89–006 

115TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 115–1076 

HELPING STARTUPS CONTINUE TO GROW ACT 

DECEMBER 12, 2018.—Committed to the Committee of the Whole House on the State 

of the Union and ordered to be printed 

Mr. HENSARLING, from the Committee on Financial Services, 

submitted the following 

R E P O R T 

together with 

MINORITY VIEWS 

[To accompany H.R. 6130] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Financial Services, to whom was referred the 

bill (H.R. 6130) to provide for a 5 year extension of certain exemptions and reduced disclosure requirements for companies that were 

emerging growth companies and would continue to be emerging 

growth companies but for the 5-year restriction on emerging 

growth companies, and for other purposes, having considered the 

same, report favorably thereon without amendment and recommend that the bill do pass. 

PURPOSE AND SUMMARY

On June 15, 2018, Representative Keith Rothfus introduced H.R. 

6130, the ‘‘Helping Startups Continue to Grow Act’’. H.R. 6130 expands the on-ramp for emerging growth companies (EGCs) created 

by Title I of the Jumpstart Our Business Startups (JOBS) Act (P.L. 

112–106). H.R. 6130 provides EGCs an additional five years of exemptions from certain disclosure requirements. The expansion is 

limited to EGCs that, after five years as an EGC, would continue 

to qualify as such but for the five-year restriction on EGC status. 

BACKGROUND AND NEED FOR LEGISLATION

Title I of the Jumpstart Our Small Businesses (JOBS) Act established a new category of issuers known as Emerging Growth ComVerDate Sep 11 2014 05:07 Dec 16, 2018 Jkt 089006 PO 00000 Frm 00001 Fmt 6659 Sfmt 6602 E:\HR\OC\HR1076.XXX HR1076

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panies (EGCs). These issuers must have less than $1 billion in annual revenues or $700 million in public float when they register 

with the Securities and Exchange Commission (SEC). These companies are given up to five years on an ‘‘on-ramp’’ to comply with 

certain regulatory requirements. By granting these issuers temporary on-ramp status, Title I encourages small companies to go 

public while ensuring that their move to full compliance with regulatory requirements is tailored as they grow large enough to sustain the compliance infrastructure typical of mature entities. 

The goal of H.R. 6130 is to allow these EGCs to direct their financial and human resources towards growing their company, 

which will ultimately help their employees, investors and the economy, rather than expend internal and external resources on disclosure requirements that such companies and investors in such companies routinely have said are immaterial to why investors invest 

in EGCs. 

The five-year on-ramp has been very helpful to EGCsthat are 

looking to reduce their initial post-initial public offering (IPO) 

legal, audit and compliance costs. According to a recent study conducted by Ernst and Young, many companies found provisions of 

the on-ramp helpful: 

• 87 percent of the firms that filed for IPO status identified 

as EGCs under the IPO on-ramp; 

• 88 percent used the confidential review accommodation; 

• 96 percent provided reduced executive compensation disclosures; 

• 69 percent provided only the two years of required audited 

financial statements for EGCs; and 

• 15 percent adopted new accounting standards using delayed private company effective dates. 

However, despite the effectiveness of the on-ramp provision in 

Title I of the JOBS Act, many companies do not generate enough 

revenue after five years to comply with the litany of regulatory requirements for public companies. As an example, many biotech 

companies are still pre-revenue at five years, and to require those 

companies to comply with these regulations would divert important, limited resources away from research and innovation. Congress can, and should, review the improvements the JOBS Act 

made to tailor regulatory requirements for EGCs and enhance how 

the on-ramp is tailored to match how such companies are growing 

since the JOBS Act was enacted more than half a decade ago. 

H.R. 6310 addresses this problem in part by extending the exemption for certain JOBS Act Title I on-ramp provisions from five 

to ten years. The legislation provides the following extensions beyond five-years: 

• Streamlined financial disclosures—i.e., that like smaller 

reporting companies, only 2 years of audited financial statements—instead of 3—be presented for the registration statement of an EGC with respect to an IPO to be effective; that 

for any other registration statement filed by the EGC, selected 

financial data need not be provided for any period prior to the 

earliest audited period represented in connection with its 

IPO—instead of the customary full 5 years; and that an EGC’s 

timeframe for complying with new accounting standards is the 


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same timeline as for when a private company must comply, 

rather than the timeframe for larger issuers. 

• Filing draft IPO registration statements and subsequent 

registration statements on a confidential basis to the SEC for 

agency review; 

• Simplified executive compensation disclosure such that 

EGCs would abide by the disclosure requirements for smaller 

reporting companies; and 

• Exemption from say on pay (allowing advisory shareholder 

votes on the compensation of its named executive officers), say 

on frequency, say on golden parachute votes, pay for performance disclosure and ‘‘pay ratio’’ disclosure.’’ 

In testimony before the Subcommittee on Capital Markets, Securities, and Investment on May 23, 2018, Brian Hahn, Chief Financial Officer of GlycoMimetrics, Inc.—which is an EGC, explained 

the regulatory burdens placed on biotech companies: 

More than 260 biotechs have gone public since the JOBS 

Act was enacted, and a majority of these companies are 

still in the lab and years away from getting their drug approved and becoming a profitable company. It is counterproductive for them to face a full-blown compliance burden 

identical to those faced by large, multi-national revenuegenerating company. 

Subsequently, in a June 20, 2018 letter to Congress, the Biotechnology Industry Organization (BIO) elaborated on why this legislation is important: 

As helpful as [the] five-year exemption is, the biotech development timeline is a decades-long affair. Private emerging companies working on innovative therapeutics are 

highly dependent on access to capital. More than 95% of 

these companies are in the research and development 

stage without an FDA approved product. . . . Developing 

a single therapy requires an average investment ranging 

from $1.2 billion to over $2 billion, and the clinical testing 

period alone consumes a decade or more. During this development stage, companies do not have a product to generate revenue and are dependent on capital markets to fund 

clinical trials. Every dollar dedicated to unnecessary regulatory buderns is a dollar taken from science. . . . 

Expanding the exemption from these disclosure requirements for EGCs for another five years will enable biotech 

companies to continue focusing on advancing their research. . . . (emphasis added) 

In short, the vast majority of EGCs have taken advantage of the 

provisions that would be extended under this bill for certain EGCs, 

which has helped lead to a post-JOBS Act increase in the public 

offering market. Accordingly, this bill would provide companies a 

further incentive to go public by allowing for companies that are 

still looking to grow and otherwise still qualify as an EGC to not 

have to divert necessary resources towards regulatory compliance. 

As the Small Business Entrepreneurship Council wrote to Congress on June 21, 2018: 


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Given the reduced level of entrepreneurship over the 

past decade or more, and the need for more high-growth 

firms that yield quality job opportunities and innovations 

for our economy, our policies must reflect a commitment to 

enabling and building these firms. The ‘‘Helping Startups 

Continue to Grow Act’’ will do just that. 

Nonetheless, whether an EGC takes advantage of these scaled 

processes is entirely optional. If an EGC believes it is in its interest 

to accelerate its status, it may do so. Further, an EGC must disclose its status and certain risk factors related to some of these options should it choose to take advantage of these streamlined methods—meaning that investors can evaluate whether they wish to invest in a company that still is on the on-ramp, and EGCs can decide whether the burdens of getting on the highway outweigh the 

potential for less investor interest. To treat all companies as if they 

have been in existence for more than 100 years or as a member of 

the Dow Jones Industrial Average or the S&P 500 index or have 

the financial resources to pay for attorneys, auditors, management 

consultants and information technology professionals would be to 

fundamentally misunderstand the life-cycle of public companies. 

Rather than mandate the same regulatory regime for all companies 

and impose disproportionate burdens on companies that often still 

are pre-revenue beyond five years post-offering, the expanded onramp provided by H.R. 6130 will allow a company and the capital 

markets to dictate how an EGC can best provide current and potential investors with information necessary to make an informed 

investment decision. 

HEARINGS

The Committee on Financial Services held a hearing examining 

matters relating to H.R. 6130 on May 23, 2018. 

COMMITTEE CONSIDERATION

The Committee on Financial Services met in open session on 

June 21, 2018, and ordered H.R. 6130 to be reported favorably to 

the House without amendment by a recorded vote of 32 yeas to 23 

nays (recorded vote no. FC–190), a quorum being present. An 

amendment offered by Representative Ellison was not agreed to by 

voice vote. 

COMMITTEE VOTES

Clause 3(b) of rule XIII of the Rules of the House of Representatives requires the Committee to list the record votes on the motion 

to report legislation and amendments thereto. The sole recorded 

vote was on a motion by Chairman Hensarling to report the bill favorably to the House without amendment. The motion was agreed 

to by a recorded vote of 32 yeas to 23 nays (Record vote no. FC– 

190), a quorum being present. 


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COMMITTEE OVERSIGHT FINDINGS

Pursuant to clause 3(c)(1) of rule XIII of the Rules of the House 

of Representatives, the findings and recommendations of the Committee based on oversight activities under clause 2(b)(1) of rule X 

of the Rules of the House of Representatives, are incorporated in 

the descriptive portions of this report. 

PERFORMANCE GOALS AND OBJECTIVES

Pursuant to clause 3(c)(4) of rule XIII of the Rules of the House 

of Representatives, the Committee states that H.R. 6130 will reduce regulatory compliance costs for EGCs by extending the exemption for certain JOBS Act Title I on-ramp provisions. 

NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX

EXPENDITURES

In compliance with clause 3(c)(2) of rule XIII of the Rules of the 

House of Representatives, the Committee adopts as its own the estimate of new budget authority, entitlement authority, or tax expenditures or revenues contained in the cost estimate prepared by 

the Director of the Congressional Budget Office pursuant to section 

402 of the Congressional Budget Act of 1974. 

CONGRESSIONAL BUDGET OFFICE ESTIMATES

Pursuant to clause 3(c)(3) of rule XIII of the Rules of the House 

of Representatives, the following is the cost estimate provided by 

the Congressional Budget Office pursuant to section 402 of the 

Congressional Budget Act of 1974: 

U.S. CONGRESS, CONGRESSIONAL BUDGET OFFICE, Washington, DC, September 27, 2018. 

Hon. JEB HENSARLING, Chairman, Committee on Financial Services, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 6130, the Helping 

Startups Continue to Grow Act. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Stephen Rabent. 

Sincerely, 

KEITH HALL, 

Director. 

Enclosure. 

H.R. 6130—Helping Startups Continue to Grow Act 

Under current law, a business that has issued or proposes to 

issue stock and that has had total annual gross revenues of less 

than $1.07 billion during its most recently completed fiscal year is 

considered an emerging growth company and may retain that designation for up to five years. Emerging growth companies are exempt from certain disclosure rules of the Securities and Exchange 

Commission (SEC). 


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H.R. 6130 would establish a new designation—recent emerging 

growth company—that would confer an additional five-year exemption from many of those disclosure rules as long as a company continued to qualify on the basis of the other criteria. 

Using information from the SEC, CBO estimates that implementing H.R. 6130 would cost less than $500,000 for the agency to 

amend its rules to establish the new designation. However, the 

SEC is authorized to collect fees sufficient to offset its annual appropriation; therefore, CBO estimates that the net effect on discretionary spending would be negligible, assuming appropriation actions consistent with that authority. 

Enacting H.R. 6130 would not affect direct spending or revenues; 

therefore, pay-as-you-go procedures do not apply. 

CBO estimates that enacting H.R. 6130 would not increase net 

direct spending or on-budget deficits in any of the four consecutive 

10-year periods beginning in 2029. 

H.R. 6130 contains no intergovernmental mandates as defined in 

the Unfunded Mandates Reform Act (UMRA). 

If the SEC increased fees to offset the costs associated with implementing the bill, H.R. 6130 would increase the cost of an existing mandate on private entities required to pay those assessments. 

CBO estimates that the incremental cost of the mandate would be 

less than $500,000, well below the annual threshold for private-sector mandates established in UMRA ($160 million in 2018, adjusted 

annually for inflation). 

The CBO staff contacts for this estimate are Stephen Rabent (for 

federal costs) and Rachel Austin (for mandates). The estimate was 

reviewed by H. Samuel Papenfuss, Deputy Assistant Director for 

Budget Analysis. 

FEDERAL MANDATES STATEMENT

This information is provided in accordance with section 423 of 

the Unfunded Mandates Reform Act of 1995. 

The Committee has determined that the bill does not contain 

Federal mandates on the private sector. The Committee has determined that the bill does not impose a Federal intergovernmental 

mandate on State, local, or tribal governments. 

ADVISORY COMMITTEE STATEMENT

No advisory committees within the meaning of section 5(b) of the 

Federal Advisory Committee Act were created by this legislation. 

APPLICABILITY TO LEGISLATIVE BRANCH

The Committee finds that the legislation does not relate to the 

terms and conditions of employment or access to public services or 

accommodations within the meaning of the section 102(b)(3) of the 

Congressional Accountability Act. 

EARMARK IDENTIFICATION

With respect to clause 9 of rule XXI of the Rules of the House 

of Representatives, the Committee has carefully reviewed the provisions of the bill and states that the provisions of the bill do not 


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contain any congressional earmarks, limited tax benefits, or limited 

tariff benefits within the meaning of the rule. 

DUPLICATION OF FEDERAL PROGRAMS

In compliance with clause 3(c)(5) of rule XIII of the Rules of the 

House of Representatives, the Committee states that no provision 

of the bill establishes or reauthorizes: (1) a program of the Federal 

Government known to be duplicative of another Federal program; 

(2) a program included in any report from the Government Accountability Office to Congress pursuant to section 21 of Public 

Law 111–139; or (3) a program related to a program identified in 

the most recent Catalog of Federal Domestic Assistance, published 

pursuant to the Federal Program Information Act (Pub. L. No. 95– 

220, as amended by Pub. L. No. 98–169). 

DISCLOSURE OF DIRECTED RULEMAKING

Pursuant to section 3(i) of H. Res. 5, (115th Congress), the following statement is made concerning directed rule makings: The 

Committee estimates that the bill requires no directed rule makings within the meaning of such section. 

SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title 

This section cites H.R. 6130 as the ‘‘Helping Startups Continue 

to Grow Act’’. 

Section 2. On-ramp exemption 

This section provides for a 5 year extension of certain exemptions 

and reduced disclosure requirements for companies that were 

emerging growth companies and would continue to be emerging 

growth companies but for the 5-year restriction. 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic, 

and existing law in which no change is proposed is shown in 

roman): 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic, 

and existing law in which no change is proposed is shown in 

roman): 

SECURITIES ACT OF 1933 

* * * * * * * 


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TITLE I— 

* * * * * * * 

DEFINITIONS

SEC. 2. (a) DEFINITIONS.—When used in this title, unless the context otherwise requires— 

(1) The term ‘‘security’’ means any note, stock, treasury 

stock, security future, security-based swap, bond, debenture, 

evidence of indebtedness, certificate of interest or participation 

in any profit-sharing agreement, collateral-trust certificate, 

preorganization certificate or subscription, transferable share, 

investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or 

other mineral rights, 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), or any put, call, straddle, option, or privilege entered 

into on a national securities exchange relating to foreign currency, or, in general, any interest or instrument commonly 

known as a ‘‘security’’, or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any 

of the foregoing. 

(2) The term ‘‘person’’ means an individual, a corporation, a 

partnership, an association, a joint-stock company, a trust, any 

unincorporated organization, or a government or political subdivision thereof. As used in this paragraph the term ‘‘trust’’ 

shall include only a trust where the interest or interests of the 

beneficiary or beneficiaries are evidenced by a security. 

(3) The term ‘‘sale’’ or ‘‘sell’’ shall include every contract of 

sale or disposition of a security or interest in a security, for 

value. The term ‘‘offer to sell’’, ‘‘offer for sale’’, or ‘‘offer’’ shall 

include every attempt or offer to dispose of, or solicitation of 

an offer to buy, a security or interest in a security, for value. 

The terms defined in this paragraph and the term ‘‘offer to 

buy’’ as used in subsection (c) of section 5 shall not include preliminary negotiations or agreements between an issuer (or any 

person directly or indirectly controlling or controlled by an 

issuer, or under direct or indirect common control with an 

issuer) and any underwriter or among underwriters who are or 

are to be in privity of contract with an issuer (or any person 

directly or indirectly controlling or controlled by an issuer, or 

under direct or indirect common control with an issuer). Any 

security given or delivered with, or as a bonus on account of, 

any purchase of securities or any other thing, shall be conclusively presumed to constitute a part of the subject of such purchase and to have been offered and sold for value. The issue 

or transfer of a right or privilege, when originally issued or 

transferred with a security, giving the holder of such security 

the right to convert such security into another security of the 

same issuer or of another person, or giving a right to subscribe 

to another security of the same issuer or of another person, 

which right cannot be exercised until some future date, shall 

not be deemed to be an offer or sale of such other security; but 


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the issue or transfer of such other security upon the exercise 

of such right of conversion or subscription shall be deemed a 

sale of such other security. Any offer or sale of a security futures product by or on behalf of the issuer of the securities underlying the security futures product, an affiliate of the issuer, 

or an underwriter, shall constitute a contract for sale of, sale 

of, offer for sale, or offer to sell the underlying securities. Any 

offer or sale of a security-based swap by or on behalf of 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. The publication or distribution by a broker or dealer of a research report about an emerging growth company that is the subject of a proposed public offering of the common equity securities of such emerging growth 

company pursuant to a registration statement that the issuer 

proposes to file, or has filed, or that is effective shall be 

deemed for purposes of paragraph (10) of this subsection and 

section 5(c) not to constitute an offer for sale or offer to sell a 

security, even if the broker or dealer is participating or will 

participate in the registered offering of the securities of the 

issuer. As used in this paragraph, the term ‘‘research report’’ 

means a written, electronic, or oral communication that includes information, opinions, or recommendations with respect 

to securities of an issuer or an analysis of a security or an 

issuer, whether or not it provides information reasonably sufficient upon which to base an investment decision. 

(4) The term ‘‘issuer’’ means every person who issues or proposes to issue any security; except that with respect to certificates of deposit, voting-trust certificates, or collateral-trust certificates, or with respect to certificates of interest or shares in 

an unincorporated investment trust not having a board of directors (or persons performing similar functions) or of the 

fixed, restricted management, or unit type, the term ‘‘issuer’’ 

means the person or persons performing the acts and assuming 

the duties of depositor or manager pursuant to the provisions 

of the trust or other agreement or instrument under which 

such securities are issued; except that in the case of an unincorporated association which provides by its articles for limited 

liability of any or all of its members, or in the case of a trust, 

committee, or other legal entity, the trustees or members 

thereof shall not be individually liable as issuers of any security issued by the association, trust, committee, or other legal 

entity; except that with respect to equipment-trust certificates 

or like securities, the term ‘‘issuer’’ means the person by whom 

the equipment or property is or is to be used; and except that 

with respect to fractional undivided interests in oil, gas, or 

other mineral rights, the term ‘‘issuer’’ means the owner of any 

such right or of any interest in such right (whether whole or 

fractional) who creates fractional interests therein for the purpose of public offering. 

(5) The term ‘‘Commission’’ means the Securities and Exchange Commission. 

(6) The term ‘‘Territory’’ means Puerto Rico, the Virgin Islands, and the insular possessions of the United States. 


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(7) The term ‘‘interstate commerce’’ means trade or commerce in securities or any transportation or communication relating thereto among the several States or between the District 

of Columbia or any Territory of the United States and any 

State or other Territory, or between any foreign country and 

any State, Territory, or the District of Columbia, or within the 

District of Columbia. 

(8) The term ‘‘registration statement’’ means the statement 

provided for in section 6, and includes any amendment thereto 

and any report, document, or memorandum filed as part of 

such statement or incorporated therein by reference. 

(9) The term ‘‘write’’ or ‘‘written’’ shall include printed, 

lithographed, or any means of graphic communication. 

(10) The term ‘‘prospectus’’ means any prospectus, notice, circular, advertisement, letter, or communication, written or by 

radio or television, which offers any security for sale or confirms the sale of any security; except that (a) a communication 

sent or given after the effective date of the registration statement (other than a prospectus permitted under subsection (b) 

of section 10) shall not be deemed a prospectus if it is proved 

that prior to or at the same time with such communication a 

written prospectus meeting the requirements of subsection (a) 

of section 10 at the time of such communication was sent or 

given to the person to whom the communication was made, 

and (b) a notice, circular, advertisement, letter, or communication in respect of a security shall not be deemed to be a prospectus if it states from whom a written prospectus meeting 

the requirements of section 10 may be obtained and, in addition, does no more than identify the security, state the price 

thereof, state by whom orders will be executed, and contain 

such other information as the Commission, by rules or regulations deemed necessary or appropriate in the public interest 

and for the protection of investors, and subject to such terms 

and conditions as may be prescribed therein, may permit. 

(11) The term ‘‘underwriter’’ means any person who has purchased from an issuer with a view to, or offers or sells for an 

issuer in connection with, the distribution of any security, or 

participates or has a direct or indirect participation in any 

such undertaking, or participates or has a participation in the 

direct or indirect underwriting of any such undertaking; but 

such term shall not include a person whose interest is limited 

to a commission from an underwriter or dealer not in excess 

of the usual and customary distributors’ or sellers’ commission. 

As used in this paragraph the term ‘‘issuer’’ shall include, in 

addition to an issuer, any person directly or indirectly controlling or controlled by the issuer, or any person under direct or 

indirect common control with the issuer. 

(12) The term ‘‘dealer’’ means any person who engages either 

for all or part of his time, directly or indirectly, as agent, 

broker, or principal, in the business of offering, buying, selling, 

or otherwise dealing or trading in securities issued by another 

person. 

(13) The term ‘‘insurance company’’ means a company which 

is organized as an insurance company, whose primary and predominant business activity is the writing of insurance or the 


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reinsuring of risks underwritten by insurance companies, and 

which is subject to supervision by the insurance commissioner, 

or a similar official or agency, of a State or territory or the District of Columbia; or any receiver or similar official or any liquidating agent for such company, in his capacity as such. 

(14) The term ‘‘separate account’’ means an account established and maintained by an insurance company pursuant to 

the laws of any State or territory of the United States, the District of Columbia, or of Canada or any province thereof, under 

which income, gains and losses, whether or not realized, from 

assets allocated to such account, are, in accordance with the 

applicable contract, credited to or charged against such account 

without regard to other income, gains, or losses of the insurance company. 

(15) The term ‘‘accredited investor’’ shall mean— 

(i) a bank as defined in section 3(a)(2) whether acting in 

its individual or fiduciary capacity; an insurance company 

as defined in paragraph (13) of this subsection; an investment company registered under the Investment Company 

Act of 1940 or a business development company as defined 

in section 2(a)(48) of that Act; a Small Business Investment Company licensed by the Small Business Administration; or an employee benefit plan, including an individual retirement account, which is subject to the provisions of the Employee Retirement Income Security Act of 

1974, if the investment decision is made by a plan fiduciary, as defined in section 3(21) of such Act, which is either a bank, insurance company, or registered investment 

adviser; or 

(ii) any person who, on the basis of such factors as financial sophistication, net worth, knowledge, and experience 

in financial matters, or amount of assets under management qualifies as an accredited investor under rules and 

regulations which the Commission shall prescribe. 

(16) The terms ‘‘security future’’, ‘‘narrow-based security 

index’’, and ‘‘security futures product’’ have the same meanings 

as provided in section 3(a)(55) of the Securities Exchange Act 

of 1934. 

(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. 

(19) The term ‘‘emerging growth company’’ means an issuer 

that had total annual gross revenues of less than 

$1,000,000,000 (as such amount is indexed for inflation every 

5 years by the Commission to reflect the change in the Consumer Price Index for All Urban Consumers published by the 

Bureau of Labor Statistics, setting the threshold to the nearest 

1,000,000) during its most recently completed fiscal year. An 

issuer that is an emerging growth company as of the first day 


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of that fiscal year shall continue to be deemed an emerging 

growth company until the earliest of— 

(A) the last day of the fiscal year of the issuer during which it had total annual gross revenues of $1,000,000,000 

(as such amount is indexed for inflation every 5 years by 

the Commission to reflect the change in the Consumer 

Price Index for All Urban Consumers published by the Bureau of Labor Statistics, setting the threshold to the nearest 1,000,000) or more; 

(B) the last day of the fiscal year of the issuer following 

the fifth anniversary of the date of the first sale of common equity securities of the issuer pursuant to an effective 

registration statement under this title; 

(C) the date on which such issuer has, during the pre- vious 3-year period, issued more than $1,000,000,000 in 

non-convertible debt; or 

(D) the date on which such issuer is deemed to be a 

‘‘large accelerated filer’’, as defined in section 240.12b–2 of 

title 17, Code of Federal Regulations, or any successor 

thereto. 

(20) RECENT EMERGING GROWTH COMPANY.—The term ‘‘recent 

emerging growth company’’ means an issuer that— 

(A) was, but is no longer, an emerging growth company; 

(B) would continue to be an emerging growth company 

but for the application of subparagraph (B) of paragraph 

(19); and 

(C) ceased to be an emerging growth company within the 

previous 5-year period. 

(b) CONSIDERATION OF PROMOTION OF EFFICIENCY, COMPETITION, AND CAPITAL FORMATION.—Whenever pursuant to this title the 

Commission is engaged in rulemaking and is required to 

consider or determine whether an action is necessary or appropriate in the public interest, the Commission shall also consider, in 

addition to the protection of investors, whether the action will promote efficiency, competition, and capital formation. 

* * * * * * * 

REGISTRATION OF SECURITIES AND SIGNING OF REGISTRATION

STATEMENT

SEC. 6. (a) Any security may be registered with the Commission 

under the terms and conditions hereinafter provided, by filing a 

registration statement in triplicate, at least one of which shall be 

signed by each issuer, its principal executive officer or officers, its 

principal financial officer, its comptroller or principal accounting officer, and the majority of its board of directors or persons performing similar functions (or, if there is no board of directors or 

persons performing similar functions, by the majority of the persons or board having the power of management of the issuer), and 

in case the issuer is a foreign or Territorial person by its duly authorized representative in the United States; except that when 

such registration statement relates to a security issued by a foreign 

government, or political subdivision thereof, it need be signed only 

by the underwriter of such security. Signatures of all such persons 

when written on the said registration statements shall be preVerDate Sep 11 2014 05:07 Dec 16, 2018 Jkt 089006 PO 00000 Frm 00013 Fmt 6659 Sfmt 6602 E:\HR\OC\HR1076.XXX HR1076

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sumed to have been so written by authority of the person whose 

signature is so affixed and the burden of proof, in the event such 

authority shall be denied, shall be upon the party denying the 

same. The affixing of any signature without the authority of the 

purported signer shall constitute a violation of this title. A registration statement shall be deemed effective only as to the securities 

specified therein as proposed to be offered. 

(b) REGISTRATION FEE.— (1) FEE PAYMENT REQUIRED.—At the time of filing a registration statement, the applicant shall pay to the Commission a fee 

at a rate that shall be equal to $92 per $1,000,000 of the maximum aggregate price at which such securities are proposed to 

be offered, except that during fiscal year 2003 and any succeeding fiscal year such fee shall be adjusted pursuant to paragraph (2). 

(2) ANNUAL ADJUSTMENT.—For each fiscal year, the Commission shall by order adjust the rate required by paragraph (1) 

for such fiscal year to a rate that, when applied to the baseline 

estimate of the aggregate maximum offering prices for such fiscal year, is reasonably likely to produce aggregate fee collections under this subsection that are equal to the target fee collection amount for such fiscal year. 

(3) PRO RATA APPLICATION.—The rates per $1,000,000 required by this subsection shall be applied pro rata to amounts 

and balances of less than $1,000,000. 

(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. 

(5) PUBLICATION.—The Commission shall publish in the Federal Register notices of the rate applicable under this subsection and under sections 13(e) and 14(g) for each fiscal year 

not later than August 31 of the fiscal year preceding the fiscal 

year to which such rate applies, together with any estimates 

or projections on which such rate is based. 

(6) DEFINITIONS.—For purposes of this subsection: 

(A) TARGET OFFSETTING COLLECTION AMOUNT.—The target fee collection amount for each fiscal year is determined 

according to the following table: 

Target fee 

Fiscal year: collection amount 

2002 ......................................................................................................... $377,000,000

2003 ......................................................................................................... $435,000,000

2004 ......................................................................................................... $467,000,000

2005 ......................................................................................................... $570,000,000

2006 ......................................................................................................... $689,000,000

2007 ......................................................................................................... $214,000,000

2008 ......................................................................................................... $234,000,000

2009 ......................................................................................................... $284,000,000

2010 ......................................................................................................... $334,000,000

2011 ......................................................................................................... $394,000,000

2012 ......................................................................................................... $425,000,000

2013 ......................................................................................................... $455,000,000

2014 ......................................................................................................... $485,000,000


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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. 

(B) BASELINE ESTIMATE OF THE AGGREGATE MAXIMUM OFFERING PRICES.—The baseline estimate of the aggregate 

maximum offering prices for any fiscal year is the baseline 

estimate of the aggregate maximum offering price at which 

securities are proposed to be offered pursuant to registration statements filed with the Commission during such fiscal year as determined by the Commission, after consultation with the Congressional Budget Office and the Office 

of Management and Budget, using the methodology required for projections pursuant to section 257 of the Balanced Budget and Emergency Deficit Control Act of 1985. 

(c) The filing with the Commission of a registration statement, 

or of an amendment to a registration statement, shall be deemed 

to have taken place upon the receipt thereof, but the filing of a registration statement shall not be deemed to have taken place unless 

it is accompanied by a United States postal money order or a certified bank check or cash for the amount of the fee required under 

subsection (b). 

(d) The information contained in or filed with any registration 

statement shall be made available to the public under such regulations as the Commission may prescribe, and copies thereof, photostatic or otherwise, shall be furnished to every applicant at such 

reasonable charge as the Commission may prescribe. 

(e) EMERGING GROWTH COMPANIES.— 

(1) IN GENERAL.—Any øemerging growth company¿ emerging 

growth company or recent emerging growth company, prior to 

its initial public offering date, may confidentially submit to the 

Commission a draft registration statement, for confidential 

nonpublic review by the staff of the Commission prior to public 

filing, provided that the initial confidential submission and all 

amendments thereto shall be publicly filed with the Commission not later than 15 days before the date on which the issuer 

conducts a road show, as such term is defined in section 

230.433(h)(4) of title 17, Code of Federal Regulations, or any 

successor thereto. An issuer that was an øemerging growth 

company¿ emerging growth company or recent emerging growth 

company at the time it submitted a confidential registration 

statement or, in lieu thereof, a publicly filed registration statement for review under this subsection but ceases to be an 

øemerging growth company¿ emerging growth company or recent emerging growth company thereafter shall continue to be 

treated as an emerging market growth company for the purposes of this subsection through the earlier of the date on 

which the issuer consummates its initial public offering pursuant to such registrations statement or the end of the 1-year period beginning on the date the company ceases to be an 


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øemerging growth company¿ emerging growth company or recent emerging growth company. (2) CONFIDENTIALITY.—Notwithstanding any other provision 

of this title, the Commission shall not be compelled to disclose 

any information provided to or obtained by the Commission 

pursuant to this subsection. 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. Information described in or obtained pursuant to this subsection 

shall be deemed to constitute confidential information for purposes of section 24(b)(2) of the Securities Exchange Act of 1934. 

INFORMATION REQUIRED IN REGISTRATION STATEMENT

SEC. 7. 

(a) INFORMATION REQUIRED IN REGISTRATION STATEMENT.— (1) IN GENERAL.—The registration statement, when relating 

to a security other than a security issued by a foreign government, or political subdivision thereof, shall contain the information, and be accompanied by the documents, specified in 

Schedule A, and when relating to a security issued by a foreign 

government, or political subdivision thereof, shall contain the 

information, and be accompanied by the documents, specified 

in Schedule B; except that the Commission may by rules or 

regulations provide that any such information or document 

need not be included in respect of any class of issuers or securities if it finds that the requirement of such information or 

document is inapplicable to such class and that disclosure fully 

adequate for the protection of investors is otherwise required 

to be included within the registration statement. If any accountant, engineer, or appraiser, or any person whose profession gives authority to a statement made by him, is named as 

having prepared or certified any part of the registration statement, or is named as having prepared or certified a report or 

valuation for use in connection with the registration statement, 

the written consent of such person shall be filed with the registration statement. If any such person is named as having 

prepared or certified a report or valuation (other than a public 

official document or statement) which is used in connection 

with the registration statement, but is not named as having 

prepared or certified such report or valuation for use in connection with the registration statement, the written consent of 

such person shall be filed with the registration statement unless the Commission dispenses with such filing as impracticable or as involving undue hardship on the person filing the 

registration statement. Any such registration statement shall 

contain such other information, and be accompanied by such 

other documents, as the Commission may by rules or regulations require as being necessary or appropriate in the public 

interest or for the protection of investors. 

(2) TREATMENT OF EMERGING GROWTH COMPANIES.—An 

emerging growth company and a recent emerging growth company— 

(A) need not present more than 2 years of audited financial statements in order for the registration statement of 

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spect to an initial public offering of its common equity securities to be effective, and in any other registration statement to be filed with the Commission, øan emerging 

growth company¿ such company need not present selected 

financial data in accordance with section 229.301 of title 

17, Code of Federal Regulations, for any period prior to the 

earliest audited period presented in connection with its initial public offering; and 

(B) may not be required to comply with any new or revised financial accounting standard until such date that a 

company that is not an issuer (as defined under section 

2(a) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7201(a))) 

is required to comply with such new or revised accounting 

standard, if such standard applies to companies that are 

not issuers. 

(b)(1) The Commission shall prescribe special rules with respect 

to registration statements filed by any issuer that is a blank check 

company. Such rules may, as the Commission determines necessary or appropriate in the public interest or for the protection of 

investors— 

(A) require such issuers to provide timely disclosure, prior to 

or after such statement becomes effective under section 8, of (i) 

information regarding the company to be acquired and the specific application of the proceeds of the offering, or (ii) additional 

information necessary to prevent such statement from being 

misleading; 

(B) place limitations on the use of such proceeds and the distribution of securities by such issuer until the disclosures required under subparagraph (A) have been made; and 

(C) provide a right of rescission to shareholders of such securities. 

(2) The Commission may, as it determines consistent with the 

public interest and the protection of investors, by rule or order exempt any issuer or class of issuers from the rules prescribed under 

paragraph (1). 

(3) For purposes of paragraph (1) of this subsection, the term 

‘‘blank check company’’ means any development stage company 

that is issuing a penny stock (within the meaning of section 

3(a)(51) of the Securities Exchange Act of 1934) and that— 

(A) has no specific business plan or purpose; or 

(B) has indicated that its business plan is to merge with an 

unidentified company or companies. 

(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 


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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. 

(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). 

* * * * * * * 

SECURITIES EXCHANGE ACT OF 1934 

* * * * * * * 

TITLE I—REGULATION OF SECURITIES EXCHANGES 

* * * * * * * 

DEFINITIONS AND APPLICATION OF TITLE

SEC. 3. (a) When used in this title, unless the context otherwise 

requires— 

(1) The term ‘‘exchange’’ means any organization, association, or group of persons, whether incorporated or unincorporated, which constitutes, maintains, or provides a market 

place or facilities for bringing together purchasers and sellers 

of securities or for otherwise performing with respect to securities the functions commonly performed by a stock exchange as 

that term is generally understood, and includes the market 

place and the market facilities maintained by such exchange. 

(2) The term ‘‘facility’’ when used with respect to an exchange includes its premises, tangible or intangible property 

whether on the premises or not, any right to the use of such 

premises or property or any service thereof for the purpose of 

effecting or reporting a transaction on an exchange (including, 

among other things, any system of communication to or from 

the exchange, by ticker or otherwise, maintained by or with 

the consent of the exchange), and any right of the exchange to 

the use of any property or service. 

(3)(A) The term ‘‘member’’ when used with respect to a national securities exchange means (i) any natural person permitted to effect transactions on the floor of the exchange without the services of another person acting as broker, (ii) any 

registered broker or dealer with which such a natural person 


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is associated, (iii) any registered broker or dealer permitted to 

designate as a representative such a natural person, and (iv) 

any other registered broker or dealer which agrees to be regulated by such exchange and with respect to which the exchange 

undertakes to enforce compliance with the provisions of this 

title, the rules and regulations thereunder, and its own rules. 

For purposes of sections 6(b)(1), 6(b)(4), 6(b)(6), 6(b)(7), 6(d), 

17(d), 19(d), 19(e), 19(g), 19(h), and 21 of this title, the term 

‘‘member’’ when used with respect to a national securities exchange also means, to the extent of the rules of the exchange 

specified by the Commission, any person required by the Commission to comply with such rules pursuant to section 6(f) of 

this title. 

(B) The term ‘‘member’’ when used with respect to a registered securities association means any broker or dealer who 

agrees to be regulated by such association and with respect to 

whom the association undertakes to enforce compliance with 

the provisions of this title, the rules and regulations thereunder, and its own rules. 

(4) BROKER.— (A) IN GENERAL.—The term ‘‘broker’’ means any person 

engaged in the business of effecting transactions in securities for the account of others. 

(B) EXCEPTION FOR CERTAIN BANK ACTIVITIES.—A bank 

shall not be considered to be a broker because the bank engages in any one or more of the following activities under 

the conditions described: 

(i) THIRD PARTY BROKERAGE ARRANGEMENTS.—The 

bank enters into a contractual or other written arrangement with a broker or dealer registered under 

this title under which the broker or dealer offers brokerage services on or off the premises of the bank if— 

(I) such broker or dealer is clearly identified as 

the person performing the brokerage services; 

(II) the broker or dealer performs brokerage 

services in an area that is clearly marked and, to 

the extent practicable, physically separate from 

the routine deposit-taking activities of the bank; 

(III) any materials used by the bank to advertise or promote generally the availability of brokerage services under the arrangement clearly indicate that the brokerage services are being provided by the broker or dealer and not by the bank; 

(IV) any materials used by the bank to advertise 

or promote generally the availability of brokerage 

services under the arrangement are in compliance 

with the Federal securities laws before distribution; 

(V) bank employees (other than associated persons of a broker or dealer who are qualified pursuant to the rules of a self-regulatory organization) 

perform only clerical or ministerial functions in 

connection with brokerage transactions including 

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ployees may forward customer funds or securities 

and may describe in general terms the types of investment vehicles available from the bank and the 

broker or dealer under the arrangement; 

(VI) bank employees do not receive incentive 

compensation for any brokerage transaction unless such employees are associated persons of a 

broker or dealer and are qualified pursuant to the 

rules of a self-regulatory organization, except that 

the bank employees may receive compensation for 

the referral of any customer if the compensation is 

a nominal one-time cash fee of a fixed dollar 

amount and the payment of the fee is not contingent on whether the referral results in a transaction; 

(VII) such services are provided by the broker or 

dealer on a basis in which all customers that receive any services are fully disclosed to the broker 

or dealer; 

(VIII) the bank does not carry a securities account of the customer except as permitted under 

clause (ii) or (viii) of this subparagraph; and 

(IX) the bank, broker, or dealer informs each 

customer that the brokerage services are provided 

by the broker or dealer and not by the bank and 

that the securities are not deposits or other obligations of the bank, are not guaranteed by the 

bank, and are not insured by the Federal Deposit 

Insurance Corporation. 

(ii) TRUST ACTIVITIES.—The bank effects transactions in a trustee capacity, or effects transactions in 

a fiduciary capacity in its trust department or other 

department that is regularly examined by bank examiners for compliance with fiduciary principles and 

standards, and— 

(I) is chiefly compensated for such transactions, 

consistent with fiduciary principles and standards, 

on the basis of an administration or annual fee 

(payable on a monthly, quarterly, or other basis), 

a percentage of assets under management, or a 

flat or capped per order processing fee equal to 

not more than the cost incurred by the bank in 

connection with executing securities transactions 

for trustee and fiduciary customers, or any combination of such fees; and 

(II) does not publicly solicit brokerage business, 

other than by advertising that it effects transactions in securities in conjunction with advertising its other trust activities. 

(iii) PERMISSIBLE SECURITIES TRANSACTIONS.—The 

bank effects transactions in— 

(I) commercial paper, bankers acceptances, or 

commercial bills; 

(II) exempted securities; 


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(III) qualified Canadian government obligations 

as defined in section 5136 of the Revised Statutes, 

in conformity with section 15C of this title and the 

rules and regulations thereunder, or obligations of 

the North American Development Bank; or 

(IV) any standardized, credit enhanced debt security issued by a foreign government pursuant to 

the March 1989 plan of then Secretary of the 

Treasury Brady, used by such foreign government 

to retire outstanding commercial bank loans. 

(iv) CERTAIN STOCK PURCHASE PLANS.— (I) EMPLOYEE BENEFIT PLANS.—The bank effects 

transactions, as part of its transfer agency activities, in the securities of an issuer as part of any 

pension, retirement, profit-sharing, bonus, thrift, 

savings, incentive, or other similar benefit plan for 

the employees of that issuer or its affiliates (as defined in section 2 of the Bank Holding Company 

Act of 1956), if the bank does not solicit transactions or provide investment advice with respect 

to the purchase or sale of securities in connection 

with the plan. 

(II) DIVIDEND REINVESTMENT PLANS.—The bank 

effects transactions, as part of its transfer agency 

activities, in the securities of an issuer as part of 

that issuer’s dividend reinvestment plan, if— 

(aa) the bank does not solicit transactions 

or provide investment advice with respect to 

the purchase or sale of securities in connection with the plan; and 

(bb) the bank does not net shareholders’ 

buy and sell orders, other than for programs 

for odd-lot holders or plans registered with 

the Commission. 

(III) ISSUER PLANS.—The bank effects transactions, as part of its transfer agency activities, in 

the securities of an issuer as part of a plan or program for the purchase or sale of that issuer’s 

shares, if— 

(aa) the bank does not solicit transactions 

or provide investment advice with respect to 

the purchase or sale of securities in connection with the plan or program; and 

(bb) the bank does not net shareholders’ 

buy and sell orders, other than for programs 

for odd-lot holders or plans registered with 

the Commission. 

(IV) PERMISSIBLE DELIVERY OF MATERIALS.—The 

exception to being considered a broker for a bank 

engaged in activities described in subclauses (I), 

(II), and (III) will not be affected by delivery of 

written or electronic plan materials by a bank to 

employees of the issuer, shareholders of the 

issuer, or members of affinity groups of the issuer, 

so long as such materials are— 


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(aa) comparable in scope or nature to that 

permitted by the Commission as of the date of 

the enactment of the Gramm-Leach-Bliley 

Act; or 

(bb) otherwise permitted by the Commission. 

(v) SWEEP ACCOUNTS.—The bank effects transactions 

as part of a program for the investment or reinvestment of deposit funds into any no-load, open-end management investment company registered under the Investment Company Act of 1940 that holds itself out as 

a money market fund. 

(vi) AFFILIATE TRANSACTIONS.—The bank effects 

transactions for the account of any affiliate of the 

bank (as defined in section 2 of the Bank Holding 

Company Act of 1956) other than— 

(I) a registered broker or dealer; or 

(II) an affiliate that is engaged in merchant 

banking, as described in section 4(k)(4)(H) of the 

Bank Holding Company Act of 1956. 

(vii) PRIVATE SECURITIES OFFERINGS.—The bank— 

(I) effects sales as part of a primary offering of 

securities not involving a public offering, pursuant 

to section 3(b), 4(2), or 4(5) of the Securities Act 

of 1933 or the rules and regulations issued thereunder; 

(II) at any time after the date that is 1 year 

after the date of the enactment of the GrammLeach-Bliley Act, is not affiliated with a broker or 

dealer that has been registered for more than 1 

year in accordance with this Act, and engages in 

dealing, market making, or underwriting activities, other than with respect to exempted securities; and 

(III) if the bank is not affiliated with a broker 

or dealer, does not effect any primary offering described in subclause (I) the aggregate amount of 

which exceeds 25 percent of the capital of the 

bank, except that the limitation of this subclause 

shall not apply with respect to any sale of government securities or municipal securities. 

(viii) SAFEKEEPING AND CUSTODY ACTIVITIES.— 

(I) IN GENERAL.—The bank, as part of customary banking activities— 

(aa) provides safekeeping or custody services with respect to securities, including the 

exercise of warrants and other rights on behalf of customers; 

(bb) facilitates the transfer of funds or securities, as a custodian or a clearing agency, in 

connection with the clearance and settlement 

of its customers’ transactions in securities; 

(cc) effects securities lending or borrowing 

transactions with or on behalf of customers as 

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ant to division (aa) or (bb) or invests cash collateral pledged in connection with such transactions; 

(dd) holds securities pledged by a customer 

to another person or securities subject to purchase or resale agreements involving a customer, or facilitates the pledging or transfer 

of such securities by book entry or as otherwise provided under applicable law, if the 

bank maintains records separately identifying 

the securities and the customer; or 

(ee) serves as a custodian or provider of 

other related administrative services to any 

individual retirement account, pension, retirement, profit sharing, bonus, thrift savings, incentive, or other similar benefit plan. 

(II) EXCEPTION FOR CARRYING BROKER ACTIVI- TIES.—The exception to being considered a broker 

for a bank engaged in activities described in subclause (I) shall not apply if the bank, in connection with such activities, acts in the United States 

as a carrying broker (as such term, and different 

formulations thereof, are used in section 15(c)(3) 

of this title and the rules and regulations thereunder) for any broker or dealer, unless such carrying broker activities are engaged in with respect 

to government securities (as defined in paragraph 

(42) of this subsection). 

(ix) IDENTIFIED BANKING PRODUCTS.—The bank effects transactions in identified banking products as defined in section 206 of the Gramm-Leach-Bliley Act. 

(x) MUNICIPAL SECURITIES.—The bank effects transactions in municipal securities. 

(xi) DE MINIMIS EXCEPTION.—The bank effects, other 

than in transactions referred to in clauses (i) through 

(x), not more than 500 transactions in securities in 

any calendar year, and such transactions are not effected by an employee of the bank who is also an employee of a broker or dealer. 

(C) EXECUTION BY BROKER OR DEALER.—The exception to 

being considered a broker for a bank engaged in activities 

described in clauses (ii), (iv), and (viii) of subparagraph (B) 

shall not apply if the activities described in such provisions result in the trade in the United States of any security that is a publicly traded security in the United States, 

unless— 

(i) the bank directs such trade to a registered broker 

or dealer for execution; 

(ii) the trade is a cross trade or other substantially 

similar trade of a security that— 

(I) is made by the bank or between the bank 

and an affiliated fiduciary; and 

(II) is not in contravention of fiduciary principles established under applicable Federal or 

State law; or 


dlhill on DSK3GLQ082PROD with HEARING
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(iii) the trade is conducted in some other manner 

permitted under rules, regulations, or orders as the 

Commission may prescribe or issue. 

(D) FIDUCIARY CAPACITY.—For purposes of subparagraph 

(B)(ii), the term ‘‘fiduciary capacity’’ means— 

(i) in the capacity as trustee, executor, administrator, registrar of stocks and bonds, transfer agent, 

guardian, assignee, receiver, or custodian under a uniform gift to minor act, or as an investment adviser if 

the bank receives a fee for its investment advice; 

(ii) in any capacity in which the bank possesses investment discretion on behalf of another; or 

(iii) in any other similar capacity. 

(E) EXCEPTION FOR ENTITIES SUBJECT TO SECTION 15(e).— 

The term ‘‘broker’’ does not include a bank that— 

(i) was, on the day before the date of enactment of 

the Gramm-Leach-Bliley Act, subject to section 15(e); 

and 

(ii) is subject to such restrictions and requirements 

as the Commission considers appropriate. 

(F) JOINT RULEMAKING REQUIRED.—The Commission and 

the Board of Governors of the Federal Reserve System 

shall jointly adopt a single set of rules or regulations to 

implement the exceptions in subparagraph (B). 

(5) DEALER.— (A) IN GENERAL.—The term ‘‘dealer’’ means any person 

engaged in the business of buying and selling securities 

(not including security-based swaps, other than securitybased swaps with or for persons that are not eligible contract participants) for such person’s own account through 

a broker or otherwise. 

(B) EXCEPTION FOR PERSON NOT ENGAGED IN THE BUSI- NESS OF DEALING.—The term ‘‘dealer’’ does not include a 

person that buys or sells securities (not including securitybased swaps, other than security-based swaps with or for 

persons that are not eligible contract participants) for such 

person’s own account, either individually or in a fiduciary 

capacity, but not as a part of a regular business. 

(C) EXCEPTION FOR CERTAIN BANK ACTIVITIES.—A bank 

shall not be considered to be a dealer because the bank engages in any of the following activities under the conditions described: 

(i) PERMISSIBLE SECURITIES TRANSACTIONS.—The 

bank buys or sells— 

(I) commercial paper, bankers acceptances, or 

commercial bills; 

(II) exempted securities; 

(III) qualified Canadian government obligations 

as defined in section 5136 of the Revised Statutes 

of the United States, in conformity with section 

15C of this title and the rules and regulations 

thereunder, or obligations of the North American 

Development Bank; or 

(IV) any standardized, credit enhanced debt security issued by a foreign government pursuant to 


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the March 1989 plan of then Secretary of the 

Treasury Brady, used by such foreign government 

to retire outstanding commercial bank loans. 

(ii) INVESTMENT, TRUSTEE, AND FIDUCIARY TRANS- ACTIONS.—The bank buys or sells securities for investment purposes— 

(I) for the bank; or 

(II) for accounts for which the bank acts as a 

trustee or fiduciary. 

(iii) ASSET-BACKED TRANSACTIONS.—The bank engages in the issuance or sale to qualified investors, 

through a grantor trust or other separate entity, of securities backed by or representing an interest in notes, 

drafts, acceptances, loans, leases, receivables, other 

obligations (other than securities of which the bank is 

not the issuer), or pools of any such obligations predominantly originated by— 

(I) the bank; 

(II) an affiliate of any such bank other than a 

broker or dealer; or 

(III) a syndicate of banks of which the bank is 

a member, if the obligations or pool of obligations 

consists of mortgage obligations or consumer-related receivables. 

(iv) IDENTIFIED BANKING PRODUCTS.—The bank buys 

or sells identified banking products, as defined in section 206 of the Gramm-Leach-Bliley Act. 

(6) The term ‘‘bank’’ means (A) a banking institution organized under the laws of the United States or a Federal savings 

association, as defined in section 2(5) of the Home Owners’ 

Loan Act, (B) a member bank of the Federal Reserve System, 

(C) any other banking institution or savings association, as defined in section 2(4) of the Home Owners’ Loan Act, whether 

incorporated or not, doing business under the laws of any State 

or of the United States, a substantial portion of the business 

of which consists of receiving deposits or exercising fiduciary 

powers similar to those permitted to national banks under the 

authority of the Comptroller of the Currency pursuant to the 

first section of Public Law 87–722 (12 U.S.C. 92a), and which 

is supervised and examined by State or Federal authority having supervision over banks or savings associations, and which 

is not operated for the purpose of evading the provisions of this 

title, and (D) a receiver, conservator, or other liquidating agent 

of any institution or firm included in clauses (A), (B), or (C) of 

this paragraph. 

(7) The term ‘‘director’’ means any director of a corporation 

or any person performing similar functions with respect to any 

organization, whether incorporated or unincorporated. 

(8) The term ‘‘issuer’’ means any person who issues or proposes to issue any security; except that with respect to certificates of deposit for securities, voting-trust certificates, or collateral-trust certificates, or with respect to certificates of interest or shares in an unincorporated investment trust not having 

a board of directors or of the fixed, restricted management, or 

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forming the acts and assuming the duties of depositor or manager pursuant to the provisions of the trust or other agreement 

or instrument under which such securities are issued; and except that with respect to equipment-trust certificates or like securities, the term ‘‘issuer’’ means the person by whom the 

equipment or property is, or is to be, used. 

(9) The term ‘‘person’’ means a natural person, company, 

government, or political subdivision, agency, or instrumentality 

of a government. 

(10) The term ‘‘security’’ means any note, stock, treasury 

stock, security future, security-based swap,bond, debenture, 

certificate of interest or participation in any profit-sharing 

agreement or in any oil, gas, or other mineral royalty or lease, 

any collateral-trust certificate, preorganization certificate or 

subscription, transferable share, investment contract, votingtrust certificate, certificate of deposit for a security, 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), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or in general, any instrument commonly known as a ‘‘security’’; or any certificate of interest or participation in, temporary or interim certificate for, 

receipt for, or warrant or right to subscribe to or purchase, any 

of the foregoing; but shall not include currency or any note, 

draft, bill of exchange, or banker’s acceptance which has a maturity at the time of issuance of not exceeding nine months, exclusive of days of grace, or any renewal thereof the maturity 

of which is likewise limited. 

(11) The term ‘‘equity security’’ means any stock or similar 

security; or any security future on any such security; or any security convertible, with or without consideration, into such a 

security, or carrying any warrant or right to subscribe to or 

purchase such a security; or any such warrant or right; or any 

other security which the Commission shall deem to be of similar nature and consider necessary or appropriate, by such rules 

and regulations as it may prescribe in the public interest or for 

the protection of investors, to treat as an equity security. 

(12)(A) The term ‘‘exempted security’’ or ‘‘exempted securities’’ includes— 

(i) government securities, as defined in paragraph (42) of 

this subsection; 

(ii) municipal securities, as defined in paragraph (29) of 

this subsection; 

(iii) any interest or participation in any common trust 

fund or similar fund that is excluded from the definition 

of the term ‘‘investment company’’ under section 3(c)(3) of 

the Investment Company Act of 1940; 

(iv) any interest or participation in a single trust fund, 

or a collective trust fund maintained by a bank, or any security arising out of a contract issued by an insurance 

company, which interest, participation, or security is 

issued in connection with a qualified plan as defined in 

subparagraph (C) of this paragraph; 


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(v) any security issued by or any interest or participation 

in any pooled income fund, collective trust fund, collective 

investment fund, or similar fund that is excluded from the 

definition of an investment company under section 

3(c)(10)(B) of the Investment Company Act of 1940; 

(vi) solely for purposes of sections 12, 13, 14, and 16 of 

this title, any security issued by or any interest or participation in any church plan, company, or account that is excluded from the definition of an investment company 

under section 3(c)(14) of the Investment Company Act of 

1940; and 

(vii) such other securities (which may include, among 

others, unregistered securities, the market in which is predominantly intrastate) as the Commission may, by such 

rules and regulations as it deems consistent with the public interest and the protection of investors, either unconditionally or upon specified terms and conditions or for stated periods, exempt from the operation of any one or more 

provisions of this title which by their terms do not apply 

to an ‘‘exempted security’’ or to ‘‘exempted securities’’. 

(B)(i) Notwithstanding subparagraph (A)(i) of this paragraph, 

government securities shall not be deemed to be ‘‘exempted securities’’ for the purposes of section 17A of this title. 

(ii) Notwithstanding subparagraph (A)(ii) of this paragraph, 

municipal securities shall not be deemed to be ‘‘exempted securities’’ for the purposes of sections 15 and 17A of this title. 

(C) For purposes of subparagraph (A)(iv) of this paragraph, 

the term ‘‘qualified plan’’ means (i) a stock bonus, pension, or 

profit-sharing plan which meets the requirements for qualification under section 401 of the Internal Revenue Code of 1954, 

(ii) an annuity plan which meets the requirements for the deduction of the employer’s contribution under section 404(a)(2) 

of such Code, (iii) a governmental plan as defined in section 

414(d) of such Code which has been established by an employer 

for the exclusive benefit of its employees or their beneficiaries 

for the purpose of distributing to such employees or their beneficiaries the corpus and income of the funds accumulated under 

such plan, if under such plan it is impossible, prior to the satisfaction of all liabilities with respect to such employees and 

their beneficiaries, for any part of the corpus or income to be 

used for, or diverted to, purposes other than the exclusive benefit of such employees or their beneficiaries, or (iv) a church 

plan, company, or account that is excluded from the definition 

of an investment company under section 3(c)(14) of the Investment Company Act of 1940, other than any plan described in 

clause (i), (ii), or (iii) of this subparagraph which (I) covers employees some or all of whom are employees within the meaning 

of section 401(c) of such Code, or (II) is a plan funded by an 

annuity contract described in section 403(b) of such Code. 

(13) The terms ‘‘buy’’ and ‘‘purchase’’ each include any contract to buy, purchase, or otherwise acquire. For security futures products, such term includes any contract, agreement, or 

transaction for future delivery. For security-based swaps, such 

terms include the execution, termination (prior to its scheduled 

maturity date), assignment, exchange, or similar transfer or 


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conveyance of, or extinguishing of rights or obligations under, 

a security-based swap, as the context may require. 

(14) The terms ‘‘sale’’ and ‘‘sell’’ each include any contract to 

sell or otherwise dispose of. For security futures products, such 

term includes any contract, agreement, or transaction for future delivery. 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. 

(15) The term ‘‘Commission’’ means the Securities and Exchange Commission established by section 4 of this title. 

(16) The term ‘‘State’’ means any State of the United States, 

the District of Columbia, Puerto Rico, the Virgin Islands, or 

any other possession of the United States. 

(17) The term ‘‘interstate commerce’’ means trade, commerce, 

transportation, or communication among the several States, or 

between any foreign country and any State, or between any 

State and any place or ship outside thereof. The term also includes intrastate use of (A) any facility of a national securities 

exchange or of a telephone or other interstate means of communication, or (B) any other interstate instrumentality. 

(18) The term ‘‘person associated with a broker or dealer’’ or 

‘‘associated person of a broker or dealer’’ means any partner, 

officer, director, or branch manager of such broker or dealer (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 broker or dealer, 

or any employee of such broker or dealer, except that any person associated with a broker or dealer whose functions are 

solely clerical or ministerial shall not be included in the meaning of such term for purposes of section 15(b) of this title (other 

than paragraph (6) thereof). 

(19) The terms ‘‘investment company,’’‘‘affiliated person,’’‘‘insurance company,’’‘‘separate account,’’ and ‘‘company’’ 

have the same meanings as in the Investment Company Act of 

1940. 

(20) The terms ‘‘investment adviser’’ and ‘‘underwriter’’ have 

the same meanings as in the Investment Advisers Act of 1940. 

(21) The term ‘‘persons associated with a member’’ or ‘‘associated person of a member’’ when used with respect to a member 

of a national securities exchange or registered securities association means any partner, officer, director, or branch manager 

of such member (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 

member, or any employee of such member. 

(22)(A) The term ‘‘securities information processor’’ means 

any person engaged in the business of (i) collecting, processing, 

or preparing for distribution or publication, or assisting, participating in, or coordinating the distribution or publication of, 

information with respect to transactions in or quotations for 

any security (other than an exempted security) or (ii) distributing or publishing (whether by means of a ticker tape, a communications network, a terminal display device, or otherwise) 


dlhill on DSK3GLQ082PROD with HEARING
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on a current and continuing basis, information with respect to 

such transactions or quotations. The term ‘‘securities information processor’’ does not include any bona fide newspaper, news 

magazine, or business or financial publication of general and 

regular circulation, any self-regulatory organization, any bank, 

broker, dealer, building and loan, savings and loan, or homestead association, or cooperative bank, if such bank, broker, 

dealer, association, or cooperative bank would be deemed to be 

a securities information processor solely by reason of functions 

performed by such institutions as part of customary banking, 

brokerage, dealing, association, or cooperative bank activities, 

or any common carrier, as defined in section 3 of the Communications Act of 1934, subject to the jurisdiction of the Federal 

Communications Commission or a State commission, as defined in section 3 of that Act, unless the Commission determines that such carrier is engaged in the business of collecting, 

processing, or preparing for distribution or publication, information with respect to transactions in or quotations for any security. 

(B) The term ‘‘exclusive processor’’ means any securities information processor or self-regulatory organization which, directly or indirectly, engages on an exclusive basis on behalf of 

any national securities exchange or registered securities association, or any national securities exchange or registered securities association which engages on an exclusive basis on its 

own behalf, in collecting, processing, or preparing for distribution or publication any information with respect to (i) transactions or quotations on or effected or made by means of any 

facility of such exchange or (ii) quotations distributed or published by means of any electronic system operated or controlled 

by such association. 

(23)(A) The term ‘‘clearing agency’’ means any person who 

acts as an intermediary in making payments or deliveries or 

both in connection with transactions in securities or who provides facilities for comparison of data respecting the terms of 

settlement of securities transactions, to reduce the number of 

settlements of securities transactions, or for the allocation of 

securities settlement responsibilities. Such term also means 

any person, such as a securities depository, who (i) acts as a 

custodian of securities in connection with a system for the central handling of securities whereby all securities of a particular 

class or series of any issuer deposited within the system are 

treated as fungible and may be transferred, loaned, or pledged 

by bookkeeping entry without physical delivery of securities 

certificates, or (ii) otherwise permits or facilitates the settlement of securities transactions or the hypothecation or lending 

of securities without physical delivery of securities certificates. 

(B) The term ‘‘clearing agency’’ does not include (i) any Federal Reserve bank, Federal home loan bank, or Federal land 

bank; (ii) any national securities exchange or registered securities association solely by reason of its providing facilities for 

comparison of data respecting the terms of settlement of securities transactions effected on such exchange or by means of 

any electronic system operated or controlled by such association; (iii) any bank, broker, dealer, building and loan, savings 


dlhill on DSK3GLQ082PROD with HEARING
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and loan, or homestead association, or cooperative bank if such 

bank, broker, dealer, association, or cooperative bank would be 

deemed to be a clearing agency solely by reason of functions 

performed by such institution as part of customary banking, 

brokerage, dealing, association, or cooperative banking activities, or solely by reason of acting on behalf of a clearing agency 

or a participant therein in connection with the furnishing by 

the clearing agency of services to its participants or the use of 

services of the clearing agency by its participants, unless the 

Commission, by rule, otherwise provides as necessary or appropriate to assure the prompt and accurate clearance and settlement of securities transactions or to prevent evasion of this 

title; (iv) any life insurance company, its registered separate 

accounts, or a subsidiary of such insurance company solely by 

reason of functions commonly performed by such entities in 

connection with variable annuity contracts or variable life policies issued by such insurance company or its separate accounts; (v) any registered open-end investment company or 

unit investment trust solely by reason of functions commonly 

performed by it in connection with shares in such registered 

open-end investment company or unit investment trust, or (vi) 

any person solely by reason of its performing functions described in paragraph 25(E) of this subsection. 

(24) The term ‘‘participant’’ when used with respect to a 

clearing agency means any person who uses a clearing agency 

to clear or settle securities transactions or to transfer, pledge, 

lend, or hypothecate securities. Such term does not include a 

person whose only use of a clearing agency is (A) through another person who is a participant or (B) as a pledgee of securities. 

(25) The term ‘‘transfer agent’’ means any person who engages on behalf of an issuer of securities or on behalf of itself 

as an issuer of securities in (A) countersigning such securities 

upon issuance; (B) monitoring the issuance of such securities 

with a view to preventing unauthorized issuance, a function 

commonly performed by a person called a registrar; (C) registering the transfer of such securities; (D) exchanging or converting such securities; or (E) transferring record ownership of 

securities by bookkeeping entry without physical issuance of 

securities certificates. The term ‘‘transfer agent’’ does not include any insurance company or separate account which performs such functions solely with respect to variable annuity 

contracts or variable life policies which it issues or any registered clearing agency which performs such functions solely 

with respect to options contracts which it issues. 

(26) The term ‘‘self-regulatory organization’’ means any national securities exchange, registered securities association, or 

registered clearing agency, or (solely for purposes of sections 

19(b), 19(c), and 23(b) of this title) the Municipal Securities 

Rulemaking Board established by section 15B of this title. 

(27) The term ‘‘rules of an exchange’’, ‘‘rules of an association’’, or ‘‘rules of a clearing agency’’ means the constitution, 

articles of incorporation, bylaws, and rules, or instruments corresponding to the foregoing, of an exchange, association of brokers and dealers, or clearing agency, respectively, and such of 


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the stated policies, practices, and interpretations of such exchange, association, or clearing agency as the Commission, by 

rule, may determine to be necessary or appropriate in the public interest or for the protection of investors to be deemed to 

be rules of such exchange, association, or clearing agency. 

(28) The term ‘‘rules of a self-regulatory organization’’ means 

the rules of an exchange which is a national securities exchange, the rules of an association of brokers and dealers 

which is a registered securities association, the rules of a clearing agency which is a registered clearing agency, or the rules 

of the Municipal Securities Rulemaking Board. 

(29) The term ‘‘municipal securities’’ means securities which 

are direct obligations of, or obligations guaranteed as to principal or interest by, a State or any political subdivision thereof, 

or any agency or instrumentality of a State or any political 

subdivision thereof, or any municipal corporate instrumentality 

of one or more States, or any security which is an industrial 

development bond (as defined in section 103(c)(2) of the Internal Revenue Code of 1954) the interest on which is excludable 

from gross income under section 103(a)(1) of such Code if, by 

reason of the application of paragraph (4) or (6) of section 

103(c) of such Code (determined as if paragraphs (4)(A), (5), 

and (7) were not included in such section 103(c)), paragraph (1) 

of such section 103(c) does not apply to such security. 

(30) The term ‘‘municipal securities dealer’’ means any person (including a separately identifiable department or division 

of a bank) engaged in the business of buying and selling municipal securities for his own account, through a broker or otherwise, but does not include— 

(A) any person insofar as he buys or sells such securities 

for his own account, either individually or in some fiduciary capacity, but not as a part of a regular business; or 

(B) a bank, unless the bank is engaged in the business 

of buying and selling municipal securities for its own account other than in a fiduciary capacity, through a broker 

or otherwise; Provided, however, That if the bank is engaged in such business through a separately identifiable 

department or division (as defined by the Municipal Securities Rulemaking Board in accordance with section 

15B(b)(2)(H) of this title), the department or division and 

not the bank itself shall be deemed to be the municipal securities dealer. 

(31) The term ‘‘municipal securities broker’’ means a broker 

engaged in the business of effecting transactions in municipal 

securities for the account of others. 

(32) The term ‘‘person associated with a municipal securities 

dealer’’ when used with respect to a municipal securities dealer 

which is a bank or a division or department of a bank means 

any person directly engaged in the management, direction, supervision, or performance of any of the municipal securities 

dealer’s activities with respect to municipal securities, and any 

person directly or indirectly controlling such activities or controlled by the municipal securities dealer in connection with 

such activities. 


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(33) The term ‘‘municipal securities investment portfolio’’ 

means all municipal securities held for investment and not for 

sale as part of a regular business by a municipal securities 

dealer or by a person, directly or indirectly, controlling, controlled by, or under common control with a municipal securities dealer. 

(34) The term ‘‘appropriate regulatory agency’’ means— 

(A) When used with respect to a municipal securities 

dealer: 

(i) the Comptroller of the Currency, in the case of a 

national bank, 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 subsidiary or department or division 

of any such Federal savings association; 

(ii) the Board of Governors of the Federal Reserve 

System, in the case of a State member bank of the 

Federal Reserve System, a subsidiary or a department 

or division thereof, a bank holding company, 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, a subsidiary or a department or 

division of such subsidiary, or a savings and loan holding company; 

(iii) the Federal Deposit Insurance Corporation, in 

the case of a bank insured by the Federal Deposit Insurance Corporation (other than a member of the Federal Reserve System), 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) the Commission in the case of all other municipal securities dealers. 

(B) When used with respect to a clearing agency or 

transfer agent: 

(i) the Comptroller of the Currency, in the case of a 

national bank, 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) the Board of Governors of the Federal Reserve 

System, in the case of a State member bank of the 

Federal Reserve System, a subsidiary thereof, a bank 

holding company, 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; 


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(iii) the Federal Deposit Insurance Corporation, in 

the case of a bank insured by the Federal Deposit Insurance Corporation (other than a member of the Federal Reserve System), 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) the Commission in the case of all other clearing 

agencies and transfer agents. 

(C) When used with respect to a participant or applicant 

to become a participant in a clearing agency or a person 

requesting or having access to services offered by a clearing agency: 

(i) the Comptroller of the Currency, in the case of a 

national 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 when the appropriate regulatory agency for such 

clearing agency is not the Commission; 

(ii) the Board of Governors of the Federal Reserve 

System in the case of a State member bank of the Federal Reserve System, a bank holding company, or a 

subsidiary of a bank holding company, 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 when 

the appropriate regulatory agency for such clearing 

agency is not the Commission; 

(iii) the Federal Deposit Insurance Corporation, in 

the case of a bank insured by the Federal Deposit Insurance Corporation (other than a member of the Federal Reserve 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 when the appropriate regulatory agency for 

such clearing agency is not the Commission; 

(iv) the Commission in all other cases. 

(D) When used with respect to an institutional investment manager which is a bank the deposits of which are 

insured in accordance with the Federal Deposit Insurance 

Act: 

(i) the Comptroller of the Currency, in the case of a 

national 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) the Board of Governors of the Federal Reserve 

System, in the case of any other member bank of the 

Federal Reserve System; and 


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(iii) the Federal Deposit Insurance Corporation, in 

the case of any other insured bank 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) When used with respect to a national securities exchange or registered securities association, member thereof, person associated with a member thereof, applicant to 

become a member thereof or to become associated with a 

member thereof, or person requesting or having access to 

services offered by such exchange or association or member 

thereof, or the Municipal Securities Rulemaking Board, 

the Commission. 

(F) When used with respect to a person exercising investment discretion with respect to an account: 

(i) the Comptroller of the Currency, in the case of a 

national 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) the Board of Governors of the Federal Reserve 

System in the case of any other member bank of the 

Federal Reserve System; 

(iii) the Federal Deposit Insurance Corporation, in 

the case of any other bank the deposits of which are 

insured in accordance with the Federal Deposit Insurance Act 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) the Commission in the case of all other such 

persons. 

(G) When used with respect to a government securities 

broker or government securities dealer, or person associated with a government securities broker or government 

securities dealer: 

(i) the Comptroller of the Currency, in the case of a 

national bank, 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, or a Federal 

branch or Federal agency of a foreign bank (as such 

terms are used in the International Banking Act of 

1978); 

(ii) the Board of Governors of the Federal Reserve 

System, in the case of a State member bank of the 

Federal Reserve System, a foreign bank, an uninsured 

State branch or State agency of a foreign bank, a commercial lending company owned or controlled by a foreign bank (as such terms are used in the International 

Banking Act of 1978), or a corporation organized or 

having an agreement with the Board of Governors of 


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the Federal Reserve System pursuant to section 25 or 

section 25A of the Federal Reserve Act; 

(iii) the Federal Deposit Insurance Corporation, in 

the case of a bank insured by the Federal Deposit Insurance Corporation (other than a member of the Federal Reserve System or a Federal savings bank), 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, or an insured State branch of a foreign 

bank (as such terms are used in the International 

Banking Act of 1978); and 

(iv) the Commission, in the case of all other government securities brokers and government securities 

dealers. 

(H) When used with respect to an institution described 

in subparagraph (D), (F), or (G) of section 2(c)(2), or held 

under section 4(f), of the Bank Holding Company Act of 

1956— 

(i) the Comptroller of the Currency, in the case of a 

national bank; 

(ii) the Board of Governors of the Federal Reserve 

System, in the case of a State member bank of the 

Federal Reserve System or any corporation chartered 

under section 25A of the Federal Reserve Act; 

(iii) the Federal Deposit Insurance Corporation, in 

the case of any other bank the deposits of which are 

insured in accordance with the Federal Deposit Insurance Act; or 

(iv) the Commission in the case of all other such institutions. 

As used in this paragraph, the terms ‘‘bank holding company’’ 

and ‘‘subsidiary of a bank holding company’’ have the meanings given them in section 2 of the Bank Holding Company Act 

of 1956. As used in this paragraph, the term ‘‘savings and loan 

holding company’’ has the same meaning as in section 10(a) of 

the Home Owners’ Loan Act (12 U.S.C. 1467a(a)). 

(35) A person exercises ‘‘investment discretion’’ with respect 

to an account if, directly or indirectly, such person (A) is authorized to determine what securities or other property shall 

be purchased or sold by or for the account, (B) makes decisions 

as to what securities or other property shall be purchased or 

sold by or for the account even though some other person may 

have responsibility for such investment decisions, or (C) otherwise exercises such influence with respect to the purchase and 

sale of securities or other property by or for the account as the 

Commission, by rule, determines, in the public interest or for 

the protection of investors, should be subject to the operation 

of the provisions of this title and rules and regulations thereunder. 

(36) A class of persons or markets is subject to ‘‘equal regulation’’ if no member of the class has a competitive advantage 

over any other member thereof resulting from a disparity in 

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mines is unfair and not necessary or appropriate in furtherance of the purposes of this title. 

(37) The term ‘‘records’’ means accounts, correspondence, 

memorandums, tapes, discs, papers, books, and other documents or transcribed information of any type, whether expressed in ordinary or machine language. 

(38) The term ‘‘market maker’’ means any specialist permitted to act as a dealer, any dealer acting in the capacity of 

block positioner, and any dealer who, with respect to a security, holds himself out (by entering quotations in an inter-dealer communications system or otherwise) as being willing to buy 

and sell such security for his own account on a regular or continuous basis. 

(39) A person is subject to a ‘‘statutory disqualification’’ with 

respect to membership or participation in, or association with 

a member of, a self-regulatory organization, if such person— 

(A) has been and is expelled or suspended from membership or participation in, or barred or suspended from being 

associated with a member of, any self-regulatory organization, foreign equivalent of a self-regulatory organization, 

foreign or international securities exchange, contract market designated pursuant to section 5 of the Commodity Exchange Act (7 U.S.C. 7), or any substantially equivalent 

foreign statute or regulation, or futures association registered under section 17 of such Act (7 U.S.C. 21), or any 

substantially equivalent foreign statute or regulation, or 

has been and is denied trading privileges on any such contract market or foreign equivalent; 

(B) is subject to— 

(i) an order of the Commission, other appropriate regulatory agency, or foreign financial regulatory authority— 

(I) denying, suspending for a period not exceeding 12 

months, or revoking his registration as a broker, dealer, municipal securities dealer, government securities 

broker, government securities dealer, security-based 

swap dealer, or major security-based swap participant 

or limiting his activities as a foreign person performing a function substantially equivalent to any of 

the above; or 

(II) barring or suspending for a period not exceeding 

12 months his being associated with a broker, dealer, 

municipal securities dealer, government securities 

broker, government securities dealer, security-based 

swap dealer, major security-based swap participant, or 

foreign person performing a function substantially 

equivalent to any of the above; 

(ii) an order of the Commodity Futures Trading Commission denying, suspending, or revoking his registration 

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

or 

(iii) an order by a foreign financial regulatory authority 

denying, suspending, or revoking the person’s authority to 

engage in transactions in contracts of sale of a commodity 

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ject to the rules of a contract market, board of trade, or 

foreign equivalent thereof; 

(C) by his conduct while associated with a broker, dealer, municipal securities dealer, government securities 

broker, government securities dealer, security-based swap 

dealer, or major security-based swap participant, or while 

associated with an entity or person required to be registered under the Commodity Exchange Act, has been 

found to be a cause of any effective suspension, expulsion, 

or order of the character described in subparagraph (A) or 

(B) of this paragraph, and in entering such a suspension, 

expulsion, or order, the Commission, an appropriate regulatory agency, or any such self-regulatory organization 

shall have jurisdiction to find whether or not any person 

was a cause thereof; 

(D) by his conduct while associated with any broker, 

dealer, municipal securities dealer, government securities 

broker, government securities dealer, security-based swap 

dealer, major security-based swap participant, or any other 

entity engaged in transactions in securities, or while associated with an entity engaged in transactions in contracts 

of sale of a commodity for future delivery or other instruments traded on or subject to the rules of a contract market, board of trade, or foreign equivalent thereof, has been 

found to be a cause of any effective suspension, expulsion, 

or order by a foreign or international securities exchange 

or foreign financial regulatory authority empowered by a 

foreign government to administer or enforce its laws relating to financial transactions as described in subparagraph 

(A) or (B) of this paragraph; 

(E) has associated with him any person who is known, 

or in the exercise of reasonable care should be known, to 

him to be a person described by subparagraph (A), (B), (C), 

or (D) of this paragraph; or 

(F) has committed or omitted any act, or is subject to an 

order or finding, enumerated in subparagraph (D), (E), (H), 

or (G) of paragraph (4) of section 15(b) of this title, has 

been convicted of any offense specified in subparagraph (B) 

of such paragraph (4) or any other felony within ten years 

of the date of the filing of an application for membership 

or participation in, or to become associated with a member 

of, such self-regulatory organization, is enjoined from any 

action, conduct, or practice specified in subparagraph (C) 

of such paragraph (4), has willfully made or caused to be 

made in any application for membership or participation 

in, or to become associated with a member of, a self-regulatory organization, report required to be filed with a selfregulatory organization, or proceeding before a self-regulatory organization, 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, report, or proceeding any material fact which is required to 

be stated therein. 


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(40) The term ‘‘financial responsibility rules’’ means the rules 

and regulations of the Commission or the rules and regulations 

prescribed by any self-regulatory organization relating to financial responsibility and related practices which are designated by the Commission, by rule or regulation, to be financial responsibility rules. 

(41) The term ‘‘mortgage related security’’ means a security 

that meets standards of credit-worthiness as established by the 

Commission, and either: 

(A) represents ownership of one or more promissory 

notes or certificates of interest or participation in such 

notes (including any rights designed to assure servicing of, 

or the receipt or timeliness of receipt by the holders of 

such notes, certificates, or participations of amounts payable under, such notes, certificates, or participations), 

which notes: 

(i) are directly secured by a first lien on a single 

parcel of real estate, including stock allocated to a 

dwelling unit in a residential cooperative housing corporation, upon which is located a dwelling or mixed 

residential and commercial structure, on a residential 

manufactured home as defined in section 603(6) of the 

National Manufactured Housing Construction and 

Safety Standards Act of 1974, whether such manufactured home is considered real or personal property 

under the laws of the State in which it is to be located, 

or on one or more parcels of real estate upon which is 

located one or more commercial structures; and 

(ii) were originated by a savings and loan association, savings bank, commercial bank, credit union, insurance company, or similar institution which is supervised and examined by a Federal or State authority, or by a mortgage approved by the Secretary of 

Housing and Urban Development pursuant to sections 

203 and 211 of the National Housing Act, or, where 

such notes involve a lien on the manufactured home, 

by any such institution or by any financial institution 

approved for insurance by the Secretary of Housing 

and Urban Development pursuant to section 2 of the 

National Housing Act; or 

(B) is secured by one or more promissory notes or certificates of interest or participations in such notes (with or 

without recourse to the issuer thereof) and, by its terms, 

provides for payments of principal in relation to payments, 

or reasonable projections of payments, on notes meeting 

the requirements of subparagraphs (A) (i) and (ii) or certificates of interest or participations in promissory notes 

meeting such requirements. 

For the purpose of this paragraph, the term ‘‘promissory note’’, 

when used in connection with a manufactured home, shall also 

include a loan, advance, or credit sale as evidence by a retail 

installment sales contract or other instrument. 

(42) The term ‘‘government securities’’ means— 


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(A) securities which are direct obligations of, or obligations guaranteed as to principal or interest by, the United 

States; 

(B) securities which are issued or guaranteed by the 

Tennessee Valley Authority or by corporations in which 

the United States has a direct or indirect interest and 

which are designated by the Secretary of the Treasury for 

exemption as necessary or appropriate in the public interest or for the protection of investors; 

(C) securities issued or guaranteed as to principal or interest by any corporation the securities of which are designated, by statute specifically naming such corporation, to 

constitute exempt securities within the meaning of the 

laws administered by the Commission; 

(D) for purposes of sections 15C and 17A, any put, call, 

straddle, option, or privilege on a security described in 

subparagraph (A), (B), or (C) other than a put, call, straddle, option, or privilege— 

(i) that is traded on one or more national securities 

exchanges; or 

(ii) for which quotations are disseminated through 

an automated quotation system operated by a registered securities association; or 

(E) for purposes of sections 15, 15C, and 17A as applied 

to a bank, a qualified Canadian government obligation as 

defined in section 5136 of the Revised Statutes of the 

United States. 

(43) The term ‘‘government securities broker’’ means any 

person regularly engaged in the business of effecting transactions in government securities for the account of others, but 

does not include— 

(A) any corporation the securities of which are government securities under subparagraph (B) or (C) of paragraph (42) of this subsection; or 

(B) any person registered with the Commodity Futures 

Trading Commission, any contract market designated by 

the Commodity Futures Trading Commission, such contract market’s affiliated clearing organization, or any floor 

trader on such contract market, solely because such person 

effects transactions in government securities that the Commission, after consultation with the Commodity Futures 

Trading Commission, has determined by rule or order to 

be incidental to such person’s futures-related business. 

(44) The term ‘‘government securities dealer’’ means any person engaged in the business of buying and selling government 

securities for his own account, through a broker or otherwise, 

but does not include— 

(A) any person insofar as he buys or sells such securities 

for his own account, either individually or in some fiduciary capacity, but not as a part of a regular business; 

(B) any corporation the securities of which are government securities under subparagraph (B) or (C) of paragraph (42) of this subsection; 

(C) any bank, unless the bank is engaged in the business 

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count other than in a fiduciary capacity, through a broker 

or otherwise; or 

(D) any person registered with the Commodity Futures 

Trading Commission, any contract market designated by 

the Commodity Futures Trading Commission, such contract market’s affiliated clearing organization, or any floor 

trader on such contract market, solely because such person 

effects transactions in government securities that the Commission, after consultation with the Commodity Futures 

Trading Commission, has determined by rule or order to 

be incidental to such person’s futures-related business. 

(45) The term ‘‘person associated with a government securities broker or government securities dealer’’ means any partner, officer, director, or branch manager of such government 

securities broker or government securities dealer (or any person occupying a similar status or performing similar functions), 

and any other employee of such government securities broker 

or government securities dealer who is engaged in the management, direction, supervision, or performance of any activities 

relating to government securities, and any person directly or 

indirectly controlling, controlled by, or under common control 

with such government securities broker or government securities dealer. 

(46) The term ‘‘financial institution’’ means— 

(A) a bank (as defined in paragraph (6) of this subsection); 

(B) a foreign bank (as such term is used in the International Banking Act of 1978); and 

(C) a savings association (as defined in section 3(b) of 

the Federal Deposit Insurance Act) the deposits of which 

are insured by the Federal Deposit Insurance Corporation. 

(47) The term ‘‘securities laws’’ means the Securities Act of 

1933 (15 U.S.C. 78a et seq.), the Securities Exchange Act of 

1934 (15 U.S.C. 78a et seq.), the Sarbanes-Oxley Act of 2002, 

the Trust Indenture Act of 1939 (15 U.S.C. 77aaa et seq.), the 

Investment Company Act of 1940 (15 U.S.C. 80a–1 et seq.), the 

Investment Advisers Act of 1940 (15 U.S.C. 80b et seq.), and 

the Securities Investor Protection Act of 1970 (15 U.S.C. 78aaa 

et seq.). 

(48) The term ‘‘registered broker or dealer’’ means a broker 

or dealer registered or required to register pursuant to section 

15 or 15B of this title, except that in paragraph (3) of this subsection and sections 6 and 15A the term means such a broker 

or dealer and a government securities broker or government 

securities dealer registered or required to register pursuant to 

section 15C(a)(1)(A) of this title. 

(49) The terms ‘‘person associated with a transfer agent’’ and 

‘‘associated person of a transfer agent’’ mean any person (except an employee whose functions are solely clerical or ministerial) directly engaged in the management, direction, supervision, or performance of any of the transfer agent’s activities 

with respect to transfer agent functions, and any person directly or indirectly controlling such activities or controlled by 

the transfer agent in connection with such activities. 


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(50) The term ‘‘foreign securities authority’’ means any foreign government, or any governmental body or regulatory organization empowered by a foreign government to administer or 

enforce its laws as they relate to securities matters. 

(51)(A) The term ‘‘penny stock’’ means any equity security 

other than a security that is— 

(i) registered or approved for registration and traded on 

a national securities exchange that meets such criteria as 

the Commission shall prescribe by rule or regulation for 

purposes of this paragraph; 

(ii) authorized for quotation on an automated quotation 

system sponsored by a registered securities association, if 

such system (I) was established and in operation before 

January 1, 1990, and (II) meets such criteria as the Commission shall prescribe by rule or regulation for purposes 

of this paragraph; 

(iii) issued by an investment company registered under 

the Investment Company Act of 1940; 

(iv) excluded, on the basis of exceeding a minimum price, 

net tangible assets of the issuer, or other relevant criteria, 

from the definition of such term by rule or regulation 

which the Commission shall prescribe for purposes of this 

paragraph; or 

(v) exempted, in whole or in part, conditionally or unconditionally, from the definition of such term by rule, regulation, or order prescribed by the Commission. 

(B) The Commission may, by rule, regulation, or order, designate any equity security or class of equity securities described in clause (i) or (ii) of subparagraph (A) as within the 

meaning of the term ‘‘penny stock’’ if such security or class of 

securities is traded other than on a national securities exchange or through an automated quotation system described in 

clause (ii) of subparagraph (A). 

(C) In exercising its authority under this paragraph to prescribe rules, regulations, and orders, the Commission shall determine that such rule, regulation, or order is consistent with 

the public interest and the protection of investors. 

(52) The term ‘‘foreign financial regulatory authority’’ means 

any (A) foreign securities authority, (B) other governmental 

body or foreign equivalent of a self-regulatory organization empowered by a foreign government to administer or enforce its 

laws relating to the regulation of fiduciaries, trusts, commercial lending, insurance, trading in contracts of sale of a commodity for future delivery, or other instruments traded on or 

subject to the rules of a contract market, board of trade, or foreign equivalent, or other financial activities, or (C) membership 

organization a function of which is to regulate participation of 

its members in activities listed above. 

(53)(A) The term ‘‘small business related security’’ means a 

security that meets standards of credit-worthiness as established by the Commission, and either— 

(i) represents an interest in 1 or more promissory notes 

or leases of personal property evidencing the obligation of 

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pany, or similar institution which is supervised and examined by a Federal or State authority, or a finance company 

or leasing company; or 

(ii) is secured by an interest in 1 or more promissory 

notes or leases of personal property (with or without recourse to the issuer or lessee) and provides for payments 

of principal in relation to payments, or reasonable projections of payments, on notes or leases described in clause 

(i). 

(B) For purposes of this paragraph— 

(i) an ‘‘interest in a promissory note or a lease of personal property’’ includes ownership rights, certificates of 

interest or participation in such notes or leases, and rights 

designed to assure servicing of such notes or leases, or the 

receipt or timely receipt of amounts payable under such 

notes or leases; 

(ii) the term ‘‘small business concern’’ means a business 

that meets the criteria for a small business concern established by the Small Business Administration under section 

3(a) of the Small Business Act; 

(iii) the term ‘‘insured depository institution’’ has the 

same meaning as in section 3 of the Federal Deposit Insurance Act; and 

(iv) the term ‘‘insured credit union’’ has the same meaning as in section 101 of the Federal Credit Union Act. 

(54) QUALIFIED INVESTOR.— 

(A) DEFINITION.—Except as provided in subparagraph 

(B), for purposes of this title, the term ‘‘qualified investor’’ 

means— 

(i) any investment company registered with the 

Commission under section 8 of the Investment Company Act of 1940; 

(ii) any issuer eligible for an exclusion from the definition of investment company pursuant to section 

3(c)(7) of the Investment Company Act of 1940; 

(iii) any bank (as defined in paragraph (6) of this 

subsection), savings association (as defined in section 

3(b) of the Federal Deposit Insurance Act), broker, 

dealer, insurance company (as defined in section 

2(a)(13) of the Securities Act of 1933), or business development company (as defined in section 2(a)(48) of 

the Investment Company Act of 1940); 

(iv) any small business investment company licensed 

by the United States Small Business Administration 

under section 301 (c) or (d) of the Small Business Investment Act of 1958; 

(v) any State sponsored employee benefit plan, or 

any other employee benefit plan, within the meaning 

of the Employee Retirement Income Security Act of 

1974, other than an individual retirement account, if 

the investment decisions are made by a plan fiduciary, 

as defined in section 3(21) of that Act, which is either 

a bank, savings and loan association, insurance company, or registered investment adviser; 


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(vi) any trust whose purchases of securities are directed by a person described in clauses (i) through (v) 

of this subparagraph; 

(vii) any market intermediary exempt under section 

3(c)(2) of the Investment Company Act of 1940; 

(viii) any associated person of a broker or dealer 

other than a natural person; 

(ix) any foreign bank (as defined in section 1(b)(7) of 

the International Banking Act of 1978); 

(x) the government of any foreign country; 

(xi) any corporation, company, or partnership that 

owns and invests on a discretionary basis, not less 

than $25,000,000 in investments; 

(xii) any natural person who owns and invests on a 

discretionary basis, not less than $25,000,000 in investments; 

(xiii) any government or political subdivision, agency, or instrumentality of a government who owns and 

invests on a discretionary basis not less than 

$50,000,000 in investments; or 

(xiv) any multinational or supranational entity or 

any agency or instrumentality thereof. 

(B) ALTERED THRESHOLDS FOR ASSET-BACKED SECURITIES

AND LOAN PARTICIPATIONS.—For purposes of section 

3(a)(5)(C)(iii) of this title and section 206(a)(5) of the 

Gramm-Leach-Bliley Act, the term ‘‘qualified investor’’ has 

the meaning given such term by subparagraph (A) of this 

paragraph except that clauses (xi) and (xii) shall be applied by substituting ‘‘$10,000,000’’ for ‘‘$25,000,000’’. 

(C) ADDITIONAL AUTHORITY.—The Commission may, by 

rule or order, define a ‘‘qualified investor’’ as any other 

person, taking into consideration such factors as the financial sophistication of the person, net worth, and knowledge 

and experience in financial matters. 

(55)(A) The term ‘‘security future’’ means a contract of sale 

for future delivery of a single security or of a narrow-based security index, including any interest therein or based on the 

value thereof, except an exempted security under section 

3(a)(12) of this title as in effect on the date of the enactment 

of the Futures Trading Act of 1982 (other than any municipal 

security as defined in section 3(a)(29) as in effect on the date 

of the enactment of the Futures Trading Act of 1982). The term 

‘‘security future’’ does not include any agreement, contract, or 

transaction excluded from the Commodity Exchange Act under 

section 2(c), 2(d), 2(f), or 2(g) of the Commodity Exchange Act 

(as in effect on the date of the enactment of the Commodity 

Futures Modernization Act of 2000) or title IV of the Commodity Futures Modernization Act of 2000. 

(B) The term ‘‘narrow-based security index’’ means an 

index— 

(i) that has 9 or fewer component securities; 

(ii) in which a component security comprises more than 

30 percent of the index’s weighting; 


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(iii) in which the five highest weighted component securities in the aggregate comprise more than 60 percent of 

the index’s weighting; or 

(iv) in which the lowest weighted component securities 

comprising, in the aggregate, 25 percent of the index’s 

weighting have an aggregate dollar value of average daily 

trading volume of less than $50,000,000 (or in the case of 

an index with 15 or more component securities, 

$30,000,000), except that if there are two or more securities with equal weighting that could be included in the calculation of the lowest weighted component securities comprising, in the aggregate, 25 percent of the index’s 

weighting, such securities shall be ranked from lowest to 

highest dollar value of average daily trading volume and 

shall be included in the calculation based on their ranking 

starting with the lowest ranked security. 

(C) Notwithstanding subparagraph (B), an index is not a 

narrow-based security index if— 

(i)(I) it has at least nine component securities; 

(II) no component security comprises more than 30 percent of the index’s weighting; and 

(III) each component security is— 

(aa) registered pursuant to section 12 of the Securities Exchange Act of 1934; 

(bb) one of 750 securities with the largest market 

capitalization; and 

(cc) one of 675 securities with the largest dollar 

value of average daily trading volume; 

(ii) a board of trade was designated as a contract market 

by the Commodity Futures Trading Commission with respect to a contract of sale for future delivery on the index, 

before the date of the enactment of the Commodity Futures Modernization Act of 2000; 

(iii)(I) a contract of sale for future delivery on the index 

traded on a designated contract market or registered derivatives transaction execution facility for at least 30 days 

as a contract of sale for future delivery on an index that 

was not a narrow-based security index; and 

(II) it has been a narrow-based security index for no 

more than 45 business days over 3 consecutive calendar 

months; 

(iv) a contract of sale for future delivery on the index is 

traded on or subject to the rules of a foreign board of trade 

and meets such requirements as are jointly established by 

rule or regulation by the Commission and the Commodity 

Futures Trading Commission; 

(v) no more than 18 months have passed since the date 

of the enactment of the Commodity Futures Modernization 

Act of 2000 and— 

(I) it is traded on or subject to the rules of a foreign 

board of trade; 

(II) the offer and sale in the United States of a contract of sale for future delivery on the index was authorized before the date of the enactment of the Commodity Futures Modernization Act of 2000; and 


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(III) the conditions of such authorization continue to 

be met; or 

(vi) a contract of sale for future delivery on the index is 

traded on or subject to the rules of a board of trade and 

meets such requirements as are jointly established by rule, 

regulation, or order by the Commission and the Commodity Futures Trading Commission. 

(D) Within 1 year after the enactment of the Commodity Futures Modernization Act of 2000, the Commission and the 

Commodity Futures Trading Commission jointly shall adopt 

rules or regulations that set forth the requirements under 

clause (iv) of subparagraph (C). 

(E) An index that is a narrow-based security index solely because it was a narrow-based security index for more than 45 

business days over 3 consecutive calendar months pursuant to 

clause (iii) of subparagraph (C) shall not be a narrow-based security index for the 3 following calendar months. 

(F) For purposes of subparagraphs (B) and (C) of this paragraph— 

(i) the dollar value of average daily trading volume and 

the market capitalization shall be calculated as of the preceding 6 full calendar months; and 

(ii) the Commission and the Commodity Futures Trading 

Commission shall, by rule or regulation, jointly specify the 

method to be used to determine market capitalization and 

dollar value of average daily trading volume. 

(56) The term ‘‘security futures product’’ means a security future or any put, call, straddle, option, or privilege on any security future. 

(57)(A) The term ‘‘margin’’, when used with respect to a security futures product, means the amount, type, and form of collateral required to secure any extension or maintenance of 

credit, or the amount, type, and form of collateral required as 

a performance bond related to the purchase, sale, or carrying 

of a security futures product. 

(B) The terms ‘‘margin level’’ and ‘‘level of margin’’, when 

used with respect to a security futures product, mean the 

amount of margin required to secure any extension or maintenance of credit, or the amount of margin required as a performance bond related to the purchase, sale, or carrying of a 

security futures product. 

(C) The terms ‘‘higher margin level’’ and ‘‘higher level of 

margin’’, when used with respect to a security futures product, 

mean a margin level established by a national securities exchange registered pursuant to section 6(g) that is higher than 

the minimum amount established and in effect pursuant to 

section 7(c)(2)(B). 

(58) AUDIT COMMITTEE.—The term ‘‘audit committee’’ 

means— 

(A) a committee (or equivalent body) established by and 

amongst the board of directors of an issuer for the purpose 

of overseeing the accounting and financial reporting processes of the issuer and audits of the financial statements 

of the issuer; and 


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(B) if no such committee exists with respect to an issuer, 

the entire board of directors of the issuer. 

(59) REGISTERED PUBLIC ACCOUNTING FIRM.—The term ‘‘registered public accounting firm’’ has the same meaning as in 

section 2 of the Sarbanes-Oxley Act of 2002. 

(60) CREDIT RATING.—The term ‘‘credit rating’’ means an assessment of the creditworthiness of an obligor as an entity or 

with respect to specific securities or money market instruments. 

(61) CREDIT RATING AGENCY.—The term ‘‘credit rating agency’’ means any person— 

(A) engaged in the business of issuing credit ratings on 

the Internet or through another readily accessible means, 

for free or for a reasonable fee, but does not include a commercial credit reporting company; 

(B) employing either a quantitative or qualitative model, 

or both, to determine credit ratings; and 

(C) receiving fees from either issuers, investors, or other 

market participants, or a combination thereof. 

(62) NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZA- TION.—The term ‘‘nationally recognized statistical rating organization’’ means a credit rating agency that— 

(A) issues credit ratings certified by qualified institutional buyers, in accordance with section 15E(a)(1)(B)(ix), 

with respect to— 

(i) financial institutions, brokers, or dealers; 

(ii) insurance companies; 

(iii) corporate issuers; 

(iv) issuers of asset-backed securities (as that term 

is defined in section 1101(c) of part 229 of title 17, 

Code of Federal Regulations, as in effect on the date 

of enactment of this paragraph); 

(v) issuers of government securities, municipal securities, or securities issued by a foreign government; or 

(vi) a combination of one or more categories of obligors described in any of clauses (i) through (v); and 

(B) is registered under section 15E. 

(63) PERSON ASSOCIATED WITH A NATIONALLY RECOGNIZED

STATISTICAL RATING ORGANIZATION.—The term ‘‘person associated with’’ a nationally recognized statistical rating organization means any partner, officer, director, or branch manager of 

a nationally recognized statistical rating organization (or any 

person occupying a similar status or performing similar functions), any person directly or indirectly controlling, controlled 

by, or under common control with a nationally recognized statistical rating organization, or any employee of a nationally 

recognized statistical rating organization. 

(64) QUALIFIED INSTITUTIONAL BUYER.—The term ‘‘qualified 

institutional buyer’’ has the meaning given such term in section 230.144A(a) of title 17, Code of Federal Regulations, or 

any successor thereto. 

(79) 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 


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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; 

(ii) a collateralized debt obligation; 

(iii) a collateralized bond obligation; 

(iv) a collateralized debt obligation of asset-backed 

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. 

(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 

(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 


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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 securitybased swap participant for 1 or more categories of securitybased swaps without being classified as a major securitybased swap participant for all classes of security-based 

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 

(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 AGREE- MENTS.—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 securitybased 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 


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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 

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 securitybased 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 securitybased 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; 


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(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)). 

(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 security-based 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.— 


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(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. 

(80) EMERGING GROWTH COMPANY.—The term ‘‘emerging 

growth company’’ means an issuer that had total annual gross 

revenues of less than $1,000,000,000 (as such amount is indexed for inflation every 5 years by the Commission to reflect 

the change in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics, setting the 

threshold to the nearest 1,000,000) during its most recently 

completed fiscal year. An issuer that is an emerging growth 

company as of the first day of that fiscal year shall continue 

to be deemed an emerging growth company until the earliest 

of— 

(A) the last day of the fiscal year of the issuer during 

which it had total annual gross revenues of $1,000,000,000 

(as such amount is indexed for inflation every 5 years by 

the Commission to reflect the change in the Consumer 

Price Index for All Urban Consumers published by the Bureau of Labor Statistics, setting the threshold to the nearest 1,000,000) or more; 

(B) the last day of the fiscal year of the issuer following 

the fifth anniversary of the date of the first sale of common equity securities of the issuer pursuant to an effective 

registration statement under the Securities Act of 1933; 

(C) the date on which such issuer has, during the previous 3-year period, issued more than $1,000,000,000 in 

non-convertible debt; or 

(D) the date on which such issuer is deemed to be a 

‘‘large accelerated filer’’, as defined in section 240.12b–2 of 

title 17, Code of Federal Regulations, or any successor 

thereto. 

ø(80)¿ (81) FUNDING PORTAL.—The term ‘‘funding portal’’ 

means any person acting as an intermediary in a transaction 

involving the offer or sale of securities for the account of others, solely pursuant to section 4(6) of the Securities Act of 1933 

(15 U.S.C. 77d(6)), that does not— 

(A) offer investment advice or recommendations; 

(B) solicit purchases, sales, or offers to buy the securities 

offered or displayed on its website or portal; 

(C) compensate employees, agents, or other persons for 

such solicitation or based on the sale of securities displayed or referenced on its website or portal; 

(D) hold, manage, possess, or otherwise handle investor 

funds or securities; or 

(E) engage in such other activities as the Commission, 

by rule, determines appropriate. 


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(82) RECENT EMERGING GROWTH COMPANY.—The term ‘‘recent 

emerging growth company’’ means an issuer that— 

(A) was, but is no longer, an emerging growth company; 

(B) would continue to be an emerging growth company 

but for the application of subparagraph (B) of paragraph 

(80); and 

(C) ceased to be an emerging growth company within the 

previous 5-year period. 

(b) The Commission and the Board of Governors of the Federal 

Reserve System, as to matters within their respective jurisdictions, 

shall have power by rules and regulations to define technical, 

trade, accounting, and other terms used in this title, consistently 

with the provisions and purposes of this title. 

(c) No provision of this title shall apply to, or be deemed to include, any executive department or independent establishment of 

the United States, or any lending agency which is wholly owned, 

directly or indirectly, by the United States, or any officer, agent, or 

employee of any such department, establishment, or agency, acting 

in the course of his official duty as such, unless such provision 

makes specific reference to such department, establishment, or 

agency. 

(d) No issuer of municipal securities or officer or employee thereof acting in the course of his official duties as such shall be deemed 

to be a ‘‘broker’’, ‘‘dealer’’, or ‘‘municipal securities dealer’’ solely by 

reason of buying, selling, or effecting transactions in the issuer’s 

securities. 

(e) CHARITABLE ORGANIZATIONS.— (1) EXEMPTION.—Notwithstanding any other provision of this 

title, but subject to paragraph (2) of this subsection, a charitable organization, as defined in section 3(c)(10)(D) of the Investment Company Act of 1940, or any trustee, director, officer, 

employee, or volunteer of such a charitable organization acting 

within the scope of such person’s employment or duties with 

such organization, shall not be deemed to be a ‘‘broker’’, ‘‘dealer’’, ‘‘municipal securities broker’’, ‘‘municipal securities dealer’’, ‘‘government securities broker’’, or ‘‘government securities 

dealer’’ for purposes of this title solely because such organization or person buys, holds, sells, or trades in securities for its 

own account in its capacity as trustee or administrator of, or 

otherwise on behalf of or for the account of— 

(A) such a charitable organization; 

(B) a fund that is excluded from the definition of an investment company under section 3(c)(10)(B) of the Investment Company Act of 1940; or 

(C) a trust or other donative instrument described in 

section 3(c)(10)(B) of the Investment Company Act of 1940, 

or the settlors (or potential settlors) or beneficiaries of any 

such trust or other instrument. 

(2) LIMITATION ON COMPENSATION.—The exemption provided 

under paragraph (1) shall not be available to any charitable organization, or any trustee, director, officer, employee, or volunteer of such a charitable organization, unless each person who, 

on or after 90 days after the date of enactment of this subsection, solicits donations on behalf of such charitable organization from any donor to a fund that is excluded from the defiVerDate Sep 11 2014 05:07 Dec 16, 2018 Jkt 089006 PO 00000 Frm 00052 Fmt 6659 Sfmt 6602 E:\HR\OC\HR1076.XXX HR1076

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nition of an investment company under section 3(c)(10)(B) of 

the Investment Company Act of 1940, is either a volunteer or 

is engaged in the overall fund raising activities of a charitable 

organization and receives no commission or other special compensation based on the number or the value of donations collected for the fund. 

(f) CONSIDERATION OF PROMOTION OF EFFICIENCY, COMPETITION, AND CAPITAL FORMATION.—Whenever pursuant to this title the 

Commission is engaged in rulemaking, or in the review of a rule 

of a self-regulatory organization, and is required to consider or determine whether an action is necessary or appropriate in the public 

interest, the Commission shall also consider, in addition to the protection of investors, whether the action will promote efficiency, 

competition, and capital formation. 

(g) CHURCH PLANS.—No church plan described in section 414(e) 

of the Internal Revenue Code of 1986, no person or entity eligible 

to establish and maintain such a plan under the Internal Revenue 

Code of 1986, no company or account that is excluded from the definition of an investment company under section 3(c)(14) of the Investment Company Act of 1940, and no trustee, director, officer or 

employee of or volunteer for such plan, company, account, person, 

or entity, acting within the scope of that person’s employment or 

activities with respect to such plan, shall be deemed to be a 

‘‘broker’’, ‘‘dealer’’, ‘‘municipal securities broker’’, ‘‘municipal securities dealer’’, ‘‘government securities broker’’, ‘‘government securities 

dealer’’, ‘‘clearing agency’’, or ‘‘transfer agent’’ for purposes of this 

title— 

(1) solely because such plan, company, person, or entity buys, 

holds, sells, trades in, or transfers securities or acts as an 

intermediary in making payments in connection with transactions in securities for its own account in its capacity as trustee or administrator of, or otherwise on behalf of, or for the account of, any church plan, company, or account that is excluded from the definition of an investment company under 

section 3(c)(14) of the Investment Company Act of 1940; and 

(2) if no such person or entity receives a commission or other 

transaction-related sales compensation in connection with any 

activities conducted in reliance on the exemption provided by 

this subsection. 

(h) LIMITED EXEMPTION FOR FUNDING PORTALS.— 

(1) IN GENERAL.—The Commission shall, by rule, exempt, 

conditionally or unconditionally, a registered funding portal 

from the requirement to register as a broker or dealer under 

section 15(a)(1), provided that such funding portal— 

(A) remains subject to the examination, enforcement, 

and other rulemaking authority of the Commission; 

(B) is a member of a national securities association registered under section 15A; and 

(C) is subject to such other requirements under this title 

as the Commission determines appropriate under such 

rule. 

(2) NATIONAL SECURITIES ASSOCIATION MEMBERSHIP.—For 

purposes of sections 15(b)(8) and 15A, the term ‘‘broker or dealer’’ includes a funding portal and the term ‘‘registered broker 

or dealer’’ includes a registered funding portal, except to the 


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extent that the Commission, by rule, determines otherwise, 

provided that a national securities association shall only examine for and enforce against a registered funding portal rules of 

such national securities association written specifically for registered funding portals. 

* * * * * * * 

PERIODICAL AND OTHER REPORTS

SEC. 13. (a) Every issuer of a security registered pursuant to section 12 of this title shall file with the Commission, in accordance 

with such rules and regulations as the Commission may prescribe 

as necessary or appropriate for the proper protection of investors 

and to insure fair dealing in the security— 

(1) such information and documents (and such copies thereof) 

as the Commission shall require to keep reasonably current 

the information and documents required to be included in or 

filed with an application or registration statement filed pursuant to section 12, except that the Commission may not require 

the filing of any material contract wholly executed before July 

1, 1962. 

(2) such annual reports (and such copies thereof), certified if 

required by the rules and regulations of the Commission by 

independent public accountants, and such quarterly reports 

(and such copies thereof), as the Commission may prescribe. 

Every issuer of a security registered on a national securities exchange shall also file a duplicate original of such information, documents, and reports with the exchange. In any registration statement, periodic report, or other reports to be filed with the Commission, an emerging growth company need not present selected financial data in accordance with section 229.301 of title 17, Code of 

Federal Regulations, for any period prior to the earliest audited period presented in connection with its first registration statement 

that became effective under this Act or the Securities Act of 1933 

and, with respect to any such statement or reports, an emerging 

growth company may not be required to comply with any new or 

revised financial accounting standard until such date that a company that is not an issuer (as defined under section 2(a) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7201(a))) is required to comply 

with such new or revised accounting standard, if such standard applies to companies that are not issuers. The previous sentence shall 

apply, to the same extent as such sentence applies to an emerging 

growth company, to a recent emerging growth company. 

(b)(1) The Commission may prescribe, in regard to reports made 

pursuant to this title, the form or forms in which the required information shall be set forth, the items or details to be shown in the 

balance sheet and the earnings statement, and the methods to be 

followed in the preparation of reports, in the appraisal or valuation 

of assets and liabilities, in the determination of depreciation and 

depletion, in the differentiation of recurring and nonrecurring income, in the differentiation of investment and operating income, 

and in the preparation, where the Commission deems it necessary 

or desirable, of separate and/or consolidated balance sheets or income accounts of any person directly or indirectly controlling or 

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mon control with the issuer; but in the case of the reports of any 

person whose methods of accounting are prescribed under the provisions of any law of the United States, or any rule or regulation 

thereunder, the rules and regulations of the Commission with respect to reports shall not be inconsistent with the requirements imposed by such law or rule or regulation in respect of the same subject matter (except that such rules and regulations of the Commission may be inconsistent with such requirements to the extent that 

the Commission determines that the public interest or the protection of investors so requires). 

(2) Every issuer which has a class of securities registered pursuant to section 12 of this title and every issuer which is required to 

file reports pursuant to section 15(d) of this title shall— 

(A) make and keep books, records, and accounts, which, in 

reasonable detail, accurately and fairly reflect the transactions 

and dispositions of the assets of the issuer; 

(B) devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that— 

(i) transactions are executed in accordance with management’s general or specific authorization; 

(ii) transactions are recorded as necessary (I) to permit 

preparation of financial statements in conformity with generally accepted accounting principles or any other criteria 

applicable to such statements, and (II) to maintain accountability for assets; 

(iii) access to assets is permitted only in accordance with 

management’s general or specific authorization; and 

(iv) the recorded accountability for assets is compared 

with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences; and 

(C) notwithstanding any other provision of law, pay the allocable share of such issuer of a reasonable annual accounting 

support fee or fees, determined in accordance with section 109 

of the Sarbanes-Oxley Act of 2002. 

(3)(A) With respect to matters concerning the national security of 

the United States, no duty or liability under paragraph (2) of this 

subsection shall be imposed upon any person acting in cooperation 

with the head of any Federal department or agency responsible for 

such matters if such act in cooperation with such head of a department or agency was done upon the specific, written directive of the 

head of such department or agency pursuant to Presidential authority to issue such directives. Each directive issued under this 

paragraph shall set forth the specific facts and circumstances with 

respect to which the provisions of this paragraph are to be invoked. 

Each such directive shall, unless renewed in writing, expire one 

year after the date of issuance. 

(B) Each head of a Federal department or agency of the United 

States who issues a directive pursuant to this paragraph shall 

maintain a complete file of all such directives and shall, on October 

1 of each year, transmit a summary of matters covered by such directives in force at any time during the previous year to the Permanent Select Committee on Intelligence of the House of Representatives and the Select Committee on Intelligence of the Senate. 


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(4) No criminal liability shall be imposed for failing to comply 

with the requirements of paragraph (2) of this subsection except as 

provided in paragraph (5) of this subsection. 

(5) No person shall knowingly circumvent or knowingly fail to 

implement a system of internal accounting controls or knowingly 

falsify any book, record, or account described in paragraph (2). 

(6) Where an issuer which has a class of securities registered 

pursuant to section 12 of this title or an issuer which is required 

to file reports pursuant to section 15(d) of this title holds 50 per 

centum or less of the voting power with respect to a domestic or 

foreign firm, the provisions of paragraph (2) require only that the 

issuer proceed in good faith to use its influence, to the extent reasonable under the issuer’s circumstances, to cause such domestic or 

foreign firm to devise and maintain a system of internal accounting 

controls consistent with paragraph (2). Such circumstances include 

the relative degree of the issuer’s ownership of the domestic or foreign firm and the laws and practices governing the business operations of the country in which such firm is located. An issuer which 

demonstrates good faith efforts to use such influence shall be conclusively presumed to have complied with the requirements of 

paragraph (2). 

(7) For the purpose of paragraph (2) of this subsection, the terms 

‘‘reasonable assurances’’ and ‘‘reasonable detail’’ mean such level of 

detail and degree of assurance as would satisfy prudent officials in 

the conduct of their own affairs. 

(c) If in the judgment of the Commission any report required 

under subsection (a) is inapplicable to any specified class or classes 

of issuers, the Commission shall require in lieu thereof the submission of such reports of comparable character as it may deem applicable to such class or classes of issuers. 

(d)(1) Any person who, after acquiring directly or indirectly the 

beneficial ownership of any equity security of a class which is registered pursuant to section 12 of this title, or any equity security 

of an insurance company which would have been required to be so 

registered except for the exemption contained in section 12(g)(2)(G) 

of this title, or any equity security issued by a closed-end investment company registered under the Investment Company Act of 

1940 or any equity security issued by a Native Corporation pursuant to section 37(d)(6) of the Alaska Native Claims Settlement Act, 

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 is directly or 

indirectly the beneficial owner of more than 5 per centum of such 

class shall, within ten days after such acquisition or within such 

shorter time as the Commission may establish by rule, file with the 

Commission, a statement containing such of the following information, and such additional information, as the Commission may by 

rules and regulations, prescribe as necessary or appropriate in the 

public interest or for the protection of investors— 

(A) the background, and identity, residence, and citizenship 

of, and the nature of such beneficial ownership by, such person 

and all other persons by whom or on whose behalf the purchases have been or are to be effected; 

(B) the source and amount of the funds or other consideration used or to be used in making the purchases, and if any 


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part of the purchase price is represented or is to be represented by funds or other consideration borrowed or otherwise 

obtained for the purpose of acquiring, holding, or trading such 

security, a description of the transaction and the names of the 

parties thereto, except that where a source of funds is a loan 

made in the ordinary course of business by a bank, as defined 

in section 3(a)(6) of this title, if the person filing such statement so requests, the name of the bank shall not be made 

available to the public; 

(C) if the purpose of the purchases or prospective purchases 

is to acquire control of the business of the issuer of the securities any plans or proposals which such persons may have to 

liquidate such issuer, to sell its assets to or merge it with any 

other persons, or to make any other major change in its business or corporate structure; 

(D) the number of shares of such security which are beneficially owned, and the number of shares concerning which 

there is a right to acquire, directly or indirectly, by (i) such 

person, and (ii) by each associate of such person, giving the 

background, identity, residence, and citizenship of each such 

associate; and 

(E) information as to any contracts, arrangements, or understandings with any person with respect to any securities of the 

issuer, including but not limited to transfer of any of the securities, joint ventures, loan or option arrangements, puts or 

calls, guaranties of loans, guaranties against loss or guaranties 

of profits, division of losses or profits, or the giving or withholding of proxies, naming the persons with whom such contracts, arrangements, or understandings have been entered 

into, and giving the details thereof. 

(2) If any material change occurs in the facts set forth in the 

statement filed with the Commission, an amendment shall be filed 

with the Commission, in accordance with such rules and regulations as the Commission may prescribe as necessary or appropriate 

in the public interest or for the protection of investors. 

(3) When two or more persons act as a partnership, limited partnership, syndicate, or other group for the purpose of acquiring, 

holding, or disposing of securities of an issuer, such syndicate or 

group shall be deemed a ‘‘person’’ for the purposes of this subsection. 

(4) In determining, for purposes of this subsection, any percentage of a class of any security, such class shall be deemed to consist 

of the amount of the outstanding securities of such class, exclusive 

of any securities of such class held by or for the account of the 

issuer or a subsidiary of the issuer. 

(5) The Commission, by rule or regulation or by order, may permit any person to file in lieu of the statement required by paragraph (1) of this subsection or the rules and regulations thereunder, a notice stating the name of such person, the number of 

shares of any equity securities subject to paragraph (1) which are 

owned by him, the date of their acquisition and such other information as the Commission may specify, if it appears to the Commission that such securities were acquired by such person in the ordinary course of his business and were not acquired for the purpose 

of and do not have the effect of changing or influencing the control 


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of the issuer nor in connection with or as a participant in any 

transaction having such purpose or effect. 

(6) The provisions of this subsection shall not apply to— 

(A) any acquisition or offer to acquire securities made or proposed to be made by means of a registration statement under 

the Securities Act of 1933; 

(B) any acquisition of the beneficial ownership of a security 

which, together with all other acquisitions by the same person 

of securities of the same class during the preceding twelve 

months, does not exceed 2 per centum of that class; 

(C) any acquisition of an equity security by the issuer of such 

security; 

(D) any acquisition or proposed acquisition of a security 

which the Commission, by rules or regulations or by order, 

shall exempt from the provisions of this subsection as not entered into for the purpose of, and not having the effect of, 

changing or influencing the control of the issuer or otherwise 

as not comprehended within the purposes of this subsection. 

(e)(1) It shall be unlawful for an issuer which has a class of equity securities registered pursuant to section 12 of this title, or 

which is a closed-end investment company registered under the Investment Company Act of 1940, to purchase any equity security 

issued by it if such purchase is in contravention of such rules and 

regulations as the Commission, in the public interest or for the protection of investors, may adopt (A) to define acts and practices 

which are fraudulent, deceptive, or manipulative, and (B) to prescribe means reasonably designed to prevent such acts and practices. Such rules and regulations may require such issuer to provide holders of equity securities of such class with such information 

relating to the reasons for such purchase, the source of funds, the 

number of shares to be purchased, the price to be paid for such securities, the method of purchase, and such additional information, 

as the Commission deems necessary or appropriate in the public interest or for the protection of investors, or which the Commission 

deems to be material to a determination whether such security 

should be sold. 

(2) For the purpose of this subsection, a purchase by or for the 

issuer or any person controlling, controlled by, or under common 

control with the issuer, or a purchase subject to control of the 

issuer or any such person, shall be deemed to be a purchase by the 

issuer. The Commission shall have power to make rules and regulations implementing this paragraph in the public interest and for 

the protection of investors, including exemptive rules and regulations covering situations in which the Commission deems it unnecessary or inappropriate that a purchase of the type described in 

this paragraph shall be deemed to be a purchase by the issuer for 

purposes of some or all of the provisions of paragraph (1) of this 

subsection. 

(3) At the time of filing such statement as the Commission may 

require by rule pursuant to paragraph (1) of this subsection, the 

person making the filing shall pay to the Commission a fee at a 

rate that, subject to paragraph (4), is equal to $92 per $1,000,000 

of the value of securities proposed to be purchased. The fee shall 

be reduced with respect to securities in an amount equal to any fee 

paid with respect to any securities issued in connection with the 


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proposed transaction under section 6(b) of the Securities Act of 

1933, or the fee paid under that section shall be reduced in an 

amount equal to the fee paid to the Commission in connection with 

such transaction under this paragraph. 

(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)). 

(7) PRO RATA APPLICATION.—The rates per $1,000,000 required by this subsection shall be applied pro rata to amounts 

and balances of less than $1,000,000. 

(f)(1) Every institutional investment manager which uses the 

mails, or any means or instrumentality of interstate commerce in 

the course of its business as an institutional investment manager 

and which exercises investment discretion with respect to accounts 

holding equity securities of a class described in section 13(d)(1) of 

this title having an aggregate fair market value on the last trading 

day in any of the preceding twelve months of at least $100,000,000 

or such lesser amount (but in no case less than $10,000,000) as the 

Commission, by rule, may determine, shall file reports with the 

Commission in such form, for such periods, and at such times after 

the end of such periods as the Commission, by rule, may prescribe, 

but in no event shall such reports be filed for periods longer than 

one year or shorter than one quarter. Such reports shall include for 

each such equity security held on the last day of the reporting period by accounts (in aggregate or by type as the Commission, by 

rule, may prescribe) with respect to which the institutional investment manager exercises investment discretion (other than securities held in amounts which the Commission, by rule, determines to 

be insignificant for purposes of this subsection), the name of the 

issuer and the title, class, CUSIP number, number of shares or 

principal amount, and aggregate fair market value of each such security. Such reports may also include for accounts (in aggregate or 

by type) with respect to which the institutional investment manager exercises investment discretion such of the following information as the Commission, by rule, prescribes— 

(A) the name of the issuer and the title, class, CUSIP number, number of shares or principal amount, and aggregate fair 

market value or cost or amortized cost of each other security 

(other than an exempted security) held on the last day of the 

reporting period by such accounts; 

(B) the aggregate fair market value or cost or amortized cost 

of exempted securities (in aggregate or by class) held on the 

last day of the reporting period by such accounts; 


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(C) the number of shares of each equity security of a class 

described in section 13(d)(1) of this title held on the last day 

of the reporting period by such accounts with respect to which 

the institutional investment manager possesses sole or shared 

authority to exercise the voting rights evidenced by such securities; 

(D) the aggregate purchases and aggregate sales during the 

reporting period of each security (other than an exempted security) effected by or for such accounts; and 

(E) with respect to any transaction or series of transactions having a market value of at least $500,000 or such other 

amount as the Commission, by rule, may determine, effected 

during the reporting period by or for such accounts in any equity security of a class described in section 13(d)(1) of this 

title— 

(i) the name of the issuer and the title, class, and CUSIP 

number of the security; 

(ii) the number of shares or principal amount of the security involved in the transaction; 

(iii) whether the transaction was a purchase or sale; 

(iv) the per share price or prices at which the transaction was effected; 

(v) the date or dates of the transaction; 

(vi) the date or dates of the settlement of the transaction; 

(vii) the broker or dealer through whom the transaction 

was effected; 

(viii) the market or markets in which the transaction 

was effected; and 

(ix) such other related information as the Commission, 

by rule, may prescribe. 

(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. 

(3) The Commission, by rule or order, may exempt, conditionally 

or unconditionally, any institutional investment manager or security or any class of institutional investment managers or securities 

from any or all of the provisions of this subsection or the rules 

thereunder. 

(4) The Commission shall make available to the public for a reasonable fee a list of all equity securities of a class described in section 13(d)(1) of this title, updated no less frequently than reports 

are required to be filed pursuant to paragraph (1) of this subsection. The Commission shall tabulate the information contained 

in any report filed pursuant to this subsection in a manner which 

will, in the view of the Commission, maximize the usefulness of the 

information to other Federal and State authorities and the public. 

Promptly after the filing of any such report, the Commission shall 

make the information contained therein conveniently available to 

the public for a reasonable fee in such form as the Commission, by 

rule, may prescribe, except that the Commission, as it determines 

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tection of investors, may delay or prevent public disclosure of any 

such information in accordance with section 552 of title 5, United 

States Code. Notwithstanding the preceding sentence, any such information identifying the securities held by the account of a natural person or an estate or trust (other than a business trust or 

investment company) shall not be disclosed to the public. 

(5) In exercising its authority under this subsection, the Commission shall determine (and so state) that its action is necessary or 

appropriate in the public interest and for the protection of investors or to maintain fair and orderly markets or, in granting an exemption, that its action is consistent with the protection of investors and the purposes of this subsection. In exercising such authority the Commission shall take such steps as are within its power, 

including consulting with the Comptroller General of the United 

States, the Director of the Office of Management and Budget, the 

appropriate regulatory agencies, Federal and State authorities 

which, directly or indirectly, require reports from institutional investment managers of information substantially similar to that 

called for by this subsection, national securities exchanges, and 

registered securities associations, (A) to achieve uniform, centralized reporting of information concerning the securities holdings of 

and transactions by or for accounts with respect to which institutional investment managers exercise investment discretion, and (B) 

consistently with the objective set forth in the preceding subparagraph, to avoid unnecessarily duplicative reporting by, and minimize the compliance burden on, institutional investment managers. 

Federal authorities which, directly or indirectly, require reports 

from institutional investment managers of information substantially similar to that called for by this subsection shall cooperate 

with the Commission in the performance of its responsibilities 

under the preceding sentence. An institutional investment manager 

which is a bank, the deposits of which are insured in accordance 

with the Federal Deposit Insurance Act, shall file with the appropriate regulatory agency a copy of every report filed with the Commission pursuant to this subsection. 

(6)(A) For purposes of this subsection the term ‘‘institutional investment manager’’ includes any person, other than a natural person, investing in or buying and selling securities for its own account, and any person exercising investment discretion with respect to the account of any other person. 

(B) The Commission shall adopt such rules as it deems necessary 

or appropriate to prevent duplicative reporting pursuant to this 

subsection by two or more institutional investment managers exercising investment discretion with respect to the same amount. 

(g)(1) Any person who is directly or indirectly the beneficial 

owner of more than 5 per centum of any security of a class described in subsection (d)(1) of this section 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 ruleshall file 

with the Commission a statement setting forth, in such form and 

at such time as the Commission may, by rule, prescribe— 

(A) such person’s identity, residence, and citizenship; and 

(B) the number and description of the shares in which such 

person has an interest and the nature of such interest. 


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(2) If any material change occurs in the facts set forth in the 

statement filed with the Commission, an amendment shall be filed 

with the Commission, in accordance with such rules and regulations as the Commission may prescribe as necessary or appropriate 

in the public interest or for the protection of investors. 

(3) When two or more persons act as a partnership, limited partnership, syndicate, or other group for the purpose of acquiring, 

holding, or disposing of securities of an issuer, such syndicate or 

group shall be deemed a ‘‘person’’ for the purposes of this subsection. 

(4) In determining, for purposes of this subsection, any percentage of a class of any security, such class shall be deemed to consist 

of the amount of the outstanding securities of such class, exclusive 

of any securities of such class held by or for the account of the 

issuer or a subsidiary of the issuer. 

(5) In exercising its authority under this subsection, the Commission shall take such steps as it deems necessary or appropriate in 

the public interest or for the protection of investors (A) to achieve 

centralized reporting of information regarding ownership, (B) to 

avoid unnecessarily duplicative reporting by and minimize the compliance burden on persons required to report, and (C) to tabulate 

and promptly make available the information contained in any report filed pursuant to this subsection in a manner which will, in 

the view of the Commission, maximize the usefulness of the information to other Federal and State agencies and the public. 

(6) The Commission may, by rule or order, exempt, in whole or 

in part, any person or class of persons from any or all of the reporting requirements of this subsection as it deems necessary or appropriate in the public interest or for the protection of investors. 

(h) LARGE TRADER REPORTING.— (1) IDENTIFICATION REQUIREMENTS FOR LARGE TRADERS.—For 

the purpose of monitoring the impact on the securities markets 

of securities transactions involving a substantial volume or a 

large fair market value or exercise value and for the purpose 

of otherwise assisting the Commission in the enforcement of 

this title, each large trader shall— 

(A) provide such information to the Commission as the 

Commission may by rule or regulation prescribe as necessary or appropriate, identifying such large trader and all 

accounts in or through which such large trader effects such 

transactions; and 

(B) identify, in accordance with such rules or regulations 

as the Commission may prescribe as necessary or appropriate, to any registered broker or dealer by or through 

whom such large trader directly or indirectly effects securities transactions, such large trader and all accounts directly or indirectly maintained with such broker or dealer 

by such large trader in or through which such transactions 

are effected. 

(2) RECORDKEEPING AND REPORTING REQUIREMENTS FOR BRO- KERS AND DEALERS.—Every registered broker or dealer shall 

make and keep for prescribed periods such records as the Commission by rule or regulation prescribes as necessary or appropriate in the public interest, for the protection of investors, or 

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spect to securities transactions that equal or exceed the reporting activity level effected directly or indirectly by or through 

such registered broker or dealer of or for any person that such 

broker or dealer knows is a large trader, or any person that 

such broker or dealer has reason to know is a large trader on 

the basis of transactions in securities effected by or through 

such broker or dealer. Such records shall be available for reporting to the Commission, or any self-regulatory organization 

that the Commission shall designate to receive such reports, on 

the morning of the day following the day the transactions were 

effected, and shall be reported to the Commission or a self-regulatory organization designated by the Commission immediately upon request by the Commission or such a self-regulatory organization. Such records and reports shall be in a format and transmitted in a manner prescribed by the Commission (including, but not limited to, machine readable form). 

(3) AGGREGATION RULES.—The Commission may prescribe 

rules or regulations governing the manner in which transactions and accounts shall be aggregated for the purpose of 

this subsection, including aggregation on the basis of common 

ownership or control. 

(4) EXAMINATION OF BROKER AND DEALER RECORDS.—All 

records required to be made and kept by registered brokers 

and dealers pursuant to this subsection with respect to transactions effected by large traders are subject at any time, or 

from time to time, to such reasonable periodic, special, or other 

examinations by representatives of the Commission as the 

Commission deems necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of this title. 

(5) FACTORS TO BE CONSIDERED IN COMMISSION ACTIONS.—In 

exercising its authority under this subsection, the Commission 

shall take into account— 

(A) existing reporting systems; 

(B) the costs associated with maintaining information 

with respect to transactions effected by large traders and 

reporting such information to the Commission or self-regulatory organizations; and 

(C) the relationship between the United States and 

international securities markets. 

(6) EXEMPTIONS.—The Commission, by rule, regulation, or 

order, consistent with the purposes of this title, may exempt 

any person or class of persons or any transaction or class of 

transactions, either conditionally or upon specified terms and 

conditions or for stated periods, from the operation of this subsection, and the rules and regulations thereunder. 

(7) AUTHORITY OF COMMISSION TO LIMIT DISCLOSURE OF IN- FORMATION.—Notwithstanding any other provision of law, the 

Commission shall not be compelled to disclose any information 

required to be kept or reported under this subsection. Nothing 

in this subsection shall authorize the Commission to withhold 

information from Congress, or prevent the Commission from 

complying with a request for information from any other Federal department or agency requesting information for purposes 

within the scope of its jurisdiction, or complying with an order 


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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 subsection shall be considered a statute described in subsection (b)(3)(B) of such section 

552. 

(8) DEFINITIONS.—For purposes of this subsection— 

(A) the term ‘‘large trader’’ means every person who, for 

his own account or an account for which he exercises investment discretion, effects transactions for the purchase 

or sale of any publicly traded security or securities by use 

of any means or instrumentality of interstate commerce or 

of the mails, or of any facility of a national securities exchange, directly or indirectly by or through a registered 

broker or dealer in an aggregate amount equal to or in excess of the identifying activity level; 

(B) the term ‘‘publicly traded security’’ means any equity 

security (including an option on individual equity securities, and an option on a group or index of such securities) 

listed, or admitted to unlisted trading privileges, on a national securities exchange, or quoted in an automated 

interdealer quotation system; 

(C) the term ‘‘identifying activity level’’ means transactions in publicly traded securities at or above a level of 

volume, fair market value, or exercise value as shall be 

fixed from time to time by the Commission by rule or regulation, specifying the time interval during which such 

transactions shall be aggregated; 

(D) the term ‘‘reporting activity level’’ means transactions in publicly traded securities at or above a level of 

volume, fair market value, or exercise value as shall be 

fixed from time to time by the Commission by rule, regulation, or order, specifying the time interval during which 

such transactions shall be aggregated; and 

(E) the term ‘‘person’’ has the meaning given in section 

3(a)(9) of this title and also includes two or more persons 

acting as a partnership, limited partnership, syndicate, or 

other group, but does not include a foreign central bank. 

(i) ACCURACY OF FINANCIAL REPORTS.—Each financial report that 

contains financial statements, and that is required to be prepared 

in accordance with (or reconciled to) generally accepted accounting 

principles under this title and filed with the Commission shall reflect all material correcting adjustments that have been identified 

by a registered public accounting firm in accordance with generally 

accepted accounting principles and the rules and regulations of the 

Commission. 

(j) OFF-BALANCE SHEET TRANSACTIONS.—Not later than 180 days 

after the date of enactment of the Sarbanes-Oxley Act of 2002, the 

Commission shall issue final rules providing that each annual and 

quarterly financial report required to be filed with the Commission 

shall disclose all material off-balance sheet transactions, arrangements, obligations (including contingent obligations), and other relationships of the issuer with unconsolidated entities or other persons, that may have a material current or future effect on financial 

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quidity, capital expenditures, capital resources, or significant components of revenues or expenses. 

(k) PROHIBITION ON PERSONAL LOANS TO EXECUTIVES.— 

(1) IN GENERAL.—It shall be unlawful for any issuer (as defined in section 2 of the Sarbanes-Oxley Act of 2002), directly 

or indirectly, including through any subsidiary, to extend or 

maintain credit, to arrange for the extension of credit, or to 

renew an extension of credit, in the form of a personal loan to 

or for any director or executive officer (or equivalent thereof) 

of that issuer. An extension of credit maintained by the issuer 

on the date of enactment of this subsection shall not be subject 

to the provisions of this subsection, provided that there is no 

material modification to any term of any such extension of 

credit or any renewal of any such extension of credit on or 

after that date of enactment. 

(2) LIMITATION.—Paragraph (1) does not preclude any home 

improvement and manufactured home loans (as that term is 

defined in section 5 of the Home Owners’ Loan Act (12 U.S.C. 

1464)), consumer credit (as defined in section 103 of the Truth 

in Lending Act (15 U.S.C. 1602)), or any extension of credit 

under an open end credit plan (as defined in section 103 of the 

Truth in Lending Act (15 U.S.C. 1602)), or a charge card (as 

defined in section 127(c)(4)(e) of the Truth in Lending Act (15 

U.S.C. 1637(c)(4)(e)), or any extension of credit by a broker or 

dealer registered under section 15 of this title to an employee 

of that broker or dealer to buy, trade, or carry securities, that 

is permitted under rules or regulations of the Board of Governors of the Federal Reserve System pursuant to section 7 of 

this title (other than an extension of credit that would be used 

to purchase the stock of that issuer), that is— 

(A) made or provided in the ordinary course of the consumer credit business of such issuer; 

(B) of a type that is generally made available by such 

issuer to the public; and 

(C) made by such issuer on market terms, or terms that 

are no more favorable than those offered by the issuer to 

the general public for such extensions of credit. 

(3) RULE OF CONSTRUCTION FOR CERTAIN LOANS.—Paragraph 

(1) does not apply to any loan made or maintained by an insured depository institution (as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813)), if the loan is subject to the insider lending restrictions of section 22(h) of the 

Federal Reserve Act (12 U.S.C. 375b). 

(l) REAL TIME ISSUER DISCLOSURES.—Each issuer reporting 

under section 13(a) or 15(d) shall disclose to the public on a rapid 

and current basis such additional information concerning material 

changes in the financial condition or operations of the issuer, in 

plain English, which may include trend and qualitative information 

and graphic presentations, as the Commission determines, by rule, 

is necessary or useful for the protection of investors and in the public interest. 

(m) PUBLIC AVAILABILITY OF SECURITY-BASED SWAP TRANSACTION

DATA.— 

(1) IN GENERAL.— 


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(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 

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 


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(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 AGGRE- GATE 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 paragraph 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 securitybased 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. 


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(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; 

(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 security-based swap data obtained by the 

security-based swap data repository, including individual 

counterparty trade and position data, to— 

(i) each appropriate prudential regulator; 

(ii) the Financial Stability Oversight Council; 


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(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; 

(III) foreign ministries; and 

(IV) other foreign authorities. 

(H) CONFIDENTIALITY AGREEMENT.—Before the securitybased swap data repository may share information with 

any entity described in subparagraph (G), the securitybased 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. 

(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 function 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 


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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. 

(B) GOVERNANCE ARRANGEMENTS.—Each security-based 

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 DESIGNEES.—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 


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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. 

(o) BENEFICIAL OWNERSHIP.—For purposes ofthis section and section 16, a person shall be deemed to acquire beneficialownership of 

an equity security based on the purchase or sale of asecurity-based 

swap, only to the extent that the Commission, by rule,determines 

after consultation with the prudential regulators and the 

Secretaryof the Treasury, that the purchase or sale of the securitybased swap, or classof security-based swap, provides incidents of 

ownership comparable to directownership of the equity security, 

and that it is necessary to achieve thepurposes of this section that 

the purchase or sale of the security-based swaps,or class of security-based swap, be deemed the acquisition of beneficialownership 

of the equitysecurity. 

(p) DISCLOSURES RELATING TO CONFLICT MINERALS ORIGINATING

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 

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 


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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 

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. 


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(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.— (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. 


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(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. 

(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). 


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(4) AUTHORIZATION OF APPROPRIATIONS.—There are authorized to be appropriated to the Commission such sums as may 

be necessary to carry out this subsection. 

(r) DISCLOSURE OF CERTAIN ACTIVITIES RELATING TO IRAN.— (1) IN GENERAL.—Each issuer required to file an annual or 

quarterly report under subsection (a) shall disclose in that report the information required by paragraph (2) if, during the 

period covered by the report, the issuer or any affiliate of the 

issuer— 

(A) knowingly engaged in an activity described in subsection (a) or (b) of section 5 of the Iran Sanctions Act of 

1996 (Public Law 104–172; 50 U.S.C. 1701 note); 

(B) knowingly engaged in an activity described in subsection (c)(2) of section 104 of the Comprehensive Iran 

Sanctions, Accountability, and Divestment Act of 2010 (22 

U.S.C. 8513) or a transaction described in subsection (d)(1) 

of that section; 

(C) knowingly engaged in an activity described in section 

105A(b)(2) of that Act; or 

(D) knowingly conducted any transaction or dealing 

with— 

(i) any person the property and interests in property 

of which are blocked pursuant to Executive Order No. 

13224 (66 Fed. Reg. 49079; relating to blocking property and prohibiting transactions with persons who 

commit, threaten to commit, or support terrorism); 

(ii) any person the property and interests in property of which are blocked pursuant to Executive Order 

No. 13382 (70 Fed. Reg. 38567; relating to blocking of 

property of weapons of mass destruction proliferators 

and their supporters); or 

(iii) any person or entity identified under section 

560.304 of title 31, Code of Federal Regulations (relating to the definition of the Government of Iran) without the specific authorization of a Federal department 

or agency. 

(2) INFORMATION REQUIRED.—If an issuer or an affiliate of 

the issuer has engaged in any activity described in paragraph 

(1), the issuer shall disclose a detailed description of each such 

activity, including— 

(A) the nature and extent of the activity; 

(B) the gross revenues and net profits, if any, attributable to the activity; and 

(C) whether the issuer or the affiliate of the issuer (as 

the case may be) intends to continue the activity. 

(3) NOTICE OF DISCLOSURES.—If an issuer reports under 

paragraph (1) that the issuer or an affiliate of the issuer has 

knowingly engaged in any activity described in that paragraph, 

the issuer shall separately file with the Commission, concurrently with the annual or quarterly report under subsection 

(a), a notice that the disclosure of that activity has been included in that annual or quarterly report that identifies the 

issuer and contains the information required by paragraph (2). 

(4) PUBLIC DISCLOSURE OF INFORMATION.—Upon receiving a 

notice under paragraph (3) that an annual or quarterly report 


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includes a disclosure of an activity described in paragraph (1), 

the Commission shall promptly— 

(A) transmit the report to— 

(i) the President; 

(ii) the Committee on Foreign Affairs and the Committee on Financial Services of the House of Representatives; and 

(iii) the Committee on Foreign Relations and the 

Committee on Banking, Housing, and Urban Affairs of 

the Senate; and 

(B) make the information provided in the disclosure and 

the notice available to the public by posting the information on the Internet website of the Commission. 

(5) INVESTIGATIONS.—Upon receiving a report under paragraph (4) that includes a disclosure of an activity described in 

paragraph (1) (other than an activity described in subparagraph (D)(iii) of that paragraph), the President shall— 

(A) initiate an investigation into the possible imposition 

of sanctions under the Iran Sanctions Act of 1996 (Public 

Law 104–172; 50 U.S.C. 1701 note), section 104 or 105A of 

the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010, an Executive order specified in 

clause (i) or (ii) of paragraph (1)(D), or any other provision 

of law relating to the imposition of sanctions with respect 

to Iran, as applicable; and 

(B) not later than 180 days after initiating such an investigation, make a determination with respect to whether 

sanctions should be imposed with respect to the issuer or 

the affiliate of the issuer (as the case may be). 

(6) SUNSET.—The provisions of this subsection shall terminate on the date that is 30 days after the date on which the 

President makes the certification described in section 401(a) of 

the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (22 U.S.C. 8551(a)). 

* * * * * * * 

PROXIES

SEC. 14. (a)(1) It shall be unlawful for any person, by the use of 

the mails or by any means or instrumentality of interstate commerce or of any facility of a national securities exchange or otherwise, 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, to solicit or to permit the 

use of his name to solicit any proxy or consent or authorization in 

respect of any security (other than an exempted security) registered 

pursuant to section 12 of this title. 

(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). 


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(b)(1) It shall be unlawful for any member of a national securities 

exchange, or any broker or dealer registered under this title, or any 

bank, association, or other entity that exercises fiduciary powers, 

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, to give, or to refrain from giving a 

proxy, consent, authorization, or information statement in respect 

of any security registered pursuant to section 12 of this title, or any 

security issued by an investment company registered under the Investment Company Act of 1940, and carried for the account of a 

customer. 

(2) With respect to banks, the rules and regulations prescribed 

by the Commission under paragraph (1) shall not require the disclosure of the names of beneficial owners of securities in an account 

held by the bank on the date of enactment of this paragraph unless 

the beneficial owner consents to the disclosure. The provisions of 

this paragraph shall not apply in the case of a bank which the 

Commission finds has not made a good faith effort to obtain such 

consent from such beneficial owners. 

(c) Unless proxies, consents, or authorizations in respect of a security registered pursuant to section 12 of this title, or a security 

issued by an investment company registered under the Investment 

Company Act of 1940, are solicited by or on behalf of the management of the issuer from the holders of record of such security in 

accordance with the rules and regulations prescribed under subsection (a) of this section, prior to any annual or other meeting of 

the holders of such security, such issuer shall, in accordance with 

rules and regulations prescribed by the Commission, file with the 

Commission and transmit to all holders of record of such security 

information substantially equivalent to the information which 

would be required to be transmitted if a solicitation were made, but 

no information shall be required to be filed or transmitted pursuant to this subsection before July 1, 1964. 

(d)(1) It shall be unlawful for any person, directly or indirectly, 

by use of the mails or by any means or instrumentality of interstate commerce or of any facility of a national securities exchange 

or otherwise, to make a tender offer for, or a request or invitation 

for tenders of, any class of any equity security which is registered 

pursuant to section 12 of this title, or any equity security of an insurance company which would have been required to be so registered except for the exemption contained in section 12(g)(2)(G) of 

this title, or any equity security issued by a closed-end investment 

company registered under the Investment Company Act of 1940, if, 

after consummation thereof, such person would, directly or indirectly, be the beneficial owner of more than 5 per centum of such 

class, unless at the time copies of the offer or request or invitation 

are first published or sent or given to security holders such person 

has filed with the Commission a statement containing such of the 

information specified in section 13(d) of this title, and such additional information as the Commission may by rules and regulations 

prescribe as necessary or appropriate in the public interest or for 

the protection of investors. All requests or invitations for tenders 

or advertisements making a tender offer or requesting or inviting 

tenders, of such a security shall be filed as a part of such statement 

and shall contain such of the information contained in such stateVerDate Sep 11 2014 05:07 Dec 16, 2018 Jkt 089006 PO 00000 Frm 00077 Fmt 6659 Sfmt 6602 E:\HR\OC\HR1076.XXX HR1076

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ment as the Commission may by rules and regulations prescribe. 

Copies of any additional material soliciting or requesting such tender offers subsequent to the initial solicitation or request shall contain such information as the Commission may by rules and regulations prescribe as necessary or appropriate in the public interest or 

for the protection of investors, and shall be filed with the Commission not later than the time copies of such material are first published or sent or given to security holders. Copies of all statements, 

in the form in which such material is furnished to security holders 

and the Commission, shall be sent to the issuer not later than the 

date such material is first published or sent or given to any security holders. 

(2) When two or more persons act as a partnership, limited partnership, syndicate, or other group for the purpose of acquiring, 

holding, or disposing of securities of an issuer, such syndicate or 

group shall be deemed a ‘‘person’’ for purposes of this subsection. 

(3) In determining, for purposes of this subsection, any percentage of a class of any security, such class shall be deemed to consist 

of the amount of the outstanding securities of such class, exclusive 

of any securities of such class held by or for the account of the 

issuer or a subsidiary of the issuer. 

(4) Any solicitation or recommendation to the holders of such a 

security to accept or reject a tender offer or request or invitation 

for tenders shall be made in accordance with such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors. 

(5) Securities deposited pursuant to a tender offer or request or 

invitation for tenders may be withdrawn by or on behalf of the depositor at any time until the expiration of seven days after the time 

definitive copies of the offer or request or invitation are first published or sent or given to security holders, and at any time after 

sixty days from the date of the original tender offer or request or 

invitation, except as the Commission may otherwise prescribe by 

rules, regulations, or order as necessary or appropriate in the public interest or for the protection of investors. 

(6) Where any person makes a tender offer, or request or invitation for tenders, for less than all the outstanding equity securities 

of a class, and where a greater number of securities is deposited 

pursuant thereto within ten days after copies of the offer or request 

or invitation are first published or sent or given to security holders 

than such person is bound or willing to take up and pay for, the 

securities taken up shall be taken up as nearly as may be pro rata, 

disregarding fractions, according to the number of securities deposited by each depositor. The provisions of this subsection shall also 

apply to securities deposited within ten days after notice of an increase in the consideration offered to security holders, as described 

in paragraph (7), is first published or sent or given to security holders. 

(7) Where any person varies the terms of a tender offer or request or invitation for tenders before the expiration thereof by increasing the consideration offered to holders of such securities, 

such person shall pay the increased consideration to each security 

holder whose securities are taken up and paid for pursuant to the 

tender offer or request or invitation for tenders whether or not 


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such securities have been taken up by such person before the variation of the tender offer or request or invitation. 

(8) The provisions of this subsection shall not apply to any offer 

for, or request or invitation for tenders of, any security— 

(A) if the acquisition of such security, together with all other 

acquisitions by the same person of securities of the same class 

during the preceding twelve months, would not exceed 2 per 

centum of that class; 

(B) by the issuer of such security; or 

(C) which the Commission, by rules or regulations or by 

order, shall exempt from the provisions of this subsection as 

not entered into for the purpose of, and not having the effect 

of, changing or influencing the control of the issuer or otherwise as not comprehended within the purposes of this subsection. 

(e) It shall be unlawful for any person to make any untrue statement of a material fact or omit to state any material fact necessary 

in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or to engage in any fraudulent, deceptive, or manipulative acts or practices, in connection with any tender offer or request or invitation 

for tenders, or any solicitation of security holders in opposition to 

or in favor of any such offer, request, or invitation. The Commission shall, for the purposes of this subsection, by rules and regulations define, and prescribe means reasonably designed to prevent, 

such acts and practices as are fraudulent, deceptive, or manipulative. 

(f) If, pursuant to any arrangement or understanding with the 

person or persons acquiring securities in a transaction subject to 

subsection (d) of this section or subsection (d) of section 13 of this 

title, any persons are to be elected or designated as directors of the 

issuer, otherwise than at a meeting of security holders, and the 

persons so elected or designated will constitute a majority of the directors of the issuer, then, prior to the time any such person takes 

office as a director, and in accordance with rules and regulations 

prescribed by the Commission, the issuer shall file with the Commission, and transmit to all holders of record of securities of the 

issuer who would be entitled to vote at a meeting for election of directors, information substantially equivalent to the information 

which would be required by subsection (a) or (c) of this section to 

be transmitted if such person or persons were nominees for election 

as directors at a meeting of such security holders. 

(g)(1)(A) At the time of filing such preliminary proxy solicitation 

material as the Commission may require by rule pursuant to subsection (a) of this section that concerns an acquisition, merger, consolidation, or proposed sale or other disposition of substantially all 

the assets of a company, the person making such filing, other than 

a company registered under the Investment Company Act of 1940, 

shall pay to the Commission the following fees: 

(i) for preliminary proxy solicitation material involving an 

acquisition, merger, or consolidation, if there is a proposed payment of cash or transfer of securities or property to shareholders, a fee at a rate that, subject to paragraph (4), is equal 

to $92 per $1,000,000 of such proposed payment, or of the 


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value of such securities or other property proposed to be transferred; and 

(ii) for preliminary proxy solicitation material involving a 

proposed sale or other disposition of substantially all of the assets of a company, a fee at a rate that, subject to paragraph 

(4), is equal to $92 per $1,000,000 of the cash or of the value 

of any securities or other property proposed to be received 

upon such sale or disposition. 

(B) The fee imposed under subparagraph (A) shall be reduced 

with respect to securities in an amount equal to any fee paid to the 

Commission with respect to such securities in connection with the 

proposed transaction under section 6(b) of the Securities Act of 

1933 (15 U.S.C. 77f(b)), or the fee paid under that section shall be 

reduced in an amount equal to the fee paid to the Commission in 

connection with such transaction under this subsection. Where two 

or more companies involved in an acquisition, merger, consolidation, sale, or other disposition of substantially all the assets of a 

company must file such proxy material with the Commission, each 

shall pay a proportionate share of such fee. 

(2) At the time of filing such preliminary information statement 

as the Commission may require by rule pursuant to subsection (c) 

of this section, the issuer shall pay to the Commission the same fee 

as required for preliminary proxy solicitation material under paragraph (1) of this subsection. 

(3) At the time of filing such statement as the Commission may 

require by rule pursuant to subsection (d)(1) of this section, the 

person making the filing shall pay to the Commission a fee at a 

rate that, subject to paragraph (4), is equal to $92 per $1,000,000 

of the aggregate amount of cash or of the value of securities or 

other property proposed to be offered. The fee shall be reduced with 

respect to securities in an amount equal to any fee paid with respect to such securities in connection with the proposed transaction 

under section 6(b) of the Securities Act of 1933 (15 U.S.C. 77f(b)), 

or the fee paid under that section shall be reduced in an amount 

equal to the fee paid to the Commission in connection with such 

transaction under this subsection. 

(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)). 

(7) PRO RATA APPLICATION.—The rates per $1,000,000 required by this subsection shall be applied pro rata to amounts 

and balances of less than $1,000,000. 


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(8) Notwithstanding any other provision of law, the Commission 

may impose fees, charges, or prices for matters not involving any 

acquisition, merger, consolidation, sale, or other disposition of assets described in this subsection, as authorized by section 9701 of 

title 31, United States Code, or otherwise. 

(h) PROXY SOLICITATIONS AND TENDER OFFERS IN CONNECTION

WITH LIMITED PARTNERSHIP ROLLUP TRANSACTIONS.— 

(1) PROXY RULES TO CONTAIN SPECIAL PROVISIONS.—It shall 

be unlawful for any person to solicit any proxy, consent, or authorization concerning a limited partnership rollup transaction, 

or to make any tender offer in furtherance of a limited partnership rollup transaction, unless such transaction is conducted in 

accordance with rules prescribed by the Commission under 

subsections (a) and (d) as required by this subsection. Such 

rules shall— 

(A) permit any holder of a security that is the subject of 

the proposed limited partnership rollup transaction to engage in preliminary communications for the purpose of determining whether to solicit proxies, consents, or authorizations in opposition to the proposed limited partnership 

rollup transaction, without regard to whether any such 

communication would otherwise be considered a solicitation of proxies, and without being required to file soliciting 

material with the Commission prior to making that determination, except that— 

(i) nothing in this subparagraph shall be construed 

to limit the application of any provision of this title 

prohibiting, or reasonably designed to prevent, fraudulent, deceptive, or manipulative acts or practices under 

this title; and 

(ii) any holder of not less than 5 percent of the outstanding securities that are the subject of the proposed limited partnership rollup transaction who engages in the business of buying and selling limited 

partnership interests in the secondary market shall be 

required to disclose such ownership interests and any 

potential conflicts of interests in such preliminary 

communications; 

(B) require the issuer to provide to holders of the securities that are the subject of the limited partnership rollup 

transaction such list of the holders of the issuer’s securities as the Commission may determine in such form and 

subject to such terms and conditions as the Commission 

may specify; 

(C) prohibit compensating any person soliciting proxies, 

consents, or authorizations directly from security holders 

concerning such a limited partnership rollup transaction— 

(i) on the basis of whether the solicited proxy, consent, or authorization either approves or disapproves 

the proposed limited partnership rollup transaction; or 

(ii) contingent on the approval, disapproval, or completion of the limited partnership rollup transaction; 

(D) set forth disclosure requirements for soliciting material distributed in connection with a limited partnership 


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rollup transaction, including requirements for clear, concise, and comprehensible disclosure with respect to— 

(i) any changes in the business plan, voting rights, 

form of ownership interest, or the compensation of the 

general partner in the proposed limited partnership 

rollup transaction from each of the original limited 

partnerships; 

(ii) the conflicts of interest, if any, of the general 

partner; 

(iii) whether it is expected that there will be a significant difference between the exchange values of the 

limited partnerships and the trading price of the securities to be issued in the limited partnership rollup 

transaction; 

(iv) the valuation of the limited partnerships and 

the method used to determine the value of the interests of the limited partners to be exchanged for the securities in the limited partnership rollup transaction; 

(v) the differing risks and effects of the limited partnership rollup transaction for investors in different 

limited partnerships proposed to be included, and the 

risks and effects of completing the limited partnership 

rollup transaction with less than all limited partnerships; 

(vi) the statement by the general partner required 

under subparagraph (E); 

(vii) such other matters deemed necessary or appropriate by the Commission; 

(E) require a statement by the general partner as to 

whether the proposed limited partnership rollup transaction is fair or unfair to investors in each limited partnership, a discussion of the basis for that conclusion, and an 

evaluation and a description by the general partner of alternatives to the limited partnership rollup transaction, 

such as liquidation; 

(F) provide that, if the general partner or sponsor has 

obtained any opinion (other than an opinion of counsel), 

appraisal, or report that is prepared by an outside party 

and that is materially related to the limited partnership 

rollup transaction, such soliciting materials shall contain 

or be accompanied by clear, concise, and comprehensible 

disclosure with respect to— 

(i) the analysis of the transaction, scope of review, 

preparation of the opinion, and basis for and methods 

of arriving at conclusions, and any representations 

and undertakings with respect thereto; 

(ii) the identity and qualifications of the person who 

prepared the opinion, the method of selection of such 

person, and any material past, existing, or contemplated relationships between the person or any of 

its affiliates and the general partner, sponsor, successor, or any other affiliate; 

(iii) any compensation of the preparer of such opinion, appraisal, or report that is contingent on the 

transaction’s approval or completion; and 


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(iv) any limitations imposed by the issuer on the access afforded to such preparer to the issuer’s personnel, premises, and relevant books and records; 

(G) provide that, if the general partner or sponsor has 

obtained any opinion, appraisal, or report as described in 

subparagraph (F) from any person whose compensation is 

contingent on the transaction’s approval or completion or 

who has not been given access by the issuer to its personnel and premises and relevant books and records, the 

general partner or sponsor shall state the reasons therefor; 

(H) provide that, if the general partner or sponsor has 

not obtained any opinion on the fairness of the proposed 

limited partnership rollup transaction to investors in each 

of the affected partnerships, such soliciting materials shall 

contain or be accompanied by a statement of such partner’s or sponsor’s reasons for concluding that such an opinion is not necessary in order to permit the limited partners 

to make an informed decision on the proposed transaction; 

(I) require that the soliciting material include a clear, 

concise, and comprehensible summary of the limited partnership rollup transaction (including a summary of the 

matters referred to in clauses (i) through (vii) of subparagraph (D) and a summary of the matter referred to in subparagraphs (F), (G), and (H)), with the risks of the limited 

partnership rollup transaction set forth prominently in the 

fore part thereof; 

(J) provide that any solicitation or offering period with 

respect to any proxy solicitation, tender offer, or information statement in a limited partnership rollup transaction 

shall be for not less than the lesser of 60 calendar days or 

the maximum number of days permitted under applicable 

State law; and 

(K) contain such other provisions as the Commission determines to be necessary or appropriate for the protection 

of investors in limited partnership rollup transactions. 

(2) EXEMPTIONS.—The Commission may, consistent with the 

public interest, the protection of investors, and the purposes of 

this title, exempt by rule or order any security or class of securities, any transaction or class of transactions, or any person 

or class of persons, in whole or in part, conditionally or unconditionally, from the requirements imposed pursuant to paragraph (1) or from the definition contained in paragraph (4). 

(3) EFFECT ON COMMISSION AUTHORITY.—Nothing in this subsection limits the authority of the Commission under subsection (a) or (d) or any other provision of this title or precludes the Commission from imposing, under subsection (a) or 

(d) or any other provision of this title, a remedy or procedure 

required to be imposed under this subsection. 

(4) DEFINITION OF LIMITED PARTNERSHIP ROLLUP TRANSACTION.—Except as provided in paragraph (5), as used in this 

subsection, the term ‘‘limited partnership rollup transaction’’ 

means a transaction involving the combination or reorganization of one or more limited partnerships, directly or indirectly, 

in which— 


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(A) some or all of the investors in any of such limited 

partnerships will receive new securities, or securities in 

another entity, that will be reported under a transaction 

reporting plan declared effective before the date of enactment of this subsection by the Commission under section 

11A; 

(B) any of the investors’ limited partnership securities 

are not, as of the date of filing, reported under a transaction reporting plan declared effective before the date of 

enactment of this subsection by the Commission under section 11A; 

(C) investors in any of the limited partnerships involved 

in the transaction are subject to a significant adverse 

change with respect to voting rights, the term of existence 

of the entity, management compensation, or investment 

objectives; and 

(D) any of such investors are not provided an option to 

receive or retain a security under substantially the same 

terms and conditions as the original issue. 

(5) EXCLUSIONS FROM DEFINITION.—Notwithstanding paragraph (4), the term ‘‘limited partnership rollup transaction’’ 

does not include— 

(A) a transaction that involves only a limited partnership or partnerships having an operating policy or practice 

of retaining cash available for distribution and reinvesting 

proceeds from the sale, financing, or refinancing of assets 

in accordance with such criteria as the Commission determines appropriate; 

(B) a transaction involving only limited partnerships 

wherein the interests of the limited partners are repurchased, recalled, or exchanged in accordance with the 

terms of the preexisting limited partnership agreements 

for securities in an operating company specifically identified at the time of the formation of the original limited 

partnership; 

(C) a transaction in which the securities to be issued or 

exchanged are not required to be and are not registered 

under the Securities Act of 1933; 

(D) a transaction that involves only issuers that are not 

required to register or report under section 12, both before 

and after the transaction; 

(E) a transaction, except as the Commission may otherwise provide by rule for the protection of investors, involving the combination or reorganization of one or more limited partnerships in which a non-affiliated party succeeds 

to the interests of a general partner or sponsor, if— 

(i) such action is approved by not less than 662⁄3 percent of the outstanding units of each of the participating limited partnerships; and 

(ii) as a result of the transaction, the existing general partners will receive only compensation to which 

they are entitled as expressly provided for in the preexisting limited partnership agreements; or 

(F) a transaction, except as the Commission may otherwise provide by rule for the protection of investors, in 


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which the securities offered to investors are securities of 

another entity that are reported under a transaction reporting plan declared effective before the date of enactment of this subsection by the Commission under section 

11A, if— 

(i) such other entity was formed, and such class of 

securities was reported and regularly traded, not less 

than 12 months before the date on which soliciting 

material is mailed to investors; and 

(ii) the securities of that entity issued to investors in 

the transaction do not exceed 20 percent of the total 

outstanding securities of the entity, exclusive of any 

securities of such class held by or for the account of 

the entity or a subsidiary of the entity. 

(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, for any 

issuer other than an emerging growth company or a recent emerging growth company, 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. 

(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. 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 

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closure 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 COMPENSA- TION.— 

(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 officers 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), 


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unless such vote is otherwise required to be reported publicly by 

rule or regulation of the Commission. 

(e) EXEMPTION.— 

(1) IN GENERAL.—.—The Commission may, by rule or order, 

exempt any other 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. 

(2) TREATMENT OF EMERGING GROWTH COMPANIES.— 

(A) IN GENERAL.—øAn emerging growth company¿ Any 

emerging growth company or recent emerging growth company shall be exempt from the requirements of subsections 

(a) and (b). 

(B) COMPLIANCE AFTER øTERMINATION OF EMERGING

GROWTH COMPANY TREATMENT¿ EXEMPTION.—An issuer 

that was øan emerging growth company but is no longer 

an emerging growth company¿ exempt under subparagraph (A) but is no longer exempt shall include the first 

separate resolution described under subsection (a)(1) not 

later than the end of— 

(i) in the case of an issuer that was an emerging 

growth company for less than 2 years after the date of 

first sale of common equity securities of the issuer 

pursuant to an effective registration statement under 

the Securities Act of 1933, the 3-year period beginning 

on such date; and 

(ii) in the case of any other issuer, the 1-year period 

beginning on the date the issuer is no longer an 

emerging growth company or a recent emerging growth 

company. 

* * * * * * * 

INVESTOR PROTECTION AND SECURITIES REFORM ACT 

OF 2010 

* * * * * * * 

TITLE IX—INVESTOR PROTECTIONS 

AND IMPROVEMENTS TO THE REGULATION OF SECURITIES 

* * * * * * * 

Subtitle E—Accountability and Executive 

Compensation 

* * * * * * * 


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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: 

‘‘(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, other than an emerging growth companyø, as that 

term is defined in¿ or a recent emerging growth company, as 

such terms are defined, respectively, under section 3(a) of the 

Securities Exchange Act of 1934, 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. 

* * * * * * * 


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(89) 

MINORITY VIEWS 

H.R. 6130, the so-called ‘‘Helping Startups Continue to Grow 

Act,’’ would enable certain public companies to avoid compliance 

with key requirements of the federal securities laws, such as disclosures of certain financial information and transparency regarding 

executive compensation, for up to a decade. 

In 2012, the Jumpstart Our Business Startups Act (‘‘JOBS Act’’) 

established a five-year exemption from the full requirements of our 

federal securities laws to give newly-public, emerging growth companies (‘‘EGCs’’) a temporary on-ramp for transitioning to full reporting companies. Today, more than 85% of companies go public 

as an EGC. 

Compared to a company undertaking a traditional initial public 

offering (‘‘IPO’’), an EGC may make use of the following options: 

• reduced disclosure requirements in which the EGC (1) may 

use two years of financial statements certified by independent 

auditors, instead of three years for a traditional IPO; and (2) 

is not required to provide certain executive compensation disclosures; 

• an exemption from auditor attestations of internal controls 

over financial reporting required by Section 404(b) of the Sarbanes-Oxley Act; and 

• ‘‘test-the-waters’’ communications that allow the EGCs to 

meet with qualified institutional buyers and institutional accredited investors to gauge their interests in a potential offering during the registration process, an activity prohibited during a normal IPO. 

H.R. 6130 would create a new category of issuer consisting of 

companies that have surpassed the five-year exemption period for 

EGCs. The bill would grant such companies, referred to as ‘‘recent 

emerging growth companies,’’ an additional five years to make use 

of the reduced executive compensation and financial statement disclosures available to EGCs. Such an extension would reduce investors’ ability to hold corporate boards and executives accountable by, 

for example, allowing companies ten years to avoid compliance with 

Dodd-Frank Act requirements like shareholder say-on-pay and disclosures designed to better align executive compensation with the 

long-term interests of investors. 

During a May 2018 Capital Markets Subcommittee hearing, Professor John Coffee of Columbia Law School testified that H.R. 6130 

would encourage EGCs to continue to lobby for further extensions, 

eventually resulting in a two-tier disclosure system where EGCs 

are permanently exempt from the disclosure requirements applicable to other public companies. Additionally, as pointed out by 

Americans for Financial Reform and Public Citizen in letters to the 

Committee opposing H.R. 6130, further reducing transparency surVerDate Sep 11 2014 05:07 Dec 16, 2018 Jkt 089006 PO 00000 Frm 00089 Fmt 6604 Sfmt 6604 E:\HR\OC\HR1076.XXX HR1076

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rounding newly public companies could negatively impact capital 

formation by making investment in such firms less attractive. 

H.R. 6130 fails to consider the perspective of the investor, without whom startups would be unable to raise the capital necessary 

for growth. For these reasons, we oppose the bill. 

MAXINE WATERS. 

CAROLYN B. MALONEY. 

WM. LACY CLAY. 

DANIEL T. KILDEE. 

MICHAEL E. CAPUANO. 

Æ 


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