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[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[S. 1682 Introduced in Senate (IS)]

111th CONGRESS
  1st Session
                                S. 1682

    To provide the Commodity Futures Trading Commission with clear 
       antimarket manipulation authority, and for other purposes.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                           September 17, 2009

  Ms. Cantwell (for herself and Mr. Nelson of Florida) introduced the 
 following bill; which was read twice and referred to the Committee on 
                  Agriculture, Nutrition, and Forestry

_______________________________________________________________________

                                 A BILL

 
    To provide the Commodity Futures Trading Commission with clear 
       antimarket manipulation authority, and for other purposes.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Derivatives Market Manipulation 
Prevention Act of 2009''.

SEC. 2. CIVIL PENALTIES FOR MARKET MANIPULATION.

    Subsection (c) of section 6 of the Commodity Exchange Act (7 U.S.C. 
9, 15) is amended to read as follows:
    ``(c) Prohibition Regarding Market Manipulation and False 
Information.--
            ``(1) Prohibition regarding market manipulation.--It shall 
        be unlawful for any person, directly or indirectly, to use or 
        employ, or attempt to use or employ, in connection with a swap, 
        or a contract of sale of a commodity, in interstate commerce, 
        or for future delivery on or subject to the rules of any 
        registered entity, any manipulative or deceptive device or 
        contrivance, in contravention of such rules and regulations as 
        the Commission shall promulgate by not later than 1 year after 
        the date of enactment of the Derivatives Market Manipulation 
        Prevention Act of 2009.
            ``(2) Prohibition regarding false information.--It shall be 
        unlawful for any person to report information relating to any 
        registration application, any report filed with the Commission, 
        or any other information relating to a swap, or a contract of 
        sale of a commodity, in interstate commerce, or for future 
        delivery on or subject to the rules of any registered entity, 
        or to omit any material fact that is required to be stated in 
        any application or report if the person knew, or reasonably 
        should have known, the information to be false or misleading.
            ``(3) Enforcement.--
                    ``(A) Authority of commission.--If the Commission 
                has reason to believe that any person is violating or 
                has violated this subsection, or any other provision of 
                this Act (including any rule, regulation, or order 
                promulgated in accordance with this subsection or any 
                other provision of this Act), the Commission may serve 
                upon the person a complaint.
                    ``(B) Contents of complaint.--A complaint under 
                subparagraph (A) shall--
                            ``(i) contain a description of the charges 
                        against the person that is the subject of the 
                        complaint; and
                            ``(ii) have attached or contain a notice of 
                        hearing that specifies the date and location of 
                        the hearing regarding the complaint.
                    ``(C) Hearing.--A hearing described in subparagraph 
                (B)(ii)--
                            ``(i) shall be held not later than 3 days 
                        after the date on which the person described in 
                        subparagraph (A) receives the complaint;
                            ``(ii) shall require the person to show 
                        cause regarding why--
                                    ``(I) an order should not be made--
                                            ``(aa) to prohibit the 
                                        person from trading on, or 
                                        subject to the rules of, any 
                                        registered entity; and
                                            ``(bb) to direct all 
                                        registered entities to refuse 
                                        all privileges to the person 
                                        until further notice of the 
                                        Commission; and
                                    ``(II) the registration of the 
                                person, if registered with the 
                                Commission in any capacity, should not 
                                be suspended or revoked; and
                            ``(iii) may be held before--
                                    ``(I) the Commission; or
                                    ``(II) an administrative law judge 
                                designated by the Commission, under 
                                which the administrative law judge 
                                shall ensure that all evidence is 
                                recorded in written form and submitted 
                                to the Commission.
            ``(4) Subpoena.--For the purpose of securing effective 
        enforcement of the provisions of this chapter, for the purpose 
        of any investigation or proceeding under this chapter, and for 
        the purpose of any action taken under section 12(f) of this 
        title, any member of the Commission or any Administrative Law 
        Judge or other officer designated by the Commission (except as 
        provided in paragraph (6)) may administer oaths and 
        affirmations, subpoena witnesses, compel their attendance, take 
        evidence, and require the production of any books, papers, 
        correspondence, memoranda, or other records that the Commission 
        deems relevant or material to the inquiry.
            ``(5) Witnesses.--The attendance of witnesses and the 
        production of any such records may be required from any place 
        in the United States, any State, or any foreign country or 
        jurisdiction at any designated place of hearing.
            ``(6) Service.--A subpoena issued under this section may be 
        served upon any person who is not to be found within the 
        territorial jurisdiction of any court of the United States in 
        such manner as the Federal Rules of Civil Procedure prescribe 
        for service of process in a foreign country, except that a 
        subpoena to be served on a person who is not to be found within 
        the territorial jurisdiction of any court of the United States 
        may be issued only on the prior approval of the Commission.
            ``(7) Refusal to obey.--In case of contumacy by, or refusal 
        to obey a subpoena issued to, any person, the Commission may 
        invoke the aid of any court of the United States within the 
        jurisdiction in which the investigation or proceeding is 
        conducted, or where such person resides or transacts business, 
        in requiring the attendance and testimony of witnesses and the 
        production of books, papers, correspondence, memoranda, and 
        other records. Such court may issue an order requiring such 
        person to appear before the Commission or member or 
        Administrative Law Judge or other officer designated by the 
        Commission, there to produce records, if so ordered, or to give 
        testimony touching the matter under investigation or in 
        question.
            ``(8) Failure to obey.--Any failure to obey such order of 
        the court may be punished by the court as a contempt thereof. 
        All process in any such case may be served in the judicial 
        district wherein such person is an inhabitant or transacts 
        business or wherever such person may be found.
            ``(9) Evidence.--On the receipt of evidence under paragraph 
        (3)(C)(iii)(II), the Commission may--
                    ``(A) prohibit the person that is the subject of 
                the hearing from trading on, or subject to the rules 
                of, any registered entity and require all registered 
                entities to refuse the person all privileges on the 
                registered entities for such period as the Commission 
                may require in the order;
                    ``(B) if the person is registered with the 
                Commission in any capacity, suspend, for a period not 
                to exceed 180 days, or revoke, the registration of the 
                person;
                    ``(C) assess such person--
                            ``(i) a civil penalty of not more than an 
                        amount equal to the greater of--
                                    ``(I) $140,000; or
                                    ``(II) triple the monetary gain to 
                                such person for each such violation; or
                            ``(ii) in any case of manipulation or 
                        attempted manipulation in violation of this 
                        subsection, subsection (d), or section 9(a)(2), 
                        a civil penalty of not more than an amount 
                        equal to the greater of--
                                    ``(I) $1,000,000; or
                                    ``(II) triple the monetary gain to 
                                the person for each such violation; and
                    ``(D) through an order of the Commission, require 
                restitution to customers of damages proximately caused 
                by violations of the person.
            ``(10) Orders.--
                    ``(A) Notice.--The Commission shall provide to a 
                person described in paragraph (9)(A) and the 
                appropriate governing board of the registered entity 
                notice of the order described in paragraph (9)(A) by--
                            ``(i) registered mail;
                            ``(ii) certified mail; or
                            ``(iii) personal delivery.
                    ``(B) Review.--
                            ``(i) In general.--A person that has 
                        received notice of an order by the Commission 
                        may obtain a review of the order or such other 
                        equitable relief as determined to be 
                        appropriate by a court described in clause 
                        (ii).
                            ``(ii) Petition.--To obtain a review or 
                        other relief under clause (i), a person may, 
                        not later than 15 days after the date of 
                        receipt of a notice under clause (i), file a 
                        written petition to set aside the order with 
                        the United States Court of Appeals--
                                    ``(I) for the circuit in which the 
                                petitioner carries out the business of 
                                the petitioner; or
                                    ``(II) in the case of an order 
                                denying registration, the circuit in 
                                which the principal place of business 
                                of the petitioner is located, as listed 
                                on the application of the petitioner.
                    ``(C) Procedure.--
                            ``(i) Duty of clerk of appropriate court.--
                        The clerk of the appropriate court under 
                        subparagraph (B)(ii) shall transmit to the 
                        Commission a copy of a petition filed under 
                        subparagraph (B)(ii).
                            ``(ii) Duty of commission.--In accordance 
                        with section 2112 of title 28, United States 
                        Code, the Commission shall file in the 
                        appropriate court described in subparagraph 
                        (B)(ii) the record theretofore made.
                            ``(iii) Jurisdiction of appropriate 
                        court.--Upon the filing of a petition under 
                        subparagraph (B)(ii), the appropriate court 
                        described in subparagraph (B)(ii) shall have 
                        jurisdiction to affirm, set aside, or modify 
                        the order of the Commission, and the findings 
                        of the Commission as to the facts, if supported 
                        by the weight of evidence, shall in like manner 
                        be conclusive.''.

SEC. 3. CEASE AND DESIST ORDERS, FINES.

    Section 6(d) of the Commodity Exchange Act (7 U.S.C. 13b) is 
amended to read as follows:
    ``(d) If any person (other than a registered entity), directly or 
indirectly, is using or employing, or attempting to use or employ, in 
connection with a swap, or a contract of sale of a commodity, in 
interstate commerce, or for future delivery on or subject to the rules 
of any registered entity, any manipulative or deceptive device or 
contrivance, in contravention of such rules and regulations as the 
Commission shall promulgate by not later than 1 year after the date of 
enactment of the Derivatives Market Manipulation Prevention Act of 
2009, the Commission may, upon notice and hearing, and subject to 
appeal as in other cases provided for in sections 9 and 15 of this 
title, make and enter an order directing that such person shall cease 
and desist therefrom and, if such person thereafter and after the lapse 
of the period allowed for appeal of such order or after the affirmance 
of such order, shall fail or refuse to obey or comply with such order, 
such person shall be guilty of a misdemeanor and, upon conviction 
thereof, shall be fined not more than the higher of $140,000 or triple 
the monetary gain to such person, or imprisoned for not less than six 
months nor more than one year, or both, except that if such failure or 
refusal to obey or comply with such order involves any offense within 
subsection (a) or (b) of section 13 of this title, such person shall be 
guilty of a felony and, upon conviction thereof, shall be subject to 
the penalties of said subsection (a) or (b): Provided, That any such 
cease and desist order against any respondent in any case of under this 
subsection shall be issued only in conjunction with an order issued 
against such respondent under sections 9 and 15 of this title. Each day 
during which such failure or refusal to obey or comply with such order 
continues shall be deemed a separate offense.''.

SEC. 4. MANIPULATIONS; PRIVATE RIGHTS OF ACTION.

    Section 22(a)(1) of the Commodity Exchange Act (7 U.S.C. 25(a)(1)) 
is amended by striking subparagraph (D) and inserting the following:
                    ``(D) who purchased or sold a contract referred to 
                in subparagraph (B) hereof if the violation constitutes 
                the use or employment of, or an attempt to use or 
                employ, in connection with a swap, or a contract of 
                sale of a commodity, in interstate commerce, or for 
                future delivery on or subject to the rules of any 
                registered entity, any manipulative device or 
                contrivance in contravention of such rules and 
                regulations as the Commission shall promulgate by not 
                later than 1 year after the date of enactment of the 
                Derivatives Market Manipulation Prevention Act of 
                2009.''.

SEC. 5. DEFINITION OF SWAP.

    Section 1a of the Commodity Exchange Act (7 U.S.C. 1a) is amended 
by adding at the end the following:
            ``(35) Swap.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the term `swap' means any agreement, 
                contract, or transaction that--
                            ``(i) is a put, call, cap, floor, collar, 
                        or similar option of any kind for the purchase 
                        or sale of, or based on the value of, one or 
                        more interest or other rates, currencies, 
                        commodities, securities, instruments of 
                        indebtedness, indices, quantitative measures, 
                        or other financial or economic interests or 
                        property of any kind;
                            ``(ii) provides for any purchase, sale, 
                        payment, or delivery (other than a dividend on 
                        an equity security) that is dependent on the 
                        occurrence, non-occurrence, or the extent of 
                        the occurrence of an event or contingency 
                        associated with a potential financial, 
                        economic, or commercial consequence;
                            ``(iii) provides on an executory basis for 
                        the exchange, on a fixed or contingent basis, 
                        of one or more payments based on the value or 
                        level of one or more interest or other rates, 
                        currencies, commodities, securities, 
                        instruments of indebtedness, indices, 
                        quantitative measures, or other financial or 
                        economic interests or property of any kind, or 
                        any interest therein or based on the value 
                        thereof, and that transfers, as between the 
                        parties to the transaction, in whole or in 
                        part, the financial risk associated with a 
                        future change in any such value or level 
                        without also conveying a current or future 
                        direct or indirect ownership interest in an 
                        asset (including any enterprise or investment 
                        pool) or liability that incorporates the 
                        financial risk so transferred, including any 
                        agreement, contract, or transaction commonly 
                        known as an interest rate swap, a rate floor, 
                        rate cap, rate collar, cross-currency rate 
                        swap, basis swap, currency swap, foreign 
                        exchange swap, total return swap, equity index 
                        swap, equity swap, debt index swap, debt swap, 
                        credit spread, credit default swap, credit 
                        swap, weather swap, energy swap, metal swap, 
                        agricultural swap, emissions swap, or commodity 
                        swap;
                            ``(iv) is an agreement, contract, or 
                        transaction that is, or in the future becomes, 
                        commonly known to the trade as a swap; or
                            ``(v) is any combination or permutation of, 
                        or option on, any agreement, contract, or 
                        transaction described in any of clauses (i) 
                        through (iv).
                    ``(B) Exclusions.--The term `swap' does not 
                include:
                            ``(i) any contract of sale of a commodity 
                        for future delivery or security futures product 
                        traded on or subject to the rules of any board 
                        of trade designated as a contract market under 
                        section 5 or 5f;
                            ``(ii) any sale of a nonfinancial commodity 
                        for deferred shipment or delivery, so long as 
                        such transaction is physically settled;
                            ``(iii) any put, call, straddle, option, or 
                        privilege on any security, certificate of 
                        deposit, or group or index of securities, 
                        including any interest therein or based on the 
                        value thereof, that is subject to the 
                        Securities Act of 1933 (15 U.S.C. 77a et seq.) 
                        and the Securities Exchange Act of 1934 (15 
                        U.S.C. 78a et seq.);
                            ``(iv) any put, call, straddle, option, or 
                        privilege relating to foreign currency entered 
                        into on a national securities exchange 
                        registered pursuant to section 6(a) of the 
                        Securities Exchange Act of 1934 (15 U.S.C. 
                        78f(a));
                            ``(v) any agreement, contract, or 
                        transaction providing for the purchase or sale 
                        of one or more securities on a fixed basis that 
                        is subject to the Securities Act of 1933 (15 
                        U.S.C. 77a et seq.) and the Securities Exchange 
                        Act of 1934 (15 U.S.C. 78a et seq.);
                            ``(vi) any agreement, contract, or 
                        transaction providing for the purchase or sale 
                        of one or more securities on a contingent basis 
                        that is subject to the Securities Act of 1933 
                        (15 U.S.C. 77a et seq.) and the Securities 
                        Exchange Act of 1934 (15 U.S.C. 78a et seq.), 
                        unless such agreement, contract, or transaction 
                        predicates such purchase or sale on the 
                        occurrence of a bona fide contingency that 
                        might reasonably be expected to affect or be 
                        affected by the creditworthiness of a party 
                        other than a party to the agreement, contract, 
                        or transaction;
                            ``(vii) any note, bond, or evidence of 
                        indebtedness that is a security as defined in 
                        section 2(a) of the Securities Act of 1933 (15 
                        U.S.C. 77b(a));
                            ``(viii) any agreement, contract, or 
                        transaction that is--
                                    ``(I) based on a security; and
                                    ``(II) entered into directly or 
                                through an underwriter (as defined in 
                                section 2(a) of the Securities Act of 
                                1933) (15 U.S.C. 77b(a)) by the issuer 
                                of such security for the purposes of 
                                raising capital, unless such agreement, 
                                contract, or transaction is entered 
                                into to manage a risk associated with 
                                capital raising; or
                            ``(ix) any agreement, contract, or 
                        transaction a counterparty of which is a 
                        Federal Reserve bank, the United States 
                        Government or an agency of the United States 
                        Government that is expressly backed by the full 
                        faith and credit of the United States.
                    ``(C) Rule of construction regarding master 
                agreements.--The term `swap' shall be construed to 
                include a master agreement that provides for an 
                agreement, contract, or transaction that is a 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 swap 
                pursuant to subparagraph (A), except that the master 
                agreement shall be considered to be a swap only with 
                respect to each agreement, contract, or transaction 
                under the master agreement that is a swap pursuant to 
                subparagraph (A).''.

SEC. 6. EFFECTIVE DATE.

    (a) In General.--The amendments made by sections 2, 3, and 4 shall 
take effect on the date on which the final rule promulgated by the 
Commodity Futures Trading Commission pursuant to the Derivatives Market 
Manipulation Prevention Act of 2009 takes effect.
    (b) Definition of Swap.--The amendment made by section 5 shall take 
effect on the date of enactment of this Act.
                                 <all>
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