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104TH CONGRESS

1ST SESSION S. 148

To promote the integrity of investment advisers.

IN THE SENATE OF THE UNITED STATES

JANUARY 4, 1995

Mr. GRAMM introduced the following bill; which was read twice and referred

to the Committee on Banking, Housing, and Urban Affairs

A BILL

To promote the integrity of investment advisers.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Investment Advisers

5 Integrity Act’’.

6 SEC. 2. ENHANCED ENFORCEMENT PRIORITY.

7 Of the amounts appropriated to the Securities and

8 Exchange Commission, there are authorized to be appro9 priated—

10 (1) not to exceed $10,000,000 in fiscal year

11 1996; and
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1 (2) not to exceed $12,000,000 for fiscal year

2 1997;

3 for the enforcement of the provisions of the Investment

4 Advisers Act of 1940, particularly with respect to advisers

5 managing more than $5,000,000 in assets.

6 SEC. 3. EXEMPTION FOR STATE REGISTRATION.

7 Section 203(b) of the Investment Advisers Act of

8 1940 (15 U.S.C. 80b–3(b)) is amended—

9 (1) by striking ‘‘or’’ at the end of clause (2);

10 (2) by striking the period at the end of clause

11 (3) and inserting ‘‘; and’’; and

12 (3) by adding at the end the following:

13 ‘‘(4) any investment adviser who, during the

14 course of the preceding 12 months, had no more

15 than $5,000,000 in assets under management, if the

16 investment adviser is registered with the appropriate

17 State securities regulator, except that the Commis18 sion may, by rule, also require registrations by in19 vestment advisers who, during the preceding 12

20 months, had more than $1,000,000 but less than

21 $5,000,000 in assets under management if the Com22 mission determines such action to be necessary to

23 achieve the purposes of the Act. As used in this sec24 tion, the term ‘assets under management’ means the

25 client assets with respect to which an investment ad-
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1 viser provides continuous and regular supervisory or

2 management services.’’.

3 SEC. 4. INVESTIGATION OF FRAUD.

4 Section 209 of the Investment Advisers Act of 1940

5 (15 U.S.C. 80b–9) is amended by adding at the end the

6 following:

7 ‘‘(f) The Commission is authorized to conduct inves8 tigations of any investment adviser, notwithstanding any

9 exception from registration under section 203(b)(4), in

10 any case where the appropriate State securities regulator

11 or one or more clients or former clients of the investment

12 adviser have alleged fraud on the part of the investment

13 adviser.’’.

14 SEC. 5. DISQUALIFICATION OF CONVICTED FELONS.

15 (a) AMENDMENT.—Section 203(e) of the Investment

16 Advisers Act of 1940 (15 U.S.C. 80b–3(e)) is amended—

17 (1) by redesignating paragraphs (3) through

18 (7) as paragraphs (4) through (8), respectively; and

19 (2) by inserting after paragraph (2) the follow20 ing new paragraph;

21 ‘‘(3) has been convicted within ten years pre22 ceding the filing of any application for registration

23 or at any time thereafter of any crime that is pun24 ishable by imprisonment for one or more years and

25 that is not described in paragraph (2) of this sub-
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1 section or of a substantially equivalent crime by a

2 foreign court of competent jurisdiction.’’.

3 (b) CONFORMING AMENDMENTS.—Section 203 of

4 such Act is further amended—

5 (1) in subsection (e)(6) (as redesignated by

6 subsection (a) of this section), by striking ‘‘this

7 paragraph (5)’’ and inserting ‘‘this paragraph (6)’’;

8 (2) in subsection (f)—

9 (A) by striking ‘‘paragraph (1), (4), (5), or

10 (7)’’ and inserting ‘‘paragraph (1), (5), (6), or

11 (8)’’; and

12 (B) by striking ‘‘paragraph (3)’’ and in13 serting ‘‘paragraph (4)’’; and

14 (3) in subsection (i)(1)(D), by striking ‘‘section

15 203(e)(5) of this title’’ and inserting ‘‘subsection

16 (e)(6) of this section’’.

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