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[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2550 Introduced in House (IH)]

111th CONGRESS
  1st Session
                                H. R. 2550

      To amend the Securities Exchange Act of 1934 to require the 
             registration of municipal financial advisers.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                              May 21, 2009

    Mr. Driehaus (for himself, Mr. Al Green of Texas, Mr. Frank of 
   Massachusetts, Mr. Baca, Mr. Cleaver, Mr. Moran of Virginia, Mr. 
 Andrews, and Mr. Connolly of Virginia) introduced the following bill; 
       which was referred to the Committee on Financial Services

_______________________________________________________________________

                                 A BILL

 
      To amend the Securities Exchange Act of 1934 to require the 
             registration of municipal financial advisers.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Municipal Advisers Regulation Act''.

SEC. 2. MUNICIPAL FINANCIAL ADVISER REGISTRATION REQUIREMENT.

    (a) In General.--The Securities Exchange Act of 1934 is amended by 
inserting after section 15E (15 U.S.C. 78o-7) the following new 
section:

``SEC. 15F. MUNICIPAL FINANCIAL ADVISER REGISTRATION REQUIREMENT.

    ``(a)(1) It shall be unlawful for any person that is either a 
person other than a natural person or a natural person not associated 
with a municipal financial adviser which is a person other than a 
natural person to make use of the mails or any means or instrumentality 
of interstate commerce to act as a municipal financial adviser unless 
such person is registered as a municipal financial adviser in 
accordance with subsection (b).
    ``(2) The Commission, by rule or order, as it deems consistent with 
the public interest and the protection of investors, may conditionally 
or unconditionally exempt from paragraph (1) of this section any 
municipal financial adviser or class of municipal financial advisers 
specified in such rule or order.
    ``(b)(1) A municipal financial adviser may be registered by filing 
with the Commission an application for registration in such form and 
containing such information and documents concerning such municipal 
financial adviser and any persons associated with such municipal 
financial adviser as the Commission, by rule, may prescribe as 
necessary or appropriate in the public interest or for the protection 
of investors. Within 45 days of the date of the filing of such 
application (or within such longer period as to which the applicant 
consents), the Commission shall--
            ``(A) by order grant registration, or
            ``(B) institute proceedings to determine whether 
        registration should be denied. Such proceedings shall include 
        notice of the grounds for denial under consideration and 
        opportunity for hearing and shall be concluded within 120 days 
        of the date of the filing of the application for registration. 
        At the conclusion of such proceedings, the Commission, by 
        order, shall grant or deny such registration. The Commission 
        may extend the time for conclusion of such proceedings for up 
        to 90 days if it finds good cause for such extension and 
        publishes its reasons for so finding or for such longer period 
        as to which the applicant consents.
        The Commission shall grant such registration if the Commission 
        finds that the requirements of this section are satisfied. The 
        Commission shall deny such registration if it does not make 
        such a finding or if it finds that if the applicant were so 
        registered, its registration would be subject to suspension or 
        revocation under paragraph (4).
    ``(2) An application for registration of a municipal financial 
adviser to be formed or organized may be made by a municipal financial 
adviser to which the municipal financial adviser to be formed or 
organized is to be the successor. Such application, in such form as the 
Commission, by rule, may prescribe, shall contain such information and 
documents concerning the applicant, the successor, and any persons 
associated with the applicant or the successor, as the Commission, by 
rule, may prescribe as necessary or appropriate in the public interest 
or for the protection of investors. The grant or denial of registration 
to such an applicant shall be in accordance with the procedures set 
forth in paragraph (1) of this subsection. If the Commission grants 
such registration, the registration shall terminate on the 45th day 
after the effective date thereof, unless prior thereto the successor 
shall, in accordance with such rules and regulations as the Commission 
may prescribe, adopt the application for registration as its own.
    ``(3) Any provision of this title (other than section 5 and 
subsection (a) of this section) which prohibits any act, practice, or 
course of business if the mails or any means or instrumentality of 
interstate commerce is used in connection therewith shall also prohibit 
any such act, practice, or course of business by any registered 
municipal financial adviser or any person acting on behalf of such a 
municipal financial adviser, irrespective of any use of the mails or 
any means or instrumentality of interstate commerce in connection 
therewith.
    ``(4) The Commission, by order, shall censure, place limitations on 
the activities, functions, or operations of, suspend for a period not 
exceeding 12 months, or revoke the registration of any municipal 
financial adviser if it finds, on the record after notice and 
opportunity for hearing, that such censure, placing of limitations, 
suspension, or revocation is in the public interest and that such 
municipal financial adviser, whether prior or subsequent to becoming 
such, or any person associated with such municipal financial adviser, 
whether prior or subsequent to becoming so associated--
            ``(A) has willfully made or caused to be made in any 
        application for registration or report required to be filed 
        with the Commission or with any other appropriate regulatory 
        agency under this title, or in any proceeding before the 
        Commission with respect to registration, 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, or has omitted to state in any such application 
        or report any material fact which is required to be stated 
        therein;
            ``(B) has been convicted within 10 years preceding the 
        filing of any application for registration or at any time 
        thereafter of any felony or misdemeanor or of a substantially 
        equivalent crime by a foreign court of competent jurisdiction 
        which the Commission finds--
                    ``(i) involves the purchase or sale of any 
                security, the taking of a false oath, the making of a 
                false report, bribery, perjury, burglary, any 
                substantially equivalent activity however denominated 
                by the laws of the relevant foreign government, or 
                conspiracy to commit any such offense;
                    ``(ii) arises out of the conduct of the business of 
                a municipal financial adviser, broker, dealer, 
                municipal securities dealer, government securities 
                broker, government securities dealer, investment 
                adviser, bank, insurance company, fiduciary, transfer 
                agent, nationally recognized statistical rating 
                organization, foreign person performing a function 
                substantially equivalent to any of the above, or entity 
                or person required to be registered under the Commodity 
                Exchange Act (7 U.S.C. 1 et seq.) or any substantially 
                equivalent foreign statute or regulation;
                    ``(iii) involves the larceny, theft, robbery, 
                extortion, forgery, counterfeiting, fraudulent 
                concealment, embezzlement, fraudulent conversion, or 
                misappropriation of funds, or securities, or 
                substantially equivalent activity however denominated 
                by the laws of the relevant foreign government; or
                    ``(iv) involves the violation of section 152, 1341, 
                1342, or 1343 or chapter 25 or 47 of title 18, or a 
                violation of a substantially equivalent foreign 
                statute;
            ``(C) is permanently or temporarily enjoined by order, 
        judgment, or decree of any court of competent jurisdiction from 
        acting as a municipal financial adviser, investment adviser, 
        underwriter, broker, dealer, municipal securities dealer, 
        government securities broker, government securities dealer, 
        transfer agent, nationally recognized statistical rating 
        organization, foreign person performing a function 
        substantially equivalent to any of the above, or entity or 
        person required to be registered under the Commodity Exchange 
        Act or any substantially equivalent foreign statute or 
        regulation, or as an affiliated person or employee of any 
        investment company, bank, insurance company, foreign entity 
        substantially equivalent to any of the above, or entity or 
        person required to be registered under the Commodity Exchange 
        Act or any substantially equivalent foreign statute or 
        regulation or from engaging in or continuing any conduct or 
        practice in connection with any such activity, or in connection 
        with the purchase or sale of any security;
            ``(D) has willfully violated any provision of the 
        Securities Act of 1933, the Investment Advisers Act of 1940, 
        the Investment Company Act of 1940, the Commodity Exchange Act, 
        this title, the rules or regulations under any of such 
        statutes, or is unable to comply with any such provision;
            ``(E) has willfully aided, abetted, counseled, commanded, 
        induced, or procured the violation by any other person of any 
        provision of the Securities Act of 1933, the Investment 
        Advisers Act of 1940, the Investment Company Act of 1940, the 
        Commodity Exchange Act, this title, the rules or regulations 
        under any of such statutes, or has failed reasonably to 
        supervise, with a view to preventing violations of the 
        provisions of such statutes, rules, and regulations, another 
        person who commits such a violation, if such other person is 
        subject to his supervision. For the purposes of this 
        subparagraph, no person shall be deemed to have failed 
        reasonably to supervise any other person, if--
                    ``(i) there have been established procedures, and a 
                system for applying such procedures, which would 
                reasonably be expected to prevent and detect, insofar 
                as practicable, any such violation by such other 
                person, and
                    ``(ii) such person has reasonably discharged the 
                duties and obligations incumbent upon him by reason of 
                such procedures and system without reasonable cause to 
                believe that such procedures and system were not being 
                complied with;
            ``(F) is subject to any order of the Commission barring or 
        suspending the right of the person to be associated with a 
        municipal financial adviser;
            ``(G) has been found by a foreign financial regulatory 
        authority to have--
                    ``(i) made or caused to be made in any application 
                for registration or report required to be filed with a 
                foreign financial regulatory authority, or in any 
                proceeding before a foreign financial regulatory 
                authority with respect to registration, any statement 
                that 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, or has 
                omitted to state in any application or report to the 
                foreign financial regulatory authority any material 
                fact that is required to be stated therein;
                    ``(ii) violated any foreign statute or regulation 
                regarding transactions in securities, or contracts of 
                sale of a commodity for future delivery, traded on or 
                subject to the rules of a contract market or any board 
                of trade;
                    ``(iii) aided, abetted, counseled, commanded, 
                induced, or procured the violation by any person of any 
                provision of any statutory provisions enacted by a 
                foreign government, or rules or regulations thereunder, 
                empowering a foreign financial regulatory authority 
                regarding transactions in securities, or contracts of 
                sale of a commodity for future delivery, traded on or 
                subject to the rules of a contract market or any board 
                of trade, or has been found, by a foreign financial 
                regulatory authority, to have failed reasonably to 
                supervise, with a view to preventing violations of such 
                statutory provisions, rules, and regulations, another 
                person who commits such a violation, if such other 
                person is subject to his supervision; or
            ``(H) is subject to any final order of a State securities 
        commission (or any agency or officer performing like 
        functions), State authority that supervises or examines banks, 
        savings associations, or credit unions, State insurance 
        commission (or any agency or office performing like functions), 
        an appropriate Federal banking agency (as defined in section 3 
        of the Federal Deposit Insurance Act (12 U.S.C. 1813(q))), or 
        the National Credit Union Administration, that--
                    ``(i) bars such person from association with an 
                entity regulated by such commission, authority, agency, 
                or officer, or from engaging in the business of 
                securities, insurance, banking, savings association 
                activities, or credit union activities; or
                    ``(ii) constitutes a final order based on 
                violations of any laws or regulations that prohibit 
                fraudulent, manipulative, or deceptive conduct.
    ``(5) Pending final determination whether any registration under 
this subsection shall be revoked, the Commission, by order, may suspend 
such registration, if such suspension appears to the Commission, after 
notice and opportunity for hearing, to be necessary or appropriate in 
the public interest or for the protection of investors. Any registered 
municipal financial adviser may, upon such terms and conditions as the 
Commission deems necessary or appropriate in the public interest or for 
the protection of investors, withdraw from registration by filing a 
written notice of withdrawal with the Commission. If the Commission 
finds that any registered municipal financial adviser is no longer in 
existence or has ceased to do business as a municipal financial 
adviser, the Commission, by order, shall cancel the registration of 
such municipal financial adviser.
    ``(6)(A) With respect to any person who is associated, who is 
seeking to become associated, or, at the time of the alleged 
misconduct, who was associated or was seeking to become associated with 
a municipal financial adviser, 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 municipal financial adviser, 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--
            ``(i) 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 this subsection;
            ``(ii) 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 paragraph; or
            ``(iii) is enjoined from any action, conduct, or practice 
        specified in subparagraph (C) of such paragraph (4).
    ``(B) It shall be unlawful--
            ``(i) for any person as to whom an order under subparagraph 
        (A) is in effect, without the consent of the Commission, 
        willfully to become, or to be, associated with a municipal 
        financial adviser in contravention of such order; or
            ``(ii) for any municipal financial adviser to permit such a 
        person, without the consent of the Commission, to become or 
        remain, a person associated with the municipal financial 
        adviser in contravention of such order, if such municipal 
        financial adviser knew, or in the exercise of reasonable care 
        should have known, of such order.
    ``(7) No registered municipal financial adviser shall act as such 
unless it meets such standards of operational capability and such 
municipal financial adviser and all natural persons associated with 
such municipal financial adviser meet such standards of training, 
experience, competence, and such other qualifications as the Commission 
finds necessary or appropriate in the public interest or for the 
protection of investors. The Commission shall establish such standards 
by rules and regulations, which may--
            ``(A) specify that all or any portion of such standards 
        shall be applicable to any class of municipal financial 
        advisers and persons associated with municipal financial 
        advisers;
            ``(B) require persons in any such class to pass tests 
        prescribed in accordance with such rules and regulations, which 
        tests shall, with respect to any class of partners, officers, 
        or supervisory employees (which latter term may be defined by 
        the Commission's rules and regulations) engaged in the 
        management of the municipal financial adviser, include 
        questions relating to bookkeeping, accounting, supervision of 
        employees, maintenance of records, and other appropriate 
        matters; and
            ``(C) provide that persons in any such class other than 
        municipal financial advisers and partners, officers, and 
        supervisory employees of municipal financial advisers, may be 
        qualified solely on the basis of compliance with such standards 
        of training and such other qualifications as the Commission 
        finds appropriate.
The Commission, by rule, may prescribe reasonable fees and charges to 
defray its costs in carrying out this paragraph, including, but not 
limited to, fees for any test administered by it or under its 
direction.
    ``(c)(1)(A) No municipal financial adviser shall make use of the 
mails or any means or instrumentality of interstate commerce in 
connection with which such municipal financial adviser engages in any 
fraudulent, deceptive, or manipulative act or practice or violates such 
rules and regulations regarding conflicts of interest or fair 
practices, including but not limited to rules and regulations related 
to political contributions, as the Commission shall prescribe in the 
public interest or for the protection of investors or to maintain fair 
and orderly markets.
    ``(B) The Commission shall, for the purposes of this paragraph as 
the Commission finds necessary or appropriate in the public interest or 
for the protection of investors, by rules and regulations define, and 
prescribe means reasonably designed to prevent, such acts and practices 
as are fraudulent, deceptive, or manipulative.
    ``(2) If the Commission finds, after notice and opportunity for a 
hearing, that any person subject to the provisions of this section or 
any rule or regulation thereunder has failed to comply with any such 
provision, rule, or regulation in any material respect, the Commission 
may publish its findings and issue an order requiring such person, and 
any person who was a cause of the failure to comply due to an act or 
omission the person knew or should have known would contribute to the 
failure to comply, to comply, or to take steps to effect compliance, 
with such provision or such rule or regulation thereunder upon such 
terms and conditions and within such time as the Commission may specify 
in such order.
    ``(d) Every registered municipal financial adviser shall establish, 
maintain, and enforce written policies and procedures reasonably 
designed, taking into consideration the nature of such municipal 
financial adviser's business, to prevent the misuse in violation of 
this title, or the rules or regulations thereunder, of material, 
nonpublic information by such municipal financial adviser or any person 
associated with such municipal financial adviser. The Commission, as it 
deems necessary or appropriate in the public interest or for the 
protection of investors, shall adopt rules or regulations to require 
specific policies or procedures reasonably designed to prevent misuse 
in violation of this title (or the rules or regulations thereunder) of 
material, nonpublic information.
    ``(e) A municipal financial adviser and any person associated with 
such municipal financial adviser shall be deemed to have a fiduciary 
duty to any municipal securities issuer for whom such municipal 
financial adviser acts as a municipal financial adviser. A municipal 
financial adviser may not engage in any act, practice, or course of 
business which is not consistent with a municipal financial adviser's 
fiduciary duty. The Commission shall, for the purposes of this 
paragraph, by rules and regulations define, and prescribe means 
reasonably designed to prevent, such acts, practices, and courses of 
business as are not consistent with a municipal financial adviser's 
fiduciary duty to its clients.''.
    (b) Definition.--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 
new paragraph:
            ``(65) Municipal financial adviser.--
                    ``(A) The term `municipal financial adviser' means 
                a person who, for compensation, engages in the business 
                of--
                            ``(i) providing advice to a municipal 
                        securities issuer with respect to--
                                    ``(I) the issuance or proposed 
                                issuance of securities, including any 
                                remarketing of municipal securities 
                                directly or indirectly by or on behalf 
                                of a municipal securities issuer;
                                    ``(II) the investment of proceeds 
                                from securities issued by such 
                                municipal securities issuer;
                                    ``(III) the hedging of any risks 
                                associated with subclauses (I) or (II), 
                                including advice as to swap agreements 
                                (as defined in section 206A of the 
                                Gramm-Leach-Bliley Act regardless of 
                                whether the counterparties constitute 
                                eligible contract participants); or
                                    ``(IV) preparation of disclosure 
                                documents in connection with the 
                                issuance, proposed issuance, or 
                                previous issuance of securities issued 
                                by a municipal securities issuer, 
                                including, without limitation, official 
                                statements and documents prepared in 
                                connection with a written agreement or 
                                contract for the benefit of holders of 
                                such securities described in section 
                                240.15c2-12 of title 17, Code of 
                                Federal Regulations; or
                            ``(ii) assisting a municipal securities 
                        issuer in selecting or negotiating guaranteed 
                        investment contracts or other investment 
                        products; or
                            ``(iii) assisting any municipal securities 
                        issuer in the primary offering of securities 
                        not involving a public offering.
                    ``(B) Such term does not include--
                            ``(i) an attorney, if the attorney is 
                        offering advice or providing services that are 
                        of a traditional legal nature;
                            ``(ii) a nationally recognized statistical 
                        rating organization to the extent it is 
                        involved in the process of developing credit 
                        ratings;
                            ``(iii) a registered broker-dealer when 
                        acting as an underwriter, as such term is 
                        defined in section 2(a)(11) of the Securities 
                        Act of 1933 (15 U.S.C. section 77b(a)(11)); or
                            ``(iv) a State or any political subdivision 
                        thereof.
            ``(66) Municipal securities issuer.--The term `municipal 
        securities issuer' means--
                    ``(A) any entity that has the ability to issue a 
                security the interest on which is excludable from gross 
                income under section 103 of the Internal Revenue Code 
                of 1986 and the regulations thereunder; or
                    ``(B) any person who receives the proceeds 
                generated from the issuance of municipal securities.
            ``(67) Person associated with a municipal financial 
        adviser; associated person of a municipal financial adviser.--
        The term `person associated with a municipal financial adviser' 
        or `associated person of a municipal financial adviser' means 
        any partner, officer, director, or branch manager of such 
        municipal financial adviser (or any person occupying a similar 
        status or performing similar functions), any person directly or 
        indirectly controlling, controlled by, or under common control 
        with such municipal financial adviser, or any employee of such 
        municipal financial adviser, except that any person associated 
        with a municipal financial adviser whose functions are solely 
        clerical or ministerial shall not be included in the meaning of 
        such term for purposes of section 15F(b) (other than paragraph 
        (6) thereof).''.

SEC. 3. CONFORMING AMENDMENTS.

    (a) Securities Exchange Act of 1934 .--The Securities Exchange Act 
of 1934 is amended--
            (1) in section 15(b)(4)(B)(ii) (15 U.S.C. 
        78o(b)(4)(B)(ii)), by inserting ``municipal finance adviser,'' 
        after ``nationally recognized statistical rating 
        organization,'';
            (2) in section 15(b)(4)(C) (15 U.S.C. 78o(b)(4)(C)), by 
        inserting ``municipal finance adviser,'' after ``nationally 
        recognized statistical rating organization,''; and
            (3) in section 17(a)(1) (15 U.S.C. 78q(a)(1)), by inserting 
        ``registered municipal financial adviser,'' after ``nationally 
        recognized statistical rating organization,''.
    (b) Investment Company Act of 1940.--The Investment Company Act of 
1940 is amended--
            (1) in section 2(a) (15 U.S.C. 80a-2(a)), by inserting the 
        following new paragraph:
            ``(54) The term `municipal finance adviser' has the same 
        meaning as in section 3 of the Securities Exchange Act of 
        1934.'';
            (2) in section 9(a)(1) (15 U.S.C. 80a-9(a)(1), by inserting 
        ``municipal finance adviser,'' after ``credit rating agency,''; 
        and
            (3) in section 9(a)(2) (15 U.S.C. 80a-9(a)(2), by inserting 
        ``municipal finance adviser,'' after ``credit rating agency,''.
    (c) Investment Advisers Act of 1940.--The Investment Advisers Act 
of 1940 is amended--
            (1) in section 202(a) (15 U.S.C. 80b-2(a)), by inserting 
        the following new paragraph:
            ``(29) The term `municipal finance adviser' has the same 
        meaning as in Section 3 of the Securities Exchange Act of 
        1934.'';
            (2) in section 203(e)(2)(B) (15 U.S.C. 80b-3(e)(2)(B)), by 
        inserting ``municipal finance adviser,'' after ``credit rating 
        agency,''; and
            (3) in section 203(e)(4) (15 U.S.C. 80b-3(e)(4)) is amended 
        by inserting ``municipal finance adviser,'' after ``credit 
        rating agency,''.

SEC. 4. EFFECTIVE DATES.

    (a) In General.--The amendments made by this Act shall take effect 
30 days after the date of the enactment of this Act.
    (b) Effective Date and Requirements for Regulations.--
Notwithstanding subsection (a), the Securities and Exchange Commission 
shall, within 120 days after the date of the enactment of this Act, 
publish for notice and public comment such regulations as are initially 
required to implement this Act, and shall take final action with 
respect to such regulations not later than 270 days after the date of 
enactment of this Act.
    (c) Registration Date.--No person may continue to act as a 
municipal financial adviser, as such term is defined in section 
3(a)(65) of the Securities Exchange Act of 1934, after 30 days after 
the date the regulations described in subsection (b) become effective 
unless such person has been registered as required by the amendment 
made by section 2 of this Act.
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