 1639(c)(2)) is hereby repealed. 

(b) NO BALLOON PAYMENTS.—Section 129(e) of the Truth in 

Lending Act (15 U.S.C. 1639(e)) is amended to read as follows: 

‘‘(e) NO BALLOON PAYMENTS.—No high-cost mortgage may contain a scheduled payment that is more than twice as large as the 

average of earlier scheduled payments. This subsection shall not 

apply when the payment schedule is adjusted to the seasonal or irregular income of the consumer.’’. 

SEC. 1433. ADDITIONAL REQUIREMENTS FOR CERTAIN MORTGAGES. 

(a) ADDITIONAL REQUIREMENTS FOR CERTAIN MORTGAGES.— 

Section 129 of the Truth in Lending Act (15 U.S.C. 1639) is amended— 

(1) by redesignating subsections (j), (k), (l) and (m) as subsections (n), (o), (p), and (q) respectively; and 

(2) by inserting after subsection (i) the following new subsections: 

‘‘(j) RECOMMENDED DEFAULT.—No creditor shall recommend or 

encourage default on an existing loan or other debt prior to and in 

connection with the closing or planned closing of a high-cost mortgage that refinances all or any portion of such existing loan or debt. 

‘‘(k) LATE FEES.— 

‘‘(1) IN GENERAL.—No creditor may impose a late payment 

charge or fee in connection with a high-cost mortgage— 

‘‘(A) in an amount in excess of 4 percent of the amount 

of the payment past due; 

‘‘(B) unless the loan documents specifically authorize 

the charge or fee; 

‘‘(C) before the end of the 15-day period beginning on 

the date the payment is due, or in the case of a loan on 

which interest on each installment is paid in advance, before the end of the 30-day period beginning on the date the 

payment is due; or 

‘‘(D) more than once with respect to a single late payment. 

‘‘(2) COORDINATION WITH SUBSEQUENT LATE FEES.—If a 

payment is otherwise a full payment for the applicable period 

and is paid on its due date or within an applicable grace period, and the only delinquency or insufficiency of payment is attributable to any late fee or delinquency charge assessed on any 

earlier payment, no late fee or delinquency charge may be imposed on such payment. 

‘‘(3) FAILURE TO MAKE INSTALLMENT PAYMENT.—If, in the 

case of a loan agreement the terms of which provide that any 

payment shall first be applied to any past due principal balVerDate Mar 15 2010 04:29 Jul 07, 2010 Jkt 057098 PO 00000 Frm 00802 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
799 

ance, the consumer fails to make an installment payment and 

the consumer subsequently resumes making installment payments but has not paid all past due installments, the creditor 

may impose a separate late payment charge or fee for any principal due (without deduction due to late fees or related fees) 

until the default is cured. 

‘‘(l) ACCELERATION OF DEBT.—No high-cost mortgage may contain a provision which permits the creditor to accelerate the indebtedness, except when repayment of the loan has been accelerated by 

default in payment, or pursuant to a due-on-sale provision, or pursuant to a material violation of some other provision of the loan 

document unrelated to payment schedule. 

‘‘(m) RESTRICTION ON FINANCING POINTS AND FEES.—No creditor may directly or indirectly finance, in connection with any highcost mortgage, any of the following: 

‘‘(1) Any prepayment fee or penalty payable by the consumer 

in a refinancing transaction if the creditor or an affiliate of the 

creditor is the noteholder of the note being refinanced. 

‘‘(2) Any points or fees.’’. 

(b) PROHIBITIONS ON EVASIONS.—Section 129 of the Truth in 

Lending Act (15 U.S.C. 1639) is amended by inserting after subsection (q) (as so redesignated by subsection (a)(1)) the following 

new subsection: 

‘‘(r) PROHIBITIONS ON EVASIONS, STRUCTURING OF TRANS- ACTIONS, AND RECIPROCAL ARRANGEMENTS.—A creditor may not 

take any action in connection with a high-cost mortgage— 

‘‘(1) to structure a loan transaction as an open-end credit 

plan or another form of loan for the purpose and with the intent 

of evading the provisions of this title; or 

‘‘(2) to divide any loan transaction into separate parts for 

the purpose and with the intent of evading provisions of this 

title.’’. 

(c) MODIFICATION OR DEFERRAL FEES.—Section 129 of the 

Truth in Lending Act (15 U.S.C. 1639) is amended by inserting 

after subsection (r) (as added by subsection (b) of this section) the 

following new subsection: 

‘‘(s) MODIFICATION AND DEFERRAL FEES PROHIBITED.—A creditor, successor in interest, assignee, or any agent of any of the above, 

may not charge a consumer any fee to modify, renew, extend, or 

amend a high-cost mortgage, or to defer any payment due under the 

terms of such mortgage.’’. 

(d) PAYOFF STATEMENT.—Section 129 of the Truth in Lending 

Act (15 U.S.C. 1639) is amended by inserting after subsection (s) (as 

added by subsection (c) of this section) the following new subsection: 

‘‘(t) PAYOFF STATEMENT.— 

‘‘(1) FEES.— 

‘‘(A) IN GENERAL.—Except as provided in subparagraph 

(B), no creditor or servicer may charge a fee for informing 

or transmitting to any person the balance due to pay off the 

outstanding balance on a high-cost mortgage. 

‘‘(B) TRANSACTION FEE.—When payoff information referred to in subparagraph (A) is provided by facsimile 

transmission or by a courier service, a creditor or servicer 

may charge a processing fee to cover the cost of such transmission or service in an amount not to exceed an amount 


sroberts on DSKD5P82C1PROD with HEARING
800 

that is comparable to fees imposed for similar services provided in connection with consumer credit transactions that 

are secured by the consumer’s principal dwelling and are 

not high-cost mortgages. 

‘‘(C) FEE DISCLOSURE.—Prior to charging a transaction 

fee as provided in subparagraph (B), a creditor or servicer 

shall disclose that payoff balances are available for free 

pursuant to subparagraph (A). 

‘‘(D) MULTIPLE REQUESTS.—If a creditor or servicer has 

provided payoff information referred to in subparagraph 

(A) without charge, other than the transaction fee allowed 

by subparagraph (B), on 4 occasions during a calendar 

year, the creditor or servicer may thereafter charge a reasonable fee for providing such information during the remainder of the calendar year. 

‘‘(2) PROMPT DELIVERY.—Payoff balances shall be provided 

within 5 business days after receiving a request by a consumer 

or a person authorized by the consumer to obtain such information.’’. 

(e) PRE-LOAN COUNSELING REQUIRED.—Section 129 of the 

Truth in Lending Act (15 U.S.C. 1639) is amended by inserting 

after subsection t) (as added by subsection (d) of this section) the following new subsection: 

‘‘(u) PRE-LOAN COUNSELING.— 

‘‘(1) IN GENERAL.—A creditor may not extend credit to a 

consumer under a high-cost mortgage without first receiving 

certification from a counselor that is approved by the Secretary 

of Housing and Urban Development, or at the discretion of the 

Secretary, a State housing finance authority, that the consumer 

has received counseling on the advisability of the mortgage. 

Such counselor shall not be employed by the creditor or an affiliate of the creditor or be affiliated with the creditor. 

‘‘(2) DISCLOSURES REQUIRED PRIOR TO COUNSELING.—No 

counselor may certify that a consumer has received counseling 

on the advisability of the high-cost mortgage unless the counselor can verify that the consumer has received each statement 

required (in connection with such loan) by this section or the 

Real Estate Settlement Procedures Act of 1974 with respect to 

the transaction. 

‘‘(3) REGULATIONS.—The Board may prescribe such regulations as the Board determines to be appropriate to carry out the 

requirements of paragraph (1).’’. 

(f) CORRECTIONS AND UNINTENTIONAL VIOLATIONS.—Section 

129 of the Truth in Lending Act (15 U.S.C. 1639) is amended by 

inserting after subsection (u) (as added by subsection (e)) the following new subsection: 

‘‘(v) CORRECTIONS AND UNINTENTIONAL VIOLATIONS.—A creditor or assignee in a high-cost mortgage who, when acting in good 

faith, fails to comply with any requirement under this section will 

not be deemed to have violated such requirement if the creditor or 

assignee establishes that either— 

‘‘(1) within 30 days of the loan closing and prior to the institution of any action, the consumer is notified of or discovers 

the violation, appropriate restitution is made, and whatever adVerDate Mar 15 2010 04:29 Jul 07, 2010 Jkt 057098 PO 00000 Frm 00804 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
801 

justments are necessary are made to the loan to either, at the 

choice of the consumer— 

‘‘(A) make the loan satisfy the requirements of this 

chapter; or 

‘‘(B) in the case of a high-cost mortgage, change the 

terms of the loan in a manner beneficial to the consumer 

so that the loan will no longer be a high-cost mortgage; or 

‘‘(2) within 60 days of the creditor’s discovery or receipt of 

notification of an unintentional violation or bona fide error and 

prior to the institution of any action, the consumer is notified 

of the compliance failure, appropriate restitution is made, and 

whatever adjustments are necessary are made to the loan to either, at the choice of the consumer— 

‘‘(A) make the loan satisfy the requirements of this 

chapter; or 

‘‘(B) in the case of a high-cost mortgage, change the 

terms of the loan in a manner beneficial so that the loan 

will no longer be a high-cost mortgage.’’. 

Subtitle D—Office of Housing Counseling 

SEC. 1441. SHORT TITLE. 

This subtitle may be cited as the ‘‘Expand and Preserve Home 

Ownership Through Counseling Act’’. 

SEC. 1442. ESTABLISHMENT OF OFFICE OF HOUSING COUNSELING. 

Section 4 of the Department of Housing and Urban Development Act (42 U.S.C. 3533) is amended by adding at the end the following new subsection: 

‘‘(g) OFFICE OF HOUSING COUNSELING.— 

‘‘(1) ESTABLISHMENT.—There is established, in the Department, the Office of Housing Counseling. 

‘‘(2) DIRECTOR.—There is established the position of Director of Housing Counseling. The Director shall be the head of the 

Office of Housing Counseling and shall be appointed by, and 

shall report to, the Secretary. Such position shall be a careerreserved position in the Senior Executive Service. 

‘‘(3) FUNCTIONS.— 

‘‘(A) IN GENERAL.—The Director shall have primary responsibility within the Department for all activities and 

matters relating to homeownership counseling and rental 

housing counseling, including— 

‘‘(i) research, grant administration, public outreach, and policy development relating to such counseling; and 

‘‘(ii) establishment, coordination, and administration of all regulations, requirements, standards, and 

performance measures under programs and laws administered by the Department that relate to housing 

counseling, homeownership counseling (including 

maintenance of homes), mortgage-related counseling 

(including home equity conversion mortgages and credit protection options to avoid foreclosure), and rental 

housing counseling, including the requirements, standards, and performance measures relating to housing 

counseling. 


sroberts on DSKD5P82C1PROD with HEARING
802 

‘‘(B) SPECIFIC FUNCTIONS.—The Director shall carry 

out the functions assigned to the Director and the Office 

under this section and any other provisions of law. Such 

functions shall include establishing rules necessary for— 

‘‘(i) the counseling procedures under section 

106(g)(1) of the Housing and Urban Development Act 

of 1968 (12 U.S.C. 1701x(h)(1)); 

‘‘(ii) carrying out all other functions of the Secretary under section 106(g) of the Housing and Urban 

Development Act of 1968, including the establishment, 

operation, and publication of the availability of the 

toll-free telephone number under paragraph (2) of such 

section; 

‘‘(iii) contributing to the distribution of home buying information booklets pursuant to section 5 of the 

Real Estate Settlement Procedures Act of 1974 (12 

U.S.C. 2604); 

‘‘(iv) carrying out the certification program under 

section 106(e) of the Housing and Urban Development 

Act of 1968 (12 U.S.C. 1701x(e)); 

‘‘(v) carrying out the assistance program under section 106(a)(4) of the Housing and Urban Development 

Act of 1968, including criteria for selection of applications to receive assistance; 

‘‘(vi) carrying out any functions regarding abusive, 

deceptive, or unscrupulous lending practices relating to 

residential mortgage loans that the Secretary considers 

appropriate, which shall include conducting the study 

under section 6 of the Expand and Preserve Home 

Ownership Through Counseling Act; 

‘‘(vii) providing for operation of the advisory committee established under paragraph (4) of this subsection; 

‘‘(viii) collaborating with community-based organizations with expertise in the field of housing counseling; and 

‘‘(ix) providing for the building of capacity to provide housing counseling services in areas that lack sufficient services, including underdeveloped areas that 

lack basic water and sewer systems, electricity services, 

and safe, sanitary housing. 

‘‘(4) ADVISORY COMMITTEE.— 

‘‘(A) IN GENERAL.—The Secretary shall appoint an advisory committee to provide advice regarding the carrying 

out of the functions of the Director. 

‘‘(B) MEMBERS.—Such advisory committee shall consist 

of not more than 12 individuals, and the membership of the 

committee shall equally represent the mortgage and real estate industry, including consumers and housing counseling 

agencies certified by the Secretary. 

‘‘(C) TERMS.—Except as provided in subparagraph (D), 

each member of the advisory committee shall be appointed 

for a term of 3 years. Members may be reappointed at the 

discretion of the Secretary. 


sroberts on DSKD5P82C1PROD with HEARING
803 

‘‘(D) TERMS OF INITIAL APPOINTEES.—As designated by 

the Secretary at the time of appointment, of the members 

first appointed to the advisory committee, 4 shall be appointed for a term of 1 year and 4 shall be appointed for 

a term of 2 years. 

‘‘(E) PROHIBITION OF PAY; TRAVEL EXPENSES.—Members of the advisory committee shall serve without pay, but 

shall receive travel expenses, including per diem in lieu of 

subsistence, in accordance with applicable provisions under 

subchapter I of chapter 57 of title 5, United States Code. 

‘‘(F) ADVISORY ROLE ONLY.—The advisory committee 

shall have no role in reviewing or awarding housing counseling grants. 

‘‘(5) SCOPE OF HOMEOWNERSHIP COUNSELING.—In carrying 

out the responsibilities of the Director, the Director shall ensure 

that homeownership counseling provided by, in connection with, 

or pursuant to any function, activity, or program of the Department addresses the entire process of homeownership, including 

the decision to purchase a home, the selection and purchase of 

a home, issues arising during or affecting the period of ownership of a home (including refinancing, default and foreclosure, 

and other financial decisions), and the sale or other disposition 

of a home.’’. 

SEC. 1443. COUNSELING PROCEDURES. 

(a) IN GENERAL.—Section 106 of the Housing and Urban Development Act of 1968 (12 U.S.C. 1701x) is amended by adding at the 

end the following new subsection: 

‘‘(g) PROCEDURES AND ACTIVITIES.— 

‘‘(1) COUNSELING PROCEDURES.— 

‘‘(A) IN GENERAL.—The Secretary shall establish, coordinate, and monitor the administration by the Department of Housing and Urban Development of the counseling 

procedures for homeownership counseling and rental housing counseling provided in connection with any program of 

the Department, including all requirements, standards, 

and performance measures that relate to homeownership 

and rental housing counseling. 

‘‘(B) HOMEOWNERSHIP COUNSELING.—For purposes of 

this subsection and as used in the provisions referred to in 

this subparagraph, the term ‘homeownership counseling’ 

means counseling related to homeownership and residential 

mortgage loans. Such term includes counseling related to 

homeownership and residential mortgage loans that is provided pursuant to— 

‘‘(i) section 105(a)(20) of the Housing and Community Development Act of 1974 (42 U.S.C. 5305(a)(20)); 

‘‘(ii) in the United States Housing Act of 1937— 

‘‘(I) section 9(e) (42 U.S.C. 1437g(e)); 

‘‘(II) section 8(y)(1)(D) (42 U.S.C. 

1437f(y)(1)(D)); 

‘‘(III) section 18(a)(4)(D) (42 U.S.C. 

1437p(a)(4)(D)); 

‘‘(IV) section 23(c)(4) (42 U.S.C. 1437u(c)(4)); 

‘‘(V) section 32(e)(4) (42 U.S.C. 1437z–4(e)(4)); 


sroberts on DSKD5P82C1PROD with HEARING
804 

‘‘(VI) section 33(d)(2)(B) (42 U.S.C. 1437z– 

5(d)(2)(B)); 

‘‘(VII) sections 302(b)(6) and 303(b)(7) (42 

U.S.C. 1437aaa–1(b)(6), 1437aaa–2(b)(7)); and 

‘‘(VIII) section 304(c)(4) (42 U.S.C. 1437aaa– 

3(c)(4)); 

‘‘(iii) section 302(a)(4) of the American Homeownership and Economic Opportunity Act of 2000 (42 U.S.C. 

1437f note); 

‘‘(iv) sections 233(b)(2) and 258(b) of the CranstonGonzalez National Affordable Housing Act (42 U.S.C. 

12773(b)(2), 12808(b)); 

‘‘(v) this section and section 101(e) of the Housing 

and Urban Development Act of 1968 (12 U.S.C. 1701x, 

1701w(e)); 

‘‘(vi) section 220(d)(2)(G) of the Low-Income Housing Preservation and Resident Homeownership Act of 

1990 (12 U.S.C. 4110(d)(2)(G)); 

‘‘(vii) sections 422(b)(6), 423(b)(7), 424(c)(4), 

442(b)(6), and 443(b)(6) of the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 12872(b)(6), 

12873(b)(7), 12874(c)(4), 12892(b)(6), and 12893(b)(6)); 

‘‘(viii) section 491(b)(1)(F)(iii) of the McKinneyVento Homeless Assistance Act (42 U.S.C. 

11408(b)(1)(F)(iii)); 

‘‘(ix) sections 202(3) and 810(b)(2)(A) of the Native 

American Housing and Self-Determination Act of 1996 

(25 U.S.C. 4132(3), 4229(b)(2)(A)); 

‘‘(x) in the National Housing Act— 

‘‘(I) in section 203 (12 U.S.C. 1709), the penultimate undesignated paragraph of paragraph (2) 

of subsection (b), subsection (c)(2)(A), and subsection (r)(4); 

‘‘(II) subsections (a) and (c)(3) of section 237 

(12 U.S.C. 1715z–2); and 

‘‘(III) subsections (d)(2)(B) and (m)(1) of section 255 (12 U.S.C. 1715z–20); 

‘‘(xi) section 502(h)(4)(B) of the Housing Act of 

1949 (42 U.S.C. 1472(h)(4)(B)); 

‘‘(xii) section 508 of the Housing and Urban Development Act of 1970 (12 U.S.C. 1701z–7); and 

‘‘(xiii) section 106 of the Energy Policy Act of 1992 

(42 U.S.C. 12712 note). 

‘‘(C) RENTAL HOUSING COUNSELING.—For purposes of 

this subsection, the term ‘rental housing counseling’ means 

counseling related to rental of residential property, which 

may include counseling regarding future homeownership 

opportunities and providing referrals for renters and prospective renters to entities providing counseling and shall 

include counseling related to such topics that is provided 

pursuant to— 

‘‘(i) section 105(a)(20) of the Housing and Community Development Act of 1974 (42 U.S.C. 5305(a)(20)); 

‘‘(ii) in the United States Housing Act of 1937— 

‘‘(I) section 9(e) (42 U.S.C. 1437g(e)); 


sroberts on DSKD5P82C1PROD with HEARING
805 

‘‘(II) section 18(a)(4)(D) (42 U.S.C. 

1437p(a)(4)(D)); 

‘‘(III) section 23(c)(4) (42 U.S.C. 1437u(c)(4)); 

‘‘(IV) section 32(e)(4) (42 U.S.C. 1437z–4(e)(4)); 

‘‘(V) section 33(d)(2)(B) (42 U.S.C. 1437z– 

5(d)(2)(B)); and 

‘‘(VI) section 302(b)(6) (42 U.S.C. 1437aaa– 

1(b)(6)); 

‘‘(iii) section 233(b)(2) of the Cranston-Gonzalez 

National Affordable Housing Act (42 U.S.C. 

12773(b)(2)); 

‘‘(iv) section 106 of the Housing and Urban Development Act of 1968 (12 U.S.C. 1701x); 

‘‘(v) section 422(b)(6) of the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 12872(b)(6)); 

‘‘(vi) section 491(b)(1)(F)(iii) of the McKinney-Vento 

Homeless Assistance Act (42 U.S.C. 11408(b)(1)(F)(iii)); 

‘‘(vii) sections 202(3) and 810(b)(2)(A) of the Native 

American Housing and Self-Determination Act of 1996 

(25 U.S.C. 4132(3), 4229(b)(2)(A)); and 

‘‘(viii) the rental assistance program under section 

8 of the United States Housing Act of 1937 (42 U.S.C. 

1437f). 

‘‘(2) STANDARDS FOR MATERIALS.—The Secretary, in consultation with the advisory committee established under subsection (g)(4) of the Department of Housing and Urban Development Act, shall establish standards for materials and forms to 

be used, as appropriate, by organizations providing homeownership counseling services, including any recipients of assistance 

pursuant to subsection (a)(4). 

‘‘(3) MORTGAGE SOFTWARE SYSTEMS.— 

‘‘(A) CERTIFICATION.—The Secretary shall provide for 

the certification of various computer software programs for 

consumers to use in evaluating different residential mortgage loan proposals. The Secretary shall require, for such 

certification, that the mortgage software systems take into 

account— 

‘‘(i) the consumer’s financial situation and the cost 

of maintaining a home, including insurance, taxes, 

and utilities; 

‘‘(ii) the amount of time the consumer expects to remain in the home or expected time to maturity of the 

loan; and 

‘‘(iii) such other factors as the Secretary considers 

appropriate to assist the consumer in evaluating 

whether to pay points, to lock in an interest rate, to select an adjustable or fixed rate loan, to select a conventional or government-insured or guaranteed loan and 

to make other choices during the loan application process. 

If the Secretary determines that available existing software 

is inadequate to assist consumers during the residential 

mortgage loan application process, the Secretary shall arrange for the development by private sector software compaVerDate Mar 15 2010 04:29 Jul 07, 2010 Jkt 057098 PO 00000 Frm 00809 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
806 

nies of new mortgage software systems that meet the Secretary’s specifications. 

‘‘(B) USE AND INITIAL AVAILABILITY.—Such certified 

computer software programs shall be used to supplement, 

not replace, housing counseling. The Secretary shall provide that such programs are initially used only in connection with the assistance of housing counselors certified pursuant to subsection (e). 

‘‘(C) AVAILABILITY.—After a period of initial availability under subparagraph (B) as the Secretary considers 

appropriate, the Secretary shall take reasonable steps to 

make mortgage software systems certified pursuant to this 

paragraph widely available through the Internet and at 

public locations, including public libraries, senior-citizen 

centers, public housing sites, offices of public housing agencies that administer rental housing assistance vouchers, 

and housing counseling centers. 

‘‘(D) BUDGET COMPLIANCE.—This paragraph shall be 

effective only to the extent that amounts to carry out this 

paragraph are made available in advance in appropriations Acts. 

‘‘(4) NATIONAL PUBLIC SERVICE MULTIMEDIA CAMPAIGNS TO

PROMOTE HOUSING COUNSELING.— ‘‘(A) IN GENERAL.—The Director of Housing Counseling 

shall develop, implement, and conduct national public service multimedia campaigns designed to make persons facing 

mortgage foreclosure, persons considering a subprime mortgage loan to purchase a home, elderly persons, persons who 

face language barriers, low-income persons, minorities, and 

other potentially vulnerable consumers aware that it is advisable, before seeking or maintaining a residential mortgage loan, to obtain homeownership counseling from an unbiased and reliable sources and that such homeownership 

counseling is available, including through programs sponsored by the Secretary of Housing and Urban Development. 

‘‘(B) CONTACT INFORMATION.—Each segment of the 

multimedia campaign under subparagraph (A) shall publicize the toll-free telephone number and website of the Department of Housing and Urban Development through 

which persons seeking housing counseling can locate a 

housing counseling agency in their State that is certified by 

the Secretary of Housing and Urban Development and can 

provide advice on buying a home, renting, defaults, foreclosures, credit issues, and reverse mortgages. 

‘‘(C) AUTHORIZATION OF APPROPRIATIONS.—There are 

authorized to be appropriated to the Secretary, not to exceed $3,000,000 for fiscal years 2009, 2010, and 2011, for 

the development, implementation, and conduct of national 

public service multimedia campaigns under this paragraph. 

‘‘(D) FORECLOSURE RESCUE EDUCATION PROGRAMS.— 

‘‘(i) IN GENERAL.—Ten percent of any funds appropriated pursuant to the authorization under subparagraph (C) shall be used by the Director of Housing 

Counseling to conduct an education program in areas 


sroberts on DSKD5P82C1PROD with HEARING
807 

that have a high density of foreclosure. Such program 

shall involve direct mailings to persons living in such 

areas describing— 

‘‘(I) tips on avoiding foreclosure rescue scams; 

‘‘(II) tips on avoiding predatory lending mortgage agreements; 

‘‘(III) tips on avoiding for-profit foreclosure 

counseling services; and 

‘‘(IV) local counseling resources that are approved by the Department of Housing and Urban 

Development. 

‘‘(ii) PROGRAM EMPHASIS.—In conducting the education program described under clause (i), the Director 

of Housing Counseling shall also place an emphasis on 

serving communities that have a high percentage of retirement communities or a high percentage of low-income minority communities. 

‘‘(iii) TERMS DEFINED.—For purposes of this subparagraph: 

‘‘(I) HIGH DENSITY OF FORECLOSURES.—An 

area has a ‘high density of foreclosures’ if such 

area is one of the metropolitan statistical areas (as 

that term is defined by the Director of the Office of 

Management and Budget) with the highest home 

foreclosure rates. 

‘‘(II) HIGH PERCENTAGE OF RETIREMENT COMMUNITIES.—An area has a ‘high percentage of retirement communities’ if such area is one of the 

metropolitan statistical areas (as that term is defined by the Director of the Office of Management 

and Budget) with the highest percentage of residents aged 65 or older. 

‘‘(III) HIGH PERCENTAGE OF LOW-INCOME MINORITY COMMUNITIES.—An area has a ‘high percentage of low-income minority communities’ if 

such area contains a higher-than-normal percentage of residents who are both minorities and lowincome, as defined by the Director of Housing 

Counseling. 

‘‘(5) EDUCATION PROGRAMS.—The Secretary shall provide 

advice and technical assistance to States, units of general local 

government, and nonprofit organizations regarding the establishment and operation of, including assistance with the development of content and materials for, educational programs to 

inform and educate consumers, particularly those most vulnerable with respect to residential mortgage loans (such as elderly 

persons, persons facing language barriers, low-income persons, 

minorities, and other potentially vulnerable consumers), regarding home mortgages, mortgage refinancing, home equity loans, 

home repair loans, and where appropriate by region, any requirements and costs associated with obtaining flood or other 

disaster-specific insurance coverage.’’. 

(b) CONFORMING AMENDMENTS TO GRANT PROGRAM FOR HOMEOWNERSHIP COUNSELING ORGANIZATIONS.—Section 106(c)(5)(A)(ii) 


sroberts on DSKD5P82C1PROD with HEARING
808 

of the Housing and Urban Development Act of 1968 (12 U.S.C. 

1701x(c)(5)(A)(ii)) is amended— 

(1) in subclause (III), by striking ‘‘and’’ at the end; 

(2) in subclause (IV) by striking the period at the end and 

inserting ‘‘; and’’; and 

(3) by inserting after subclause (IV) the following new subclause: 

‘‘(V) notify the housing or mortgage applicant 

of the availability of mortgage software systems 

provided pursuant to subsection (g)(3).’’. 

SEC. 1444. GRANTS FOR HOUSING COUNSELING ASSISTANCE. 

Section 106(a) of the Housing and Urban Development Act of 

1968 (12 U.S.C. 1701x(a)) is amended by adding at the end the following new paragraph: 

‘‘(4) HOMEOWNERSHIP AND RENTAL COUNSELING ASSISTANCE.— 

‘‘(A) IN GENERAL.—The Secretary shall make financial assistance available under this paragraph to HUD-approved 

housing counseling agencies and State housing finance agencies. 

‘‘(B) QUALIFIED ENTITIES.—The Secretary shall establish 

standards and guidelines for eligibility of organizations (including governmental and nonprofit organizations) to receive 

assistance under this paragraph, in accordance with subparagraph (D). 

‘‘(C) DISTRIBUTION.—Assistance made available under this 

paragraph shall be distributed in a manner that encourages efficient and successful counseling programs and that ensures 

adequate distribution of amounts for rural areas having traditionally low levels of access to such counseling services, including areas with insufficient access to the Internet. In distributing 

such assistance, the Secretary may give priority consideration to 

entities serving areas with the highest home foreclosure rates. 

‘‘(D) LIMITATION ON DISTRIBUTION OF ASSISTANCE.— 

‘‘(i) IN GENERAL.—None of the amounts made available 

under this paragraph shall be distributed to— 

‘‘(I) any organization which has been convicted for 

a violation under Federal law relating to an election 

for Federal office; or 

‘‘(II) any organization which employs applicable 

individuals. 

‘‘(ii) DEFINITION OF APPLICABLE INDIVIDUALS.—In this 

subparagraph, the term ‘applicable individual’ means an 

individual who— 

‘‘(I) is— 

‘‘(aa) employed by the organization in a permanent or temporary capacity; 

‘‘(bb) contracted or retained by the organization; or 

‘‘(cc) acting on behalf of, or with the express or 

apparent authority of, the organization; and 

‘‘(II) has been convicted for a violation under Federal law relating to an election for Federal office. 

‘‘(E) GRANTMAKING PROCESS.—In making assistance available under this paragraph, the Secretary shall consider approVerDate Mar 15 2010 04:29 Jul 07, 2010 Jkt 057098 PO 00000 Frm 00812 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
809 

priate ways of streamlining and improving the processes for 

grant application, review, approval, and award. 

‘‘(F) AUTHORIZATION OF APPROPRIATIONS.—There are authorized to be appropriated $45,000,000 for each of fiscal years 

2009 through 2012 for— 

‘‘(i) the operations of the Office of Housing Counseling 

of the Department of Housing and Urban Development; 

‘‘(ii) the responsibilities of the Director of Housing 

Counseling under paragraphs (2) through (5) of subsection 

(g); and 

‘‘(iii) assistance pursuant to this paragraph for entities 

providing homeownership and rental counseling.’’. 

SEC. 1445. REQUIREMENTS TO USE HUD-CERTIFIED COUNSELORS 

UNDER HUD PROGRAMS. 

Section 106(e) of the Housing and Urban Development Act of 

1968 (12 U.S.C. 1701x(e)) is amended— 

(1) by striking paragraph (1) and inserting the following 

new paragraph: 

‘‘(1) REQUIREMENT FOR ASSISTANCE.—An organization may 

not receive assistance for counseling activities under subsection 

(a)(1)(iii), (a)(2), (a)(4), (c), or (d) of this section, or under section 101(e), unless the organization, or the individuals through 

which the organization provides such counseling, has been certified by the Secretary under this subsection as competent to 

provide such counseling.’’; 

(2) in paragraph (2)— 

(A) by inserting ‘‘and for certifying organizations’’ before the period at the end of the first sentence; and 

(B) in the second sentence by striking ‘‘for certification’’ 

and inserting ‘‘, for certification of an organization, that 

each individual through which the organization provides 

counseling shall demonstrate, and, for certification of an 

individual,’’; 

(3) in paragraph (3), by inserting ‘‘organizations and’’ before ‘‘individuals’’; 

(4) by redesignating paragraph (3) as paragraph (5); and 

(5) by inserting after paragraph (2) the following new paragraphs: 

‘‘(3) REQUIREMENT UNDER HUD PROGRAMS.—Any homeownership counseling or rental housing counseling (as such terms 

are defined in subsection (g)(1)) required under, or provided in 

connection with, any program administered by the Department 

of Housing and Urban Development shall be provided only by 

organizations or counselors certified by the Secretary under this 

subsection as competent to provide such counseling. 

‘‘(4) OUTREACH.—The Secretary shall take such actions as 

the Secretary considers appropriate to ensure that individuals 

and organizations providing homeownership or rental housing 

counseling are aware of the certification requirements and 

standards of this subsection and of the training and certification programs under subsection (f).’’. 

SEC. 1446. STUDY OF DEFAULTS AND FORECLOSURES. 

The Secretary of Housing and Urban Development shall conduct an extensive study of the root causes of default and foreclosure 


sroberts on DSKD5P82C1PROD with HEARING
810 

of home loans, using as much empirical data as are available. The 

study shall also examine the role of escrow accounts in helping 

prime and nonprime borrowers to avoid defaults and foreclosures, 

and the role of computer registries of mortgages, including those 

used for trading mortgage loans. Not later than 12 months after the 

date of the enactment of this Act, the Secretary shall submit to the 

Congress a preliminary report regarding the study. Not later than 

24 months after such date of enactment, the Secretary shall submit 

a final report regarding the results of the study, which shall include 

any recommended legislation relating to the study, and recommendations for best practices and for a process to identify populations that need counseling the most. 

SEC. 1447. DEFAULT AND FORECLOSURE DATABASE. 

(a) ESTABLISHMENT.—The Secretary of Housing and Urban Development and the Director of the Bureau, in consultation with the 

Federal agencies responsible for regulation of banking and financial 

institutions involved in residential mortgage lending and servicing, 

shall establish and maintain a database of information on foreclosures and defaults on mortgage loans for one- to four-unit residential properties and shall make such information publicly available, subject to subsection (e). 

(b) CENSUS TRACT DATA.—Information in the database may be 

collected, aggregated, and made available on a census tract basis. 

(c) REQUIREMENTS.—Information collected and made available 

through the database shall include— 

(1) the number and percentage of such mortgage loans that 

are delinquent by more than 30 days; 

(2) the number and percentage of such mortgage loans that 

are delinquent by more than 90 days; 

(3) the number and percentage of such properties that are 

real estate-owned; 

(4) number and percentage of such mortgage loans that are 

in the foreclosure process; 

(5) the number and percentage of such mortgage loans that 

have an outstanding principal obligation amount that is greater 

than the value of the property for which the loan was made; 

and 

(6) such other information as the Secretary of Housing and 

Urban Development and the Director of the Bureau consider appropriate. 

(d) RULE OF CONSTRUCTION.—Nothing in this section shall be 

construed to encourage discriminatory or unsound allocation of 

credit or lending policies or practices. 

(e) PRIVACY AND CONFIDENTIALITY.—In establishing and maintaining the database described in subsection (a), the Secretary of 

Housing and Urban Development and the Director of the Bureau 

shall— 

(1) be subject to the standards applicable to Federal agencies for the protection of the confidentiality of personally identifiable information and for data security and integrity; 

(2) implement the necessary measures to conform to the 

standards for data integrity and security described in paragraph (1); and 

(3) collect and make available information under this section, in accordance with paragraphs (5) and (6) of section 


sroberts on DSKD5P82C1PROD with HEARING
811 

1022(c) and the rules prescribed under such paragraphs, in 

order to protect privacy and confidentiality. 

SEC. 1448. DEFINITIONS FOR COUNSELING-RELATED PROGRAMS. 

Section 106 of the Housing and Urban Development Act of 1968 

(12 U.S.C. 1701x), as amended by the preceding provisions of this 

subtitle, is amended by adding at the end the following new subsection: 

‘‘(h) DEFINITIONS.—For purposes of this section: 

‘‘(1) NONPROFIT ORGANIZATION.—The term ‘nonprofit organization’ has the meaning given such term in section 104(5) of 

the Cranston-Gonzalez National Affordable Housing Act (42 

U.S.C. 12704(5)), except that subparagraph (D) of such section 

shall not apply for purposes of this section. 

‘‘(2) STATE.—The term ‘State’ means each of the several 

States, the Commonwealth of Puerto Rico, the District of Columbia, the Commonwealth of the Northern Mariana Islands, 

Guam, the Virgin Islands, American Samoa, the Trust Territories of the Pacific, or any other possession of the United 

States. 

‘‘(3) UNIT OF GENERAL LOCAL GOVERNMENT.—The term 

‘unit of general local government’ means any city, county, parish, town, township, borough, village, or other general purpose 

political subdivision of a State. 

‘‘(4) HUD-APPROVED COUNSELING AGENCY.—The term 

‘HUD-approved counseling agency’ means a private or public 

nonprofit organization that is— 

‘‘(A) exempt from taxation under section 501(c) of the 

Internal Revenue Code of 1986; and 

‘‘(B) certified by the Secretary to provide housing counseling services. 

‘‘(5) STATE HOUSING FINANCE AGENCY.—The term ‘State 

housing finance agency’ means any public body, agency, or instrumentality specifically created under State statute that is 

authorised to finance activities designed to provide housing and 

related facilities throughout an entire State through land acquisition, construction, or rehabilitation.’’. 

SEC. 1449. ACCOUNTABILITY AND TRANSPARENCY FOR GRANT RECIPIENTS. 

Section 106 of the Housing and Urban Development Act of 1968 

(12 U.S.C. 1701x), as amended by the preceding provisions of this 

subtitle, is amended by adding at the end the following: 

‘‘(i) ACCOUNTABILITY FOR RECIPIENTS OF COVERED ASSISTANCE.— 

‘‘(1) TRACKING OF FUNDS.—The Secretary shall— 

‘‘(A) develop and maintain a system to ensure that any 

organization or entity that receives any covered assistance 

uses all amounts of covered assistance in accordance with 

this section, the regulations issued under this section, and 

any requirements or conditions under which such amounts 

were provided; and 

‘‘(B) require any organization or entity, as a condition 

of receipt of any covered assistance, to agree to comply with 

such requirements regarding covered assistance as the Secretary shall establish, which shall include— 


sroberts on DSKD5P82C1PROD with HEARING
812 

‘‘(i) appropriate periodic financial and grant activity reporting, record retention, and audit requirements 

for the duration of the covered assistance to the organization or entity to ensure compliance with the limitations and requirements of this section, the regulations 

under this section, and any requirements or conditions 

under which such amounts were provided; and 

‘‘(ii) any other requirements that the Secretary determines are necessary to ensure appropriate administration and compliance. 

‘‘(2) MISUSE OF FUNDS.—If any organization or entity that 

receives any covered assistance is determined by the Secretary 

to have used any covered assistance in a manner that is materially in violation of this section, the regulations issued under 

this section, or any requirements or conditions under which 

such assistance was provided— 

‘‘(A) the Secretary shall require that, within 12 months 

after the determination of such misuse, the organization or 

entity shall reimburse the Secretary for such misused 

amounts and return to the Secretary any such amounts 

that remain unused or uncommitted for use; and 

‘‘(B) such organization or entity shall be ineligible, at 

any time after such determination, to apply for or receive 

any further covered assistance. 

The remedies under this paragraph are in addition to any other 

remedies that may be available under law. 

‘‘(3) COVERED ASSISTANCE.—For purposes of this subsection, the term ‘covered assistance’ means any grant or other 

financial assistance provided under this section.’’. 

SEC. 1450. UPDATING AND SIMPLIFICATION OF MORTGAGE INFORMATION BOOKLET. 

Section 5 of the Real Estate Settlement Procedures Act of 1974 

(12 U.S.C. 2604) is amended— 

(1) in the section heading, by striking ‘‘SPECIAL’’ and inserting ‘‘HOME BUYING’’; 

(2) by striking subsections (a) and (b) and inserting the following new subsections: 

‘‘(a) PREPARATION AND DISTRIBUTION.—The Director of the Bureau of Consumer Financial Protection (hereafter in this section referred to as the ‘Director’) shall prepare, at least once every 5 years, 

a booklet to help consumers applying for federally related mortgage 

loans to understand the nature and costs of real estate settlement 

services. The Director shall prepare the booklet in various languages 

and cultural styles, as the Director determines to be appropriate, so 

that the booklet is understandable and accessible to homebuyers of 

different ethnic and cultural backgrounds. The Director shall distribute such booklets to all lenders that make federally related mortgage loans. The Director shall also distribute to such lenders lists, 

organized by location, of homeownership counselors certified under 

section 106(e) of the Housing and Urban Development Act of 1968 

(12 U.S.C. 1701x(e)) for use in complying with the requirement 

under subsection (c) of this section. 

‘‘(b) CONTENTS.—Each booklet shall be in such form and detail 

as the Director shall prescribe and, in addition to such other inforVerDate Mar 15 2010 04:29 Jul 07, 2010 Jkt 057098 PO 00000 Frm 00816 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
813 

mation as the Director may provide, shall include in plain and understandable language the following information: 

‘‘(1) A description and explanation of the nature and purpose of the costs incident to a real estate settlement or a federally related mortgage loan. The description and explanation 

shall provide general information about the mortgage process 

as well as specific information concerning, at a minimum— 

‘‘(A) balloon payments; 

‘‘(B) prepayment penalties; 

‘‘(C) the advantages of prepayment; and 

‘‘(D) the trade-off between closing costs and the interest 

rate over the life of the loan. 

‘‘(2) An explanation and sample of the uniform settlement 

statement required by section 4. 

‘‘(3) A list and explanation of lending practices, including 

those prohibited by the Truth in Lending Act or other applicable Federal law, and of other unfair practices and unreasonable 

or unnecessary charges to be avoided by the prospective buyer 

with respect to a real estate settlement. 

‘‘(4) A list and explanation of questions a consumer obtaining a federally related mortgage loan should ask regarding the 

loan, including whether the consumer will have the ability to 

repay the loan, whether the consumer sufficiently shopped for 

the loan, whether the loan terms include prepayment penalties 

or balloon payments, and whether the loan will benefit the borrower. 

‘‘(5) An explanation of the right of rescission as to certain 

transactions provided by sections 125 and 129 of the Truth in 

Lending Act. 

‘‘(6) A brief explanation of the nature of a variable rate 

mortgage and a reference to the booklet entitled ‘Consumer 

Handbook on Adjustable Rate Mortgages’, published by the Director, or to any suitable substitute of such booklet that the Director may subsequently adopt pursuant to such section. 

‘‘(7) A brief explanation of the nature of a home equity line 

of credit and a reference to the pamphlet required to be provided under section 127A of the Truth in Lending Act. 

‘‘(8) Information about homeownership counseling services 

made available pursuant to section 106(a)(4) of the Housing 

and Urban Development Act of 1968 (12 U.S.C. 1701x(a)(4)), a 

recommendation that the consumer use such services, and notification that a list of certified providers of homeownership counseling in the area, and their contact information, is available. 

‘‘(9) An explanation of the nature and purpose of escrow accounts when used in connection with loans secured by residential real estate and the requirements under section 10 of this 

Act regarding such accounts. 

‘‘(10) An explanation of the choices available to buyers of 

residential real estate in selecting persons to provide necessary 

services incidental to a real estate settlement. 

‘‘(11) An explanation of a consumer’s responsibilities, liabilities, and obligations in a mortgage transaction. 

‘‘(12) An explanation of the nature and purpose of real estate appraisals, including the difference between an appraisal 

and a home inspection. 


sroberts on DSKD5P82C1PROD with HEARING
814 

‘‘(13) Notice that the Office of Housing of the Department 

of Housing and Urban Development has made publicly available a brochure regarding loan fraud and a World Wide Web 

address and toll-free telephone number for obtaining the brochure. 

The booklet prepared pursuant to this section shall take into consideration differences in real estate settlement procedures that may 

exist among the several States and territories of the United States 

and among separate political subdivisions within the same State 

and territory.’’; 

(3) in subsection (c), by inserting at the end the following 

new sentence: ‘‘Each lender shall also include with the booklet 

a reasonably complete or updated list of homeownership counselors who are certified pursuant to section 106(e) of the Housing and Urban Development Act of 1968 (12 U.S.C. 1701x(e)) 

and located in the area of the lender.’’; and 

(4) in subsection (d), by inserting after the period at the end 

of the first sentence the following: ‘‘The lender shall provide the 

booklet in the version that is most appropriate for the person receiving it.’’. 

SEC. 1451. HOME INSPECTION COUNSELING. 

(a) PUBLIC OUTREACH.— (1) IN GENERAL.—The Secretary of Housing and Urban Development (in this section referred to as the ‘‘Secretary’’) shall 

take such actions as may be necessary to inform potential homebuyers of the availability and importance of obtaining an independent home inspection. Such actions shall include— 

(A) publication of the HUD/FHA form HUD 92564–CN 

entitled ‘‘For Your Protection: Get a Home Inspection’’, in 

both English and Spanish languages; 

(B) publication of the HUD/FHA booklet entitled ‘‘For 

Your Protection: Get a Home Inspection’’, in both English 

and Spanish languages; 

(C) development and publication of a HUD booklet entitled ‘‘For Your Protection—Get a Home Inspection’’ that 

does not reference FHA-insured homes, in both English and 

Spanish languages; and 

(D) publication of the HUD document entitled ‘‘Ten Important Questions To Ask Your Home Inspector’’, in both 

English and Spanish languages. 

(2) AVAILABILITY.—The Secretary shall make the materials 

specified in paragraph (1) available for electronic access and, 

where appropriate, inform potential homebuyers of such availability through home purchase counseling public service announcements and toll-free telephone hotlines of the Department 

of Housing and Urban Development. The Secretary shall give 

special emphasis to reaching first-time and low-income homebuyers with these materials and efforts. 

(3) UPDATING.—The Secretary may periodically update and 

revise such materials, as the Secretary determines to be appropriate. 

(b) REQUIREMENT FOR FHA-APPROVED LENDERS.—Each mortgagee approved for participation in the mortgage insurance programs under title II of the National Housing Act shall provide prospective homebuyers, at first contact, whether upon pre-qualificaVerDate Mar 15 2010 04:29 Jul 07, 2010 Jkt 057098 PO 00000 Frm 00818 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
815 

tion, pre-approval, or initial application, the materials specified in 

subparagraphs (A), (B), and (D) of subsection (a)(1). 

(c) REQUIREMENTS FOR HUD-APPROVED COUNSELING AGEN- CIES.—Each counseling agency certified pursuant by the Secretary 

to provide housing counseling services shall provide each of their 

clients, as part of the home purchase counseling process, the materials specified in subparagraphs (C) and (D) of subsection (a)(1). 

(d) TRAINING.—Training provided the Department of Housing 

and Urban Development for housing counseling agencies, whether 

such training is provided directly by the Department or otherwise, 

shall include— 

(1) providing information on counseling potential homebuyers of the availability and importance of getting an independent home inspection; 

(2) providing information about the home inspection process, including the reasons for specific inspections such as radon 

and lead-based paint testing; 

(3) providing information about advising potential homebuyers on how to locate and select a qualified home inspector; 

and 

(4) review of home inspection public outreach materials of 

the Department. 

SEC. 1452. WARNINGS TO HOMEOWNERS OF FORECLOSURE RESCUE 

SCAMS. 

(a) ASSISTANCE TO NRC.—Notwithstanding any other provision 

of law, of any amounts made available for any fiscal year pursuant 

to section 106(a)(4)(F) of the Housing and Urban Development Act 

of 1968 (12 U.S.C. 1701x(a)(4)(F)) (as added by section 1444), 10 

percent shall be used only for assistance to the Neighborhood Reinvestment Corporation for activities, in consultation with servicers of 

residential mortgage loans, to provide notice to borrowers under 

such loans who are delinquent with respect to payments due under 

such loans that makes such borrowers aware of the dangers of 

fraudulent activities associated with foreclosure. 

(b) NOTICE.—The Neighborhood Reinvestment Corporation, in 

consultation with servicers of residential mortgage loans, shall use 

the amounts provided pursuant to subsection (a) to carry out activities to inform borrowers under residential mortgage loans— 

(1) that the foreclosure process is complex and can be confusing; 

(2) that the borrower may be approached during the foreclosure process by persons regarding saving their home and 

they should use caution in any such dealings; 

(3) that there are Federal Government and nonprofit agencies that may provide information about the foreclosure process, 

including the Department of Housing and Urban Development; 

(4) that they should contact their lender immediately, contact the Department of Housing and Urban Development to find 

a housing counseling agency certified by the Department to assist in avoiding foreclosure, or visit the Department’s website regarding tips for avoiding foreclosure; and 

(5) of the telephone number of the loan servicer or successor, the telephone number of the Department of Housing and 

Urban Development housing counseling line, and the Uniform 

Resource Locators (URLs) for the Department of Housing and 


sroberts on DSKD5P82C1PROD with HEARING
816 

Urban Development Web sites for housing counseling and for 

tips for avoiding foreclosure. 

Subtitle E—Mortgage Servicing 

SEC. 1461. ESCROW AND IMPOUND ACCOUNTS RELATING TO CERTAIN 

CONSUMER CREDIT TRANSACTIONS. 

(a) IN GENERAL.—Chapter 2 of the Truth in Lending Act (15 

U.S.C. 1631 et seq.) is amended by inserting after section 129C (as 

added by section 1411) the following new section: 

‘‘§ 129D. Escrow or impound accounts relating to certain consumer credit transactions 

‘‘(a) IN GENERAL.—Except as provided in subsection (b), (c), (d), 

or (e), a creditor, in connection with the consummation of a consumer credit transaction secured by a first lien on the principal 

dwelling of the consumer, other than a consumer credit transaction 

under an open end credit plan or a reverse mortgage, shall establish, before the consummation of such transaction, an escrow or impound account for the payment of taxes and hazard insurance, and, 

if applicable, flood insurance, mortgage insurance, ground rents, 

and any other required periodic payments or premiums with respect 

to the property or the loan terms, as provided in, and in accordance 

with, this section. 

‘‘(b) WHEN REQUIRED.—No impound, trust, or other type of account for the payment of property taxes, insurance premiums, or 

other purposes relating to the property may be required as a condition of a real property sale contract or a loan secured by a first deed 

of trust or mortgage on the principal dwelling of the consumer, 

other than a consumer credit transaction under an open end credit 

plan or a reverse mortgage, except when— 

‘‘(1) any such impound, trust, or other type of escrow or impound account for such purposes is required by Federal or State 

law; 

‘‘(2) a loan is made, guaranteed, or insured by a State or 

Federal governmental lending or insuring agency; 

‘‘(3) the transaction is secured by a first mortgage or lien 

on the consumer’s principal dwelling having an original principal obligation amount that— 

‘‘(A) does not exceed the amount of the maximum limitation on the original principal obligation of mortgage in 

effect for a residence of the applicable size, as of the date 

such interest rate set, pursuant to the sixth sentence of section 305(a)(2) the Federal Home Loan Mortgage Corporation Act (12 U.S.C. 1454(a)(2)), and the annual percentage 

rate will exceed the average prime offer rate as defined in 

section 129C by 1.5 or more percentage points; or 

‘‘(B) exceeds the amount of the maximum limitation on 

the original principal obligation of mortgage in effect for a 

residence of the applicable size, as of the date such interest 

rate set, pursuant to the sixth sentence of section 305(a)(2) 

the Federal Home Loan Mortgage Corporation Act (12 

U.S.C. 1454(a)(2)), and the annual percentage rate will exceed the average prime offer rate as defined in section 129C 

by 2.5 or more percentage points; or 

‘‘(4) so required pursuant to regulation. 


sroberts on DSKD5P82C1PROD with HEARING
817 

‘‘(c) EXEMPTIONS.—The Board may, by regulation, exempt from 

the requirements of subsection (a) a creditor that— 

‘‘(1) operates predominantly in rural or underserved areas; 

‘‘(2) together with all affiliates, has total annual mortgage 

loan originations that do not exceed a limit set by the Board; 

‘‘(3) retains its mortgage loan originations in portfolio; and 

‘‘(4) meets any asset size threshold and any other criteria 

the Board may establish, consistent with the purposes of this 

subtitle. 

‘‘(d) DURATION OF MANDATORY ESCROW OR IMPOUND AC- COUNT.—An escrow or impound account established pursuant to 

subsection (b) shall remain in existence for a minimum period of 5 

years, beginning with the date of the consummation of the loan, unless and until— 

‘‘(1) such borrower has sufficient equity in the dwelling securing the consumer credit transaction so as to no longer be required to maintain private mortgage insurance; 

‘‘(2) such borrower is delinquent; 

‘‘(3) such borrower otherwise has not complied with the 

legal obligation, as established by rule; or 

‘‘(4) the underlying mortgage establishing the account is 

terminated. 

‘‘(e) LIMITED EXEMPTIONS FOR LOANS SECURED BY SHARES IN

A COOPERATIVE OR IN WHICH AN ASSOCIATION MUST MAINTAIN A

MASTER INSURANCE POLICY.—Escrow accounts need not be established for loans secured by shares in a cooperative. Insurance premiums need not be included in escrow accounts for loans secured 

by dwellings or units, where the borrower must join an association 

as a condition of ownership, and that association has an obligation 

to the dwelling or unit owners to maintain a master policy insuring 

the dwellings or units. 

‘‘(f) CLARIFICATION ON ESCROW ACCOUNTS FOR LOANS NOT

MEETING STATUTORY TEST.—For mortgages not covered by the requirements of subsection (b), no provision of this section shall be 

construed as precluding the establishment of an impound, trust, or 

other type of account for the payment of property taxes, insurance 

premiums, or other purposes relating to the property— 

‘‘(1) on terms mutually agreeable to the parties to the loan; 

‘‘(2) at the discretion of the lender or servicer, as provided 

by the contract between the lender or servicer and the borrower; 

or 

‘‘(3) pursuant to the requirements for the escrowing of flood 

insurance payments for regulated lending institutions in section 

102(d) of the Flood Disaster Protection Act of 1973. 

‘‘(g) ADMINISTRATION OF MANDATORY ESCROW OR IMPOUND ACCOUNTS.— 

‘‘(1) IN GENERAL.—Except as may otherwise be provided for 

in this title or in regulations prescribed by the Board, escrow 

or impound accounts established pursuant to subsection (b) 

shall be established in a federally insured depository institution 

or credit union. 

‘‘(2) ADMINISTRATION.—Except as provided in this section 

or regulations prescribed under this section, an escrow or impound account subject to this section shall be administered in 

accordance with— 


sroberts on DSKD5P82C1PROD with HEARING
818 

‘‘(A) the Real Estate Settlement Procedures Act of 1974 

and regulations prescribed under such Act; 

‘‘(B) the Flood Disaster Protection Act of 1973 and regulations prescribed under such Act; and 

‘‘(C) the law of the State, if applicable, where the real 

property securing the consumer credit transaction is located. 

‘‘(3) APPLICABILITY OF PAYMENT OF INTEREST.—If prescribed by applicable State or Federal law, each creditor shall 

pay interest to the consumer on the amount held in any impound, trust, or escrow account that is subject to this section in 

the manner as prescribed by that applicable State or Federal 

law. 

‘‘(4) PENALTY COORDINATION WITH RESPA.—Any action or 

omission on the part of any person which constitutes a violation 

of the Real Estate Settlement Procedures Act of 1974 or any regulation prescribed under such Act for which the person has 

paid any fine, civil money penalty, or other damages shall not 

give rise to any additional fine, civil money penalty, or other 

damages under this section, unless the action or omission also 

constitutes a direct violation of this section. 

‘‘(h) DISCLOSURES RELATING TO MANDATORY ESCROW OR IMPOUND ACCOUNT.—In the case of any impound, trust, or escrow account that is required under subsection (b), the creditor shall disclose by written notice to the consumer at least 3 business days before the consummation of the consumer credit transaction giving 

rise to such account or in accordance with timeframes established 

in prescribed regulations the following information: 

‘‘(1) The fact that an escrow or impound account will be established at consummation of the transaction. 

‘‘(2) The amount required at closing to initially fund the escrow or impound account. 

‘‘(3) The amount, in the initial year after the consummation 

of the transaction, of the estimated taxes and hazard insurance, 

including flood insurance, if applicable, and any other required 

periodic payments or premiums that reflects, as appropriate, either the taxable assessed value of the real property securing the 

transaction, including the value of any improvements on the 

property or to be constructed on the property (whether or not 

such construction will be financed from the proceeds of the 

transaction) or the replacement costs of the property. 

‘‘(4) The estimated monthly amount payable to be escrowed 

for taxes, hazard insurance (including flood insurance, if applicable) and any other required periodic payments or premiums. 

‘‘(5) The fact that, if the consumer chooses to terminate the 

account in the future, the consumer will become responsible for 

the payment of all taxes, hazard insurance, and flood insurance, if applicable, as well as any other required periodic payments or premiums on the property unless a new escrow or impound account is established. 

‘‘(6) Such other information as the Board determines necessary for the protection of the consumer. 

‘‘(i) DEFINITIONS.—For purposes of this section, the following 

definitions shall apply: 


sroberts on DSKD5P82C1PROD with HEARING
819 

‘‘(1) FLOOD INSURANCE.—The term ‘flood insurance’ means 

flood insurance coverage provided under the national flood insurance program pursuant to the National Flood Insurance Act 

of 1968. 

‘‘(2) HAZARD INSURANCE.—The term ‘hazard insurance’ 

shall have the same meaning as provided for ‘hazard insurance’, ‘casualty insurance’, ‘homeowner’s insurance’, or other 

similar term under the law of the State where the real property 

securing the consumer credit transaction is located.’’. 

(b) EXEMPTIONS AND MODIFICATIONS.—The Board may prescribe rules that revise, add to, or subtract from the criteria of section 129D(b) of the Truth in Lending Act if the Board determines 

that such rules are in the interest of consumers and in the public 

interest. 

(c) CLERICAL AMENDMENT.—The table of sections for chapter 2 

of the Truth in Lending Act is amended by inserting after the item 

relating to section 129C (as added by section 1411) the following 

new item: 

‘‘129D. Escrow or impound accounts relating to certain consumer credit transactions.’’. 

SEC. 1462. DISCLOSURE NOTICE REQUIRED FOR CONSUMERS WHO 

WAIVE ESCROW SERVICES. 

Section 129D of the Truth in Lending Act (as added by section 

1461) is amended by adding at the end the following new subsection: 

‘‘(j) DISCLOSURE NOTICE REQUIRED FOR CONSUMERS WHO

WAIVE ESCROW SERVICES.— 

‘‘(1) IN GENERAL.—If— 

‘‘(A) an impound, trust, or other type of account for the 

payment of property taxes, insurance premiums, or other 

purposes relating to real property securing a consumer 

credit transaction is not established in connection with the 

transaction; or 

‘‘(B) a consumer chooses, and provides written notice to 

the creditor or servicer of such choice, at any time after 

such an account is established in connection with any such 

transaction and in accordance with any statute, regulation, 

or contractual agreement, to close such account, 

the creditor or servicer shall provide a timely and clearly written disclosure to the consumer that advises the consumer of the 

responsibilities of the consumer and implications for the consumer in the absence of any such account. 

‘‘(2) DISCLOSURE REQUIREMENTS.—Any disclosure provided 

to a consumer under paragraph (1) shall include the following: 

‘‘(A) Information concerning any applicable fees or 

costs associated with either the non-establishment of any 

such account at the time of the transaction, or any subsequent closure of any such account. 

‘‘(B) A clear and prominent statement that the consumer is responsible for personally and directly paying the 

non-escrowed items, in addition to paying the mortgage 

loan payment, in the absence of any such account, and the 

fact that the costs for taxes, insurance, and related fees can 

be substantial. 


sroberts on DSKD5P82C1PROD with HEARING
820 

‘‘(C) A clear explanation of the consequences of any failure to pay non-escrowed items, including the possible requirement for the forced placement of insurance by the 

creditor or servicer and the potentially higher cost (including any potential commission payments to the servicer) or 

reduced coverage for the consumer in the event of any such 

creditor-placed insurance. 

‘‘(D) Such other information as the Board determines 

necessary for the protection of the consumer.’’. 

SEC. 1463. REAL ESTATE SETTLEMENT PROCEDURES ACT OF 1974 

AMENDMENTS. 

(a) SERVICER PROHIBITIONS.—Section 6 of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2605) is amended by 

adding at the end the following new subsections: 

‘‘(k) SERVICER PROHIBITIONS.— 

‘‘(1) IN GENERAL.—A servicer of a federally related mortgage shall not— 

‘‘(A) obtain force-placed hazard insurance unless there 

is a reasonable basis to believe the borrower has failed to 

comply with the loan contract’s requirements to maintain 

property insurance; 

‘‘(B) charge fees for responding to valid qualified written requests (as defined in regulations which the Bureau of 

Consumer Financial Protection shall prescribe) under this 

section; 

‘‘(C) fail to take timely action to respond to a borrower’s 

requests to correct errors relating to allocation of payments, 

final balances for purposes of paying off the loan, or avoiding foreclosure, or other standard servicer’s duties; 

‘‘(D) fail to respond within 10 business days to a request from a borrower to provide the identity, address, and 

other relevant contact information about the owner or assignee of the loan; or 

‘‘(E) fail to comply with any other obligation found by 

the Bureau of Consumer Financial Protection, by regulation, to be appropriate to carry out the consumer protection 

purposes of this Act. 

‘‘(2) FORCE-PLACED INSURANCE DEFINED.—For purposes of 

this subsection and subsections (l) and (m), the term ‘forceplaced insurance’ means hazard insurance coverage obtained by 

a servicer of a federally related mortgage when the borrower 

has failed to maintain or renew hazard insurance on such property as required of the borrower under the terms of the mortgage. 

‘‘(l) REQUIREMENTS FOR FORCE-PLACED INSURANCE.—A servicer 

of a federally related mortgage shall not be construed as having a 

reasonable basis for obtaining force-placed insurance unless the requirements of this subsection have been met. 

‘‘(1) WRITTEN NOTICES TO BORROWER.—A servicer may not 

impose any charge on any borrower for force-placed insurance 

with respect to any property securing a federally related mortgage unless— 

‘‘(A) the servicer has sent, by first-class mail, a written 

notice to the borrower containing— 


sroberts on DSKD5P82C1PROD with HEARING
821 

‘‘(i) a reminder of the borrower’s obligation to 

maintain hazard insurance on the property securing 

the federally related mortgage; 

‘‘(ii) a statement that the servicer does not have evidence of insurance coverage of such property; 

‘‘(iii) a clear and conspicuous statement of the procedures by which the borrower may demonstrate that 

the borrower already has insurance coverage; and 

‘‘(iv) a statement that the servicer may obtain such 

coverage at the borrower’s expense if the borrower does 

not provide such demonstration of the borrower’s existing coverage in a timely manner; 

‘‘(B) the servicer has sent, by first-class mail, a second 

written notice, at least 30 days after the mailing of the notice under subparagraph (A) that contains all the information described in each clause of such subparagraph; and 

‘‘(C) the servicer has not received from the borrower 

any demonstration of hazard insurance coverage for the 

property securing the mortgage by the end of the 15-day period beginning on the date the notice under subparagraph 

(B) was sent by the servicer. 

‘‘(2) SUFFICIENCY OF DEMONSTRATION.—A servicer of a federally related mortgage shall accept any reasonable form of 

written confirmation from a borrower of existing insurance coverage, which shall include the existing insurance policy number 

along with the identity of, and contact information for, the insurance company or agent, or as otherwise required by the Bureau of Consumer Financial Protection. 

‘‘(3) TERMINATION OF FORCE-PLACED INSURANCE.—Within 

15 days of the receipt by a servicer of confirmation of a borrower’s existing insurance coverage, the servicer shall— 

‘‘(A) terminate the force-placed insurance; and 

‘‘(B) refund to the consumer all force-placed insurance 

premiums paid by the borrower during any period during 

which the borrower’s insurance coverage and the forceplaced insurance coverage were each in effect, and any related fees charged to the consumer’s account with respect to 

the force-placed insurance during such period. 

‘‘(4) CLARIFICATION WITH RESPECT TO FLOOD DISASTER PRO- TECTION ACT.—No provision of this section shall be construed 

as prohibiting a servicer from providing simultaneous or concurrent notice of a lack of flood insurance pursuant to section 

102(e) of the Flood Disaster Protection Act of 1973. 

‘‘(m) LIMITATIONS ON FORCE-PLACED INSURANCE CHARGES.—All 

charges, apart from charges subject to State regulation as the business of insurance, related to force-placed insurance imposed on the 

borrower by or through the servicer shall be bona fide and reasonable.’’. 

(b) INCREASE IN PENALTY AMOUNTS.—Section 6(f) of the Real 

Estate Settlement Procedures Act of 1974 (12 U.S.C. 2605(f)) is 

amended— 

(1) in paragraphs (1)(B) and (2)(B), by striking ‘‘$1,000’’ each place such term appears and inserting ‘‘$2,000’’; and (2) in paragraph (2)(B)(i), by striking ‘‘$500,000’’ and in- serting ‘‘$1,000,000’’. 


sroberts on DSKD5P82C1PROD with HEARING
822 

(c) DECREASE IN RESPONSE TIMES.—Section 6(e) of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2605(e)) is 

amended— 

(1) in paragraph (1)(A), by striking ‘‘20 days’’ and inserting 

‘‘5 days’’; 

(2) in paragraph (2), by striking ‘‘60 days’’ and inserting 

‘‘30 days’’; and 

(3) by adding at the end the following new paragraph: 

‘‘(4) LIMITED EXTENSION OF RESPONSE TIME.—The 30-day 

period described in paragraph (2) may be extended for not more 

than 15 days if, before the end of such 30-day period, the 

servicer notifies the borrower of the extension and the reasons 

for the delay in responding.’’. 

(d) PROMPT REFUND OF ESCROW ACCOUNTS UPON PAYOFF.— 

Section 6(g) of the Real Estate Settlement Procedures Act of 1974 

(12 U.S.C. 2605(g)) is amended by adding at the end the following 

new sentence: ‘‘Any balance in any such account that is within the 

servicer’s control at the time the loan is paid off shall be promptly 

returned to the borrower within 20 business days or credited to a 

similar account for a new mortgage loan to the borrower with the 

same lender.’’. 

SEC. 1464. TRUTH IN LENDING ACT AMENDMENTS. 

(a) REQUIREMENTS FOR PROMPT CREDITING OF HOME LOAN

PAYMENTS.—Chapter 2 of the Truth in Lending Act (15 U.S.C. 1631 

et seq.) is amended by inserting after section 129E (as added by section 1472) the following new section: 

‘‘§ 129F. Requirements for prompt crediting of home loan payments 

‘‘(a) IN GENERAL.—In connection with a consumer credit transaction secured by a consumer’s principal dwelling, no servicer shall 

fail to credit a payment to the consumer’s loan account as of the 

date of receipt, except when a delay in crediting does not result in 

any charge to the consumer or in the reporting of negative information to a consumer reporting agency, except as required in subsection (b). 

‘‘(b) EXCEPTION.—If a servicer specifies in writing requirements 

for the consumer to follow in making payments, but accepts a payment that does not conform to the requirements, the servicer shall 

credit the payment as of 5 days after receipt.’’. 

(b) REQUESTS FOR PAYOFF AMOUNTS.—Chapter 2 of the Truth 

in Lending Act (15 U.S.C. 1631 et seq.), as amended by this title, 

is amended by inserting after section 129F (as added by subsection 

(a)) the following new section: 

‘‘§ 129G. Requests for payoff amounts of home loan 

‘‘A creditor or servicer of a home loan shall send an accurate 

payoff balance within a reasonable time, but in no case more than 

7 business days, after the receipt of a written request for such balance from or on behalf of the borrower.’’. 

SEC. 1465. ESCROWS INCLUDED IN REPAYMENT ANALYSIS. 

Section 128(b) of the Truth in Lending Act (15 U.S.C. 1638(b)) 

is amended by adding at the end the following new paragraph: 


sroberts on DSKD5P82C1PROD with HEARING
823 

‘‘(4) REPAYMENT ANALYSIS REQUIRED TO INCLUDE ESCROW

PAYMENTS.— 

‘‘(A) IN GENERAL.—In the case of any consumer credit 

transaction secured by a first mortgage or lien on the principal dwelling of the consumer, other than a consumer 

credit transaction under an open end credit plan or a reverse mortgage, for which an impound, trust, or other type 

of account has been or will be established in connection 

with the transaction for the payment of property taxes, hazard and flood (if any) insurance premiums, or other periodic payments or premiums with respect to the property, 

the information required to be provided under subsection 

(a) with respect to the number, amount, and due dates or 

period of payments scheduled to repay the total of payments 

shall take into account the amount of any monthly payment 

to such account for each such repayment in accordance 

with section 10(a)(2) of the Real Estate Settlement Procedures Act of 1974. 

‘‘(B) ASSESSMENT VALUE.—The amount taken into account under subparagraph (A) for the payment of property 

taxes, hazard and flood (if any) insurance premiums, or 

other periodic payments or premiums with respect to the 

property shall reflect the taxable assessed value of the real 

property securing the transaction after the consummation of 

the transaction, including the value of any improvements 

on the property or to be constructed on the property (whether or not such construction will be financed from the proceeds of the transaction), if known, and the replacement 

costs of the property for hazard insurance, in the initial 

year after the transaction.’’. 

Subtitle F—Appraisal Activities 

SEC. 1471. PROPERTY APPRAISAL REQUIREMENTS. 

Chapter 2 of the Truth in Lending Act (15 U.S.C. 1631 et seq.) 

is amended by inserting after 129G (as added by section 1464(b)) 

the following new section: 

‘‘§ 129H. Property appraisal requirements 

‘‘(a) IN GENERAL.—A creditor may not extend credit in the form 

of a higher-risk mortgage to any consumer without first obtaining 

a written appraisal of the property to be mortgaged prepared in accordance with the requirements of this section. 

‘‘(b) APPRAISAL REQUIREMENTS.— ‘‘(1) PHYSICAL PROPERTY VISIT.—Subject to the rules prescribed under paragraph (4), an appraisal of property to be secured by a higher-risk mortgage does not meet the requirement 

of this section unless it is performed by a certified or licensed 

appraiser who conducts a physical property visit of the interior 

of the mortgaged property. 

‘‘(2) SECOND APPRAISAL UNDER CERTAIN CIRCUMSTANCES.— ‘‘(A) IN GENERAL.—If the purpose of a higher-risk mortgage is to finance the purchase or acquisition of the mortgaged property from a person within 180 days of the purchase or acquisition of such property by that person at a 

price that was lower than the current sale price of the propVerDate Mar 15 2010 04:29 Jul 07, 2010 Jkt 057098 PO 00000 Frm 00827 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
824 

erty, the creditor shall obtain a second appraisal from a 

different certified or licensed appraiser. The second appraisal shall include an analysis of the difference in sale 

prices, changes in market conditions, and any improvements made to the property between the date of the previous 

sale and the current sale. 

‘‘(B) NO COST TO APPLICANT.—The cost of any second 

appraisal required under subparagraph (A) may not be 

charged to the applicant. 

‘‘(3) CERTIFIED OR LICENSED APPRAISER DEFINED.—For purposes of this section, the term ‘certified or licensed appraiser’ 

means a person who— 

‘‘(A) is, at a minimum, certified or licensed by the State 

in which the property to be appraised is located; and 

‘‘(B) performs each appraisal in conformity with the 

Uniform Standards of Professional Appraisal Practice and 

title XI of the Financial Institutions Reform, Recovery, and 

Enforcement Act of 1989, and the regulations prescribed 

under such title, as in effect on the date of the appraisal. 

‘‘(4) REGULATIONS.— ‘‘(A) IN GENERAL.—The Board, the Comptroller of the 

Currency, the Federal Deposit Insurance Corporation, the 

National Credit Union Administration Board, the Federal 

Housing Finance Agency, and the Bureau shall jointly prescribe regulations to implement this section. 

‘‘(B) EXEMPTION.—The agencies listed in subparagraph 

(A) may jointly exempt, by rule, a class of loans from the 

requirements of this subsection or subsection (a) if the agencies determine that the exemption is in the public interest 

and promotes the safety and soundness of creditors. 

‘‘(c) FREE COPY OF APPRAISAL.—A creditor shall provide 1 copy 

of each appraisal conducted in accordance with this section in connection with a higher-risk mortgage to the applicant without charge, 

and at least 3 days prior to the transaction closing date. 

‘‘(d) CONSUMER NOTIFICATION.—At the time of the initial mortgage application, the applicant shall be provided with a statement 

by the creditor that any appraisal prepared for the mortgage is for 

the sole use of the creditor, and that the applicant may choose to 

have a separate appraisal conducted at the expense of the applicant. 

‘‘(e) VIOLATIONS.—In addition to any other liability to any person under this title, a creditor found to have willfully failed to obtain an appraisal as required in this section shall be liable to the 

applicant or borrower for the sum of $2,000. 

‘‘(f) HIGHER-RISK MORTGAGE DEFINED.—For purposes of this 

section, the term ‘higher-risk mortgage’ means a residential mortgage loan, other than a reverse mortgage loan that is a qualified 

mortgage, as defined in section 129C, secured by a principal dwelling— 

‘‘(1) that is not a qualified mortgage, as defined in section 

129C; and 

‘‘(2) with an annual percentage rate that exceeds the average prime offer rate for a comparable transaction, as defined in 

section 129C, as of the date the interest rate is set— 

‘‘(A) by 1.5 or more percentage points, in the case of a 

first lien residential mortgage loan having an original 


sroberts on DSKD5P82C1PROD with HEARING
825 

principal obligation amount that does not exceed the 

amount of the maximum limitation on the original principal obligation of mortgage in effect for a residence of the 

applicable size, as of the date of such interest rate set, pursuant to the sixth sentence of section 305(a)(2) the Federal 

Home Loan Mortgage Corporation Act (12 U.S.C. 

1454(a)(2)); 

‘‘(B) by 2.5 or more percentage points, in the case of a 

first lien residential mortgage loan having an original 

principal obligation amount that exceeds the amount of the 

maximum limitation on the original principal obligation of 

mortgage in effect for a residence of the applicable size, as 

of the date of such interest rate set, pursuant to the sixth 

sentence of section 305(a)(2) the Federal Home Loan Mortgage Corporation Act (12 U.S.C. 1454(a)(2)); and 

‘‘(C) by 3.5 or more percentage points for a subordinate 

lien residential mortgage loan.’’. 

SEC. 1472. APPRAISAL INDEPENDENCE REQUIREMENTS. 

(a) IN GENERAL.—Chapter 2 of the Truth in Lending Act (15 

U.S.C. 1631 et seq.) is amended by inserting after section 129D (as 

added by section 1461(a)) the following new section: 

‘‘§ 129E. Appraisal independence requirements 

‘‘(a) IN GENERAL.—It shall be unlawful, in extending credit or 

in providing any services for a consumer credit transaction secured 

by the principal dwelling of the consumer, to engage in any act or 

practice that violates appraisal independence as described in or pursuant to regulations prescribed under this section. 

‘‘(b) APPRAISAL INDEPENDENCE.—For purposes of subsection (a), 

acts or practices that violate appraisal independence shall include— 

‘‘(1) any appraisal of a property offered as security for repayment of the consumer credit transaction that is conducted in 

connection with such transaction in which a person with an interest in the underlying transaction compensates, coerces, extorts, colludes, instructs, induces, bribes, or intimidates a person, appraisal management company, firm, or other entity conducting or involved in an appraisal, or attempts, to compensate, 

coerce, extort, collude, instruct, induce, bribe, or intimidate such 

a person, for the purpose of causing the appraised value assigned, under the appraisal, to the property to be based on any 

factor other than the independent judgment of the appraiser; 

‘‘(2) mischaracterizing, or suborning any mischaracterization of, the appraised value of the property securing the extension of the credit; 

‘‘(3) seeking to influence an appraiser or otherwise to encourage a targeted value in order to facilitate the making or 

pricing of the transaction; and 

‘‘(4) withholding or threatening to withhold timely payment 

for an appraisal report or for appraisal services rendered when 

the appraisal report or services are provided for in accordance 

with the contract between the parties. 

‘‘(c) EXCEPTIONS.—The requirements of subsection (b) shall not 

be construed as prohibiting a mortgage lender, mortgage broker, 

mortgage banker, real estate broker, appraisal management company, employee of an appraisal management company, consumer, or 


sroberts on DSKD5P82C1PROD with HEARING
826 

any other person with an interest in a real estate transaction from 

asking an appraiser to undertake 1 or more of the following: 

‘‘(1) Consider additional, appropriate property information, 

including the consideration of additional comparable properties 

to make or support an appraisal. 

‘‘(2) Provide further detail, substantiation, or explanation 

for the appraiser’s value conclusion. 

‘‘(3) Correct errors in the appraisal report. 

‘‘(d) PROHIBITIONS ON CONFLICTS OF INTEREST.—No certified or 

licensed appraiser conducting, and no appraisal management company procuring or facilitating, an appraisal in connection with a 

consumer credit transaction secured by the principal dwelling of a 

consumer may have a direct or indirect interest, financial or otherwise, in the property or transaction involving the appraisal. 

‘‘(e) MANDATORY REPORTING.—Any mortgage lender, mortgage 

broker, mortgage banker, real estate broker, appraisal management 

company, employee of an appraisal management company, or any 

other person involved in a real estate transaction involving an appraisal in connection with a consumer credit transaction secured by 

the principal dwelling of a consumer who has a reasonable basis to 

believe an appraiser is failing to comply with the Uniform Standards of Professional Appraisal Practice, is violating applicable laws, 

or is otherwise engaging in unethical or unprofessional conduct, 

shall refer the matter to the applicable State appraiser certifying 

and licensing agency. 

‘‘(f) NO EXTENSION OF CREDIT.—In connection with a consumer 

credit transaction secured by a consumer’s principal dwelling, a 

creditor who knows, at or before loan consummation, of a violation 

of the appraisal independence standards established in subsections 

(b) or (d) shall not extend credit based on such appraisal unless the 

creditor documents that the creditor has acted with reasonable diligence to determine that the appraisal does not materially misstate 

or misrepresent the value of such dwelling. 

‘‘(g) RULES AND INTERPRETIVE GUIDELINES.— 

‘‘(1) IN GENERAL.—Except as provided under paragraph (2), 

the Board, the Comptroller of the Currency, the Federal Deposit 

Insurance Corporation, the National Credit Union Administration Board, the Federal Housing Finance Agency, and the Bureau may jointly issue rules, interpretive guidelines, and general statements of policy with respect to acts or practices that 

violate appraisal independence in the provision of mortgage 

lending services for a consumer credit transaction secured by 

the principal dwelling of the consumer and mortgage brokerage 

services for such a transaction, within the meaning of subsections (a), (b), (c), (d), (e), (f), (h), and (i). 

‘‘(2) INTERIM FINAL REGULATIONS.—The Board shall, for 

purposes of this section, prescribe interim final regulations no 

later than 90 days after the date of enactment of this section defining with specificity acts or practices that violate appraisal 

independence in the provision of mortgage lending services for 

a consumer credit transaction secured by the principal dwelling 

of the consumer or mortgage brokerage services for such a 

transaction and defining any terms in this section or such regulations. Rules prescribed by the Board under this paragraph 


sroberts on DSKD5P82C1PROD with HEARING
827 

shall be deemed to be rules prescribed by the agencies jointly 

under paragraph (1). 

‘‘(h) APPRAISAL REPORT PORTABILITY.—Consistent with the requirements of this section, the Board, the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the National 

Credit Union Administration Board, the Federal Housing Finance 

Agency, and the Bureau may jointly issue regulations that address 

the issue of appraisal report portability, including regulations that 

ensure the portability of the appraisal report between lenders for a 

consumer credit transaction secured by a 1–4 unit single family residence that is the principal dwelling of the consumer, or mortgage 

brokerage services for such a transaction. 

‘‘(i) CUSTOMARY AND REASONABLE FEE.— ‘‘(1) IN GENERAL.—Lenders and their agents shall compensate fee appraisers at a rate that is customary and reasonable for appraisal services performed in the market area of the 

property being appraised. Evidence for such fees may be established by objective third-party information, such as government 

agency fee schedules, academic studies, and independent private sector surveys. Fee studies shall exclude assignments ordered by known appraisal management companies. 

‘‘(2) FEE APPRAISER DEFINITION.—For purposes of this section, the term ‘fee appraiser’ means a person who is not an employee of the mortgage loan originator or appraisal management company engaging the appraiser and is— 

‘‘(A) a State licensed or certified appraiser who receives 

a fee for performing an appraisal and certifies that the appraisal has been prepared in accordance with the Uniform 

Standards of Professional Appraisal Practice; or 

‘‘(B) a company not subject to the requirements of section 1124 of the Financial Institutions Reform, Recovery, 

and Enforcement Act of 1989 (12 U.S.C. 3331 et seq.) that 

utilizes the services of State licensed or certified appraisers 

and receives a fee for performing appraisals in accordance 

with the Uniform Standards of Professional Appraisal 

Practice. 

‘‘(3) EXCEPTION FOR COMPLEX ASSIGNMENTS.—In the case of 

an appraisal involving a complex assignment, the customary 

and reasonable fee may reflect the increased time, difficulty, 

and scope of the work required for such an appraisal and include an amount over and above the customary and reasonable 

fee for non-complex assignments. 

‘‘(j) SUNSET.—Effective on the date the interim final regulations 

are promulgated pursuant to subsection (g), the Home Valuation 

Code of Conduct announced by the Federal Housing Finance Agency 

on December 23, 2008, shall have no force or effect. 

‘‘(k) PENALTIES.— 

‘‘(1) FIRST VIOLATION.—In addition to the enforcement provisions referred to in section 130, each person who violates this 

section shall forfeit and pay a civil penalty of not more than 

$10,000 for each day any such violation continues. 

‘‘(2) SUBSEQUENT VIOLATIONS.—In the case of any person 

on whom a civil penalty has been imposed under paragraph (1), 

paragraph (1) shall be applied by substituting ‘$20,000’ for 

‘$10,000’ with respect to all subsequent violations. 


sroberts on DSKD5P82C1PROD with HEARING
828 

‘‘(3) ASSESSMENT.—The agency referred to in subsection (a) 

or (c) of section 108 with respect to any person described in 

paragraph (1) shall assess any penalty under this subsection to 

which such person is subject.’’. 

(b) CLERICAL AMENDMENT.—The table of sections for chapter 2 

of the Truth in Lending Act is amended by inserting after the item 

relating to section 129D (as added by section 1461(c)) the following 

new items: 

‘‘129E. Appraisal independence requirements. 

‘‘129F. Requirements for prompt crediting of home loan payments. 

‘‘129G. Requests for payoff amounts of home loan. 

‘‘129H. Property appraisal requirements.’’. 

(c) DEFERENCE.—Section 105 of the Truth in Lending Act (15 

U.S.C. 1604) is amended by adding at the end the following: 

‘‘(h) DEFERENCE.—Notwithstanding any power granted to any 

Federal agency under this title, the deference that a court affords to 

the Bureau with respect to a determination made by the Bureau relating to the meaning or interpretation of any provision of this title, 

other than section 129E or 129H, shall be applied as if the Bureau 

were the only agency authorized to apply, enforce, interpret, or administer the provisions of this title.’’. 

(d) CONFORMING AMENDMENTS IN TITLE X NOT APPLICABLE TO

SECTIONS 129E AND 129H.—Notwithstanding section 1099A, the 

term ‘‘Board’’ in sections 129E and 129H, as added by this subtitle, 

shall not be substituted by the term ‘‘Bureau’’. 

SEC. 1473. AMENDMENTS RELATING TO APPRAISAL SUBCOMMITTEE 

OF FFIEC, APPRAISER INDEPENDENCE MONITORING, APPROVED APPRAISER EDUCATION, APPRAISAL MANAGEMENT COMPANIES, APPRAISER COMPLAINT HOTLINE, 

AUTOMATED VALUATION MODELS, AND BROKER PRICE 

OPINIONS. 

(a) THRESHOLD LEVELS.—Section 1112(b) of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 

3341(b)) is amended by inserting before the period the following: ‘‘, 

and receives concurrence from the Bureau of Consumer Financial 

Protection that such threshold level provides reasonable protection 

for consumers who purchase 1–4 unit single-family residences’’. 

(b) ANNUAL REPORT OF APPRAISAL SUBCOMMITTEE.—Section 

1103(a) of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 3332(a)) is amended at the end by inserting the following new paragraph: 

‘‘(5) transmit an annual report to the Congress not later 

than June 15 of each year that describes the manner in which 

each function assigned to the Appraisal Subcommittee has been 

carried out during the preceding year. The report shall also detail the activities of the Appraisal Subcommittee, including the 

results of all audits of State appraiser regulatory agencies, and 

provide an accounting of disapproved actions and warnings 

taken in the previous year, including a description of the conditions causing the disapproval and actions taken to achieve compliance.’’. 

(c) OPEN MEETINGS.—Section 1104(b) of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 

3333(b)) is amended— 

(1) by inserting ‘‘in public session after notice in the Federal Register, but may close certain portions of these meetings 


sroberts on DSKD5P82C1PROD with HEARING
829 

related to personnel and review of preliminary State audit reports,’’ after ‘‘shall meet’’; and 

(2) by adding after the final period the following: ‘‘The subject matter discussed in any closed or executive session shall be 

described in the Federal Register notice of the meeting.’’. 

(d) REGULATIONS.—Section 1106 of the Financial Institutions 

Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 3335) is 

amended— 

(1) by inserting ‘‘prescribe regulations in accordance with 

chapter 5 of title 5, United States Code (commonly referred to 

as the Administrative Procedures Act) after notice and opportunity for comment,’’ after ‘‘hold hearings’’; and 

(2) at the end by inserting ‘‘Any regulations prescribed by 

the Appraisal Subcommittee shall (unless otherwise provided in 

this title) be limited to the following functions: temporary practice, national registry, information sharing, and enforcement. 

For purposes of prescribing regulations, the Appraisal Subcommittee shall establish an advisory committee of industry 

participants, including appraisers, lenders, consumer advocates, real estate agents, and government agencies, and hold 

meetings as necessary to support the development of regulations.’’. 

(e) APPRAISAL REVIEWS AND COMPLEX APPRAISALS.— (1) SECTION 1110.—Section 1110 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 

3339) is amended— 

(A) in paragraph (1), by striking ‘‘and’’; 

(B) in paragraph (2), by striking the period at the end 

and inserting ‘‘; and’’; and 

(C) by inserting after paragraph (2) the following: 

‘‘(3) that such appraisals shall be subject to appropriate review for compliance with the Uniform Standards of Professional Appraisal Practice.’’. 

(2) SECTION 1113.—Section 1113 of the Financial Institutions and Reform, Recovery, and Enforcement Act of 1989 (12 

U.S.C. 3342) is amended by inserting before the period the following: ‘‘, where a complex 1- to 4-unit single family residential 

appraisal means an appraisal for which the property to be appraised, the form of ownership, the property characteristics, or 

the market conditions are atypical’’. 

(f) APPRAISAL MANAGEMENT SERVICES.— 

(1) SUPERVISION OF THIRD-PARTY PROVIDERS OF APPRAISAL

MANAGEMENT SERVICES.—Section 1103(a) of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 

U.S.C. 3332(a)) (as previously amended by this section) is 

amended— 

(A) by amending paragraph (1) to read as follows: 

‘‘(1) monitor the requirements established by States— 

‘‘(A) for the certification and licensing of individuals 

who are qualified to perform appraisals in connection with 

federally related transactions, including a code of professional responsibility; and 

‘‘(B) for the registration and supervision of the operations and activities of an appraisal management company;’’; and 


sroberts on DSKD5P82C1PROD with HEARING
830 

(B) by adding at the end the following new paragraph: 

‘‘(6) maintain a national registry of appraisal management 

companies that either are registered with and subject to supervision of a State appraiser certifying and licensing agency or 

are operating subsidiaries of a Federally regulated financial institution.’’. 

(2) APPRAISAL MANAGEMENT COMPANY MINIMUM REQUIRE- MENTS.—Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 3331 et seq.) is 

amended by adding at the end the following new section (and 

amending the table of contents accordingly): 

‘‘SEC. 1124. APPRAISAL MANAGEMENT COMPANY MINIMUM REQUIREMENTS. 

‘‘(a) IN GENERAL.—The Board of Governors of the Federal Reserve System, the Comptroller of the Currency, the Federal Deposit 

Insurance Corporation, the National Credit Union Administration 

Board, the Federal Housing Finance Agency, and the Bureau of 

Consumer Financial Protection shall jointly, by rule, establish minimum requirements to be applied by a State in the registration of 

appraisal management companies. Such requirements shall include 

a requirement that such companies— 

‘‘(1) register with and be subject to supervision by a State 

appraiser certifying and licensing agency in each State in 

which such company operates; 

‘‘(2) verify that only licensed or certified appraisers are used 

for federally related transactions; 

‘‘(3) require that appraisals coordinated by an appraisal 

management company comply with the Uniform Standards of 

Professional Appraisal Practice; and 

‘‘(4) require that appraisals are conducted independently 

and free from inappropriate influence and coercion pursuant to 

the appraisal independence standards established under section 

129E of the Truth in Lending Act. 

‘‘(b) RELATION TO STATE LAW.—Nothing in this section shall be 

construed to prevent States from establishing requirements in addition to any rules promulgated under subsection (a). 

‘‘(c) FEDERALLY REGULATED FINANCIAL INSTITUTIONS.—The requirements of subsection (a) shall apply to an appraisal management company that is a subsidiary owned and controlled by a financial institution and regulated by a Federal financial institution 

regulatory agency. An appraisal management company that is a 

subsidiary owned and controlled by a financial institution regulated 

by a Federal financial institution regulatory agency shall not be required to register with a State. 

‘‘(d) REGISTRATION LIMITATIONS.—An appraisal management 

company shall not be registered by a State or included on the national registry if such company, in whole or in part, directly or indirectly, is owned by any person who has had an appraiser license or 

certificate refused, denied, cancelled, surrendered in lieu of revocation, or revoked in any State. Additionally, each person that owns 

more than 10 percent of an appraisal management company shall 

be of good moral character, as determined by the State appraiser 

certifying and licensing agency, and shall submit to a background 

investigation carried out by the State appraiser certifying and licensing agency. 


sroberts on DSKD5P82C1PROD with HEARING
831 

‘‘(e) REPORTING.—The Board of Governors of the Federal Reserve System, the Comptroller of the Currency, the Federal Deposit 

Insurance Corporation, the National Credit Union Administration 

Board, the Federal Housing Finance Agency, and the Bureau of 

Consumer Financial Protection shall jointly promulgate regulations 

for the reporting of the activities of appraisal management companies to the Appraisal Subcommittee in determining the payment of 

the annual registry fee. 

‘‘(f) EFFECTIVE DATE.— 

‘‘(1) IN GENERAL.—No appraisal management company may 

perform services related to a federally related transaction in a 

State after the date that is 36 months after the date on which 

the regulations required to be prescribed under subsection (a) 

are prescribed in final form unless such company is registered 

with such State or subject to oversight by a Federal financial 

institutions regulatory agency. 

‘‘(2) EXTENSION OF EFFECTIVE DATE.—Subject to the approval of the Council, the Appraisal Subcommittee may extend 

by an additional 12 months the requirements for the registration and supervision of appraisal management companies if it 

makes a written finding that a State has made substantial 

progress in establishing a State appraisal management company registration and supervision system that appears to conform with the provisions of this title.’’. 

(3) STATE APPRAISER CERTIFYING AND LICENSING AGENCY

AUTHORITY.—Section 1117 of the Financial Institutions Reform, 

Recovery, and Enforcement Act of 1989 (12 U.S.C. 3346) is 

amended by adding at the end the following: ‘‘The duties of 

such agency may additionally include the registration and supervision of appraisal management companies and the addition 

of information about the appraisal management company to the 

national registry.’’. 

(4) APPRAISAL MANAGEMENT COMPANY DEFINITION.—Section 

1121 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 3350) is amended by adding 

at the end the following: 

‘‘(11) APPRAISAL MANAGEMENT COMPANY.—The term ‘appraisal management company’ means, in connection with valuing properties collateralizing mortgage loans or mortgages incorporated into a securitization, any external third party authorized either by a creditor of a consumer credit transaction secured by a consumer’s principal dwelling or by an underwriter 

of or other principal in the secondary mortgage markets, that 

oversees a network or panel of more than 15 certified or licensed 

appraisers in a State or 25 or more nationally within a given 

year— 

‘‘(A) to recruit, select, and retain appraisers; 

‘‘(B) to contract with licensed and certified appraisers 

to perform appraisal assignments; 

‘‘(C) to manage the process of having an appraisal performed, including providing administrative duties such as 

receiving appraisal orders and appraisal reports, submitting completed appraisal reports to creditors and underwriters, collecting fees from creditors and underwriters for 


sroberts on DSKD5P82C1PROD with HEARING
832 

services provided, and reimbursing appraisers for services 

performed; or 

‘‘(D) to review and verify the work of appraisers.’’. 

(g) STATE AGENCY REPORTING REQUIREMENT.—Section 1109(a) 

of the Financial Institutions Reform, Recovery, and Enforcement Act 

of 1989 (12 U.S.C. 3338(a)) is amended— 

(1) by striking ‘‘and’’ after the semicolon in paragraph (1); 

(2) by redesignating paragraph (2) as paragraph (4); and 

(3) by inserting after paragraph (1) the following new paragraphs: 

‘‘(2) transmit reports on the issuance and renewal of licenses and certifications, sanctions, disciplinary actions, license 

and certification revocations, and license and certification suspensions on a timely basis to the national registry of the Appraisal Subcommittee; 

‘‘(3) transmit reports on a timely basis of supervisory activities involving appraisal management companies or other thirdparty providers of appraisals and appraisal management services, including investigations initiated and disciplinary actions 

taken; and’’. 

(h) REGISTRY FEES MODIFIED.— (1) IN GENERAL.—Section 1109(a) of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 

3338(a)) is amended— 

(A) by amending paragraph (4) (as modified by section 

1473(g)) to read as follows: 

‘‘(4) collect— 

‘‘(A) from such individuals who perform or seek to perform appraisals in federally related transactions, an annual registry fee of not more than $40, such fees to be 

transmitted by the State agencies to the Council on an annual basis; and 

‘‘(B) from an appraisal management company that either has registered with a State appraiser certifying and licensing agency in accordance with this title or operates as 

a subsidiary of a federally regulated financial institution, 

an annual registry fee of— 

‘‘(i) in the case of such a company that has been in 

existence for more than a year, $25 multiplied by the 

number of appraisers working for or contracting with 

such company in such State during the previous year, 

but where such $25 amount may be adjusted, up to a 

maximum of $50, at the discretion of the Appraisal 

Subcommittee, if necessary to carry out the Subcommittee’s functions under this title; and 

‘‘(ii) in the case of such a company that has not 

been in existence for more than a year, $25 multiplied 

by an appropriate number to be determined by the Appraisal Subcommittee, and where such number will be 

used for determining the fee of all such companies that 

were not in existence for more than a year, but where 

such $25 amount may be adjusted, up to a maximum 

of $50, at the discretion of the Appraisal Subcommittee, if necessary to carry out the Subcommittee’s 

functions under this title.’’; and 


sroberts on DSKD5P82C1PROD with HEARING
833 

(B) by amending the matter following paragraph (4), 

as redesignated, to read as follows: 

‘‘Subject to the approval of the Council, the Appraisal Subcommittee 

may adjust the dollar amount of registry fees under paragraph 

(4)(A), up to a maximum of $80 per annum, as necessary to carry 

out its functions under this title. The Appraisal Subcommittee shall 

consider at least once every 5 years whether to adjust the dollar 

amount of the registry fees to account for inflation. In implementing 

any change in registry fees, the Appraisal Subcommittee shall provide flexibility to the States for multi-year certifications and licenses 

already in place, as well as a transition period to implement the 

changes in registry fees. In establishing the amount of the annual 

registry fee for an appraisal management company, the Appraisal 

Subcommittee shall have the discretion to impose a minimum annual registry fee for an appraisal management company to protect 

against the under reporting of the number of appraisers working for 

or contracted by the appraisal management company.’’. 

(2) INCREMENTAL REVENUES.—Incremental revenues collected pursuant to the increases required by this subsection 

shall be placed in a separate account at the United States 

Treasury, entitled the ‘‘Appraisal Subcommittee Account’’. 

(i) GRANTS AND REPORTS.—Section 1109(b) of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 

U.S.C. 3338(b)) is amended— 

(1) by striking ‘‘and’’ after the semicolon in paragraph (3); 

(2) by striking the period at the end of paragraph (4) and 

inserting a semicolon; 

(3) by adding at the end the following new paragraphs: 

‘‘(5) to make grants to State appraiser certifying and licensing agencies, in accordance with policies to be developed by the 

Appraisal Subcommittee, to support the efforts of such agencies 

to comply with this title, including— 

‘‘(A) the complaint process, complaint investigations, 

and appraiser enforcement activities of such agencies; and 

‘‘(B) the submission of data on State licensed and certified appraisers and appraisal management companies to 

the National appraisal registry, including information affirming that the appraiser or appraisal management company meets the required qualification criteria and formal 

and informal disciplinary actions; and 

‘‘(6) to report to all State appraiser certifying and licensing 

agencies when a license or certification is surrendered, revoked, 

or suspended.’’. 

Obligations authorized under this subsection may not exceed 75 percent of the fiscal year total of incremental increase in fees collected 

and deposited in the ‘‘Appraisal Subcommittee Account’’ pursuant to 

subsection (h). 

(j) CRITERIA.—Section 1116 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 3345) is 

amended— 

(1) in subsection (c), by inserting ‘‘whose criteria for the licensing of a real estate appraiser currently meet or exceed the 

minimum criteria issued by the Appraisal Qualifications Board 

of The Appraisal Foundation for the licensing of real estate appraisers’’ before the period at the end; and 


sroberts on DSKD5P82C1PROD with HEARING
834 

(2) by striking subsection (e) and inserting the following 

new subsection: 

‘‘(e) MINIMUM QUALIFICATION REQUIREMENTS.—Any requirements established for individuals in the position of ‘Trainee Appraiser’ and ‘Supervisory Appraiser’ shall meet or exceed the minimum qualification requirements of the Appraiser Qualifications 

Board of The Appraisal Foundation. The Appraisal Subcommittee 

shall have the authority to enforce these requirements.’’. 

(k) MONITORING OF STATE APPRAISER CERTIFYING AND LICENS- ING AGENCIES.—Section 1118 of the Financial Institutions Reform, 

Recovery, and Enforcement Act of 1989 (12 U.S.C. 3347) is amended— 

(1) by amending subsection (a) to read as follows: 

‘‘(a) IN GENERAL.—The Appraisal Subcommittee shall monitor 

each State appraiser certifying and licensing agency for the purposes of determining whether such agency— 

‘‘(1) has policies, practices, funding, staffing, and procedures that are consistent with this title; 

‘‘(2) processes complaints and completes investigations in a 

reasonable time period; 

‘‘(3) appropriately disciplines sanctioned appraisers and appraisal management companies; 

‘‘(4) maintains an effective regulatory program; and 

‘‘(5) reports complaints and disciplinary actions on a timely 

basis to the national registries on appraisers and appraisal 

management companies maintained by the Appraisal Subcommittee. 

The Appraisal Subcommittee shall have the authority to remove a 

State licensed or certified appraiser or a registered appraisal management company from a national registry on an interim basis, not 

to exceed 90 days, pending State agency action on licensing, certification, registration, and disciplinary proceedings. The Appraisal 

Subcommittee and all agencies, instrumentalities, and Federally 

recognized entities under this title shall not recognize appraiser certifications and licenses from States whose appraisal policies, practices, funding, staffing, or procedures are found to be inconsistent 

with this title. The Appraisal Subcommittee shall have the authority 

to impose sanctions, as described in this section, against a State 

agency that fails to have an effective appraiser regulatory program. 

In determining whether such a program is effective, the Appraisal 

Subcommittee shall include an analysis of the licensing and certification of appraisers, the registration of appraisal management companies, the issuance of temporary licenses and certifications for appraisers, the receiving and tracking of submitted complaints against 

appraisers and appraisal management companies, the investigation 

of complaints, and enforcement actions against appraisers and appraisal management companies. The Appraisal Subcommittee shall 

have the authority to impose interim actions and suspensions 

against a State agency as an alternative to, or in advance of, the 

derecognition of a State agency.’’. 

(2) in subsection (b)(2), by inserting after ‘‘authority’’ the 

following: ‘‘or sufficient funding’’. 

(l) RECIPROCITY.—Subsection (b) of section 1122 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 

U.S.C. 3351(b)) is amended to read as follows: 


sroberts on DSKD5P82C1PROD with HEARING
835 

‘‘(b) RECIPROCITY.—Notwithstanding any other provisions of 

this title, a federally related transaction shall not be appraised by 

a certified or licensed appraiser unless the State appraiser certifying 

or licensing agency of the State certifying or licensing such appraiser has in place a policy of issuing a reciprocal certification or 

license for an individual from another State when— 

‘‘(1) the appraiser licensing and certification program of 

such other State is in compliance with the provisions of this 

title; and 

‘‘(2) the appraiser holds a valid certification from a State 

whose requirements for certification or licensing meet or exceed 

the licensure standards established by the State where an individual seeks appraisal licensure.’’. 

(m) CONSIDERATION OF PROFESSIONAL APPRAISAL DESIGNA- TIONS.—Section 1122(d) of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 3351(d)) is amended 

by striking ‘‘shall not exclude’’ and all that follows through the end 

of the subsection and inserting the following: ‘‘may include education achieved, experience, sample appraisals, and references from 

prior clients. Membership in a nationally recognized professional 

appraisal organization may be a criteria considered, though lack of 

membership therein shall not be the sole bar against consideration 

for an assignment under these criteria.’’. 

(n) APPRAISER INDEPENDENCE.—Section 1122 of the Financial 

Institutions Reform, Recovery, and Enforcement Act of 1989 (12 

U.S.C. 3351) is amended by adding at the end the following new 

subsection: 

‘‘(g) APPRAISER INDEPENDENCE MONITORING.—The Appraisal 

Subcommittee shall monitor each State appraiser certifying and licensing agency for the purpose of determining whether such agency’s 

policies, practices, and procedures are consistent with the purposes 

of maintaining appraiser independence and whether such State has 

adopted and maintains effective laws, regulations, and policies 

aimed at maintaining appraiser independence.’’. 

(o) APPRAISER EDUCATION.—Section 1122 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 

3351) is amended by inserting after subsection (g) (as added by subsection (l) of this section) the following new subsection: 

‘‘(h) APPROVED EDUCATION.—The Appraisal Subcommittee shall 

encourage the States to accept courses approved by the Appraiser 

Qualification Board’s Course Approval Program.’’. 

(p) APPRAISAL COMPLAINT HOTLINE.—Section 1122 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 

(12 U.S.C. 3351), as amended by this section, is amended by adding 

at the end the following new subsection: 

‘‘(i) APPRAISAL COMPLAINT NATIONAL HOTLINE.—If, 6 months 

after the date of the enactment of this subsection, the Appraisal 

Subcommittee determines that no national hotline exists to receive 

complaints of non-compliance with appraisal independence standards and Uniform Standards of Professional Appraisal Practice, including complaints from appraisers, individuals, or other entities 

concerning the improper influencing or attempted improper influencing of appraisers or the appraisal process, the Appraisal Subcommittee shall establish and operate such a national hotline, 

which shall include a toll-free telephone number and an email adVerDate Mar 15 2010 04:29 Jul 07, 2010 Jkt 057098 PO 00000 Frm 00839 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
836 

dress. If the Appraisal Subcommittee operates such a national hotline, the Appraisal Subcommittee shall refer complaints for further 

action to appropriate governmental bodies, including a State appraiser certifying and licensing agency, a financial institution regulator, or other appropriate legal authorities. For complaints referred 

to State appraiser certifying and licensing agencies or to Federal 

regulators, the Appraisal Subcommittee shall have the authority to 

follow up such complaint referrals in order to determine the status 

of the resolution of the complaint.’’. 

(q) AUTOMATED VALUATION MODELS.—Title XI of the Financial 

Institutions Reform, Recovery, and Enforcement Act of 1989 (12 

U.S.C. 3331 et seq.), as amended by this section, is amended by 

adding at the end the following new section (and amending the 

table of contents accordingly): 

‘‘SEC. 1125. AUTOMATED VALUATION MODELS USED TO ESTIMATE COLLATERAL VALUE FOR MORTGAGE LENDING PURPOSES. 

‘‘(a) IN GENERAL.—Automated valuation models shall adhere to 

quality control standards designed to— 

‘‘(1) ensure a high level of confidence in the estimates produced by automated valuation models; 

‘‘(2) protect against the manipulation of data; 

‘‘(3) seek to avoid conflicts of interest; 

‘‘(4) require random sample testing and reviews; and 

‘‘(5) account for any other such factor that the agencies listed in subsection (b) determine to be appropriate. 

‘‘(b) ADOPTION OF REGULATIONS.—The Board, the Comptroller 

of the Currency, the Federal Deposit Insurance Corporation, the National Credit Union Administration Board, the Federal Housing Finance Agency, and the Bureau of Consumer Financial Protection, in 

consultation with the staff of the Appraisal Subcommittee and the 

Appraisal Standards Board of the Appraisal Foundation, shall promulgate regulations to implement the quality control standards required under this section. 

‘‘(c) ENFORCEMENT.—Compliance with regulations issued under 

this subsection shall be enforced by— 

‘‘(1) with respect to a financial institution, or subsidiary 

owned and controlled by a financial institution and regulated 

by a Federal financial institution regulatory agency, the Federal financial institution regulatory agency that acts as the primary Federal supervisor of such financial institution or subsidiary; and 

‘‘(2) with respect to other participants in the market for appraisals of 1-to-4 unit single family residential real estate, the 

Federal Trade Commission, the Bureau of Consumer Financial 

Protection, and a State attorney general. 

‘‘(d) AUTOMATED VALUATION MODEL DEFINED.—For purposes of 

this section, the term ‘automated valuation model’ means any computerized model used by mortgage originators and secondary market issuers to determine the collateral worth of a mortgage secured 

by a consumer’s principal dwelling.’’. 

(r) BROKER PRICE OPINIONS.—Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 

3331 et seq.), as amended by this section, is amended by adding at 

the end the following new section (and amending the table of contents accordingly): 


sroberts on DSKD5P82C1PROD with HEARING
837 

‘‘SEC. 1126. BROKER PRICE OPINIONS. 

‘‘(a) GENERAL PROHIBITION.—In conjunction with the purchase 

of a consumer’s principal dwelling, broker price opinions may not 

be used as the primary basis to determine the value of a piece of 

property for the purpose of a loan origination of a residential mortgage loan secured by such piece of property. 

‘‘(b) BROKER PRICE OPINION DEFINED.—For purposes of this 

section, the term ‘broker price opinion’ means an estimate prepared 

by a real estate broker, agent, or sales person that details the probable selling price of a particular piece of real estate property and 

provides a varying level of detail about the property’s condition, 

market, and neighborhood, and information on comparable sales, 

but does not include an automated valuation model, as defined in 

section 1125(c).’’. 

(s) AMENDMENTS TO APPRAISAL SUBCOMMITTEE.—Section 1011 

of the Federal Financial Institutions Examination Council Act of 

1978 (12 U.S.C. 3310) is amended— 

(1) in the first sentence, by adding before the period the following: ‘‘, the Bureau of Consumer Financial Protection, and 

the Federal Housing Finance Agency’’; and 

(2) by inserting at the end the following: ‘‘At all times at 

least one member of the Appraisal Subcommittee shall have 

demonstrated knowledge and competence through licensure, certification, or professional designation within the appraisal profession.’’. 

(t) TECHNICAL CORRECTIONS.— (1) Section 1119(a)(2) of the Financial Institutions Reform, 

Recovery, and Enforcement Act of 1989 (12 U.S.C. 3348(a)(2)) 

is amended by striking ‘‘council,’’ and inserting ‘‘Council,’’. 

(2) Section 1121(6) of the Financial Institutions Reform, 

Recovery, and Enforcement Act of 1989 (12 U.S.C. 3350(6)) is 

amended by striking ‘‘Corporations,’’ and inserting ‘‘Corporation,’’. 

(3) Section 1121(8) of the Financial Institutions Reform, 

Recovery, and Enforcement Act of 1989 (12 U.S.C. 3350(8)) is 

amended by striking ‘‘council’’ and inserting ‘‘Council’’. 

(4) Section 1122 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 3351) is 

amended— 

(A) in subsection (a)(1) by moving the left margin of 

subparagraphs (A), (B), and (C) 2 ems to the right; and 

(B) in subsection (c)— 

(i) by striking ‘‘Federal Financial Institutions Examination Council’’ and inserting ‘‘Financial Institutions Examination Council’’; and 

(ii) by striking ‘‘the council’s functions’’ and inserting ‘‘the Council’s functions’’. 

SEC. 1474. EQUAL CREDIT OPPORTUNITY ACT AMENDMENT. 

Subsection (e) of section 701 of the Equal Credit Opportunity 

Act (15 U.S.C. 1691) is amended to read as follows: 

‘‘(e) COPIES FURNISHED TO APPLICANTS.— 

‘‘(1) IN GENERAL.—Each creditor shall furnish to an applicant a copy of any and all written appraisals and valuations 

developed in connection with the applicant’s application for a 

loan that is secured or would have been secured by a first lien 


sroberts on DSKD5P82C1PROD with HEARING
838 

on a dwelling promptly upon completion, but in no case later 

than 3 days prior to the closing of the loan, whether the creditor 

grants or denies the applicant’s request for credit or the application is incomplete or withdrawn. 

‘‘(2) WAIVER.—The applicant may waive the 3 day requirement provided for in paragraph (1), except where otherwise required in law. 

‘‘(3) REIMBURSEMENT.—The applicant may be required to 

pay a reasonable fee to reimburse the creditor for the cost of the 

appraisal, except where otherwise required in law. 

‘‘(4) FREE COPY.—Notwithstanding paragraph (3), the creditor shall provide a copy of each written appraisal or valuation 

at no additional cost to the applicant. 

‘‘(5) NOTIFICATION TO APPLICANTS.—At the time of application, the creditor shall notify an applicant in writing of the 

right to receive a copy of each written appraisal and valuation 

under this subsection. 

‘‘(6) VALUATION DEFINED.—For purposes of this subsection, 

the term ‘valuation’ shall include any estimate of the value of 

a dwelling developed in connection with a creditor’s decision to 

provide credit, including those values developed pursuant to a 

policy of a government sponsored enterprise or by an automated 

valuation model, a broker price opinion, or other methodology 

or mechanism.’’. 

SEC. 1475. REAL ESTATE SETTLEMENT PROCEDURES ACT OF 1974 

AMENDMENT RELATING TO CERTAIN APPRAISAL FEES. 

Section 4 of the Real Estate Settlement Procedures Act of 1974 

is amended by adding at the end the following new subsection: 

‘‘(c) The standard form described in subsection (a) may include, 

in the case of an appraisal coordinated by an appraisal management company (as such term is defined in section 1121(11) of the 

Financial Institutions Reform, Recovery, and Enforcement Act of 

1989 (12 U.S.C. 3350(11))), a clear disclosure of— 

‘‘(1) the fee paid directly to the appraiser by such company; 

and 

‘‘(2) the administration fee charged by such company.’’. 

SEC. 1476. GAO STUDY ON THE EFFECTIVENESS AND IMPACT OF VARIOUS APPRAISAL METHODS, VALUATION MODELS AND 

DISTRIBUTIONS CHANNELS, AND ON THE HOME VALUATION CODE OF CONDUCT AND THE APPRAISAL SUBCOMMITTEE. 

(a) IN GENERAL.—The Government Accountability Office shall 

conduct a study on— 

(1) the effectiveness and impact of— 

(A) appraisal methods, including the cost approach, the 

comparative sales approach, the income approach, and others that may be available; 

(B) appraisal valuation models, including licensed and 

certified appraisals, broker-priced opinions, and automated 

valuation models; and 

(C) appraisal distribution channels, including appraisal management companies, independent appraisal operations within mortgage originators, and fee-for-service 

appraisers; 

(2) the Home Valuation Code of Conduct; and 


sroberts on DSKD5P82C1PROD with HEARING
839 

(3) the Appraisal Subcommittee’s functions pursuant to title 

XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989. 

(b) STUDY.—Not later than— 

(1) 12 months after the date of enactment of this Act, the 

Government Accountability Office shall submit a study to the 

Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of 

Representatives; and 

(2) 90 days after the date of enactment of this Act, the Government Accountability Office shall provide a report on the status of the study and any preliminary findings to the Committee 

on Banking, Housing, and Urban Affairs of the Senate and the 

Committee on Financial Services of the House of Representatives. 

(c) CONTENT OF STUDY.—The study required by this section 

shall include an examination of the following: 

(1) APPRAISAL APPROACHES, VALUATION MODELS, AND DIS- TRIBUTION CHANNELS.— (A) The prevalence, alone or in combination, of certain 

appraisal approaches, models, and channels in purchasemoney and refinance mortgage transactions. 

(B) The accuracy of these approaches, models, and 

channels in assessing the property as collateral. 

(C) Whether and how these approaches, models, and 

channels contributed to price speculation during the previous cycle. 

(D) The costs to consumers of these approaches, models, 

and channels. 

(E) The disclosure of fees to consumers in the appraisal 

process. 

(F) To what extent the usage of these approaches, models, and channels may be influenced by a conflict of interest 

between the mortgage lender and the appraiser and the 

mechanism by which the lender selects and compensates 

the appraiser. 

(G) The suitability of these approaches, models, and 

channels in rural versus urban areas. 

(2) HOME VALUATION CODE OF CONDUCT (HVCC).— (A) How the HVCC affects mortgage lenders’ selection 

of appraisers. 

(B) How the HVCC affects State regulation of appraisers and appraisal distribution channels. 

(C) How the HVCC affects the quality and cost of appraisals and the length of time to obtain an appraisal. 

(D) How the HVCC affects mortgage brokers, small 

businesses, and consumers. 

(d) ADDITIONAL STUDY REQUIRED.— 

(1) IN GENERAL.—Not later than 18 months after the date 

of enactment of this Act, the Government Accountability Office 

shall submit a study to the Committee on Banking, Housing, 

and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives. 

(2) CONTENT OF ADDITIONAL STUDY.—The study required 

under paragraph (1) shall include— 


sroberts on DSKD5P82C1PROD with HEARING
840 

(A) an examination of— 

(i) the Appraisal Subcommittee’s ability to monitor 

and enforce State and Federal certification requirements and standards, including by providing a summary with a statistical breakdown of enforcement actions taken during the last 10 years; 

(ii) whether existing Federal financial institutions 

regulatory agency exemptions on appraisals for federally related transactions needs to be revised; and 

(iii) whether new means of data collection, such as 

the establishment of a national repository, would benefit the Appraisal Subcommittee’s ability to perform its 

functions; and 

(B) recommendations from this examination for administrative and legislative action at the Federal and State 

level. 

Subtitle G—Mortgage Resolution and Modification 

SEC. 1481. MULTIFAMILY MORTGAGE RESOLUTION PROGRAM. 

(a) ESTABLISHMENT.—The Secretary of Housing and Urban Development shall develop a program under this subsection to ensure 

the protection of current and future tenants and at-risk multifamily 

properties, where feasible, based on criteria that may include— 

(1) creating sustainable financing of such properties, that 

may take into consideration such factors as— 

(A) the rental income generated by such properties; and 

(B) the preservation of adequate operating reserves; 

(2) maintaining the level of Federal, State, and city subsidies in effect as of the date of the enactment of this Act; 

(3) providing funds for rehabilitation; and 

(4) facilitating the transfer of such properties, when appropriate and with the agreement of owners, to responsible new 

owners and ensuring affordability of such properties. 

(b) COORDINATION.—The Secretary of Housing and Urban Development may, in carrying out the program developed under this 

section, coordinate with the Secretary of the Treasury, the Federal 

Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, the Federal Housing Finance Agency, and any 

other Federal Government agency that the Secretary considers appropriate. 

(c) DEFINITION.—For purposes of this section, the term ‘‘multifamily properties’’ means a residential structure that consists of 5 

or more dwelling units. 

(d) PREVENTION OF QUALIFICATION FOR CRIMINAL APPLI- CANTS.— (1) IN GENERAL.—No person shall be eligible to begin receiving assistance from the Making Home Affordable Program 

authorized under the Emergency Economic Stabilization Act of 

2008 (12 U.S.C. 5201 et seq.), or any other mortgage assistance 

program authorized or funded by that Act, on or after 60 days 

after the date of the enactment of this Act, if such person, in 

connection with a mortgage or real estate transaction, has been 

convicted, within the last 10 years, of any one of the following: 

(A) Felony larceny, theft, fraud, or forgery. 

(B) Money laundering. 


sroberts on DSKD5P82C1PROD with HEARING
841 

(C) Tax evasion. 

(2) PROCEDURES.—The Secretary shall establish procedures 

to ensure compliance with this subsection. 

(3) REPORT.—The Secretary shall report to the Committee 

on Financial Services of the House of Representatives and the 

Committee on Banking, Housing, and Urban Affairs of the Senate regarding the implementation of this provision. The report 

shall also describe the steps taken to implement this subsection. 

SEC. 1482. HOME AFFORDABLE MODIFICATION PROGRAM GUIDELINES. 

(a) NET PRESENT VALUE INPUT DATA.—The Secretary of the 

Treasury (in this section referred to as the ‘‘Secretary’’) shall revise 

the supplemental directives and other guidelines for the Home Affordable Modification Program of the Making Home Affordable initiative of the Secretary of the Treasury, authorized under the Emergency Economic Stabilization Act of 2008 (Public Law 110–343), to 

require each mortgage servicer participating in such program to 

provide each borrower under a mortgage whose request for a mortgage modification under the Program is denied with all borrowerrelated and mortgage-related input data used in any net present 

value (NPV) analyses performed in connection with the subject 

mortgage. Such input data shall be provided to the borrower at the 

time of such denial. 

(b) WEB-BASED SITE FOR NPV CALCULATOR AND APPLICATION.— 

(1) NPV CALCULATOR.—In carrying out the Home Affordable Modification Program, the Secretary shall establish and 

maintain a site on the World Wide Web that provides a calculator for net present value analyses of a mortgage, based on the 

Secretary’s methodology for calculating such value, that mortgagors can use to enter information regarding their own mortgages and that provides a determination after entering such information regarding a mortgage of whether such mortgage 

would be accepted or rejected for modification under the Program, using such methodology. 

(2) DISCLOSURE.—Such Web site shall also prominently 

disclose that each mortgage servicer participating in such Program may use a method for calculating net present value of a 

mortgage that is different than the method used by such calculator. 

(3) APPLICATION.—The Secretary shall make a reasonable 

effort to include on such World Wide Web site a method for 

homeowners to apply for a mortgage modification under the 

Home Affordable Modification Program. 

(c) PUBLIC AVAILABILITY OF NPV METHODOLOGY, COMPUTER

MODEL, AND VARIABLES.—The Secretary shall make publicly available, including by posting on a World Wide Web site of the Secretary— 

(1) the Secretary’s methodology and computer model, including all formulae used in such computer model, used for calculating net present value of a mortgage that is used by the calculator established pursuant to subsection (b); and 

(2) all non-proprietary variables used in such net present 

value analysis. 


sroberts on DSKD5P82C1PROD with HEARING
842 

SEC. 1483. PUBLIC AVAILABILITY OF INFORMATION OF MAKING HOME 

AFFORDABLE PROGRAM. 

(a) REVISIONS TO PROGRAM GUIDELINES.—The Secretary of the 

Treasury (in this section referred to as the ‘‘Secretary’’) shall revise 

the guidelines for the Home Affordable Modification Program of the 

Making Home Affordable initiative of the Secretary of the Treasury, 

authorized under the Emergency Economic Stabilization Act of 2008 

(Public Law 110–343), to provide that the data being collected by 

the Secretary from each mortgage servicer and lender participating 

in the Program is made public in accordance with subsection (b). 

(b) PUBLIC AVAILABILITY.—Data shall be made available according to the following guidelines: 

(1) Not more than 14 days after each monthly deadline for 

submission of data by mortgage servicers and lenders participating in the Program, reports shall be made publicly available 

by means of a World Wide Web site of the Secretary, and by 

submitting a report to the Congress, that shall include the following information: 

(A) The number of requests for mortgage modifications 

under the Program that the servicer or lender has received. 

(B) The number of requests for mortgage modifications 

under the Program that the servicer or lender has processed. 

(C) The number of requests for mortgage modifications 

under the Program that the servicer or lender has approved. 

(D) The number of requests for mortgage modifications 

under the Program that the servicer or lender has denied. 

(2) Not more than 60 days after each monthly deadline for 

submission of data by mortgage servicers and lenders participating in the Program, the Secretary shall make data tables 

available to the public at the individual record level. The Secretary shall issue regulations prescribing— 

(A) the procedures for disclosing such data to the public; and 

(B) such deletions as the Secretary may determine to be 

appropriate to protect any privacy interest of any mortgage 

modification applicant, including the deletion or alteration 

of the applicant’s name and identification number. 

SEC. 1484. PROTECTING TENANTS AT FORECLOSURE EXTENSION AND 

CLARIFICATION. 

The Protecting Tenants at Foreclosure Act is amended— 

(1) in section 702 (12 U.S.C. 5220 note)— 

(A) in subsection (a)(2), by striking ‘‘, as of the date of 

such notice of foreclosure’’; and 

(B) in subsection (c), by inserting after the period the 

following: ‘‘For purposes of this section, the date of a notice 

of foreclosure shall be deemed to be the date on which complete title to a property is transferred to a successor entity 

or person as a result of an order of a court or pursuant to 

provisions in a mortgage, deed of trust, or security deed.’’; 

and 

(2) in section 704 (12 U.S.C. 5201 note), by striking ‘‘2012’’ 

and inserting ‘‘2014’’. 


sroberts on DSKD5P82C1PROD with HEARING
843 

Subtitle H—Miscellaneous Provisions 

SEC. 1491. SENSE OF CONGRESS REGARDING THE IMPORTANCE OF 

GOVERNMENT-SPONSORED ENTERPRISES REFORM TO ENHANCE THE PROTECTION, LIMITATION, AND REGULATION 

OF THE TERMS OF RESIDENTIAL MORTGAGE CREDIT. 

(a) FINDINGS.—The Congress finds as follows: 

(1) The Government-sponsored enterprises, Federal National Mortgage Association (Fannie Mae) and the Federal 

Home Loan Mortgage Corporation (Freddie Mac), were chartered by Congress to ensure a reliable and affordable supply of 

mortgage funding, but enjoy a dual legal status as privately 

owned corporations with Government mandated affordable 

housing goals. 

(2) In 1996, the Department of Housing and Urban Development required that 42 percent of Fannie Mae’s and Freddie 

Mac’s mortgage financing should go to borrowers with income 

levels below the median for a given area. 

(3) In 2004, the Department of Housing and Urban Development revised those goals, increasing them to 56 percent of 

their overall mortgage purchases by 2008, and additionally 

mandated that 12 percent of all mortgage purchases by Fannie 

Mae and Freddie Mac be ‘‘special affordable’’ loans made to 

borrowers with incomes less than 60 percent of an area’s median income, a target that ultimately increased to 28 percent for 

2008. 

(4) To help fulfill those mandated affordable housing goals, 

in 1995 the Department of Housing and Urban Development 

authorized Fannie Mae and Freddie Mac to purchase subprime 

securities that included loans made to low-income borrowers. 

(5) After this authorization to purchase subprime securities, 

subprime and near-prime loans increased from 9 percent of 

securitized mortgages in 2001 to 40 percent in 2006, while the 

market share of conventional mortgages dropped from 78.8 percent in 2003 to 50.1 percent by 2007 with a corresponding increase in subprime and Alt-A loans from 10.1 percent to 32.7 

percent over the same period. 

(6) In 2004 alone, Fannie Mae and Freddie Mac purchased 

$175,000,000,000 in subprime mortgage securities, which accounted for 44 percent of the market that year, and from 2005 

through 2007, Fannie Mae and Freddie Mac purchased approximately $1,000,000,000,000 in subprime and Alt-A loans, 

while Fannie Mae’s acquisitions of mortgages with less than 10 

percent down payments almost tripled. 

(7) According to data from the Federal Housing Finance 

Agency (FHFA) for the fourth quarter of 2008, Fannie Mae and 

Freddie Mac own or guarantee 75 percent of all newly originated mortgages, and Fannie Mae and Freddie Mac currently 

own 13.3 percent of outstanding mortgage debt in the United 

States and have issued mortgage-backed securities for 31.0 percent of the residential debt market, a combined total of 44.3 percent of outstanding mortgage debt in the United States. 

(8) On September 7, 2008, the FHFA placed Fannie Mae 

and Freddie Mac into conservatorship, with the Treasury Department subsequently agreeing to purchase at least 

$200,000,000,000 of preferred stock from each enterprise in exVerDate Mar 15 2010 04:29 Jul 07, 2010 Jkt 057098 PO 00000 Frm 00847 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
844 

change for warrants for the purchase of 79.9 percent of each enterprise’s common stock. 

(9) The conservatorship for Fannie Mae and Freddie Mac 

has potentially exposed taxpayers to upwards of 

$5,300,000,000,000 worth of risk. 

(10) The hybrid public-private status of Fannie Mae and 

Freddie Mac is untenable and must be resolved to assure that 

consumers are offered and receive residential mortgage loans on 

terms that reasonably reflect their ability to repay the loans and 

that are understandable and not unfair, deceptive, or abusive. 

(b) SENSE OF THE CONGRESS.—It is the sense of the Congress 

that efforts to enhance by the protection, limitation, and regulation 

of the terms of residential mortgage credit and the practices related 

to such credit would be incomplete without enactment of meaningful 

structural reforms of Fannie Mae and Freddie Mac. 

SEC. 1492. GAO STUDY REPORT ON GOVERNMENT EFFORTS TO COMBAT MORTGAGE FORECLOSURE RESCUE SCAMS AND LOAN 

MODIFICATION FRAUD. 

(a) STUDY.—The Comptroller General of the United States shall 

conduct a study of the current inter-agency efforts of the Secretary 

of the Treasury, the Secretary of Housing and Urban Development, 

the Attorney General, and the Federal Trade Commission to crack 

down on mortgage foreclosure rescue scams and loan modification 

fraud in order to advise the Congress to the risks and 

vulnerabilities of emerging schemes in the loan modification arena. 

(b) REPORT.— 

(1) IN GENERAL.—The Comptroller General shall submit a 

report to the Congress on the study conducted under subsection 

(a) containing such recommendations for legislative and administrative actions as the Comptroller General may determine to 

be appropriate in addition to the recommendations required 

under paragraph (2). 

(2) SPECIFIC TOPICS.—The report made under paragraph 

(1) shall include— 

(A) an evaluation of the effectiveness of the inter-agency 

task force current efforts to combat mortgage foreclosure 

rescue scams and loan modification fraud scams; 

(B) specific recommendations on agency or legislative 

action that are essential to properly protect homeowners 

from mortgage foreclosure rescue scams and loan modification fraud scams; and 

(C) the adequacy of financial resources that the Federal 

Government is allocating to— 

(i) crackdown on loan modification and foreclosure 

rescue scams; and 

(ii) the education of homeowners about fraudulent 

scams relating to loan modification and foreclosure 

rescues. 

SEC. 1493. REPORTING OF MORTGAGE DATA BY STATE. 

(a) IN GENERAL.—Section 104(a) of the Helping Families Save 

Their Homes Act of 2009 (division A of Public Law 111–22) is 

amended— 

(1) in paragraph (2), by striking ‘‘resulting’’ and inserting 

‘‘in each State that result’’; 


sroberts on DSKD5P82C1PROD with HEARING
845 

(2) in paragraph (3), by inserting ‘‘each State for’’ after 

‘‘modifications in’’; and 

(3) in paragraph (4), by inserting ‘‘in each State’’ after 

‘‘total number of loans’’. 

(b) CONFORMING AMENDMENT.—Section 104(b)(1)(A) of such Act 

is amended by adding at the end the following sentence: ‘‘Not later 

than 60 days after the date of the enactment of the Dodd-Frank 

Wall Street Reform and Consumer Protection Act, the Comptroller 

of the Currency and the Director of the Office of Thrift Supervision 

shall update such requirements to reflect amendments made to this 

section by such Act.’’. 

SEC. 1494. STUDY OF EFFECT OF DRYWALL PRESENCE ON FORECLOSURES. 

(a) STUDY.—The Secretary of Housing and Urban Development, 

in consultation with the Secretary of the Treasury, shall conduct a 

study of the effect on residential mortgage loan foreclosures of— 

(1) the presence in residential structures subject to such 

mortgage loans of drywall that was imported from China during the period beginning with 2004 and ending at the end of 

2007; and 

(2) the availability of property insurance for residential 

structures in which such drywall is present. 

(b) REPORT.—Not later than the expiration of the 120-day period beginning on the date of the enactment of this Act, the 

Secretary of Housing and Urban Development shall submit to the 

Congress a report on the study conducted under subsection (a) containing its findings, conclusions, and recommendations. 

SEC. 1495. DEFINITION. 

For purposes of this title, the term ‘‘designated transfer date’’ 

means the date established under section 1062 of this Act. 

SEC. 1496. EMERGENCY MORTGAGE RELIEF. 

(a) EMERGENCY HOMEOWNERS’ RELIEF FUND.—Effective October 1, 2010, and notwithstanding any other provision of law, there 

is hereby made available to the Secretary of Housing and Urban Development such sums as are necessary to provide $1,000,000,000 in 

assistance through the Emergency Homeowners’ Relief Fund, which 

such Secretary shall establish pursuant to section 107 of the Emergency Housing Act of 1975 (12 U.S.C. 2706), as such Act is amended by this section, for use for emergency mortgage assistance in accordance with title I of such Act. 

(b) REAUTHORIZATION OF EMERGENCY MORTGAGE RELIEF PROGRAM.—Title I of the Emergency Housing Act of 1975 is amended— 

(1) in section 103 (12 U.S.C. 2702)— 

(A) in paragraph (2)— 

(i) by striking ‘‘have indicated’’ and all that follows 

through ‘‘regulation of the holder’’ and insert ‘‘have certified’’; 

(ii) by striking ‘‘(such as the volume of delinquent 

loans in its portfolio)’’; and 

(iii) by striking ‘‘, except that such statement’’ and 

all that follows through ‘‘purposes of this title’’; and 

(B) in paragraph (4), by inserting ‘‘or medical conditions’’ after ‘‘adverse economic conditions’’; 

(2) in section 104 (12 U.S.C. 2703)— 


sroberts on DSKD5P82C1PROD with HEARING
846 

(A) in subsection (b), by striking ‘‘, but such assistance’’ 

and all that follows through the period at the end and inserting the following: ‘‘. The amount of assistance provided 

to a homeowner under this title shall be an amount that 

the Secretary determines is reasonably necessary to supplement such amount as the homeowner is capable of contributing toward such mortgage payment, except that the aggregate amount of such assistance provided for any homeowner shall not exceed $50,000.’’; 

(B) in subsection (d), by striking ‘‘interest on a loan or 

advance’’ and all that follows through the end of the subsection and inserting the following: ‘‘(1) the rate of interest 

on any loan or advance of credit insured under this title 

shall be fixed for the life of the loan or advance of credit 

and shall not exceed the rate of interest that is generally 

charged for mortgages on single-family housing insured by 

the Secretary of Housing and Urban Development under 

title II of the National Housing Act at the time such loan 

or advance of credit is made, and (2) no interest shall be 

charged on interest which is deferred on a loan or advance 

of credit made under this title. In establishing rates, terms 

and conditions for loans or advances of credit made under 

this title, the Secretary shall take into account a homeowner’s ability to repay such loan or advance of credit.’’; 

and 

(C) in subsection (e), by inserting after the period at the 

end of the first sentence the following: ‘‘Any eligible homeowner who receives a grant or an advance of credit under 

this title may repay the loan in full, without penalty, by 

lump sum or by installment payments at any time before 

the loan becomes due and payable.’’; 

(3) in section 105 (12 U.S.C. 2704)— 

(A) by striking subsection (b); 

(B) in subsection (e)— 

(i) by inserting ‘‘and emergency mortgage relief 

payments made under section 106’’ after ‘‘insured 

under this section’’; and 

(ii) by striking ‘‘$1,500,000,000 at any one time’’ 

and inserting ‘‘$3,000,000,000’’; 

(C) by redesignating subsections (c), (d), and (e) as subsections (b), (c), and (d), respectively; and 

(D) by adding at the end the following new subsection: 

‘‘(e) The Secretary shall establish underwriting guidelines or 

procedures to allocate amounts made available for loans and advances insured under this section and for emergency relief payments 

made under section 106 based on the likelihood that a mortgagor 

will be able to resume mortgage payments, pursuant to the requirement under section 103(5).’’; 

(4) in section 107— 

(A) by striking ‘‘(a)’’; and 

(B) by striking subsection (b); 

(5) in section 108 (12 U.S.C. 2707), by adding at the end 

the following new subsection: 

‘‘(d) COVERAGE OF EXISTING PROGRAMS.—The Secretary shall 

allow funds to be administered by a State that has an existing proVerDate Mar 15 2010 04:29 Jul 07, 2010 Jkt 057098 PO 00000 Frm 00850 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
847 

gram that is determined by the Secretary to provide substantially 

similar assistance to homeowners. After such determination is made 

such State shall not be required to modify such program to comply 

with the provisions of this title.’’; 

(6) in section 109 (12 U.S.C. 2708)— 

(A) in the section heading, by striking ‘‘AUTHORIZATION

AND’’; 

(B) by striking subsection (a); 

(C) by striking ‘‘(b)’’; and 

(D) by striking ‘‘1977’’ and inserting ‘‘2011’’; 

(7) by striking sections 110, 111, and 113 (12 U.S.C. 2709, 

2710, 2712); and 

(8) by redesignating section 112 (12 U.S.C. 2711) as section 

110. 

SEC. 1497. ADDITIONAL ASSISTANCE FOR NEIGHBORHOOD STABILIZATION PROGRAM. 

(a) IN GENERAL.—Effective October 1, 2010, out of funds in the 

Treasury not otherwise appropriated, there is hereby made available 

to the Secretary of Housing and Urban Development 

$1,000,000,000, and the Secretary of Housing and Urban Development shall use such amounts for assistance to States and units of 

general local government for the redevelopment of abandoned and 

foreclosed homes, in accordance with the same provisions applicable 

under the second undesignated paragraph under the heading ‘‘Community Planning and Development—Community Development 

Fund’’ in title XII of division A of the American Recovery and Reinvestment Act of 2009 (Public Law 111–5; 123 Stat. 217) to amounts 

made available under such second undesignated paragraph, except 

as follows: 

(1) Notwithstanding the matter of such second undesignated paragraph that precedes the first proviso, amounts made 

available by this section shall remain available until expended. 

(2) The 3rd, 4th, 5th, 6th, 7th, and 15th provisos of such 

second undesignated paragraph shall not apply to amounts 

made available by this section. 

(3) Amounts made available by this section shall be allocated based on a funding formula for such amounts established 

by the Secretary in accordance with section 2301(b) of the Housing and Economic Recovery Act of 2008 (42 U.S.C. 5301 note), 

except that— 

(A) notwithstanding paragraph (2) of such section 

2301(b), the formula shall be established not later than 30 

days after the date of the enactment of this Act; 

(B) notwithstanding such section 2301(b), each State 

shall receive, at a minimum, not less than 0.5 percent of 

funds made available under this section; 

(C) the Secretary may establish a minimum grant 

amount for direct allocations to units of general local government located within a State, which shall not exceed 

$1,000,000; 

(D) each State and local government receiving grant 

amounts shall establish procedures to create preferences for 

the development of affordable rental housing for properties 

assisted with amounts made available by this section; and 


sroberts on DSKD5P82C1PROD with HEARING
848 

(E) the Secretary may use not more than 2 percent of 

the funds made available under this section for technical 

assistance to grantees. 

(4) Paragraph (1) of section 2301(c) of the Housing and 

Economic Recovery Act of 2008 shall not apply to amounts 

made available by this section. 

(5) The fourth proviso from the end of such second undesignated paragraph shall be applied to amounts made available 

by this section by substituting ‘‘2013’’ for ‘‘2012’’. 

(6) Notwithstanding section 2301(a) of the Housing and 

Economic Recovery Act of 2008, the term ‘‘State’’ means any 

State, as defined in section 102 of the Housing and Community 

Development Act of 1974 (42 U.S.C. 5302), and the District of 

Columbia, for purposes of this section and this title, as applied 

to amounts made available by this section. 

(7)(A) None of the amounts made available by this section 

shall be distributed to— 

(i) any organization which has been convicted for a violation under Federal law relating to an election for Federal 

office; or 

(ii) any organization which employs applicable individuals. 

(B) In this paragraph, the term ‘‘applicable individual’’ 

means an individual who— 

(i) is— 

(I) employed by the organization in a permanent or 

temporary capacity; 

(II) contracted or retained by the organization; or 

(III) acting on behalf of, or with the express or apparent authority of, the organization; and 

(ii) has been convicted for a violation under Federal 

law relating to an election for Federal office. 

(8) An eligible entity receiving a grant under this section 

shall, to the maximum extent feasible, provide for the hiring of 

employees who reside in the vicinity, as such term is defined by 

the Secretary, of projects funded under this section or contract 

with small businesses that are owned and operated by persons 

residing in the vicinity of such projects. 

(b) ADDITIONAL AMENDMENTS.— (1) SECTION 2301.—Section 2301(f)(3)(A)(ii) of the Housing 

and Economic Recovery Act of 2008 (42 U.S.C. 

5301(f)(3)(A)(ii))— 

(A) is amended by striking ‘‘for the purchase and redevelopment of abandoned and foreclosed upon homes or residential properties that will be used’’; and 

(B) shall apply with respect to any unexpended or unobligated balances, including recaptured and reallocated 

funds made available under this Act, section 2301 of the 

Housing and Economic Recovery Act of 2008 (42 U.S.C. 

5301), and the heading ‘‘Community Planning and Development—Community Development Fund’’ in title XII of division A of the American Recovery and Reinvestment Act of 

2009 (Public Law 111–5; 123 Stat. 217). 

(2) NOTICE OF FORECLOSURE.—For any amounts made 

available under this section, under division B, title III of the 


sroberts on DSKD5P82C1PROD with HEARING
849 

Housing and Economic Recovery Act of 2008 (42 U.S.C. 5301), 

or under the heading ‘‘Community Planning and Development—Community Development Fund’’ in title XII of division A 

of the American Recovery and Reinvestment Act of 2009 (Public 

Law 111–5; 123 Stat. 217), the date of a notice of foreclosure 

shall be deemed to be the date on which complete title to a property is transferred to a successor entity or person as a result of 

an order of a court or pursuant to provisions in a mortgage, 

deed of trust, or security deed. 

SEC. 1498. LEGAL ASSISTANCE FOR FORECLOSURE-RELATED ISSUES. 

(a) ESTABLISHMENT.—The Secretary of Housing and Urban Development (hereafter in this section referred to as the ‘‘Secretary’’) 

shall establish a program for making grants for providing a full 

range of foreclosure legal assistance to low- and moderate-income 

homeowners and tenants related to home ownership preservation, 

home foreclosure prevention, and tenancy associated with home foreclosure. 

(b) COMPETITIVE ALLOCATION.—The Secretary shall allocate 

amounts made available for grants under this section to State and 

local legal organizations on the basis of a competitive process. For 

purposes of this subsection ‘‘State and local legal organizations’’ are 

those State and local organizations whose primary business or mission is to provide legal assistance. 

(c) PRIORITY TO CERTAIN AREAS.—In allocating amounts in accordance with subsection (b), the Secretary shall give priority consideration to State and local legal organizations that are operating 

in the 125 metropolitan statistical areas (as that term is defined by 

the Director of the Office of Management and Budget) with the highest home foreclosure rates. 

(d) LEGAL ASSISTANCE.— 

(1) IN GENERAL.—Any State or local legal organization that 

receives financial assistance pursuant to this section may use 

such amounts only to assist— 

(A) homeowners of owner-occupied homes with mortgages in default, in danger of default, or subject to or at 

risk of foreclosure; and 

(B) tenants at risk of or subject to eviction as a result 

of foreclosure of the property in which such tenant resides. 

(2) COMMENCE USE WITHIN 90 DAYS.—Any State or local 

legal organization that receives financial assistance pursuant to 

this section shall begin using any financial assistance received 

under this section within 90 days after receipt of the assistance. 

(3) PROHIBITION ON CLASS ACTIONS.—No funds provided to 

a State or local legal organization under this section may be 

used to support any class action litigation. 

(4) LIMITATION ON LEGAL ASSISTANCE.—Legal assistance 

funded with amounts provided under this section shall be limited to mortgage-related default, eviction, or foreclosure proceedings, without regard to whether such foreclosure is judicial 

or nonjudicial. 

(5) EFFECTIVE DATE.—Notwithstanding any other provision 

of this Act, this subsection shall take effect on the date of the 

enactment of this Act. 

(e) LIMITATION ON DISTRIBUTION OF ASSISTANCE.— 


sroberts on DSKD5P82C1PROD with HEARING
850 

(1) IN GENERAL.—None of the amounts made available 

under this section shall be distributed to— 

(A) any organization which has been convicted for a 

violation under Federal law relating to an election for Federal office; or 

(B) any organization which employs applicable individuals. 

(2) DEFINITION OF APPLICABLE INDIVIDUALS.—In this subsection, the term ‘‘applicable individual’’ means an individual 

who— 

(A) is— 

(i) employed by the organization in a permanent or 

temporary capacity; 

(ii) contracted or retained by the organization; or 

(iii) acting on behalf of, or with the express or apparent authority of, the organization; and 

(B) has been convicted for a violation under Federal 

law relating to an election for Federal office. 

(f) AUTHORIZATION OF APPROPRIATIONS.—There are authorized 

to be appropriated to the Secretary $35,000,000 for each of fiscal 

years 2011 through 2012 for grants under this section. 

TITLE XV—MISCELLANEOUS PROVISIONS 

SEC. 1501. RESTRICTIONS ON USE OF UNITED STATES FUNDS FOR 

FOREIGN GOVERNMENTS; PROTECTION OF AMERICAN 

TAXPAYERS. 

The Bretton Woods Agreements Act (22 U.S.C. 286 et seq.) is 

amended by adding at the end the following: 

‘‘SEC. 68. RESTRICTIONS ON USE OF UNITED STATES FUNDS FOR FOREIGN GOVERNMENTS; PROTECTION OF AMERICAN TAXPAYERS. 

‘‘(a) IN GENERAL.—The Secretary of the Treasury shall instruct 

the United States Executive Director at the International Monetary 

Fund— 

‘‘(1) to evaluate, prior to consideration by the Board of Executive Directors of the Fund, any proposal submitted to the 

Board for the Fund to make a loan to a country if— 

‘‘(A) the amount of the public debt of the country exceeds the gross domestic product of the country as of the 

most recent year for which such information is available; 

and 

‘‘(B) the country is not eligible for assistance from the 

International Development Association. 

‘‘(2) OPPOSITION TO LOANS UNLIKELY TO BE REPAID IN

FULL.—If any such evaluation indicates that the proposed loan 

is not likely to be repaid in full, the Secretary of the Treasury 

shall instruct the United States Executive Director at the Fund 

to use the voice and vote of the United States to oppose the proposal. 

‘‘(b) REPORTS TO CONGRESS.—Within 30 days after the Board 

of Executive Directors of the Fund approves a proposal described in 

subsection (a), and annually thereafter by June 30, for the duration 

of any program approved under such proposals, the Secretary of the 

Treasury shall report in writing to the Committee on Financial 

Services of the House of Representatives and the Committee on ForVerDate Mar 15 2010 04:29 Jul 07, 2010 Jkt 057098 PO 00000 Frm 00854 Fmt 6659 Sfmt 6603 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
851 

eign Relations and the Committee on Banking, Housing, and Urban 

Affairs of the Senate assessing the likelihood that loans made pursuant to such proposals will be repaid in full, including— 

‘‘(1) the borrowing country’s current debt status, including, 

to the extent possible, its maturity structure, whether it has 

fixed or floating rates, whether it is indexed, and by whom it 

is held; 

‘‘(2) the borrowing country’s external and internal 

vulnerabilities that could potentially affect its ability to repay; 

and 

‘‘(3) the borrowing country’s debt management strategy.’’. 

SEC. 1502. CONFLICT MINERALS. 

(a) SENSE OF CONGRESS ON EXPLOITATION AND TRADE OF CON- FLICT MINERALS ORIGINATING IN THE DEMOCRATIC REPUBLIC OF

THE CONGO.—It is the sense of Congress that the exploitation and 

trade of conflict minerals originating in the Democratic Republic of 

the Congo is helping to finance conflict characterized by extreme levels of violence in the eastern Democratic Republic of the Congo, particularly sexual- and gender-based violence, and contributing to an 

emergency humanitarian situation therein, warranting the provisions of section 13(p) of the Securities Exchange Act of 1934, as 

added by subsection (b). 

(b) DISCLOSURE RELATING TO CONFLICT MINERALS ORIGI- NATING IN THE DEMOCRATIC REPUBLIC OF THE CONGO.—Section 13 

of the Securities Exchange Act of 1934 (15 U.S.C. 78m), as amended 

by this Act, is amended by adding at the end the following new subsection: 

‘‘(p) DISCLOSURES RELATING TO CONFLICT MINERALS ORIGI- NATING IN THE DEMOCRATIC REPUBLIC OF THE CONGO.— ‘‘(1) REGULATIONS.— ‘‘(A) IN GENERAL.—Not later than 270 days after the 

date of the enactment of this subsection, the Commission 

shall promulgate regulations requiring any person described in paragraph (2) to disclose annually, beginning 

with the person’s first full fiscal year that begins after the 

date of promulgation of such regulations, whether conflict 

minerals that are necessary as described in paragraph 

(2)(B), in the year for which such reporting is required, did 

originate in the Democratic Republic of the Congo or an adjoining country and, in cases in which such conflict minerals did originate in any such country, submit to the Commission a report that includes, with respect to the period 

covered by the report— 

‘‘(i) a description of the measures taken by the person to exercise due diligence on the source and chain 

of custody of such minerals, which measures shall include an independent private sector audit of such report submitted through the Commission that is conducted in accordance with standards established by the 

Comptroller General of the United States, in accordance with rules promulgated by the Commission, in 

consultation with the Secretary of State; and 

‘‘(ii) a description of the products manufactured or 

contracted to be manufactured that are not DRC conflict free (‘DRC conflict free’ is defined to mean the 


sroberts on DSKD5P82C1PROD with HEARING
852 

products that do not contain minerals that directly or 

indirectly finance or benefit armed groups in the Democratic Republic of the Congo or an adjoining country), 

the entity that conducted the independent private sector 

audit in accordance with clause (i), the facilities used 

to process the conflict minerals, the country of origin of 

the conflict minerals, and the efforts to determine the 

mine or location of origin with the greatest possible 

specificity. 

‘‘(B) CERTIFICATION.—The person submitting a report 

under subparagraph (A) shall certify the audit described in 

clause (i) of such subparagraph that is included in such report. Such a certified audit shall constitute a critical component of due diligence in establishing the source and 

chain of custody of such minerals. 

‘‘(C) UNRELIABLE DETERMINATION.—If a report required 

to be submitted by a person under subparagraph (A) relies 

on a determination of an independent private sector audit, 

as described under subparagraph (A)(i), or other due diligence processes previously determined by the Commission 

to be unreliable, the report shall not satisfy the requirements of the regulations promulgated under subparagraph 

(A)(i). 

‘‘(D) DRC CONFLICT FREE.—For purposes of this paragraph, a product may be labeled as ‘DRC conflict free’ if the 

product does not contain conflict minerals that directly or 

indirectly finance or benefit armed groups in the Democratic Republic of the Congo or an adjoining country. 

‘‘(E) INFORMATION AVAILABLE TO THE PUBLIC.—Each 

person described under paragraph (2) shall make available 

to the public on the Internet website of such person the information disclosed by such person under subparagraph 

(A). 

‘‘(2) PERSON DESCRIBED.—A person is described in this 

paragraph if— 

‘‘(A) the person is required to file reports with the Commission pursuant to paragraph (1)(A); and 

‘‘(B) conflict minerals are necessary to the functionality 

or production of a product manufactured by such person. 

‘‘(3) REVISIONS AND WAIVERS.—The Commission shall revise or temporarily waive the requirements described in paragraph (1) if the President transmits to the Commission a determination that— 

‘‘(A) such revision or waiver is in the national security 

interest of the United States and the President includes the 

reasons therefor; and 

‘‘(B) establishes a date, not later than 2 years after the 

initial publication of such exemption, on which such exemption shall expire. 

‘‘(4) TERMINATION OF DISCLOSURE REQUIREMENTS.—The requirements of paragraph (1) shall terminate on the date on 

which the President determines and certifies to the appropriate 

congressional committees, but in no case earlier than the date 

that is one day after the end of the 5-year period beginning on 

the date of the enactment of this subsection, that no armed 


sroberts on DSKD5P82C1PROD with HEARING
853 

groups continue to be directly involved and benefitting from 

commercial activity involving conflict minerals. 

‘‘(5) DEFINITIONS.—For purposes of this subsection, the 

terms ‘adjoining country’, ‘appropriate congressional committees’, ‘armed group’, and ‘conflict mineral’ have the meaning 

given those terms under section 1502 of the Dodd-Frank Wall 

Street Reform and Consumer Protection Act.’’. 

(c) STRATEGY AND MAP TO ADDRESS LINKAGES BETWEEN CONFLICT MINERALS AND ARMED GROUPS.— 

(1) STRATEGY.— 

(A) IN GENERAL.—Not later than 180 days after the 

date of the enactment of this Act, the Secretary of State, in 

consultation with the Administrator of the United States 

Agency for International Development, shall submit to the 

appropriate congressional committees a strategy to address 

the linkages between human rights abuses, armed groups, 

mining of conflict minerals, and commercial products. 

(B) CONTENTS.—The strategy required by subparagraph (A) shall include the following: 

(i) A plan to promote peace and security in the 

Democratic Republic of the Congo by supporting efforts 

of the Government of the Democratic Republic of the 

Congo, including the Ministry of Mines and other relevant agencies, adjoining countries, and the international community, in particular the United Nations 

Group of Experts on the Democratic Republic of Congo, 

to— 

(I) monitor and stop commercial activities involving the natural resources of the Democratic Republic of the Congo that contribute to the activities 

of armed groups and human rights violations in 

the Democratic Republic of the Congo; and 

(II) develop stronger governance and economic 

institutions that can facilitate and improve transparency in the cross-border trade involving the 

natural resources of the Democratic Republic of the 

Congo to reduce exploitation by armed groups and 

promote local and regional development. 

(ii) A plan to provide guidance to commercial entities seeking to exercise due diligence on and formalize 

the origin and chain of custody of conflict minerals 

used in their products and on their suppliers to ensure 

that conflict minerals used in the products of such suppliers do not directly or indirectly finance armed conflict or result in labor or human rights violations. 

(iii) A description of punitive measures that could 

be taken against individuals or entities whose commercial activities are supporting armed groups and human 

rights violations in the Democratic Republic of the 

Congo. 

(2) MAP.— 

(A) IN GENERAL.—Not later than 180 days after the 

date of the enactment of this Act, the Secretary of State 

shall, in accordance with the recommendation of the United 


sroberts on DSKD5P82C1PROD with HEARING
854 

Nations Group of Experts on the Democratic Republic of 

the Congo in their December 2008 report— 

(i) produce a map of mineral-rich zones, trade 

routes, and areas under the control of armed groups in 

the Democratic Republic of the Congo and adjoining 

countries based on data from multiple sources, including— 

(I) the United Nations Group of Experts on the 

Democratic Republic of the Congo; 

(II) the Government of the Democratic Republic of the Congo, the governments of adjoining 

countries, and the governments of other Member 

States of the United Nations; and 

(III) local and international nongovernmental 

organizations; 

(ii) make such map available to the public; and 

(iii) provide to the appropriate congressional committees an explanatory note describing the sources of 

information from which such map is based and the 

identification, where possible, of the armed groups or 

other forces in control of the mines depicted. 

(B) DESIGNATION.—The map required under subparagraph (A) shall be known as the ‘‘Conflict Minerals Map’’, 

and mines located in areas under the control of armed 

groups in the Democratic Republic of the Congo and adjoining countries, as depicted on such Conflict Minerals 

Map, shall be known as ‘‘Conflict Zone Mines’’. 

(C) UPDATES.—The Secretary of State shall update the 

map required under subparagraph (A) not less frequently 

than once every 180 days until the date on which the disclosure requirements under paragraph (1) of section 13(p) 

of the Securities Exchange Act of 1934, as added by subsection (b), terminate in accordance with the provisions of 

paragraph (4) of such section 13(p). 

(D) PUBLICATION IN FEDERAL REGISTER.—The Secretary of State shall add minerals to the list of minerals in 

the definition of conflict minerals under section 1502, as 

appropriate. The Secretary shall publish in the Federal 

Register notice of intent to declare a mineral as a conflict 

mineral included in such definition not later than one year 

before such declaration. 

(d) REPORTS.— 

(1) BASELINE REPORT.—Not later than 1 year after the date 

of the enactment of this Act and annually thereafter until the 

termination of the disclosure requirements under section 13(p) 

of the Securities Exchange Act of 1934, the Comptroller General 

of the United States shall submit to appropriate congressional 

committees a report that includes an assessment of the rate of 

sexual- and gender-based violence in war-torn areas of the 

Democratic Republic of the Congo and adjoining countries. 

(2) REGULAR REPORT ON EFFECTIVENESS.—Not later than 2 

years after the date of the enactment of this Act and annually 

thereafter, the Comptroller General of the United States shall 

submit to the appropriate congressional committees a report 

that includes the following: 


sroberts on DSKD5P82C1PROD with HEARING
855 

(A) An assessment of the effectiveness of section 13(p) 

of the Securities Exchange Act of 1934, as added by subsection (b), in promoting peace and security in the Democratic Republic of the Congo and adjoining countries. 

(B) A description of issues encountered by the Securities and Exchange Commission in carrying out the provisions of such section 13(p). 

(C)(i) A general review of persons described in clause 

(ii) and whether information is publicly available about— 

(I) the use of conflict minerals by such persons; 

and 

(II) whether such conflict minerals originate from 

the Democratic Republic of the Congo or an adjoining 

country. 

(ii) A person is described in this clause if— 

(I) the person is not required to file reports with 

the Securities and Exchange Commission pursuant to 

section 13(p)(1)(A) of the Securities Exchange Act of 

1934, as added by subsection (b); and 

(II) conflict minerals are necessary to the 

functionality or production of a product manufactured 

by such person. 

(3) REPORT ON PRIVATE SECTOR AUDITING.—Not later than 

30 months after the date of the enactment of this Act, and annually thereafter, the Secretary of Commerce shall submit to the 

appropriate congressional committees a report that includes the 

following: 

(A) An assessment of the accuracy of the independent 

private sector audits and other due diligence processes described under section 13(p) of the Securities Exchange Act 

of 1934. 

(B) Recommendations for the processes used to carry 

out such audits, including ways to— 

(i) improve the accuracy of such audits; and 

(ii) establish standards of best practices. 

(C) A listing of all known conflict mineral processing 

facilities worldwide. 

(e) DEFINITIONS.—For purposes of this section: 

(1) ADJOINING COUNTRY.—The term ‘‘adjoining country’’, 

with respect to the Democratic Republic of the Congo, means a 

country that shares an internationally recognized border with 

the Democratic Republic of the Congo. 

(2) APPROPRIATE CONGRESSIONAL COMMITTEES.—The term 

‘‘appropriate congressional committees’’ means— 

(A) the Committee on Appropriations, the Committee on 

Foreign Affairs, the Committee on Ways and Means, and 

the Committee on Financial Services of the House of Representatives; and 

(B) the Committee on Appropriations, the Committee 

on Foreign Relations, the Committee on Finance, and the 

Committee on Banking, Housing, and Urban Affairs of the 

Senate. 

(3) ARMED GROUP.—The term ‘‘armed group’’ means an 

armed group that is identified as perpetrators of serious human 

rights abuses in the annual Country Reports on Human Rights 


sroberts on DSKD5P82C1PROD with HEARING
856 

Practices under sections 116(d) and 502B(b) of the Foreign Assistance Act of 1961 (22 U.S.C. 2151n(d) and 2304(b)) relating 

to the Democratic Republic of the Congo or an adjoining country. 

(4) CONFLICT MINERAL.—The term ‘‘conflict mineral’’ 

means— 

(A) columbite-tantalite (coltan), cassiterite, gold, wolframite, or their derivatives; or 

(B) any other mineral or its derivatives determined by 

the Secretary of State to be financing conflict in the Democratic Republic of the Congo or an adjoining country. 

(5) UNDER THE CONTROL OF ARMED GROUPS.—The term 

‘‘under the control of armed groups’’ means areas within the 

Democratic Republic of the Congo or adjoining countries in 

which armed groups— 

(A) physically control mines or force labor of civilians 

to mine, transport, or sell conflict minerals; 

(B) tax, extort, or control any part of trade routes for 

conflict minerals, including the entire trade route from a 

Conflict Zone Mine to the point of export from the Democratic Republic of the Congo or an adjoining country; or 

(C) tax, extort, or control trading facilities, in whole or 

in part, including the point of export from the Democratic 

Republic of the Congo or an adjoining country. 

SEC. 1503. REPORTING REQUIREMENTS REGARDING COAL OR OTHER 

MINE SAFETY. 

(a) REPORTING MINE SAFETY INFORMATION.—Each issuer that 

is required to file reports pursuant to section 13(a) or 15(d) of the 

Securities Exchange Act of 1934 (15 U.S.C. 78m, 78o) and that is 

an operator, or that has a subsidiary that is an operator, of a coal 

or other mine shall include, in each periodic report filed with the 

Commission under the securities laws on or after the date of enactment of this Act, the following information for the time period covered by such report: 

(1) For each coal or other mine of which the issuer or a 

subsidiary of the issuer is an operator— 

(A) the total number of violations of mandatory health 

or safety standards that could significantly and substantially contribute to the cause and effect of a coal or other 

mine safety or health hazard under section 104 of the Federal Mine Safety and Health Act of 1977 (30 U.S.C. 814) 

for which the operator received a citation from the Mine 

Safety and Health Administration; 

(B) the total number of orders issued under section 

104(b) of such Act (30 U.S.C. 814(b)); 

(C) the total number of citations and orders for unwarrantable failure of the mine operator to comply with mandatory health or safety standards under section 104(d) of 

such Act (30 U.S.C. 814(d)); 

(D) the total number of flagrant violations under section 110(b)(2) of such Act (30 U.S.C. 820(b)(2)); 

(E) the total number of imminent danger orders issued 

under section 107(a) of such Act (30 U.S.C. 817(a)); 


sroberts on DSKD5P82C1PROD with HEARING
857 

(F) the total dollar value of proposed assessments from 

the Mine Safety and Health Administration under such Act 

(30 U.S.C. 801 et seq.); and 

(G) the total number of mining-related fatalities. 

(2) A list of such coal or other mines, of which the issuer 

or a subsidiary of the issuer is an operator, that receive written 

notice from the Mine Safety and Health Administration of— 

(A) a pattern of violations of mandatory health or safety standards that are of such nature as could have significantly and substantially contributed to the cause and effect 

of coal or other mine health or safety hazards under section 

104(e) of such Act (30 U.S.C. 814(e)); or 

(B) the potential to have such a pattern. 

(3) Any pending legal action before the Federal Mine Safety 

and Health Review Commission involving such coal or other 

mine. 

(b) REPORTING SHUTDOWNS AND PATTERNS OF VIOLATIONS.— 

Beginning on and after the date of enactment of this Act, each 

issuer that is an operator, or that has a subsidiary that is an operator, of a coal or other mine shall file a current report with the 

Commission on Form 8–K (or any successor form) disclosing the following regarding each coal or other mine of which the issuer or subsidiary is an operator: 

(1) The receipt of an imminent danger order issued under 

section 107(a) of the Federal Mine Safety and Health Act of 

1977 (30 U.S.C. 817(a)). 

(2) The receipt of written notice from the Mine Safety and 

Health Administration that the coal or other mine has— 

(A) a pattern of violations of mandatory health or safety standards that are of such nature as could have significantly and substantially contributed to the cause and effect 

of coal or other mine health or safety hazards under section 

104(e) of such Act (30 U.S.C. 814(e)); or 

(B) the potential to have such a pattern. 

(c) RULE OF CONSTRUCTION.—Nothing in this section shall be 

construed to affect any obligation of a person to make a disclosure 

under any other applicable law in effect before, on, or after the date 

of enactment of this Act. 

(d) COMMISSION AUTHORITY.— 

(1) ENFORCEMENT.—A violation by any person of this section, or any rule or regulation of the Commission issued under 

this section, shall be treated for all purposes in the same manner as a violation of the Securities Exchange Act of 1934 (15 

U.S.C. 78a et seq.) or the rules and regulations issued thereunder, consistent with the provisions of this section, and any 

such person shall be subject to the same penalties, and to the 

same extent, as for a violation of such Act or the rules or regulations issued thereunder. 

(2) RULES AND REGULATIONS.—The Commission is authorized to issue such rules or regulations as are necessary or appropriate for the protection of investors and to carry out the 

purposes of this section. 

(e) DEFINITIONS.—In this section— 


sroberts on DSKD5P82C1PROD with HEARING
858 

(1) the terms ‘‘issuer’’ and ‘‘securities laws’’ have the meaning given the terms in section 3 of the Securities Exchange Act 

of 1934 (15 U.S.C. 78c); 

(2) the term ‘‘coal or other mine’’ means a coal or other 

mine, as defined in section 3 of the Federal Mine Safety and 

Health Act of 1977 (30 U.S.C. 802), that is subject to the provisions of such Act (30 U.S.C. 801 et seq.); and 

(3) the term ‘‘operator’’ has the meaning given the term in 

section 3 of the Federal Mine Safety and Health Act of 1977 (30 

U.S.C. 802). 

(f) EFFECTIVE DATE.—This section shall take effect on the day 

that is 30 days after the date of enactment of this Act. 

SEC. 1504. DISCLOSURE OF PAYMENTS BY RESOURCE EXTRACTION 

ISSUERS. 

Section 13 of the Securities Exchange Act of 1934 (15 U.S.C. 

78m), as amended by this Act, is amended by adding at the end the 

following: 

‘‘(q) DISCLOSURE OF PAYMENTS BY RESOURCE EXTRACTION

ISSUERS.— 

‘‘(1) DEFINITIONS.—In this subsection— 

‘‘(A) the term ‘commercial development of oil, natural 

gas, or minerals’ includes exploration, extraction, processing, export, and other significant actions relating to oil, 

natural gas, or minerals, or the acquisition of a license for 

any such activity, as determined by the Commission; 

‘‘(B) the term ‘foreign government’ means a foreign government, a department, agency, or instrumentality of a foreign government, or a company owned by a foreign government, as determined by the Commission; 

‘‘(C) the term ‘payment’— 

‘‘(i) means a payment that is— 

‘‘(I) made to further the commercial development of oil, natural gas, or minerals; and 

‘‘(II) not de minimis; and 

‘‘(ii) includes taxes, royalties, fees (including license fees), production entitlements, bonuses, and other 

material benefits, that the Commission, consistent with 

the guidelines of the Extractive Industries Transparency Initiative (to the extent practicable), determines are part of the commonly recognized revenue 

stream for the commercial development of oil, natural 

gas, or minerals; 

‘‘(D) the term ‘resource extraction issuer’ means an 

issuer that— 

‘‘(i) is required to file an annual report with the 

Commission; and 

‘‘(ii) engages in the commercial development of oil, 

natural gas, or minerals; 

‘‘(E) the term ‘interactive data format’ means an electronic data format in which pieces of information are identified using an interactive data standard; and 

‘‘(F) the term ‘interactive data standard’ means standardized list of electronic tags that mark information included in the annual report of a resource extraction issuer. 

‘‘(2) DISCLOSURE.— 


sroberts on DSKD5P82C1PROD with HEARING
859 

‘‘(A) INFORMATION REQUIRED.—Not later than 270 days 

after the date of enactment of the Dodd-Frank Wall Street 

Reform and Consumer Protection Act, the Commission 

shall issue final rules that require each resource extraction 

issuer to include in an annual report of the resource extraction issuer information relating to any payment made by 

the resource extraction issuer, a subsidiary of the resource 

extraction issuer, or an entity under the control of the resource extraction issuer to a foreign government or the Federal Government for the purpose of the commercial development of oil, natural gas, or minerals, including— 

‘‘(i) the type and total amount of such payments 

made for each project of the resource extraction issuer 

relating to the commercial development of oil, natural 

gas, or minerals; and 

‘‘(ii) the type and total amount of such payments 

made to each government. 

‘‘(B) CONSULTATION IN RULEMAKING.—In issuing rules 

under subparagraph (A), the Commission may consult with 

any agency or entity that the Commission determines is relevant. 

‘‘(C) INTERACTIVE DATA FORMAT.—The rules issued 

under subparagraph (A) shall require that the information 

included in the annual report of a resource extraction 

issuer be submitted in an interactive data format. 

‘‘(D) INTERACTIVE DATA STANDARD.— 

‘‘(i) IN GENERAL.—The rules issued under subparagraph (A) shall establish an interactive data standard 

for the information included in the annual report of a 

resource extraction issuer. 

‘‘(ii) ELECTRONIC TAGS.—The interactive data 

standard shall include electronic tags that identify, for 

any payments made by a resource extraction issuer to 

a foreign government or the Federal Government— 

‘‘(I) the total amounts of the payments, by category; 

‘‘(II) the currency used to make the payments; 

‘‘(III) the financial period in which the payments were made; 

‘‘(IV) the business segment of the resource extraction issuer that made the payments; 

‘‘(V) the government that received the payments, and the country in which the government is 

located; 

‘‘(VI) the project of the resource extraction 

issuer to which the payments relate; and 

‘‘(VII) such other information as the Commission may determine is necessary or appropriate in 

the public interest or for the protection of investors. 

‘‘(E) INTERNATIONAL TRANSPARENCY EFFORTS.—To the 

extent practicable, the rules issued under subparagraph (A) 

shall support the commitment of the Federal Government to 

international transparency promotion efforts relating to the 

commercial development of oil, natural gas, or minerals. 


sroberts on DSKD5P82C1PROD with HEARING
860 

‘‘(F) EFFECTIVE DATE.—With respect to each resource 

extraction issuer, the final rules issued under subparagraph (A) shall take effect on the date on which the resource extraction issuer is required to submit an annual report relating to the fiscal year of the resource extraction 

issuer that ends not earlier than 1 year after the date on 

which the Commission issues final rules under subparagraph (A). 

‘‘(3) PUBLIC AVAILABILITY OF INFORMATION.— 

‘‘(A) IN GENERAL.—To the extent practicable, the Commission shall make available online, to the public, a compilation of the information required to be submitted under 

the rules issued under paragraph (2)(A). 

‘‘(B) OTHER INFORMATION.—Nothing in this paragraph 

shall require the Commission to make available online information other than the information required to be submitted under the rules issued under paragraph (2)(A). 

‘‘(4) AUTHORIZATION OF APPROPRIATIONS.—There are authorized to be appropriated to the Commission such sums as 

may be necessary to carry out this subsection.’’. 

SEC. 1505. STUDY BY THE COMPTROLLER GENERAL. 

(a) IN GENERAL.—Not later than 1 year after the date of enactment of this Act, the Comptroller General of the United States shall 

issue a report assessing the relative independence, effectiveness, and 

expertise of presidentially appointed inspectors general and inspectors general of designated Federal entities, as such term is defined 

under section 8G of the Inspector General Act of 1978, and the effects on independence of the amendments to the Inspector General 

Act of 1978 made by this Act. 

(b) REPORT.—The report required by subsection (a) shall be 

issued to the Committees on Financial Services and Oversight and 

Government Reform of the House of Representatives and the Committees on Banking, Housing, and Urban Affairs and Homeland Security and Governmental Affairs of the Senate. 

SEC. 1506. STUDY ON CORE DEPOSITS AND BROKERED DEPOSITS. 

(a) STUDY.—The Corporation shall conduct a study to evaluate— 

(1) the definition of core deposits for the purpose of calculating the insurance premiums of banks; 

(2) the potential impact on the Deposit Insurance Fund of 

revising the definitions of brokered deposits and core deposits to 

better distinguish between them; 

(3) an assessment of the differences between core deposits 

and brokered deposits and their role in the economy and banking sector of the United States; 

(4) the potential stimulative effect on local economies of redefining core deposits; and 

(5) the competitive parity between large institutions and 

community banks that could result from redefining core deposits. 

(b) REPORT TO CONGRESS.—Not later than 1 year after the date 

of enactment of this Act, the Corporation shall submit to the Committee on Banking, Housing, and Urban Affairs of the Senate and 

the Committee on Financial Services of the House of Representatives 


sroberts on DSKD5P82C1PROD with HEARING
861 

a report on the results of the study under subsection (a) that includes legislative recommendations, if any, to address concerns arising in connection with the definitions of core deposits and brokered 

deposits. 

TITLE XVI—SECTION 1256 CONTRACTS 

SEC. 1601. CERTAIN SWAPS, ETC., NOT TREATED AS SECTION 1256 CONTRACTS. 

(a) IN GENERAL.—Subsection (b) of section 1256 of the Internal 

Revenue Code of 1986 is amended— 

(1) by redesignating paragraphs (1) through (5) as subparagraphs (A) through (E), respectively, and by indenting such subparagraphs (as so redesignated) accordingly, 

(2) by striking ‘‘For purposes of’’ and inserting the following: 

‘‘(1) IN GENERAL.—For purposes of’’, and 

(3) by striking the last sentence and inserting the following 

new paragraph: 

‘‘(2) EXCEPTIONS.—The term ‘section 1256 contract’ shall 

not include— 

‘‘(A) any securities futures contract or option on such a 

contract unless such contract or option is a dealer securities 

futures contract, or 

‘‘(B) any interest rate swap, currency swap, basis swap, 

interest rate cap, interest rate floor, commodity swap, equity swap, equity index swap, credit default swap, or similar agreement.’’. 

(b) EFFECTIVE DATE.—The amendments made by this section 

shall apply to taxable years beginning after the date of the enactment of this Act. 

And the Senate agree to the same. 

That the House recede from its disagreement to the amendment of the Senate to the title of the bill, and agree to the same. 

From the Committee on Financial Services, for consideration of the House bill and the Senate amendment, and 

modifications committed to conference: 

BARNEY FRANK of 

Massachusetts, 

PAUL E. KANJORSKI, MAXINE WATERS, CAROLYN B. MALONEY, LUIS V. GUTIERREZ, MELVIN L. WATT, GREGORY W. MEEKS of New 

York, 

DENNIS MOORE of Kansas, 

MARY JO KILROY, 

GARY C. PETERS, 

From the Committee on Agriculture, for consideration of 

subtitles A and B of title I, secs. 1303, 1609, 1702, 1703, 

title III (except secs. 3301 and 3302), secs. 4205(c), 

4804(b)(8)(B), 5008, and 7509 of the House bill, and sec. 

102, subtitle A of title I, secs. 406, 604(h), title VII, title 

VIII, secs. 983, 989E, 1027(j), 1088(a)(8), 1098, and 1099 


sroberts on DSKD5P82C1PROD with HEARING
862 

of the Senate amendment, and modifications committed to 

conference: 

COLLIN C. PETERSON, 

LEONARD L. BOSWELL, 

From the Committee on Energy and Commerce, for consideration of secs. 3009, 3102(a)(2), 4001, 4002, 4101–4114, 

4201, 4202, 4204–4210, 4301–4311, 4314, 4401–4403, 

4410, 4501–4509, 4601–4606, 4815, 4901, and that portion 

of sec. 8002(a)(3) which adds a new sec. 313(d) to title 31, 

United States Code, of the House bill, and that portion of 

sec. 502(a)(3) which adds a new sec. 313(d) to title 31, 

United States Code, secs. 722(e), 1001, 1002, 1011–1018, 

1021–1024, 1027–1029, 1031–1034, 1036, 1037, 1041, 

1042, 1048, 1051–1058, 1061–1067, 1101, and 1105 of the 

Senate amendment, and modifications committed to conference: 

BOBBY L. RUSH, 

From the Committee on Judiciary, for consideration of 

secs. 1101(e)(2), 1103(e)(2), 1104(i)(5) and (i)(6), 1105(h) 

and (i), 1110(c) and (d), 1601, 1605, 1607, 1609, 1610, 

1612(a), 3002(c)(3) and (c)(4), 3006, 3119, 3206, 4205(n), 

4306(b), 4501–4509, 4603, 4804(b)(8)(A), 4901(c)(8)(D) and 

(e), 6003, 7203(a), 7205, 7207, 7209, 7210, 7213–7216, 

7220, 7302, 7507, 7508, 9004, 9104, 9105, 9106(a), 9110(b), 

9111, 9118, 9203(c), and 9403(b) of the House bill, and 

secs. 112(b)(5)(B), 113(h), 153(f), 201, 202, 205, 208–210, 

211(a) and (b), 316, 502(a)(3), 712(c), 718(b), 723(a)(3), 

724(b), 725(c), 728, 731, 733, 735(b), 744, 748, 753, 763(a), 

(c) and (i), 764, 767, 809(f), 922, 924, 929B, 932, 991(b)(5), 

(c)(2)(G) and (c)(3)(H), 1023(c)(7) and (c)(8), 1024(c)(3)(B), 

1027(e), 1042, 1044(a), 1046(a), 1047, 1051–1058, 1063, 

1088(a)(7)(A), 1090, 1095, 1096, 1098, 1104, 1151(b), and 

1156(c) of the Senate amendment, and modifications committed to conference: 

JOHN CONYERS, Jr., 

HOWARD L. BERMAN, 

From the Committee on Oversight and Government Reform, for consideration of secs. 1000A, 1007, 1101(e)(3), 

1203(d), 1212, 1217, 1254(c), 1609(h)(8)(B), 1611(d), 3301, 

3302, 3304, 4106(b)(2) and (g)(4)(D), 4604, 4801, 4802, 

5004, 7203(a), 7409, and 8002(a)(3) of the House bill, and 

secs. 111(g), (i) and (j), 152(d)(2), (g) and (k), 210(h)(8), 

319, 322, 404, 502(a)(3), 723(a)(3), 748, 763(a), 809(g), 

922(a), 988, 989B, 989C, 989D, 989E, 1013(a), 1022(c)(6), 

1064, 1152, and 1159(a) and (b) of the Senate amendment, 

and modifications committed to conference: 

EDOLPHUS TOWNS, 

ELIJAH E. CUMMINGS, 

From the Committee on Small Business, for consideration 

of secs. 1071 and 1104 of the Senate amendment, and 

modifications committed to conference: 

NYDIA M. VELA ́ ZQUEZ, 

HEATH SHULER, 

Managers on the Part of the House. 


sroberts on DSKD5P82C1PROD with HEARING
863 

CHRISTOPHER J. DODD, TIM JOHNSON, JACK REED, CHARLES E. SCHUMER, From the Committee on Agriculture, Nutrition, and Forestry: 

BLANCHE L. LINCOLN, PATRICK J. LEAHY, TOM HARKIN, Managers on the Part of the Senate. 


sroberts on DSKD5P82C1PROD with HEARING

sroberts on DSKD5P82C1PROD with HEARING
(865) 

JOINT EXPLANATORY STATEMENT OF THE COMMITTEE OF 

CONFERENCE 

The managers on the part of the House and the Senate at 

the conference on the disagreeing votes of the two Houses on the 

amendment of the Senate to the bill H.R. 4173, to provide for financial regulatory reform, to protect consumers and investors, to 

enhance Federal understanding of insurance issues, to regulate the 

over-the-counter derivatives markets, and for other purposes, submit the following joint statement to the House and the Senate in 

explanation of the effect of the action agreed upon by the managers 

and recommended in the accompanying conference report: 

The Senate amendment struck all of the House bill after the 

enacting clause and inserted a substitute text. 

The House recedes from its disagreement to the amendment 

of the Senate with an amendment that is a substitute for the 

House bill and the Senate amendment. The differences between the 

House bill, the Senate amendment, and the substitute agreed to in 

conference are noted below, except for clerical corrections, conforming changes made necessary by agreements reached by the 

conferees, and minor drafting and clarifying changes. 

TITLE I—FINANCIAL STABILITY 

Title I, which establishes a specific framework for ensuring 

financial stability, consists of three subtitles. Subtitle A establishes 

a Financial Stability Oversight Council to monitor potential threats 

to the financial system and provide for more stringent regulation 

of nonbank financial companies and financial activities that the 

Council determines, based on consideration of risk-related factors, 

pose risks to financial stability. Subtitle B establishes an Office of 

Financial Research that supports the Council by collecting information, conducting research, and analyzing data. Subtitle C provides 

a specific, more stringent supervisory framework for regulating 

large, interconnected bank holding companies, nonbank financial 

companies that the Council subjects to more stringent regulation, 

and activities and practices that the Council determines may pose 

systemic threats. 

TITLE II—ORDERLY LIQUIDATION AUTHORITY 

Title II establishes an orderly liquidation authority that may 

be used only if the Secretary of the Treasury (in consultation with 

the President), based on the written recommendation of two other 

federal regulators, agrees that doing so is necessary to mitigate serious adverse effects on financial stability in the United States. 

When the authority is used, the FDIC is appointed receiver and 

must liquidate the company in a manner that mitigates significant 

risks to financial stability and minimizes moral hazard. All costs 


sroberts on DSKD5P82C1PROD with HEARING
866 

of an orderly liquidation under this title are borne first by shareholders and unsecured creditors, and, if necessary, by risk-based 

assessments on large financial companies. Taxpayers specifically 

are protected from losses associated with use of this authority. 

TITLE III—TRANSFER OF POWERS TO THE COMPTROLLER 

OF THE CURRENCY, THE CORPORATION, AND THE BOARD 

OF GOVERNORS 

PRUDENTIAL REGULATOR RESTRUCTURING

Title III of the conference report transfers the functions of 

the Office of Thrift Supervision to the Office of the Comptroller of 

the Currency, which will now supervise federal thrifts, to the Federal Deposit Insurance Corporation (‘‘FDIC’’), which will supervise 

state-chartered thrifts, and to the Federal Reserve Board, which 

will supervise thrift holding companies. 

The conference report also protects employees affected by the 

regulatory streamlining by preserving pay and benefits, and protecting them from involuntary separation or relocation for a period 

of time. Title III requires comprehensive coordination of the integration of the agencies, and reporting to the House Financial Services Committee and Senate Banking Committee regarding the implementation of the merger. 

FEDERAL DEPOSIT INSURANCE REFORMS

The title revises the FDIC’s assessment base for deposit insurance, maintaining the risk-based nature of the assessment 

structure but transitioning to a broader assessment base for bank 

premiums based on total assets (minus tangible equity). The conference report also includes additional reforms that will enhance 

FDIC’s ability to manage the Deposit Insurance Fund. 

The title makes permanent the increase in deposit insurance to $250,000, and makes the increase retroactive to January 1, 

2008. Full insurance of noninterest-bearing transaction accounts is 

also extended for an additional two years and a comparable program is authorized for credit unions. 

OFFICE OF MINORITY AND WOMEN INCLUSION

The title requires the establishment of offices of Minority 

and Women Inclusion by the Treasury Department, and the financial regulators, to coordinate technical assistance to minorityowned and women-owned businesses and to promote diversity in 

the workforce of the regulators. 

TITLE IV—REGULATION OF ADVISERS TO HEDGE FUNDS 

AND OTHERS 

The conference report eliminates the ‘‘private adviser’’ exemption in the Investment Advisers Act of 1940 (‘‘IAA’’) thus registering advisers to private funds with the U.S. Securities and Exchange Commission (‘‘SEC’’). It expands the advisers’ reporting requirements to the SEC as necessary or appropriate in the public 

interest and for the protection of investors or for the assessment 

of risk by the Financial Stability Oversight Council. The SEC is auVerDate Mar 15 2010 04:29 Jul 07, 2010 Jkt 057098 PO 00000 Frm 00870 Fmt 6601 Sfmt 6601 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
867 

thorized to take into account the size, governance, and investment 

strategy of an adviser to the fund to determine if the fund poses 

a systemic risk. The conference report also amends the IAA to 

allow the SEC to require investment advisers to disclose the identity, investments, or affairs of their clients for purposes of systemic 

risk. 

The report includes exemptions for certain private fund advisers. It provides an exemption from registration requirements for 

advisers of private funds, each with less than $150 million in assets under management, while maintaining reporting requirements 

as directed by the SEC; an SEC reporting requirement for advisers 

to venture capital funds, as defined by the SEC and otherwise exempt from the framework; and an exemption for Family Offices. 

The conference report raises the assets threshold for federal regulation of investment advisers from $30 million to $100 million. Those 

advisers who qualify to register with their home state must register with the SEC should the adviser operate in more than 15 

states. 

Finally, the report clarifies the SEC’s authority to make 

rules necessary for the exercise of the powers conferred upon the 

SEC by the IAA. The SEC must adjust for the effects of inflation 

any dollar amount measures used in making determinations of the 

qualified client standard. 

Advisers must comply with the new provisions within one 

year of enactment of the conference report, though the report allows advisers to register earlier with the SEC. 

TITLE V—INSURANCE 

Subtitle A, the Federal Insurance Office Act of 2010, creates 

a Federal Insurance Office (FIO) in the Treasury Department to 

provide the Executive Branch and the Congress with a source of information on the national insurance marketplace. FIO is not a federal regulator or supervisor of insurance. Rather, its functions include collecting information about the insurance industry; monitoring for systemic risk in the insurance industry, including serving 

in an advisory capacity to the Financial Stability Oversight Council; and administering the Terrorism Risk Insurance Program. Further, FIO will consult with the states regarding insurance matters 

of national importance and prudential insurance matters of international importance. FIO will also coordinate federal efforts and 

develop federal policy on prudential aspects of international insurance matters, including representing the United States in international insurance fora, and assisting the Treasury Secretary in 

negotiations of international insurance agreements with respect to 

the business of insurance or reinsurance. FIO will have a narrow 

and limited preemption power over state insurance measures that 

are inconsistent with such international insurance agreements. 

The Federal Insurance Office Act of 2010 expressly provides 

the Secretary of the Treasury, jointly with the USTR, the authority 

to negotiate and enter into international insurance agreements. To 

assure uniform, national application of prudential measures such 

as reinsurance collateral requirements, the Federal Insurance Office Act provides the Director with the authority to identify and 


sroberts on DSKD5P82C1PROD with HEARING
868 

narrowly preempt state insurance measures inconsistent with a defined category of international insurance agreements. 

Subtitle B, the Nonadmitted and Reinsurance Reform Act of 

2010, will reform and modernize two important sectors of the commercial insurance marketplace, nonadmitted insurance (also known 

as ‘surplus lines’ insurance) and reinsurance. Specifically, the Nonadmitted and Reinsurance Reform Act of 2010 creates a uniform 

system for nonadmitted insurance premium tax payments based 

upon the home state of the policyholder, encourages the states to 

develop a compact or other procedural mechanism for uniform tax 

allocation, and establishes regulatory deference for the home state 

of the insured. The Act adopts uniform eligibility requirements for 

nonadmitted insurers as developed and promulgated by the National Association of Insurance Commissioners (NAIC) in the Nonadmitted Insurance Model Act. The Nonadmitted and Reinsurance 

Reform Act of 2010 will allow direct access to the nonadmitted insurance markets for certain sophisticated commercial purchasers. 

The Nonadmitted and Reinsurance Reform Act also streamlines the 

regulation of reinsurance by applying single state regulation for financial solvency and credit for reinsurance. Credit for reinsurance 

determinations will be controlled by the state of domicile of the 

ceding insurer. Reinsurance solvency regulation will be controlled 

by the state of domicile of the reinsurer provided such state is 

NAIC-accredited or has financial solvency requirements substantially similar to the requirements necessary for NAIC accreditation. 

Under the Act, non-domiciliary states are specifically prohibited 

from applying their reinsurance laws in an extra-territorial manner. 

TITLE VI—IMPROVEMENTS TO REGULATION OF BANK AND 

SAVINGS ASSOCIATION HOLDING COMPANIES AND DEPOSITORY INSTITUTIONS 

Title VI improves prudential regulation of banks, saving associations, and their holding companies. The improvements include 

significant limitations on proprietary trading and sponsoring or investing in hedge funds or private equity funds by banking entities 

through the Volcker rule, better supervision of nonbank subsidiaries of holding companies, enhanced restrictions on transactions 

with affiliates, limits on derivatives and securities lending credit 

exposure, and a requirement that any company that controls an insured depository institution serve as a source of financial strength 

to the institution. 

TITLE VII—WALL STREET TRANSPARENCY AND 

ACCOUNTABILITY 

The conference report establishes a new regulatory framework to cover a broad range of participants and institutions in the 

over-the-counter derivatives market. The Commodity Futures Trading Commission (‘‘CFTC’’) and the Securities and Exchange Commission (‘‘SEC’’) are authorized to write rules for the swaps and security-based swaps markets, respectively. The Commissions shall 

consult and coordinate on rules and include the prudential regulators, to the extent possible, to assure regulatory consistency and 


sroberts on DSKD5P82C1PROD with HEARING
869 

comparability. The Commissions will register participants in the 

market including dealers, major participants, clearing agencies and 

organizations, exchanges, swap execution facilities, and trade repositories. Exemptions and exclusions from registration will apply 

as outlined in the report or at the discretion of the regulators. The 

Commissions will have enforcement authority in their jurisdictions 

while the prudential regulators maintain exclusive authority to enforce provisions for capital and margin for banks and branches or 

agencies of foreign banks. 

The report provides definitions for terms used in the Commodity Exchange Act and Securities Exchange Act of 1934. The 

regulatory framework outlines provisions for: 

Mandatory clearing of swaps and security-based swaps for 

those trades that are eligible for clearing as determined by 

both the clearing houses and the regulators; 

Mandatory trading on an exchange or swap (or security 

based swap) execution facility should the transactions be 

cleared and a facility will accept it for trading; 

Public trade reporting of all cleared and uncleared swaps 

and security-based swaps; 

Regulators have authority to impose capital on dealers and 

major swap participants; 

Regulators have authority to impose margin requirements 

only on dealers and major participants for uncleared swaps, 

adding safeguards to the system by ensuring dealers and major 

swap participants have adequate financial resources to meet 

obligations; 

Position limits on swaps contracts that perform or affect a 

significant price discovery function and requirements to aggregate limits across markets; and 

Prohibitions against market manipulation. 

The report includes a prohibition of federal assistance to 

swaps and security-based swap entities, including federal deposit 

insurance, access to the Federal Reserve discount window or Federal Reserve credit facility, to swaps entities in connection with 

their trading in swaps or securities-based swaps. 

The report establishes a code of conduct for all registered 

swap dealers and major swap participants requiring them to disclose to the swap entity the material risks and characteristics of a 

swap and any conflicts of interest or material incentives. When acting as counterparties to a pension fund, endowment fund, or state 

or local government, dealers are to have a reasonable basis to believe that the fund or governmental entity has an independent representative advising them. 

The report requires a number of studies, including studies on 

international swap regulation, the regulation of carbon markets, 

stable value contracts, and the effect of position limits on exchanges. 

TITLE VIII—PAYMENT, CLEARING, AND SETTLEMENT 

SUPERVISION 

Title VIII establishes a specific framework for promoting uniform risk-management standards for systemically important financial market utilities (FMUs) and systemically important payment, 


sroberts on DSKD5P82C1PROD with HEARING
870 

clearing, and settlement (PCS) activities conducted by financial institutions. The Board of Governors of the Federal Reserve System 

(Board), the Securities and Exchange Commission (SEC), or the 

Commodity Futures Trading Commission (CFTC), as appropriate, 

is primarily responsible for establishing and enforcing risk-management standards for FMUs and PCS activities that the Council identifies as systemically important. If the Board determines that the 

standards imposed by the SEC or the CFTC or the enforcement actions of such agencies are insufficient, then the Council can require 

the SEC or CFTC to impose additional standards or take additional 

enforcement actions. 

TITLE IX—INVESTOR PROTECTIONS AND IMPROVEMENTS 

TO THE REGULATION OF SECURITIES 

Subtitle A—Increasing Investor Protection establishes mechanisms to assist investors in their dealings with the SEC by creating 

an Office of Investor Advocate and an Ombudsman. It also creates 

an Investor Advisory Committee at the SEC, and clarifies the authority of the SEC to engage in investor testing. Subtitle A directs 

the SEC to study the standards of care applicable to broker-dealers 

and investment advisers giving investment advice to retail customers, and it authorizes the SEC to promulgate rules imposing a 

fiduciary duty on broker-dealers and investment advisers to protect 

retail customers. In addition, the subtitle streamlines filing procedures for self-regulatory organizations. Subtitle A also clarifies the 

authority of the SEC to require investor disclosures before purchase of investment products and services. Finally, the subtitle requires studies on the enhancement of investment adviser examinations, financial literacy, mutual fund advertising, conflicts of interest, improved investor access to information on investment advisers 

and broker-dealers, and financial planners and the use of financial 

designations. 

Subtitle B—Increasing Regulatory Enforcement and Remedies strengthens the SEC’s authority to conduct investigations, impose liability on control persons, and assess penalties for violations 

of the securities laws. It also makes clear that the intent standard 

in SEC enforcement actions for aiding and abetting is recklessness, 

and it requires a study regarding the issue of aiding and abetting 

liability in private actions. Under subtitle B, the SEC has the authority to restrict pre-dispute mandatory arbitration. The subtitle 

further enhances incentives and protections for whistleblowers providing information leading to successful SEC enforcement actions. 

Awards to whistleblowers will range from 10 percent to 30 percent 

of the amounts collected by the SEC in actions where the SEC obtained monetary sanctions exceeding $1 million. The subtitle also 

works to protect the confidentiality of whistleblowers. 

The subtitle further enhances the ability of the SEC to ban 

violators from all parts of the securities industry, disqualifies felons and other bad actors from using the Regulation D offering exemption, and provides for the equal treatment of self-regulatory organization (SRO) rules. It streamlines SRO rule filing procedures 

by requiring the SEC to complete the process of reviewing and taking action on proposed SRO rules within specified time frames. The 

subtitle enhances the ability of the SEC to issue subpoenas, bring 


sroberts on DSKD5P82C1PROD with HEARING
871 

cases against individuals, and share information with other authorities. It also updates the law governing the Securities Investor 

Protection Corporation (SIPC). These reforms include increasing 

the minimum assessments on SIPC members; raising penalties for 

fraud; and establishing civil and criminal penalties against any 

person who misrepresents membership in SIPC. Subtitle B gives 

the SEC authority to enhance public reporting of aggregate information on short selling, prohibits manipulative short sales, and requires notification to customers that they may choose not to allow 

their securities to be used in connection with short sales. The subtitle further establishes procedures to notify investors about missing securities, and it requires the SEC to complete investigations 

and examinations within certain time frames, subject to exceptions 

for complex cases. Finally, the subtitle requires a study regarding 

the issue of aiding and abetting liability in private actions for securities fraud. 

Subtitle C—Improvement to the Regulation of Credit Rating 

Agencies gives broader powers to the SEC to regulate nationally 

recognized statistical rating organizations (‘‘NRSROs’’). A new Office of Credit Ratings (‘‘Office’’) is required to examine NRSROs at 

least once a year and make key findings public. The Office will 

write new rules, including requiring NRSROs to (1) set up internal 

controls over the process for determining credit ratings; (2) establish an independent board of directors; (3) make greater disclosures 

to the public and investors; and (4) develop universal ratings across 

asset classes and types of issuer. The report also gives the Office 

the authority to deregister an NRSRO for providing bad ratings 

over time. New professional standards are established that require 

ratings analysts to pass qualifying exams and have continuing education. 

The report includes provisions to address conflicts of interest. It prohibits compliance officers from working on ratings, methodologies, or sales and prevents other employees from both marketing ratings services and performing the ratings of securities. 

The subtitle includes on additional conflict of interest mitigation including a new requirement for NRSROs to conduct a one-year lookback review when an NRSRO employee goes to work for an obligor 

or underwriter of a security or money market instrument subject 

to a rating by that NRSRO; and report to the SEC when certain 

employees of the NRSRO go to work for an entity that the NRSRO 

has rated in the previous twelve months. The SEC shall make such 

reports publicly available. 

To reduce the reliance on ratings, the report amends several 

statutes to remove references to credit ratings, credit rating agencies and NRSROs. The subtitle includes a requirement that all 

Federal agencies review their regulations, policies and practices 

that reference credit ratings, credit rating agencies, and NRSROs. 

After identifying where the agency relies on or makes these references, the agencies shall modify their regulations by striking 

these references and substituting a standard of creditworthiness to 

be established by the agencies. 

New provisions address information gathering. NRSROs 

must consider information in their ratings that comes to their attention from a source other than the organizations being rated, if 


sroberts on DSKD5P82C1PROD with HEARING
872 

they find it credible. In addition, the subtitle includes an elimination of the credit rating agency exemption from Regulation Fair 

Disclosure, commonly known as Reg FD. 

The report also addresses liability measures for the NRSRO. 

The report allows investors to bring private rights of action against 

credit rating agencies for a knowing or reckless failure to conduct 

a reasonable investigation of the facts or to obtain analysis from an 

independent source. The report also nullifies Rule 436(g) which 

provides an exemption for credit ratings provided by NRSROs from 

being considered a part of the registration statement prepared or 

certified by a person under the ‘‘expert liability’’ regime of Section 

7 and Section 11 of the Securities Act of 1933. The subtitle requires 

all references to ‘‘furnish’’ be replaced with the word ‘‘file’’ in existing law. Information that is ‘‘furnished’’ to the SEC is subject to a 

lower standard of accuracy and liability than information ‘‘filed’’ 

with the SEC. 

The report also directs the SEC to establish a system that 

prohibits issuers of structured finance from selecting the NRSRO 

that will provide the initial credit rating. The system would mandate that initial rating assignments for structured finance securities be made on a random or semi-random basis, unless the SEC 

determines, after study, that an alternative system of assigning 

ratings would better protect investors and serve the public interest. 

Subtitle D—Improvements to Asset-Backed Securitization 

Process requires securitizers to retain an economic interest in a 

material portion of the credit risk for any asset that securitizers 

transfer, sell, or convey to a third party. Risk retention requirements and exemptions will be determined by regulators, which will 

include setting risk retention requirements for different asset classes that are securitized and allocating risk retention obligations between securitizers and originators. An exemption is provided for 

qualified residential mortgages, as defined by the regulators, but 

which can be no broader than the definition of qualified mortgage 

in Title XIV. Regulators may tailor risk retention requirements as 

appropriate to the structure of collateralized debt obligations and 

other complex asset-backed securities. Subtitle D also requires enhanced disclosure by issuers of asset-backed securities, including 

data related to the underlying loans or assets. Express exemptions 

are provided for the Farm Credit System and any residential, multifamily, or health care facility mortgage loan asset or 

securitization which is insured or guaranteed by the United States 

or an agency of the United States. Regulators also are required to 

issue total or partial exemptions from risk retention and disclosure 

requirements for municipal securities and for securitizations of assets issued or guaranteed by federal agencies, as long as the exemption is in the public interest and for the protection of investors. 

Subtitle E—Accountability and Executive Compensation is 

designed to address shareholder rights and executive compensation 

practices. In this subtitle, Congress provides shareholders in a public company with a vote on executive compensation and additional 

disclosures involving compensation practices. Under the conference 

report, at least every three years shareholders can cast an advisory 

vote to approve the compensation of executives and, where appropriate, golden parachutes for executives. Also under this subtitle, 


sroberts on DSKD5P82C1PROD with HEARING
873 

(i) board committees that set compensation policy will consist only 

of directors who are independent; (ii) companies will tell shareholders about the relationship between the executive compensation 

the company paid and the company’s financial performance; (iii) 

companies will be required to have a policy to recover money erroneously paid to executives based on financials that later have to be 

restated due to an accounting error; and (iv) companies will be required to disclose in the annual proxy statement whether employees or members of the board may hedge or offset any decrease in 

the market value of equity securities granted. This subtitle also requires federal financial regulators to monitor incentive-based payment arrangements of federally regulated financial institutions 

larger than $1 billion and prohibit incentive-based payment arrangements that the regulators determine jointly could threaten financial institutions’ safety and soundness or could have serious adverse effects on economic conditions or financial stability. Finally, 

subtitle E prohibits brokers who are not beneficial owners of a security from voting through company proxies unless the beneficial 

owner has instructed the broker to vote on the owner’s behalf. 

Subtitle F—Improvements to the Management of the Securities and Exchange Commission requires several reports designed to 

assess SEC performance and provide recommendations for improvements. These involve assessment of the management of the 

SEC related to internal supervisory controls, personnel management, financial controls, and oversight of national securities associations. Subtitle F also creates a suggestion program for SEC employees and requires the Divisions of Trading and Markets and Investment Management to have examiners on their staffs. It requires the SEC to hire a consultant to study the SEC’s operations 

and determine whether there is a need for comprehensive reform. 

Finally, Subtitle F requires the GAO to study issues surrounding 

employees who leave the SEC to work in the securities industry. 

Subtitle G—Strengthening Corporate Governance authorizes 

the SEC to write rules allowing shareholders to nominate candidates for an issuer’s board of directors, and to have such candidates listed on the issuer’s own proxy materials. In writing such 

rules, the SEC must consider the burden on small issuers, and may 

issue exemptions from proxy access rules. Issuers must also disclose why the issuer has chosen to have a single person, or different individuals, serve as CEO and Chairman of the board of the 

company. 

Subtitle H—Municipal Securities requires the registration of 

municipal financial advisors and subjects them to rules to be promulgated by the Municipal Securities Rulemaking Board (MSRB), 

which will be enforced by the SEC. An Office of Municipal Securities is created within the SEC. The MSRB will be reconstituted, so 

that a majority of members are independent of the municipal securities industry. Municipal advisors will have a fiduciary duty to 

municipal entities. Subtitle H calls for studies of municipal securities markets, and ways to increase disclosure to investors. It also 

provides a certain source of funding for the Government Accounting 

Standards Board. 

Subtitle I—Public Company Accounting Oversight Board, 

Portfolio Margining, and Other Matters, subtitle I allows the Public 


sroberts on DSKD5P82C1PROD with HEARING
874 

Company Accounting Oversight Board (PCAOB) to examine the 

auditors of broker-dealers. It further authorizes the PCAOB to 

share information with foreign authorities. The conference report 

also authorizes portfolio margining for accounts that hold both securities and futures. In response to problems related to securities 

borrowing and lending, the conference report requires more transparency. It also raises the dollar threshold that triggers a full ‘‘material loss review’’ by federal banking regulators’ inspectors general. Subtitle I improves the coordination, activities, flexibility, and 

accountability of inspectors general at Federal financial agencies. 

Subtitle I also exempts small issuers (those with less than 

$75,000,000 in market capitalization) from the external audit of internal controls requirements of Sarbanes-Oxley Section 404(b), and 

requires studies on the impact of such an exemption and the exemption for mid-sized companies. The subtitle also creates an exemption for certain annuities from federal securities regulation. 

Further, it makes numerous technical and conforming changes to 

Federal securities laws. 

Subtitle J—Securities and Exchange Commission Match 

Funding maintains the role of the Appropriations Committees in 

setting the Securities and Exchange Commission’s annual budgets 

on and after FY2012. Transaction fee receipts would be treated as 

offsetting collections equal to the amount of the appropriation. Any 

excess collections would go to the Treasury as general revenue and 

not offset any current or future appropriations. Subtitle J sets annual registration fee targets that will produce $5 billion of revenues over ten years that will go to the Treasury general fund. It 

also requires SEC’s budget to be submitted to Congress concurrent 

with the earliest submission to the Office of Management and 

Budget and submitted unaltered by the President; builds in flexibility for multi-year budget authority and unanticipated needs; and 

authorizes graduated funding level increases for the SEC for FYs 

2011–2015. 

TITLE X—BUREAU OF CONSUMER FINANCIAL PROTECTION 

Title X establishes the Bureau of Consumer Financial Protection (Bureau), which will be an independent bureau within the 

Federal Reserve System. It will be run by a Director who is Presidentially appointed and Senate confirmed. The Bureau will have 

the authority and accountability to ensure that existing consumer 

protection laws and regulations are comprehensive, fair, and vigorously enforced. 

The Bureau will have authority to issue rules applicable to 

all financial institutions, including depository institutions that offer 

financial products and services to consumers. It will also have authority to issue rules under existing consumer banking statutes, including the Truth in Lending Act, the Equal Credit Opportunity 

Act, and the Real Estate Settlement Procedures Act. Furthermore, 

the Bureau will have authority to regulate unfair, deceptive and 

abusive practices and consumer products that it identifies (UDAP 

authority). The Bureau also may issue regulations relating to disclosures about consumer financial products and services. 

Title X also establishes the Bureau as the federal agency 

with examination and enforcement authority over very large banks 


sroberts on DSKD5P82C1PROD with HEARING
875 

and nonbank financial institutions for compliance with the consumer protection laws. The prudential regulators will retain this 

authority for insured depository institutions and credit unions with 

assets of $10 billion or less. Exclusions from supervision and enforcement are provided for nonfinancial companies, including merchants, retailers, attorneys, accountants, and real estate brokers, 

that finance the purchase of their nonfinancial consumer products 

and services under certain conditions and where the nonfinancial 

company is not significantly engaged in such financing. There is 

also an exclusion from the authority of the Bureau for automobile 

dealers, for which the Federal Reserve Board will continue to write 

regulations under the enumerated federal consumer laws, to be enforced by the Federal Trade Commission (FTC). The FTC will also 

be able to write rules proscribing unfair or deceptive acts or practices with regard to auto dealers under the procedures set out 

under the Administrative Procedures Act. 

The conference report also revises the standard the OCC will 

use to preempt state consumer protection laws. It codifies the 

standard in the 1996 Supreme Court case Barnett Bank of Marion 

County, N.A. v. Nelson to allow for the preemption of State consumer financial laws that prevent or significantly interfere with 

national banks’ exercise of their powers. State Attorneys General 

also are given authority to enforce the UDAP and other authorities 

of the Bureau against banks and savings associations. 

To address consumer protection and fair lending matters, 

Title X establishes the Office of Fair Lending and Equal Opportunity within the Bureau. This Office will oversee the enforcement 

of federal laws intended to ensure fair, equitable and nondiscriminatory access to credit for individuals and communities, including 

the Equal Credit Opportunity Act (ECOA) and Home Mortgage 

Disclosure Act (HMDA). The Office will promote coordination of 

fair lending enforcement efforts with other federal agencies and 

State regulators, as appropriate, to provide consistent, efficient and 

effective enforcement of federal fair lending laws. 

The Bureau will also include an Office for Financial Education and an Office the Financial Protection of Older Americans. 

In addition, Title X provides for enhanced data collection required 

by HMDA and ECOA. 

TITLE XI—FEDERAL RESERVE SYSTEM PROVISIONS 

LIQUIDITY PROGRAMS

The Federal Reserve will be able to make 13(3) emergency 

loans only through widely available programs approved by the Secretary of the Treasury, and not to individual firms. FDIC programs 

to guarantee short-term debt during financial crises will be limited 

to solvent depository institutions and their holding companies, and 

can be created only after meeting several conditions including Congressional approval. 

FEDERAL RESERVE GOVERNANCE AND OVERSIGHT

The Government Accountability Office will conduct an audit 

of Federal Reserve 13(3) emergency lending since December 1, 


sroberts on DSKD5P82C1PROD with HEARING
876 

2007, and the Federal Reserve will publish details about such lending on December 1, 2010. The GAO will have ongoing audit authority over Federal Reserve discount window and open market operation transactions, and emergency lending. The Federal Reserve 

will publicly disclose data on discount window and open market operations, and details about emergency lending, after a delay that 

will allow these tools to function effectively. 

The position of Vice Chairman for Supervision on the Federal Reserve Board of Governors is established, and the Federal 

Reserve is formally prohibited from delegating its functions for establishing regulatory or supervisory policy to Federal Reserve 

banks. The presidents of each Federal Reserve Bank will be elected 

by the directors selected to represent the public (Class B and C directors), and the directors representing the member banks (Class 

A directors) will no longer be authorized to vote. 

TITLE XII—IMPROVING ACCESS TO MAINSTREAM 

FINANCIAL INSTITUTIONS 

This title will expand access to safe and affordable bank accounts, credit and financial information for low-income, minority 

and other underserved families. Specifically, the title would address the following challenges facing low- and moderate-income 

families with three authorized programs: 

authorizes a program to help low- and moderate-income individuals open low-cost checking or savings accounts at banks 

or credit unions; 

increases access to objective advice through non-profits 

and others aiding in offering financial advice to consumers; 

and 

creates a pool of capital to enable community development 

financial institutions (CDFIs) to establish and maintain small 

dollar loan programs, creating an alternative to pay day or car 

title loans in local communities. 

TITLE XIII—PAY IT BACK ACT 

Title XIII, the TARP Pay it Back Act, reduces the amount 

authorized under the Troubled Asset Repurchase Program to $475 

billion, from the original $700 billion; prohibits Treasury from 

using repaid TARP funds; and prohibits Treasury from initiating 

new programs under TARP. 

TITLE XIV—MORTGAGE REFORM AND ANTI-PREDATORY 

LENDING ACT 

Title XIV enacts the Mortgage Reform and Anti-Predatory 

Lending Act. It sets minimum standards for mortgages by requiring lenders to establish that consumers have a reasonable ability 

to repay at the time the mortgage is consummated. It provides that 

certain high-quality, low-cost loans (defined as Qualified Mortgages) are presumed to meet this standard. 

The Act also prohibits financial incentives (including payments known as ‘‘yield spread premiums’’) that may encourage 

mortgage originators, including mortgage brokers and loan officers 

of lending institutions, to steer consumers to higher-cost and more 


sroberts on DSKD5P82C1PROD with HEARING
877 

abusive mortgages. In addition, it prohibits prepayment penalties 

for any adjustable rate mortgage and other mortgages that do not 

meet the definition of Qualified Mortgage; limits prepayment penalties charged to borrowers who wish to prepay their mortgages 

(typically to refinance on more affordable terms); bans single premium credit insurance and prohibits mandatory arbitration 

clauses; and includes protections for renters of foreclosed properties. Finally, title XIV authorizes funds to provide legal assistance to homeowners and renters who are experiencing problems related to foreclosure. 

Title XIV enhances and expands the scope of consumer protections for high-cost loans under the Home Ownership and Equity 

Protection Act (HOEPA) and requires additional disclosures to consumers. This title revises the benchmarks for determining loans 

subject to the heightened HOEPA standards. It also prohibits the 

financing of points and fees; excessive fees for payoff information, 

modifications, or late payments; and practices that increase the 

risk of foreclosure, such as balloon payments, encouraging a borrower to default, and call provisions. The title adds a requirement 

for pre-loan counseling. 

The Act establishes an Office of Housing Counseling at HUD 

that will carry out and coordinate homeownership and rental housing counseling programs; requires the launch of a national publicservice, multimedia campaign to promote housing counseling and 

the establishment of a website and toll-free hotline; authorizes the 

issuance of homeownership and rental housing counseling grants to 

HUD-approved housing counseling agencies and State housing finance agencies; and requires HUD to update the Mortgage Information Booklet to provide consumers with a greater understanding 

of the terms of the home buying process. Additionally, the title requires increased information to consumers about the need for home 

inspections and ways to avoid foreclosure scams. 

Moreover, Title XIV requires all higher-cost mortgage borrowers to have escrow accounts established. It also requires lenders 

to provide written disclosures about the need to pay taxes and insurance premiums to all borrowers if they opt out of creating escrow accounts. With respect to mortgage servicing reforms, Title 

XIV updates the Real Estate Settlement Procedures Act to create 

new consumer protections related to force-placed insurance, swifter 

responses to inquiries, increased penalties, prompt crediting of payments, and the timely receipt of payoff statement quotes. 

Concerning appraisal practices, Title XIV prohibits lenders 

from making a higher-cost mortgage without first obtaining a written appraisal. Lenders must additionally provide mortgage applicants with copies of any and all written appraisal reports and valuations developed in connection with a mortgage transaction at least 

3 days before the scheduled closing date on the property. Title XIV 

further creates enforceable Federal appraisal independence standards with penalties within the Truth in Lending Act. These standards prohibit the parties involved in a real estate transaction from 

influencing the independent judgment of an appraiser through collusion, coercion, and bribery, among other activities. The bill also 

reforms the Federal oversight of the State appraisal regulatory system. 


sroberts on DSKD5P82C1PROD with HEARING
878 

The Act provides $1 billion for ‘‘Emergency Mortgage Relief,’’ 

in the form of loans to homeowners who lose their jobs, to help 

make mortgage payments while the homeowner is out of work. The 

Act also provides $1 billion for a third round of funding for the 

Neighborhood Stabilization Program to enable state and local governments to finance the purchase and redevelopment of foreclosed 

homes and residential properties. In addition, the Act authorizes a 

HUD-administered grant-making program to help entities that provide legal assistance to low- and moderate-income recipients on 

home ownership preservation, foreclosure prevention, and the 

rights of tenants associated with home foreclosure. 

TITLE XV—MISCELLANEOUS PROVISIONS 

Title XV of the conference report includes: 

RESTRICTIONS ON USE OF U.S. FUNDS FOR FOREIGN GOVERNMENTS

The conference report requires the Administration to evaluate any proposed loan by the IMF to a middle-income country if 

that country’s public debt exceeds its annual Gross Domestic Product, and to oppose the loan if it cannot certify to Congress that the 

loan is likely to be repaid. 

EXTRACTIVE INDUSTRIES TRANSPARENCY

The conference report requires public disclosure to the SEC 

of any payment relating to the commercial development of oil, natural gas, and minerals made by any person to the U.S. or a foreign 

government, and includes as a ‘‘payment’’ taxes, royalties, fees, licenses, production entitlements, bonuses, and other material benefits, as determined by the Securities and Exchange Commission. 

The conference report amends the Securities Exchange Act of 

1934 to require the SEC to issue rules requiring each resource extraction issuer (an issuer that engages in the commercial development of oil, natural gas, or minerals) to include in an annual report 

information relating to any payment made by the issuer, a subsidiary or partner, or an entity under its control to the U.S. or a 

foreign government for the purpose of such commercial development. Requires such rules, to the extent practicable, to support the 

U.S. commitment to international transparency promotion efforts 

relating to such commercial development. 

CONFLICT MINERALS

The conference report requires disclosure to the SEC by all 

persons otherwise required to file with the SEC for whom minerals 

originating in the Democratic Republic of Congo and adjoining 

countries are necessary to the functionality or production of a product manufactured by such person. Such a public disclosure report 

by the person must describe the measures taken to exercise due 

diligence on the source and chain of custody of such materials, the 

products manufactured, and other matters; requires an independent audit of the report. 

The conference report requires that the Department of State, 

in consultation with others, submit to Congress a strategy to adVerDate Mar 15 2010 04:29 Jul 07, 2010 Jkt 057098 PO 00000 Frm 00882 Fmt 6601 Sfmt 6601 E:\HR\OC\HR517.XXX HR517

sroberts on DSKD5P82C1PROD with HEARING
879 

dress the illicit minerals trade in the region, and a map to address 

linkages between conflict minerals and armed groups. 

Section 1503 requires mining companies to disclose mining 

safety violations that are material to investors. 

TITLE XVI—SECTION 1256 CONTRACTS 

The title contains a provision to address the recharacterization of income as a result of increased exchange-trading of derivatives contracts by clarifying that section 1256 of the Internal Revenue Code does not apply to certain derivatives contracts transacted on exchanges. 

Compliance with clause 9 of Rule XXI.—Pursuant to clause 

9 of rule XXI of the Rules of the House of Representatives, neither 

this conference report nor the accompanying joint statement of 

managers contains any congressional earmarks, limited tax benefits, or limited tariff benefits as defined in clause 9 of rule XXI. 

From the Committee on Financial Services, for consideration of the House bill and the Senate amendment, and 

modifications committed to conference: 

BARNEY FRANK of 

Massachusetts, 

PAUL E. KANJORSKI, 

MAXINE WATERS, 

CAROLYN B. MALONEY, 

LUIS V. GUTIERREZ, 

MELVIN L. WATT, 

GREGORY W. MEEKS of New 

York, 

DENNIS MOORE of Kansas, 

MARY JO KILROY, 

GARY C. PETERS, 

From the Committee on Agriculture, for consideration of 

subtitles A and B of title I, secs. 1303, 1609, 1702, 1703, 

title III (except secs. 3301 and 3302), secs. 4205(c), 

4804(b)(8)(B), 5008, and 7509 of the House bill, and sec. 

102, subtitle A of title I, secs. 406, 604(h), title VII, title 

VIII, secs. 983, 989E, 1027(j), 1088(a)(8), 1098, and 1099 

of the Senate amendment, and modifications committed to 

conference: 

COLLIN C. PETERSON, 

LEONARD L. BOSWELL, 

From the Committee on Energy and Commerce, for consideration of secs. 3009, 3102(a)(2), 4001, 4002, 4101–4114, 

4201, 4202, 4204–4210, 4301–4311, 4314, 4401–4403, 

4410, 4501–4509, 4601–4606, 4815, 4901, and that portion 

of sec. 8002(a)(3) which adds a new sec.313(d) to title 31, 

United States Code, of the House bill, and that portion of 

sec. 502(a)(3) which adds a new sec. 313(d) to title 31, 

United States Code, secs. 722(e), 1001, 1002, 1011–1018, 

1021–1024, 1027–1029, 1031–1034, 1036, 1037, 1041, 

1042, 1048, 1051–1058, 1061–1067, 1101, and 1105 of the 

Senate amendment, and modifications committed to conference: 


sroberts on DSKD5P82C1PROD with HEARING
880 

BOBBY L. RUSH, 

From the Committee on the Judiciary, for consideration of 

secs. 1101(e)(2), 1103(e)(2), 1104(i)(5) and (i)(6), 1105(h) 

and (i), 1110(c) and (d), 1601, 1605, 1607, 1609, 1610, 

1612(a), 3002(c)(3) and (c)(4), 3006, 3119, 3206, 4205(n), 

4306(b), 4501–4509, 4603, 4804(b)(8)(A), 4901(c)(8)(D) and 

(e), 6003, 7203(a), 7205, 7207, 7209, 7210, 7213–7216, 

7220, 7302, 7507, 7508, 9004, 9104, 9105, 9106(a), 9110(b), 

9111, 9118, 9203(c), and 9403(b) of the House bill, and 

secs. 112(b)(5)(B), 113(h), 153(f), 201, 202, 205, 208–210, 

211(a) and (b), 316, 502(a)(3), 712(c), 718(b), 723(a)(3), 

724(b), 725(c), 728, 731, 733, 735(b), 744, 748, 753, 763(a), 

(c) and (i), 764, 767, 809(f), 922, 924, 929B, 932, 991(b)(5), 

(c)(2)(G) and (c)(3)(H), 1023(c)(7) and (c)(8), 1024(c)(3)(B), 

1027(e), 1042, 1044(a), 1046(a), 1047, 1051–1058, 1063, 

1088(a)(7)(A), 1090, 1095, 1096, 1098, 1104, 1151(b), and 

1156(c) of the Senate amendment, and modifications committed to conference: 

JOHN CONYERS, Jr., 

HOWARD L. BERMAN, 

From the Committee on Oversight and Government Reform, for consideration of secs. 1000A, 1007, 1101(e)(3), 

1203(d), 1212, 1217, 1254(c), 1609(h)(8)(B), 1611(d), 3301, 

3302, 3304, 4106(b)(2) and (g)(4)(D), 4604, 4801, 4802, 

5004, 7203(a), 7409, and 8002(a)(3) of the House bill, and 

secs. 111(g), (i) and (j), 152(d)(2), (g) and (k), 210(h)(8), 

319, 322, 404, 502(a)(3), 723(a)(3), 748, 763(a), 809(g), 

922(a), 988, 989B, 989C, 989D, 989E, 1013(a), 1022(c)(6), 

1064, 1152, and 1159(a) and (b) of the Senate amendment, 

and modifications committed to conference: 

EDOLPHUS TOWNS, 

ELIJAH E. CUMMINGS, 

From the Committee on Small Business, for consideration 

of secs. 1071 and 1104 of the Senate amendment, and 

modifications committed to conference: 

NYDIA M. VELA ́ ZQUEZ, 

HEATH SHULER, 

Managers on the Part of the House. 

CHRISTOPHER J. DODD, 

TIM JOHNSON, 

JACK REED, 

CHARLES E. SCHUMER, 

From the Committee on Agriculture, Nutrition, and Forestry: 

BLANCHE L. LINCOLN, 

PATRICK J. LEAHY, 

TOM HARKIN, 

Managers on the Part of the Senate. 

Æ 


sroberts on DSKD5P82C1PROD with HEARING