IB 

Union Calendar No. 408 

111TH CONGRESS 

2D SESSION H. R. 3817 

[Report No. 111–687, Part I] 

To provide the Securities and Exchange Commission with additional authorities to protect investors from violations of the securities laws, and for 

other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

OCTOBER 15, 2009 

Mr. KANJORSKI introduced the following bill; which was referred to the 

Committee on Financial Services 

DECEMBER 16, 2010 

Reported with an amendment, and referred to the Committee on the Judiciary 

for a period ending not later than December 17, 2010, for consideration 

of such provisions of the bill and amendment as fall within the jurisdiction of that committee pursuant to clause 1(k) of rule X 

[Strike out all after the enacting clause and insert the part printed in italic] 

DECEMBER 17, 2010 

Committee on the Judiciary discharged; committed to the Committee of the 

Whole House on the State of the Union and ordered to be printed 

[For text of introduced bill, see copy of bill as introduced on October 15, 2009] 


srobinson on DSKHWCL6B1PROD with BILLS
2 

•HR 3817 RH

A BILL 

To provide the Securities and Exchange Commission with 

additional authorities to protect investors from violations 

of the securities laws, and for other purposes. 


srobinson on DSKHWCL6B1PROD with BILLS
3 

•HR 3817 RH

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 ‘‘Investor Protection Act 

5 of 2009’’. 

6 SEC. 2. TABLE OF CONTENTS. 

7 The table of contents for this Act is as follows: 

Sec. 1. Short title. 

Sec. 2. Table of contents. 

TITLE I—DISCLOSURE 

Sec. 101. Investor Advisory Committee established. 

Sec. 102. Clarification of the commission’s authority to engage in consumer testing. 

Sec. 103. Establishment of a fiduciary duty for brokers, dealers, and investment 

advisers, and harmonization of regulation. 

Sec. 104. Commission study on disclosure to retail customers before purchase of 

products or services. 

Sec. 105. Beneficial ownership and short-swing profit reporting. 

Sec. 106. Revision to recordkeeping rules. 

Sec. 107. Study on enhancing investment advisor examinations. 

Sec. 108. GAO study of financial planning. 

TITLE II—ENFORCEMENT AND REMEDIES 

Sec. 201. Authority to restrict mandatory pre-dispute arbitration. 

Sec. 202. Comptroller General study to review securities arbitration system. 

Sec. 203. Whistleblower protection. 

Sec. 204. Conforming amendments for whistleblower protection. 

Sec. 205. Implementation and transition provisions for whistleblower protections. 

Sec. 206. Collateral bars. 

Sec. 207. Aiding and abetting authority under the Securities Act and the Investment Company Act. 

Sec. 208. Authority to impose penalties for aiding and abetting violations of the 

Investment Advisers Act. 

Sec. 209. Deadline for completing examinations, inspections and enforcement actions. 

Sec. 210. Nationwide service of subpoenas. 

Sec. 211. Authority to impose civil penalties in cease and desist proceedings. 

Sec. 212. Formerly associated persons. 

Sec. 213. Sharing privileged information with other authorities. 

Sec. 214. Expanded access to grand jury material. 

Sec. 215. Aiding and abetting standard of knowledge satisfied by recklessness. 

Sec. 216. Extraterritorial jurisdiction of the antifraud provisions of the Federal 

securities laws. 

Sec. 217. Fidelity bonding. 

Sec. 218. Enhanced SEC authority to conduct surveillance and risk assessment. 


srobinson on DSKHWCL6B1PROD with BILLS
4 

•HR 3817 RH

Sec. 219. Investment company examinations. 

Sec. 220. Control person liability under the Securities Exchange Act. 

Sec. 221. Enhanced application of anti-fraud provisions. 

Sec. 222. SEC Authority to Issue Rules on Proxy Access. 

TITLE III—COMMISSION FUNDING AND ORGANIZATION 

Sec. 301. Authorization of appropriations. 

Sec. 302. Investment adviser regulation funding. 

Sec. 303. Amendments to section 31 of the Securities Exchange Act of 1934. 

Sec. 304. Commission organizational study and reform. 

Sec. 305. Capital Markets Safety Board. 

Sec. 306. Report on implementation of ‘‘post-Madoff reforms’’. 

Sec. 307. Joint Advisory Committee. 

TITLE IV—ADDITIONAL COMMISSION REFORMS 

Sec. 401. Regulation of securities lending. 

Sec. 402. Lost and stolen securities. 

Sec. 403. Fingerprinting. 

Sec. 404. Equal treatment of self-regulatory organization rules. 

Sec. 405. Clarification that section 205 of the Investment Advisers Act of 1940 

does not apply to State-registered advisers. 

Sec. 406. Conforming amendments for the repeal of the Public Utility Holding 

Company Act of 1935. 

Sec. 407. Promoting transparency in financial reporting. 

Sec. 408. Unlawful margin lending. 

Sec. 409. Protecting confidentiality of materials submitted to the Commission. 

Sec. 410. Technical corrections. 

Sec. 411. Municipal securities. 

Sec. 412. Interested person definition. 

Sec. 413. Rulemaking authority to protect redeeming investors. 

Sec. 414. Study on SEC revolving door. 

Sec. 415. Study on internal control evaluation and reporting cost burdens on 

smaller issuers. 

Sec. 416. Analysis of rule regarding smaller reporting companies. 

Sec. 417. Financial Reporting Forum. 

Sec. 418. Investment advisers subject to State authorities. 

Sec. 419. Custodial requirements. 

Sec. 420. Ombudsman. 

TITLE V—SECURITIES INVESTOR PROTECTION ACT AMENDMENTS 

Sec. 501. Increasing the minimum assessment paid by SIPC members. 

Sec. 502. Increasing the borrowing limit on treasury loans. 

Sec. 503. Increasing the cash limit of protection. 

Sec. 504. SIPC as trustee in SIPA liquidation proceedings. 

Sec. 505. Insiders ineligible for SIPC advances. 

Sec. 506. Eligibility for direct payment procedure. 

Sec. 507. Increasing the fine for prohibited acts under SIPA. 

Sec. 508. Penalty for misrepresentation of SIPC membership or protection. 

Sec. 509. Futures held in a portfolio margin securities account protection. 

Sec. 510. Study and report on the feasibility of risk-based assessments SIPC 

members. 

Sec. 511. Budgetary treatment of Commission loans to SIPC. 


srobinson on DSKHWCL6B1PROD with BILLS
5 

•HR 3817 RH

TITLE VI—SARBANES-OXLEY ACT AMENDMENTS 

Sec. 601. Public Company Accounting Oversight Board oversight of auditors of 

brokers and dealers. 

Sec. 602. Foreign regulatory information sharing. 

Sec. 603. Expansion of audit information to be produced and exchanged with foreign counterparts. 

Sec. 604. Conforming amendment related to registration. 

Sec. 605. Fair fund amendments. 

Sec. 606. Exemption for nonaccelerated filers. 

Sec. 607. Whistleblower protection against retaliation by a subsidiary of an 

issuer. 

Sec. 608. Congressional access to information. 

Sec. 609. Creation of ombudsman for the PCAOB. 

Sec. 610. Auditing Oversight Board. 

TITLE VII—SENIOR INVESTMENT PROTECTION 

Sec. 701. Findings. 

Sec. 702. Definitions. 

Sec. 703. Grants to States for enhanced protection of seniors from being mislead 

by false designations. 

Sec. 704. Applications. 

Sec. 705. Length of participation. 

Sec. 706. Authorization of appropriations. 

TITLE VIII—REGISTRATION OF MUNICIPAL FINANCIAL ADVISORS 

Sec. 801. Municipal financial adviser registration requirement. 

Sec. 802. Conforming amendments. 

Sec. 803. Effective dates. 

1 TITLE I—DISCLOSURE 

2 SEC. 101. INVESTOR ADVISORY COMMITTEE ESTABLISHED. 

3 The Securities Exchange Act of 1934 (15 U.S.C. 78a 

4 et seq.) is amended by adding after section 4C the following 

5 new section: 

6 ‘‘SEC. 4D. INVESTOR ADVISORY COMMITTEE. 

7 ‘‘(a) ESTABLISHMENT AND PURPOSE.—There is estab8 lished an Investor Advisory Committee (in this section re9 ferred to as the ‘Committee’) to advise and consult with the 

10 Commission on— 


srobinson on DSKHWCL6B1PROD with BILLS
6 

•HR 3817 RH

1 ‘‘(1) regulatory priorities and issues regarding 

2 new products, trading strategies, fee structures and 

3 the effectiveness of disclosures; 

4 ‘‘(2) initiatives to protect investor interest; and 

5 ‘‘(3) initiatives to promote investor confidence in 

6 the integrity of the marketplace. 

7 ‘‘(b) MEMBERSHIP.— 

8 ‘‘(1) APPOINTMENT.—The Chairman of the Com9 mission shall appoint the members of the Committee, 

10 which members shall— 

11 ‘‘(A) represent the interests of individual 

12 investors; 

13 ‘‘(B) represent the interests of institutional 

14 investors; and 

15 ‘‘(C) use a wide range of investment ap16 proaches. 

17 ‘‘(2) MEMBERS NOT COMMISSION EMPLOYEES.— 

18 Members shall not be considered employees or agents 

19 of the Commission solely because of membership on 

20 the Committee. 

21 ‘‘(c) MEETINGS.—The Committee shall meet from time 

22 to time at the call of the Commission, but, at a minimum, 

23 shall meet at least twice each year. 


srobinson on DSKHWCL6B1PROD with BILLS
7 

•HR 3817 RH

1 ‘‘(d) COMPENSATION AND TRAVEL EXPENSES.—Mem2 bers of the Committee who are not full-time employees of 

3 the United States shall— 

4 ‘‘(1) be entitled to receive compensation at a rate 

5 fixed by the Commission while attending meetings of 

6 the Committee, including travel time; and 

7 ‘‘(2) be allowed travel expenses, including trans8 portation and subsistence, while away from their 

9 homes or regular places of business. 

10 ‘‘(e) COMMITTEE FINDINGS.—Nothing in this section 

11 requires the Commission to accept, agree, or act upon the 

12 findings or recommendations of the Committee. 

13 ‘‘(f) AUTHORIZATION OF APPROPRIATIONS.—There is 

14 authorized to be appropriated to the Commission such sums 

15 as are necessary for the activities of the Committee.’’. 

16 SEC. 102. CLARIFICATION OF THE COMMISSION’S AUTHOR17 ITY TO ENGAGE IN CONSUMER TESTING. 

18 (a) AMENDMENT TO SECURITIES ACT OF 1933.—Sec19 tion 19 of the Securities Act of 1933 (15 U.S.C. 77s) is 

20 amended by adding at the end the following new subsection: 

21 ‘‘(e) For the purposes of evaluating its rules and pro22 grams and for considering, proposing, adopting, or engag23 ing in rules or programs, the Commission is authorized to 

24 gather information, communicate with investors or other 

25 members of the public, and engage in such temporary or 


srobinson on DSKHWCL6B1PROD with BILLS
8 

•HR 3817 RH

1 experimental programs as the Commission in its discretion 

2 determines is in the public interest or for the protection of 

3 investors. The Commission may delegate to its staff some 

4 or all of the authority conferred by this subsection.’’. 

5 (b) AMENDMENT TO SECURITIES EXCHANGE ACT OF

6 1934.—Section 23 of the Securities Exchange Act of 1934 

7 (15 U.S.C. 78w) is amended by redesignating subsections 

8 (b), (c), and (d) as subsections (c), (d), and (e), respectively, 

9 and inserting after subsection (a) the following: 

10 ‘‘(b) For the purposes of evaluating its rules and pro11 grams and for considering proposing, adopting, or engaging 

12 in rules or programs, the Commission is authorized to gath13 er information, communicate with investors or other mem14 bers of the public, and engage in such temporary or experi15 mental programs as the Commission in its discretion deter16 mines is in the public interest or for the protection of inves17 tors. The Commission may delegate to its staff some or all 

18 of the authority conferred by this subsection.’’. 

19 (c) AMENDMENT TO INVESTMENT COMPANY ACT OF

20 1940.—Section 38 of the Investment Company Act of 1940 

21 (15 U.S.C. 80a–38) is amended by adding at the end the 

22 following new subsection: 

23 ‘‘(d) GATHERING INFORMATION.—For the purposes of 

24 evaluating its rules and programs and for considering pro25 posing, adopting, or engaging in rules or programs, the 


srobinson on DSKHWCL6B1PROD with BILLS
9 

•HR 3817 RH

1 Commission is authorized to gather information, commu2 nicate with investors or other members of the public, and 

3 engage in such temporary or experimental programs as the 

4 Commission in its discretion determines is in the public 

5 interest or for the protection of investors. The Commission 

6 may delegate to its staff some or all of the authority con7 ferred by this subsection.’’. 

8 (d) AMENDMENT TO THE INVESTMENT ADVISERS ACT

9 OF 1940.—Section 211 of the Investment Advisers Act of 

10 1940 (15 U.S.C. 80b–11) is amended by adding at the end 

11 the following new subsections: 

12 ‘‘(e) For the purposes of evaluating its rules and pro13 grams and for considering proposing, adopting, or engaging 

14 in rules or programs, the Commission is authorized to gath15 er information, communicate with investors or other mem16 bers of the public, and engage in such temporary or experi17 mental programs as the Commission in its discretion deter18 mines is in the public interest or for the protection of inves19 tors. The Commission may delegate to its staff some or all 

20 of the authority conferred by this subsection.’’. 

21 SEC. 103. ESTABLISHMENT OF A FIDUCIARY DUTY FOR BRO22 KERS, DEALERS, AND INVESTMENT ADVISERS, 

23 AND HARMONIZATION OF REGULATION. 

24 (a) IN GENERAL.— 


srobinson on DSKHWCL6B1PROD with BILLS
10 

•HR 3817 RH

1 (1) SECURITIES EXCHANGE ACT OF 1934.—Sec2 tion 15 of the Securities Exchange Act of 1934 (15 

3 U.S.C. 78o) is amended— 

4 (A) by redesignating the second subsection 

5 (i) as subsection (j); and 

6 (B) by adding at the end the following new 

7 subsections: 

8 ‘‘(k) STANDARD OF CONDUCT.— 

9 ‘‘(1) IN GENERAL.—Notwithstanding any other 

10 provision of this Act or the Investment Advisers Act 

11 of 1940, the Commission shall promulgate rules to 

12 provide that, with respect to a broker or dealer, when 

13 providing personalized investment advice about secu14 rities to a retail customer (and such other customers 

15 as the Commission may by rule provide), the stand16 ard of conduct for such broker or dealer with respect 

17 to such customer shall be the same as the standard of 

18 conduct applicable to an investment adviser under the 

19 Investment Advisers Act of 1940. The receipt of com20 pensation based on commission or other standard 

21 compensation for the sale of securities shall not, in 

22 and of itself, be considered a violation of such stand23 ard applied to a broker or dealer. 

24 ‘‘(2) DISCLOSURE OF RANGE OF PRODUCTS OF25 FERED.—Where a broker or dealer sells only propriVerDate Mar 15 2010 22:39 Dec 17, 2010 Jkt 099200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6203 E:\BILLS\H3817.RH H3817

srobinson on DSKHWCL6B1PROD with BILLS
11 

•HR 3817 RH

1 etary or other limited range of products, as deter2 mined by the Commission, the Commission shall by 

3 rule require that such broker or dealer provide notice 

4 to each retail customer and obtain the consent or ac5 knowledgment of the customer. The sale of only pro6 prietary or other limited range of products by a 

7 broker or dealer shall not, in and of itself, be consid8 ered a violation of the standard set forth in para9 graph (1). 

10 ‘‘(3) RETAIL CUSTOMER DEFINED.—For pur11 poses of this subsection, the term ‘retail customer’ 

12 means a natural person, or the legal representative of 

13 such natural person, who— 

14 ‘‘(A) receives personalized investment advice 

15 about securities from a broker or dealer; and 

16 ‘‘(B) uses such advice primarily for per17 sonal, family, or household purposes. 

18 ‘‘(l) OTHER MATTERS.—The Commission shall— 

19 ‘‘(1) facilitate the provision of simple and clear 

20 disclosures to investors regarding the terms of their 

21 relationships with brokers, dealers, and investment 

22 advisers, including any material conflicts of interest; 

23 and 

24 ‘‘(2) examine and, where appropriate, promul25 gate rules prohibiting or restricting certain sales 


srobinson on DSKHWCL6B1PROD with BILLS
12 

•HR 3817 RH

1 practices, conflicts of interest, and compensation 

2 schemes for brokers, dealers, and investment advisers 

3 that the Commission deems contrary to the public in4 terest and the protection of investors.’’. 

5 (2) INVESTMENT ADVISERS ACT OF 1940.—Sec6 tion 211 of the Investment Advisers Act of 1940, as 

7 amended by section 102(d), is further amended by 

8 adding at the end the following new subsections: 

9 ‘‘(f) STANDARD OF CONDUCT.— 

10 ‘‘(1) IN GENERAL.—The Commission shall pro11 mulgate rules to provide that the standard of conduct 

12 for all brokers, dealers, and investment advisers, when 

13 providing personalized investment advice about secu14 rities to retail customers (and such other customers as 

15 the Commission may by rule provide), shall be to act 

16 in the best interest of the customer without regard to 

17 the financial or other interest of the broker, dealer, or 

18 investment adviser providing the advice. In accord19 ance with such rules, any material conflicts of inter20 est shall be disclosed and may be consented to by the 

21 customer. Such rules shall provide that such standard 

22 of conduct shall be no less stringent than the standard 

23 applicable to investment advisers under section 

24 206(1) and (2) of this Act when providing personal25 ized investment advice about securities, except the 


srobinson on DSKHWCL6B1PROD with BILLS
13 

•HR 3817 RH

1 Commission shall not ascribe a meaning to the term 

2 ‘customer’ that would include an investor in a private 

3 fund managed by an investment adviser, where such 

4 private fund has entered into an advisory contract 

5 with such adviser. The receipt of compensation based 

6 on commission or fees shall not, in and of itself, be 

7 considered a violation of such standard applied to a 

8 broker, dealer, or investment adviser. 

9 ‘‘(2) RETAIL CUSTOMER DEFINED.—For pur10 poses of this subsection, the term ‘retail customer’ 

11 means a natural person, or the legal representative of 

12 such natural person, who— 

13 ‘‘(A) receives personalized investment advice 

14 about securities from a broker, dealer, or invest15 ment adviser; and 

16 ‘‘(B) uses such advice primarily for per17 sonal, family, or household purposes. 

18 ‘‘(g) OTHER MATTERS.—The Commission shall— 

19 ‘‘(1) facilitate the provision of simple and clear 

20 disclosures to investors regarding the terms of their 

21 relationships with brokers, dealers, and investment 

22 advisers, including any material conflicts of interest; 

23 and 

24 ‘‘(2) examine and, where appropriate, promul25 gate rules prohibiting or restricting certain sales 


srobinson on DSKHWCL6B1PROD with BILLS
14 

•HR 3817 RH

1 practices, conflicts of interest, and compensation 

2 schemes for brokers, dealers, and investment advisers 

3 that the Commission deems contrary to the public in4 terest and the protection of investors.’’. 

5 (b) HARMONIZATION OF ENFORCEMENT.— 

6 (1) SECURITIES EXCHANGE ACT OF 1934.—Sec7 tion 15 of the Securities Exchange Act of 1934, as 

8 amended by subsection (a)(1), is further amended by 

9 adding at the end the following new subsection: 

10 ‘‘(m) HARMONIZATION OF ENFORCEMENT.—The en11 forcement authority of the Commission with respect to vio12 lations of the standard of conduct applicable to a broker 

13 or dealer providing personalized investment advice about 

14 securities to a retail customer shall include— 

15 ‘‘(1) the enforcement authority of the Commis16 sion with respect to such violations provided under 

17 this Act, and 

18 ‘‘(2) the enforcement authority of the Commis19 sion with respect to violations of the standard of con20 duct applicable to an investment advisor under the 

21 Investment Advisers Act of 1940, including the au22 thority to impose sanctions for such violations, and 

23 the Commission shall seek to prosecute and sanction viola24 tors of the standard of conduct applicable to a broker or 

25 dealer providing personalized investment advice about secuVerDate Mar 15 2010 22:39 Dec 17, 2010 Jkt 099200 PO 00000 Frm 00014 Fmt 6652 Sfmt 6203 E:\BILLS\H3817.RH H3817

srobinson on DSKHWCL6B1PROD with BILLS
15 

•HR 3817 RH

1 rities to a retail customer under this Act to same extent 

2 as the Commission prosecutes and sanctions violators of the 

3 standard of conduct applicable to an investment advisor 

4 under the Investment Advisers Act of 1940.’’. 

5 (2) INVESTMENT ADVISERS ACT OF 1940.—Sec6 tion 211 of the Investment Advisers Act of 1940, as 

7 amended by section (a)(2), is further amended by 

8 adding at the end the following new subsection: 

9 ‘‘(h) HARMONIZATION OF ENFORCEMENT.—The en10 forcement authority of the Commission with respect to vio11 lations of the standard of conduct applicable to an invest12 ment adviser shall include— 

13 ‘‘(1) the enforcement authority of the Commis14 sion with respect to such violations provided under 

15 this Act, and 

16 ‘‘(2) the enforcement authority of the Commis17 sion with respect to violations of the standard of con18 duct applicable to a broker or dealer providing per19 sonalized investment advice about securities to a re20 tail customer under the Securities Exchange Act of 

21 1934, including the authority to impose sanctions for 

22 such violations, and 

23 the Commission shall seek to prosecute and sanction viola24 tors of the standard of conduct applicable to an investment 

25 advisor under this Act to same extent as the Commission 


srobinson on DSKHWCL6B1PROD with BILLS
16 

•HR 3817 RH

1 prosecutes and sanctions violators of the standard of con2 duct applicable to a broker or dealer providing personalized 

3 investment advice about securities to a retail customer 

4 under the Securities Exchange Act of 1934.’’. 

5 SEC. 104. COMMISSION STUDY ON DISCLOSURE TO RETAIL 

6 CUSTOMERS BEFORE PURCHASE OF PROD7 UCTS OR SERVICES. 

8 (a) STUDY REQUIRED.—Prior to proposing any rules 

9 or regulations pursuant to subsection (b)(1) regarding the 

10 manner in which investment products or services are sold 

11 or provided in the United States to retail customers or the 

12 information that must be provided to retail customers prior 

13 to the purchase of such products or services, and within 180 

14 days after the date of the enactment of this Act, the Securi15 ties and Exchange Commission shall publish a study that 

16 examines— 

17 (1) the nature of a ‘‘retail customer’’, taking into 

18 consideration the definition in section 15(k) of the Se19 curities Exchange Act of 1934 (15 U.S.C. 78o), as 

20 amended by section 103 of this Act; 

21 (2) the range of products and services sold or 

22 provided to retail customers, and the sellers or pro23 viders of such products and services, that are within 

24 the Commission’s jurisdiction; 


srobinson on DSKHWCL6B1PROD with BILLS
17 

•HR 3817 RH

1 (3) how such products and services are sold or 

2 provided to retail customers, the fees charged for such 

3 products and services, and the conflicts of interest 

4 that may arise during the sales process or provision 

5 of services; 

6 (4) information that retail customers should re7 ceive prior to purchasing each product or service, and 

8 the appropriate person or entity to provide such in9 formation; and 

10 (5) ways to ensure that, where possible, reason11 ably similar products and services are subject to simi12 lar regulatory treatment, including with respect to in13 formation that must be provided to retail customers 

14 prior to the purchase of such products or services and 

15 how such information is provided. 

16 (b) RULEMAKING.— 

17 (1) Notwithstanding any other provision of the 

18 Securities Act of 1933 (15 U.S.C. 77a et seq.) or the 

19 Investment Company Act of 1940 (15 U.S.C. 80a–1 

20 et seq.), following completion of the study required by 

21 subsection (a), the Commission is authorized to pro22 mulgate rules to require that the appropriate persons 

23 or entities provide designated documents or informa24 tion to retail customers prior to the purchase of idenVerDate Mar 15 2010 22:39 Dec 17, 2010 Jkt 099200 PO 00000 Frm 00017 Fmt 6652 Sfmt 6203 E:\BILLS\H3817.RH H3817

srobinson on DSKHWCL6B1PROD with BILLS
18 

•HR 3817 RH

1 tified investment products or services. Any such rules 

2 shall— 

3 (A) take into account the findings of the 

4 study conducted pursuant to subsection (a); 

5 (B) take into consideration, to the extent 

6 possible, the need for such documents and infor7 mation to be consistent and comparable across 

8 investment products or services sold or provided 

9 to retail customers; and 

10 (C) reduce, to the extent possible, disrup11 tions to the purchase process for investment 

12 products and services sold or provided to retail 

13 customers, by means such as permitting required 

14 disclosures to be made via the Internet. 

15 (2) Notwithstanding paragraph (1), the Commis16 sion is authorized to promulgate rules in connection 

17 with— 

18 (A) the implementation of section 103; and 

19 (B) disclosure to retail customers other than 

20 in connection with the purchase of investment 

21 products or services. 


srobinson on DSKHWCL6B1PROD with BILLS
19 

•HR 3817 RH

1 SEC. 105. BENEFICIAL OWNERSHIP AND SHORT-SWING 

2 PROFIT REPORTING. 

3 (a) BENEFICIAL OWNERSHIP REPORTING.—Section 13 

4 of the Securities Exchange Act of 1934 (15 U.S.C. 78m) 

5 is amended— 

6 (1) in subsection (d)(1)— 

7 (A) by inserting after ‘‘within ten days 

8 after such acquisition’’ the following: ‘‘or within 

9 such shorter time as the Commission may estab10 lish by rule’’; and 

11 (B) by striking ‘‘send to the issuer of the se12 curity at its principal executive office, by reg13 istered or certified mail, send to each exchange 

14 where the security is traded, and’’; 

15 (2) in subsection (d)(2)— 

16 (A) by striking ‘‘in the statements to the 

17 issuer and the exchange, and’’; and 

18 (B) by striking ‘‘shall be transmitted to the 

19 issuer and the exchange and’’; 

20 (3) in subsection (g)(1), by striking ‘‘shall send 

21 to the issuer of the security and’’; and 

22 (4) in subsection (g)(2)— 

23 (A) by striking ‘‘sent to the issuer and’’; 

24 and 

25 (B) by striking ‘‘shall be transmitted to the 

26 issuer and’’. 


srobinson on DSKHWCL6B1PROD with BILLS
20 

•HR 3817 RH

1 (b) SHORT-SWING PROFIT REPORTING.—Section 16(a) 

2 of the Securities Exchange Act of 1934 (15 U.S.C. 78p(a)) 

3 is amended— 

4 (1) in paragraph (1), by striking ‘‘(and, if such 

5 security is registered on a national securities ex6 change, also with the exchange)’’; and 

7 (2) in paragraph (2)(B), by inserting after ‘‘offi8 cer’’ the following: ‘‘, or within such shorter time as 

9 the Commission may establish by rule’’. 

10 SEC. 106. REVISION TO RECORDKEEPING RULES. 

11 (a) INVESTMENT COMPANY ACT OF 1940 AMEND12 MENTS.—Section 31 of the Investment Company Act of 

13 1940 (15 U.S.C. 80a–30) is amended— 

14 (1) in subsection (a)(1), by adding at the end the 

15 following: ‘‘Each person with custody or use of a reg16 istered investment company’s securities, deposits, or 

17 credits shall maintain and preserve all records that 

18 relate to the person’s custody or use of the registered 

19 investment company’s securities, deposits, or credits 

20 for such period or periods as the Commission, by 

21 rules and regulations, may prescribe as necessary or 

22 appropriate in the public interest or for the protec23 tion of investors.’’; and 

24 (2) in subsection (b), by adding at the end the 

25 following new paragraph: 


srobinson on DSKHWCL6B1PROD with BILLS
21 

•HR 3817 RH

1 ‘‘(4) RECORDS OF PERSONS WITH CUSTODY OR

2 USE.— 

3 ‘‘(A) IN GENERAL.—Notwithstanding para4 graph (1), records of persons with custody or use 

5 of a registered investment company’s securities, 

6 deposits, or credits, that relate to such custody or 

7 use, are subject at any time, or from time to 

8 time, to such reasonable periodic, special, or 

9 other examinations and other information and 

10 document requests by representatives of the Com11 mission as the Commission deems necessary or 

12 appropriate in the public interest or for the pro13 tection of investors. 

14 ‘‘(B) CERTAIN PERSONS SUBJECT TO OTHER

15 REGULATION.—Persons subject to regulation and 

16 examination by a Federal financial institution 

17 regulatory agency (as such term is defined under 

18 section 212(c)(2) of title 18, United States Code) 

19 may satisfy any examination request, informa20 tion request, or document request described under 

21 subparagraph (A), by providing the Commission 

22 with a detailed listing, in writing, of the reg23 istered investment company’s securities, deposits, 

24 or credits within such person’s custody or use.’’. 


srobinson on DSKHWCL6B1PROD with BILLS
22 

•HR 3817 RH

1 (b) INVESTMENT ADVISERS ACT OF 1940 AMEND2 MENT.—Section 204 of the Investment Advisers Act of 1940 

3 (15 U.S.C. 80b–4) is amended by adding at the end the 

4 following new subsection: 

5 ‘‘(d) RECORDS OF PERSONS WITH CUSTODY OR

6 USE.— 

7 ‘‘(1) IN GENERAL.—Records of persons with cus8 tody or use of a client’s securities, deposits, or credits, 

9 that relate to such custody or use, are subject at any 

10 time, or from time to time, to such reasonable peri11 odic, special, or other examinations and other infor12 mation and document requests by representatives of 

13 the Commission as the Commission deems necessary 

14 or appropriate in the public interest or for the protec15 tion of investors. 

16 ‘‘(2) CERTAIN PERSONS SUBJECT TO OTHER

17 REGULATION.—Persons subject to regulation and ex18 amination by a Federal financial institution regu19 latory agency (as such term is defined under section 

20 212(c)(2) of title 18, United States Code) may satisfy 

21 any examination request, information request, or doc22 ument request described under paragraph (1), by pro23 viding the Commission with a detailed listing, in 

24 writing, of the client’s securities, deposits, or credits 

25 within such person’s custody or use.’’. 


srobinson on DSKHWCL6B1PROD with BILLS
23 

•HR 3817 RH

1 SEC. 107. STUDY ON ENHANCING INVESTMENT ADVISOR EX2 AMINATIONS. 

3 (a) STUDY REQUIRED.— 

4 (1) IN GENERAL.—The Commission shall review 

5 and analyze the need for enhanced examination and 

6 enforcement resources for investment advisers. 

7 (2) AREAS OF CONSIDERATION.—The study re8 quired by this subsection shall examine— 

9 (A) the number and frequency of examina10 tions of investment advisers by the Commission 

11 over the 5 years preceding the date of the enact12 ment of this Act; 

13 (B) the extent to which having Congress au14 thorize the Commission to designate one or more 

15 self-regulatory organizations to augment the 

16 Commission’s efforts in overseeing investment 

17 advisers would improve the frequency of exami18 nations of investment advisers; and 

19 (C) current and potential approaches to ex20 amining the investment advisory activities of 

21 dually registered broker-dealers and investment 

22 advisers or affiliated broker-dealers and invest23 ment advisers. 

24 (b) REPORT REQUIRED.—The Commission shall re25 port its findings to the Committee on Financial Services 

26 of the House of Representatives and the Committee on 


srobinson on DSKHWCL6B1PROD with BILLS
24 

•HR 3817 RH

1 Banking, Housing, and Urban Affairs of the Senate, not 

2 later than 180 days after the date of enactment of this Act, 

3 and shall use such findings to revise its rules and regula4 tions, as necessary. The report shall include a discussion 

5 of regulatory or legislative steps that are recommended or 

6 that may be necessary to address concerns identified in the 

7 study. 

8 SEC. 108. GAO STUDY OF FINANCIAL PLANNING. 

9 (a) STUDY REQUIRED.—The Comptroller General of 

10 the United States shall conduct a study on the regulation 

11 and oversight of financial planning. The study shall con12 sider— 

13 (1) the unique role of financial planners in pro14 viding comprehensive advice in investment planning, 

15 income tax planning, education planning, retirement 

16 planning, estate planning, risk management, and 

17 other areas with respect to the management of finan18 cial resources; and 

19 (2) any gaps in the regulation of financial plan20 ners given existing State and Federal regulation of fi21 nancial planning activities and the need to provide 

22 related consumer protections for such financial plan23 ning activities. 

24 (b) REPORT.—Not later than the end of the 180-day 

25 period beginning on the date of the enactment of this Act, 


srobinson on DSKHWCL6B1PROD with BILLS
25 

•HR 3817 RH

1 the Comptroller General of the United States shall submit 

2 to the Congress a report containing the findings and deter3 minations made by the Comptroller General in carrying out 

4 the study required under subsection (a), including rec5 ommendations for the appropriate regulation of, or stand6 ards for, financial planners as a profession and how such 

7 regulations or standards should be established. 

8 TITLE II—ENFORCEMENT AND 

9 REMEDIES 

10 SEC. 201. AUTHORITY TO RESTRICT MANDATORY PRE-DIS11 PUTE ARBITRATION. 

12 (a) AMENDMENT TO SECURITIES EXCHANGE ACT OF

13 1934.—Section 15 of the Securities Exchange Act of 1934 

14 (15 U.S.C. 78o), as amended by section 103, is further 

15 amended by adding at the end the following new subsection: 

16 ‘‘(n) AUTHORITY TO RESTRICT MANDATORY PRE-DIS17 PUTE ARBITRATION.—The Commission, by rule, may pro18 hibit, or impose conditions or limitations on the use of, 

19 agreements that require customers or clients of any broker, 

20 dealer, or municipal securities dealer to arbitrate any fu21 ture dispute between them arising under the Federal securi22 ties laws, the rules and regulations thereunder, or the rules 

23 of a self-regulatory organization if it finds that such prohi24 bition, imposition of conditions, or limitations are in the 

25 public interest and for the protection of investors.’’. 


srobinson on DSKHWCL6B1PROD with BILLS
26 

•HR 3817 RH

1 (b) AMENDMENT TO INVESTMENT ADVISERS ACT OF

2 1940.—Section 205 of the Investment Advisers Act of 1940 

3 (15 U.S.C. 80b–5) is amended by adding at the end the 

4 following new subsection: 

5 ‘‘(f) AUTHORITY TO RESTRICT MANDATORY PRE-DIS6 PUTE ARBITRATION.—The Commission, by rule, may pro7 hibit, or impose conditions or limitations on the use of, 

8 agreements that require customers or clients of any invest9 ment adviser to arbitrate any future dispute between them 

10 arising under the Federal securities laws, the rules and reg11 ulations thereunder, or the rules of a self-regulatory organi12 zation if it finds that such prohibition, imposition of condi13 tions, or limitations are in the public interest and for the 

14 protection of investors.’’. 

15 SEC. 202. COMPTROLLER GENERAL STUDY TO REVIEW SE16 CURITIES ARBITRATION SYSTEM. 

17 (a) STUDY.—The Comptroller General of the United 

18 States shall conduct a study to review— 

19 (1) the costs to parties of an arbitration pro20 ceeding using the arbitration system operated by the 

21 Financial Industry Regulatory Authority and over22 seen by the Securities and Exchange Commission as 

23 compared to litigation; 

24 (2) the percentage of recovery of the total amount 

25 of a claim in an arbitration proceeding using the arVerDate Mar 15 2010 22:39 Dec 17, 2010 Jkt 099200 PO 00000 Frm 00026 Fmt 6652 Sfmt 6203 E:\BILLS\H3817.RH H3817

srobinson on DSKHWCL6B1PROD with BILLS
27 

•HR 3817 RH

1 bitration system operated by the Financial Industry 

2 Regulatory Authority and overseen by the Securities 

3 and Exchange Commission; and 

4 (3) other additional issues as may be raised dur5 ing the course of the study conducted under this sub6 section. 

7 (b) REPORT.—Not later than 1 year after the date of 

8 enactment of this Act, the Comptroller General of the United 

9 States shall submit to the Committee on Financial Services 

10 of the House of Representatives and the Committee on 

11 Banking, Housing, and Urban Affairs of the Senate a re12 port on the results of the study required by subsection (a), 

13 including in such report recommendations for improve14 ments to the arbitration system referenced in such sub15 section. 

16 SEC. 203. WHISTLEBLOWER PROTECTION. 

17 (a) IN GENERAL.—The Securities Exchange Act of 

18 1934 (15 U.S.C. 78a et seq.) is amended by adding after 

19 section 21E the following new section: 

20 ‘‘SEC. 21F. SECURITIES WHISTLEBLOWER INCENTIVES AND 

21 PROTECTION. 

22 ‘‘(a) IN GENERAL.—In any judicial or administrative 

23 action brought by the Commission under the securities laws 

24 that results in monetary sanctions exceeding $1,000,000, the 

25 Commission, under regulations prescribed by the CommisVerDate Mar 15 2010 22:39 Dec 17, 2010 Jkt 099200 PO 00000 Frm 00027 Fmt 6652 Sfmt 6203 E:\BILLS\H3817.RH H3817

srobinson on DSKHWCL6B1PROD with BILLS
28 

•HR 3817 RH

1 sion and subject to subsection (b), may pay an award or 

2 awards not exceeding an amount equal to 30 percent, in 

3 total, of the monetary sanctions imposed in the action or 

4 related actions to one or more whistleblowers who volun5 tarily provided original information to the Commission 

6 that led to the successful enforcement of the action. Any 

7 amount payable under the preceding sentence shall be paid 

8 from the fund described in subsection (f). 

9 ‘‘(b) DETERMINATION OF AMOUNT OF AWARD; DENIAL

10 OF AWARD.— 

11 ‘‘(1) DETERMINATION OF AMOUNT OF AWARD.— 

12 The determination of the amount of an award, within 

13 the limit specified in subsection (a), shall be in the 

14 sole discretion of the Commission. The Commission 

15 may take into account the significance of the whistle16 blower’s information to the success of the judicial or 

17 administrative action described in subsection (a), the 

18 degree of assistance provided by the whistleblower and 

19 any legal representative of the whistleblower in such 

20 action, the Commission’s programmatic interest in 

21 deterring violations of the securities laws by making 

22 awards to whistleblowers who provide information 

23 that leads to the successful enforcement of such laws, 

24 and such additional factors as the Commission may 

25 establish by rules or regulations. 


srobinson on DSKHWCL6B1PROD with BILLS
29 

•HR 3817 RH

1 ‘‘(2) DENIAL OF AWARD.—No award under sub2 section (a) shall be made— 

3 ‘‘(A) to any whistleblower who is, or was at 

4 the time he or she acquired the original informa5 tion submitted to the Commission, a member, of6 ficer, or employee of any appropriate regulatory 

7 agency, the Department of Justice, the Public 

8 Company Accounting Oversight Board, or a self9 regulatory organization; 

10 ‘‘(B) to any whistleblower who is convicted 

11 of a criminal violation related to the judicial or 

12 administrative action for which the whistle13 blower otherwise could receive an award under 

14 this section; or 

15 ‘‘(C) to any whistleblower who fails to sub16 mit information to the Commission in such form 

17 as the Commission may, by rule, require. 

18 ‘‘(c) REPRESENTATION.— 

19 ‘‘(1) PERMITTED REPRESENTATION.—Any whis20 tleblower who makes a claim for an award under sub21 section (a) may be represented by counsel. 

22 ‘‘(2) REQUIRED REPRESENTATION.—Any whis23 tleblower who makes a claim for an award under sub24 section (a) must be represented by counsel if the whis25 tleblower submits the information upon which the 


srobinson on DSKHWCL6B1PROD with BILLS
30 

•HR 3817 RH

1 claim is based anonymously. Prior to the payment of 

2 an award, the whistleblower must disclose his or her 

3 identity and provide such other information as the 

4 Commission may require. 

5 ‘‘(d) NO CONTRACT NECESSARY.—No contract with the 

6 Commission is necessary for any whistleblower to receive 

7 an award under subsection (a), unless the Commission, by 

8 rule or regulation, so requires. 

9 ‘‘(e) APPEALS.—Any determinations under this sec10 tion, including whether, to whom, or in what amounts to 

11 make awards, shall be in the sole discretion of the Commis12 sion, and any such determinations shall be final and not 

13 subject to judicial review. 

14 ‘‘(f) INVESTOR PROTECTION FUND.— 

15 ‘‘(1) FUND ESTABLISHED.—There is established 

16 in the Treasury of the United States a fund to be 

17 known as the ‘Securities and Exchange Commission 

18 Investor Protection Fund’ (referred to in this section 

19 as the ‘Fund’). 

20 ‘‘(2) USE OF FUND.—The Fund shall be avail21 able to the Commission, without further appropria22 tion or fiscal year limitation, for the following pur23 poses: 

24 ‘‘(A) Paying awards to whistleblowers as 

25 provided in subsection (a). 


srobinson on DSKHWCL6B1PROD with BILLS
31 

•HR 3817 RH

1 ‘‘(B) Funding investor education initiatives 

2 designed to help investors protect themselves 

3 against securities fraud or other violations of the 

4 securities laws, or the rules and regulations 

5 thereunder. 

6 ‘‘(3) DEPOSITS AND CREDITS.—There shall be 

7 deposited into or credited to the Fund— 

8 ‘‘(A) any monetary sanction collected by the 

9 Commission in any judicial or administrative 

10 action brought by the Commission under the se11 curities laws that is not added to a disgorgement 

12 fund or other fund pursuant to section 308 of the 

13 Sarbanes-Oxley Act of 2002 or otherwise distrib14 uted to victims of a violation of the securities 

15 laws, or the rules and regulations thereunder, 

16 underlying such action, unless the balance of the 

17 Fund at the time the monetary sanction is col18 lected exceeds $100,000,000; 

19 ‘‘(B) any monetary sanction added to a 

20 disgorgement fund or other fund pursuant to sec21 tion 308 of the Sarbanes-Oxley Act of 2002 that 

22 is not distributed to the victims for whom the 

23 disgorgement fund or other fund was established, 

24 unless the balance of the Fund at the time the de25 termination is made not to distribute the moneVerDate Mar 15 2010 22:39 Dec 17, 2010 Jkt 099200 PO 00000 Frm 00031 Fmt 6652 Sfmt 6203 E:\BILLS\H3817.RH H3817

srobinson on DSKHWCL6B1PROD with BILLS
32 

•HR 3817 RH

1 tary sanction to such victims exceeds 

2 $100,000,000; and 

3 ‘‘(C) all income from investments made 

4 under paragraph (4). 

5 ‘‘(4) INVESTMENTS.— 

6 ‘‘(A) AMOUNTS IN FUND MAY BE IN7 VESTED.—The Commission may request the Sec8 retary of the Treasury to invest the portion of 

9 the Fund that is not, in the Commission’s judg10 ment, required to meet the current needs of the 

11 Fund. 

12 ‘‘(B) ELIGIBLE INVESTMENTS.—Investments 

13 shall be made by the Secretary of the Treasury 

14 in obligations of the United States or obligations 

15 that are guaranteed as to principal and interest 

16 by the United States, with maturities suitable to 

17 the needs of the Fund as determined by the Com18 mission. 

19 ‘‘(C) INTEREST AND PROCEEDS CRED20 ITED.—The interest on, and the proceeds from 

21 the sale or redemption of, any obligations held in 

22 the Fund shall be credited to, and form a part 

23 of, the Fund. 

24 ‘‘(5) REPORTS TO CONGRESS.—Not later than 

25 October 30 of each year, the Commission shall transVerDate Mar 15 2010 22:39 Dec 17, 2010 Jkt 099200 PO 00000 Frm 00032 Fmt 6652 Sfmt 6203 E:\BILLS\H3817.RH H3817

srobinson on DSKHWCL6B1PROD with BILLS
33 

•HR 3817 RH

1 mit to the Committee on Banking, Housing, and 

2 Urban Affairs of the Senate, and the Committee on 

3 Financial Services of the House of Representatives a 

4 report on— 

5 ‘‘(A) the Commission’s whistleblower award 

6 program under this section, including a descrip7 tion of the number of awards that were granted 

8 and the types of cases in which awards were 

9 granted during the preceding fiscal year; 

10 ‘‘(B) investor education initiatives described 

11 in paragraph (2)(B) that were funded by the 

12 Fund during the preceding fiscal year; 

13 ‘‘(C) the balance of the Fund at the begin14 ning of the preceding fiscal year; 

15 ‘‘(D) the amounts deposited into or credited 

16 to the Fund during the preceding fiscal year; 

17 ‘‘(E) the amount of earnings on investments 

18 of amounts in the Fund during the preceding fis19 cal year; 

20 ‘‘(F) the amount paid from the Fund dur21 ing the preceding fiscal year to whistleblowers 

22 pursuant to subsection (a); 

23 ‘‘(G) the amount paid from the Fund dur24 ing the preceding fiscal year for investor edu25 cation initiatives described in paragraph (1)(B); 


srobinson on DSKHWCL6B1PROD with BILLS
34 

•HR 3817 RH

1 ‘‘(H) the balance of the Fund at the end of 

2 the preceding fiscal year; and 

3 ‘‘(I) a complete set of audited financial 

4 statements, including a balance sheet, income 

5 statement, and cash flow analysis. 

6 ‘‘(g) PROTECTION OF WHISTLEBLOWERS.— 

7 ‘‘(1) PROHIBITION AGAINST RETALIATION.— 

8 ‘‘(A) IN GENERAL.—No employer may dis9 charge, demote, suspend, threaten, harass, or in 

10 any other manner discriminate against an em11 ployee, contractor, or agent in the terms and 

12 conditions of employment because of any lawful 

13 act done by the employee, contractor, or agent in 

14 providing information to the Commission in ac15 cordance with subsection (a), or in assisting in 

16 any investigation or judicial or administrative 

17 action of the Commission based upon or related 

18 to such information. 

19 ‘‘(B) ENFORCEMENT.— 

20 ‘‘(i) CAUSE OF ACTION.—An indi21 vidual who alleges discharge or other dis22 crimination in violation of subparagraph 

23 (A) may bring an action under this sub24 section in the appropriate district court of 


srobinson on DSKHWCL6B1PROD with BILLS
35 

•HR 3817 RH

1 the United States for the relief provided in 

2 subparagraph (C). 

3 ‘‘(ii) SUBPOENAS.—A subpoena requir4 ing the attendance of a witness at a trial or 

5 hearing conducted under this section may 

6 be served at any place in the United States. 

7 ‘‘(iii) STATUTE OF LIMITATIONS.—An 

8 action under this subsection may not be 

9 brought more than 6 years after the date on 

10 which the violation of subparagraph (A) oc11 curred, or more than 3 years after the date 

12 when facts material to the right of action 

13 are known or reasonably should have been 

14 known by the employee alleging a violation 

15 of subparagraph (A), but in no event after 

16 10 years after the date on which the viola17 tion occurs. 

18 ‘‘(C) RELIEF.—An employee, contractor, or 

19 agent prevailing in any action brought under 

20 subparagraph (B) shall be entitled to all relief 

21 necessary to make that employee, contractor, or 

22 agent whole, including reinstatement with the 

23 same seniority status that the employee, con24 tractor, or agent would have had, but for the dis25 crimination, 2 times the amount of back pay, 


srobinson on DSKHWCL6B1PROD with BILLS
36 

•HR 3817 RH

1 with interest, and compensation for any special 

2 damages sustained as a result of the discrimina3 tion, including litigation costs, expert witness 

4 fees, and reasonable attorneys’ fees. 

5 ‘‘(2) CONFIDENTIALITY.— 

6 ‘‘(A) IN GENERAL.—Except as provided in 

7 subparagraph (B), all information provided to 

8 the Commission by a whistleblower shall be con9 fidential and privileged as an evidentiary matter 

10 (and shall not be subject to civil discovery or 

11 other legal process) in any proceeding in any 

12 Federal or State court or administrative agency, 

13 and shall be exempt from disclosure, in the 

14 hands of an agency or establishment of the Fed15 eral Government, under the Freedom of Informa16 tion Act (5 U.S.C. 552), or otherwise, unless and 

17 until required to be disclosed to a defendant or 

18 respondent in connection with a proceeding in19 stituted by the Commission or any entity de20 scribed in subparagraph (B). For purposes of 

21 section 552 of title 5, United States Code, this 

22 paragraph shall be considered a statute described 

23 in subsection (b)(3)(B) of such section 552. Noth24 ing herein is intended to limit the Attorney Gen25 eral’s ability to present such evidence to a grand 


srobinson on DSKHWCL6B1PROD with BILLS
37 

•HR 3817 RH

1 jury or to share such evidence with potential wit2 nesses or defendants in the course of an ongoing 

3 criminal investigation. 

4 ‘‘(B) AVAILABILITY TO GOVERNMENT AGEN5 CIES.—Without the loss of its status as confiden6 tial and privileged in the hands of the Commis7 sion, all information referred to in subparagraph 

8 (A) may, in the discretion of the Commission, 

9 when determined by the Commission to be nec10 essary to accomplish the purposes of this Act and 

11 protect investors, be made available to— 

12 ‘‘(i) the Attorney General of the United 

13 States, 

14 ‘‘(ii) an appropriate regulatory au15 thority, 

16 ‘‘(iii) a self-regulatory organization, 

17 ‘‘(iv) the Public Company Accounting 

18 Oversight Board, 

19 ‘‘(v) State attorneys general in connec20 tion with any criminal investigation, and 

21 ‘‘(vi) any appropriate State regulatory 

22 authority, 

23 each of which shall maintain such information 

24 as confidential and privileged, in accordance 

25 with the requirements in subparagraph (A). 


srobinson on DSKHWCL6B1PROD with BILLS
38 

•HR 3817 RH

1 ‘‘(3) RIGHTS RETAINED.—Nothing in this section 

2 shall be deemed to diminish the rights, privileges, or 

3 remedies of any whistleblower under any Federal or 

4 State law, or under any collective bargaining agree5 ment. 

6 ‘‘(h) PROVISION OF FALSE INFORMATION.—Any whis7 tleblower who knowingly and willfully makes any false, fic8 titious, or fraudulent statement or representation, or makes 

9 or uses any false writing or document knowing the same 

10 to contain any false, fictitious, or fraudulent statement or 

11 entry, shall not be entitled to an award under this section 

12 and shall be subject to prosecution under section 1001 of 

13 title 18, United States Code. 

14 ‘‘(i) RULEMAKING AUTHORITY.—The Commission 

15 shall have the authority to issue such rules and regulations 

16 as may be necessary or appropriate to implement the provi17 sions of this section. 

18 ‘‘(j) DEFINITIONS.—For purposes of this section, the 

19 following terms have the following meanings: 

20 ‘‘(1) ORIGINAL INFORMATION.—The term ‘origi21 nal information’ means information that— 

22 ‘‘(A) is based on the direct and independent 

23 knowledge or analysis of a whistleblower; 


srobinson on DSKHWCL6B1PROD with BILLS
39 

•HR 3817 RH

1 ‘‘(B) is not known to the Commission from 

2 any other source, unless the whistleblower is the 

3 initial source of the information; and 

4 ‘‘(C) is not based on allegations in a judi5 cial or administrative hearing, in a govern6 mental report, hearing, audit, or investigation, 

7 or from the news media, unless the whistleblower 

8 is the initial source of the information that re9 sulted in the judicial or administrative hearing, 

10 governmental report, hearing, audit, or inves11 tigation, or the news media’s report on the alle12 gations. 

13 ‘‘(2) MONETARY SANCTIONS.—The term ‘mone14 tary sanctions’, when used with respect to any judi15 cial or administrative action, means any monies, in16 cluding but not limited to penalties, disgorgement, 

17 and interest, ordered to be paid, and any monies de18 posited into a disgorgement fund or other fund pursu19 ant to section 308(b) of the Sarbanes-Oxley Act of 

20 2002 (15 U.S.C. 7246(b)), as a result of such action 

21 or any settlement of such action. 

22 ‘‘(3) RELATED ACTION.—The term ‘related ac23 tion’, when used with respect to any judicial or ad24 ministrative action brought by the Commission under 

25 the securities laws, means any judicial or administraVerDate Mar 15 2010 22:39 Dec 17, 2010 Jkt 099200 PO 00000 Frm 00039 Fmt 6652 Sfmt 6203 E:\BILLS\H3817.RH H3817

srobinson on DSKHWCL6B1PROD with BILLS
40 

•HR 3817 RH

1 tive action brought by an entity described in sub2 section (g)(2)(B) that is based upon the same original 

3 information provided by a whistleblower pursuant to 

4 subsection (a) that led to the successful enforcement of 

5 the Commission action. 

6 ‘‘(4) WHISTLEBLOWER.—The term ‘whistle7 blower’ means an individual, or two or more individ8 uals acting jointly, who submit information to the 

9 Commission as provided in this section.’’. 

10 (b) ADMINISTRATION AND ENFORCEMENT.—The Secu11 rities and Exchange Commission shall establish a separate 

12 office within the Commission to administer and enforce the 

13 provisions of section 21F of the Securities Exchange Act 

14 of 1934, as added by subsection (a). Such office shall report 

15 annually to Congress on its activities, whistleblower com16 plaints, and the response of the Commission to such com17 plaints. 

18 SEC. 204. CONFORMING AMENDMENTS FOR WHISTLE19 BLOWER PROTECTION. 

20 (a) IN GENERAL.—Each of the following provisions is 

21 amended by inserting ‘‘and section 21F of the Securities 

22 Exchange Act of 1934’’ after ‘‘the Sarbanes-Oxley Act of 

23 2002’’: 

24 (1) Section 20(d)(3)(A) of the Securities Act of 

25 1933 (15 U.S.C. 77t(d)(3)(A)). 


srobinson on DSKHWCL6B1PROD with BILLS
41 

•HR 3817 RH

1 (2) Section 42(e)(3)(A) of the Investment Com2 pany Act of 1940 (15 U.S.C. 80a–41(e)(3)(A)). 

3 (3) Section 209(e)(3)(A) of the Investment Advis4 ers Act of 1940 (15 U.S.C. 80b–9(e)(3)(A)). 

5 (b) SECURITIES EXCHANGE ACT.—The Securities Ex6 change Act of 1934 (15 U.S.C. 78a et seq.) is amended— 

7 (1) in section 21(d)(3)(C)(i) (15 U.S.C. 

8 78u(d)(3)(C)(i)), by inserting ‘‘and section 21F of 

9 this title’’ after ‘‘the Sarbanes-Oxley Act of 2002’’; 

10 (2) in section 21A(d)(1) (15 U.S.C. 78u– 

11 1(d)(1))— 

12 (A) by striking ‘‘(subject to subsection (e))’’; 

13 and 

14 (B) by inserting ‘‘and section 21F of this 

15 title’’ after ‘‘the Sarbanes-Oxley Act of 2002’’; 

16 and 

17 (3) in section 21A, by striking subsection (e) and 

18 redesignating subsections (f) and (g) as subsection (e) 

19 and (f), respectively. 

20 SEC. 205. IMPLEMENTATION AND TRANSITION PROVISIONS 

21 FOR WHISTLEBLOWER PROTECTIONS. 

22 (a) IMPLEMENTING RULES.—The Securities and Ex23 change Commission shall issue final regulations imple24 menting the provisions of section 21F of the Securities ExVerDate Mar 15 2010 22:39 Dec 17, 2010 Jkt 099200 PO 00000 Frm 00041 Fmt 6652 Sfmt 6203 E:\BILLS\H3817.RH H3817

srobinson on DSKHWCL6B1PROD with BILLS
42 

•HR 3817 RH

1 change Act of 1934, as added by this title, no later than 

2 270 days after the date of enactment of this Act. 

3 (b) ORIGINAL INFORMATION.—Information submitted 

4 to the Commission by a whistleblower in accordance with 

5 regulations implementing the provisions of section 21F of 

6 the Securities Exchange Act of 1934, as added by this title, 

7 shall not lose its status as original information, as defined 

8 in subsection (i)(1) of such section, solely because the whis9 tleblower submitted such information prior to the effective 

10 date of such regulations, provided such information was 

11 submitted after the date of enactment of this Act, or related 

12 to insider trading violations for which a bounty could have 

13 been paid at the time such information was submitted. 

14 (c) AWARDS.—A whistleblower may receive an award 

15 pursuant to section 21F of the Securities Exchange Act of 

16 1934, as added by this title, regardless of whether any viola17 tion of a provision of the securities laws, or a rule or regula18 tion thereunder, underlying the judicial or administrative 

19 action upon which the award is based occurred prior to the 

20 date of enactment of this Act. 

21 SEC. 206. COLLATERAL BARS. 

22 (a) SECTION 15 OF THE SECURITIES EXCHANGE ACT

23 OF 1934.—Section 15(b)(6)(A) of the Securities Exchange 

24 Act of 1934 (15 U.S.C. 78o(b)(6)(A)) is amended by strik25 ing ‘‘12 months, or bar such person from being associated 


srobinson on DSKHWCL6B1PROD with BILLS
43 

•HR 3817 RH

1 with a broker or dealer,’’ and inserting ‘‘12 months, or bar 

2 any such person from being associated with a broker, dealer, 

3 investment adviser, municipal securities dealer, transfer 

4 agent, or nationally recognized statistical rating organiza5 tion,’’. 

6 (b) SECTION 15B OF THE SECURITIES EXCHANGE ACT

7 OF 1934.—Section 15B(c)(4) of the Securities Exchange Act 

8 of 1934 (15 U.S.C. 78o–4(c)(4)) is amended by striking 

9 ‘‘twelve months or bar any such person from being associ10 ated with a municipal securities dealer,’’ and inserting ‘‘12 

11 months or bar any such person from being associated with 

12 a broker, dealer, investment adviser, municipal securities 

13 dealer, transfer agent, or nationally recognized statistical 

14 rating organization,’’. 

15 (c) SECTION 17A OF THE SECURITIES EXCHANGE ACT

16 OF 1934.—Section 17A(c)(4)(C) of the Securities Exchange 

17 Act of 1934 (15 U.S.C. 78q–1(c)(4)(C)) is amended by strik18 ing ‘‘twelve months or bar any such person from being asso19 ciated with the transfer agent,’’ and inserting ‘‘12 months 

20 or bar any such person from being associated with any 

21 transfer agent, broker, dealer, investment adviser, munic22 ipal securities dealer, or nationally recognized statistical 

23 rating organization,’’. 

24 (d) SECTION 203 OF THE INVESTMENT ADVISERS ACT

25 OF 1940.—Section 203(f) of the Investment Advisers Act of 


srobinson on DSKHWCL6B1PROD with BILLS
44 

•HR 3817 RH

1 1940 (15 U.S.C. 80b–3(f)) is amended by striking ‘‘twelve 

2 months or bar any such person from being associated with 

3 an investment adviser,’’ and inserting ‘‘12 months or bar 

4 any such person from being associated with an investment 

5 adviser, broker, dealer, municipal securities dealer, transfer 

6 agent, or nationally recognized statistical rating organiza7 tion,’’. 

8 SEC. 207. AIDING AND ABETTING AUTHORITY UNDER THE 

9 SECURITIES ACT AND THE INVESTMENT COM10 PANY ACT. 

11 (a) UNDER THE SECURITIES ACT OF 1933.—Section 

12 15 of the Securities Act of 1933 (15 U.S.C. 77o) is amend13 ed— 

14 (1) by striking ‘‘Every person who’’ and insert15 ing ‘‘(a) CONTROLLING PERSONS.—Every person 

16 who’’; and 

17 (2) by adding at the end the following: 

18 ‘‘(b) PROSECUTION OF PERSONS WHO AID AND ABET

19 VIOLATIONS.—For purposes of any action brought by the 

20 Commission under subparagraph (b) or (d) of section 20, 

21 any person that knowingly or recklessly provides substan22 tial assistance to another person in violation of a provision 

23 of this Act, or of any rule or regulation issued under this 

24 Act, shall be deemed to be in violation of such provision 


srobinson on DSKHWCL6B1PROD with BILLS
45 

•HR 3817 RH

1 to the same extent as the person to whom such assistance 

2 is provided.’’. 

3 (c) UNDER THE INVESTMENT COMPANY ACT OF

4 1940.—Section 48 of the Investment Company Act of 1940 

5 (15 U.S.C. 80a–48) is amended by redesignating subsection 

6 (b) as subsection (c) and inserting after subsection (a) the 

7 following: 

8 ‘‘(b) For purposes of any action brought by the Com9 mission under subsection (d) or (e) of section 42, any person 

10 that knowingly or recklessly provides substantial assistance 

11 to another person in violation of a provision of this Act, 

12 or of any rule or regulation issued under this Act, shall 

13 be deemed to be in violation of such provision to the same 

14 extent as the person to whom such assistance is provided.’’. 

15 SEC. 208. AUTHORITY TO IMPOSE PENALTIES FOR AIDING 

16 AND ABETTING VIOLATIONS OF THE INVEST17 MENT ADVISERS ACT. 

18 Section 209 of the Investment Advisers Act of 1940 (15 

19 U.S.C. 80b–9) is amended by inserting at the end the fol20 lowing new subsections: 

21 ‘‘(f) AIDING AND ABETTING.—For purposes of any ac22 tion brought by the Commission under subsection (e), any 

23 person that knowingly or recklessly has aided, abetted, 

24 counseled, commanded, induced, or procured a violation of 

25 any provision of this Act, or of any rule, regulation, or 


srobinson on DSKHWCL6B1PROD with BILLS
46 

•HR 3817 RH

1 order hereunder, shall be deemed to be in violation of such 

2 provision, rule, regulation, or order to the same extent as 

3 the person that committed such violation. 

4 ‘‘(g) ENFORCEMENT BY NATIONAL SECURITIES ASSO5 CIATIONS.—The Commission may permit or require a na6 tional securities association registered under the Securities 

7 Exchange Act of 1934 to enforce compliance by its members 

8 and persons associated with its members with the provisions 

9 of this Act, the rules and regulations thereunder, and to 

10 adopt such rules (subject to any rule or order of the Com11 mission pursuant to the Securities Exchange Act of 1934) 

12 as the association may deem necessary and in the public 

13 interest to further the purposes of this Act.’’. 

14 SEC. 209. DEADLINE FOR COMPLETING EXAMINATIONS, IN15 SPECTIONS AND ENFORCEMENT ACTIONS. 

16 The Securities Exchange Act of 1934 (15 U.S.C. 78a 

17 et seq.) is amended by inserting after section 4D (as added 

18 by section 101) the following new section: 

19 ‘‘SEC. 4E. DEADLINE FOR COMPLETING ENFORCEMENT IN20 VESTIGATIONS AND COMPLIANCE EXAMINA21 TIONS AND INSPECTIONS. 

22 ‘‘(a) ENFORCEMENT INVESTIGATIONS.— 

23 ‘‘(1) IN GENERAL.—Not later than 180 days 

24 after the date on which Commission staff provide a 

25 written Wells notification to any person, the CommisVerDate Mar 15 2010 22:39 Dec 17, 2010 Jkt 099200 PO 00000 Frm 00046 Fmt 6652 Sfmt 6203 E:\BILLS\H3817.RH H3817

srobinson on DSKHWCL6B1PROD with BILLS
47 

•HR 3817 RH

1 sion staff shall either file an action against such per2 son or provide notice to the Director of the Division 

3 of Enforcement of its intent to not file an action. 

4 ‘‘(2) EXCEPTIONS FOR CERTAIN COMPLEX AC5 TIONS.—Notwithstanding paragraph (1), if the head 

6 of any division or office within the Commission or his 

7 designee determines that a particular enforcement in8 vestigation is sufficiently complex such that a deter9 mination regarding the filing of an action against a 

10 person cannot be completed within the deadline speci11 fied in paragraph (1), the head of any division or of12 fice within the Commission or his designee may, after 

13 providing notice to the Chairman of the Commission, 

14 extend such deadline as needed for one additional 

15 180-day period. If after the additional 180-day period 

16 the head of any division or office within the Commis17 sion or his designee determines that a particular en18 forcement investigation is sufficiently complex such 

19 that a determination regarding the filing of an action 

20 against a person cannot be completed within the ad21 ditional 180-day period, the head of any division or 

22 office within the Commission or his designee may, 

23 after providing notice to and receiving approval of 

24 the Commission, extend such deadline as needed for 

25 one or more additional successive 180-day periods. 


srobinson on DSKHWCL6B1PROD with BILLS
48 

•HR 3817 RH

1 ‘‘(b) COMPLIANCE EXAMINATIONS AND INSPEC2 TIONS.— 

3 ‘‘(1) IN GENERAL.—Not later than 180 days 

4 after the date on which Commission staff completes 

5 the on-site portion of its compliance examination or 

6 inspection or receives all records requested from the 

7 entity being examined or inspected, whichever is later, 

8 Commission staff shall provide the entity being exam9 ined or inspected with written notification indicating 

10 either that the examination or inspection has con11 cluded without findings or that the staff requests the 

12 entity undertake corrective action. 

13 ‘‘(2) EXCEPTION FOR CERTAIN COMPLEX AC14 TIONS.—Notwithstanding paragraph (1), if the head 

15 of any division or office within the Commission or his 

16 designee determines that a particular compliance ex17 amination or inspection is sufficiently complex such 

18 that a determination regarding concluding the exam19 ination or inspection or regarding the staff requests 

20 the entity undertake corrective action cannot be com21 pleted within the deadline specified in paragraph (1), 

22 the head of any division or office within the Commis23 sion or his designee may, after providing notice to the 

24 Chairman of the Commission, extend such deadline as 

25 needed for one additional 180-day period.’’. 


srobinson on DSKHWCL6B1PROD with BILLS
49 

•HR 3817 RH

1 SEC. 210. NATIONWIDE SERVICE OF SUBPOENAS. 

2 (a) SECURITIES ACT OF 1933.—Section 22(a) of the 

3 Securities Act of 1933 (15 U.S.C. 77v(a)) is amended by 

4 inserting after the second sentence the following: ‘‘In any 

5 action or proceeding instituted by the Commission under 

6 this title in a United States district court for any judicial 

7 district, subpoenas issued to compel the attendance of wit8 nesses or the production of documents or tangible things (or 

9 both) at a hearing or trial may be served at any place with10 in the United States.’’. 

11 (b) SECURITIES EXCHANGE ACT OF 1934.—Section 27 

12 of the Securities Exchange Act of 1934 (15 U.S.C. 78aa) 

13 is amended by inserting after the third sentence the fol14 lowing: ‘‘In any action or proceeding instituted by the Com15 mission under this title in a United States district court 

16 for any judicial district, subpoenas issued to compel the at17 tendance of witnesses or the production of documents or tan18 gible things (or both) at a hearing or trial may be served 

19 at any place within the United States.’’. 

20 (c) INVESTMENT COMPANY ACT OF 1940.—Section 44 

21 of the Investment Company Act of 1940 (15 U.S.C. 80a– 

22 43) is amended by inserting after the fourth sentence the 

23 following: ‘‘In any action or proceeding instituted by the 

24 Commission under this title in a United States district 

25 court for any judicial district, subpoenas issued to compel 

26 the attendance of witnesses or the production of documents 


srobinson on DSKHWCL6B1PROD with BILLS
50 

•HR 3817 RH

1 or tangible things (or both) at a hearing or trial may be 

2 served at any place within the United States.’’. 

3 (d) INVESTMENT ADVISERS ACT OF 1940.—Section 

4 214 of the Investment Advisers Act of 1940 (15 U.S.C. 80b– 

5 14) is amended by inserting after the third sentence the fol6 lowing: ‘‘In any action or proceeding instituted by the Com7 mission under this title in a United States district court 

8 for any judicial district, subpoenas issued to compel the at9 tendance of witnesses or the production of documents or tan10 gible things (or both) at a hearing or trial may be served 

11 at any place within the United States.’’. 

12 SEC. 211. AUTHORITY TO IMPOSE CIVIL PENALTIES IN 

13 CEASE AND DESIST PROCEEDINGS. 

14 (a) UNDER THE SECURITIES ACT OF 1933.—Section 

15 8A of the Securities Act of 1933 (15 U.S.C. 77h–1) is 

16 amended by adding at the end the following new subsection: 

17 ‘‘(g) AUTHORITY TO IMPOSE MONEY PENALTIES.— 

18 ‘‘(1) GROUNDS FOR IMPOSING.—In any cease19 and-desist proceeding under subsection (a), the Com20 mission may impose a civil penalty on a person if it 

21 finds, on the record after notice and opportunity for 

22 hearing, that— 

23 ‘‘(A) such person— 


srobinson on DSKHWCL6B1PROD with BILLS
51 

•HR 3817 RH

1 ‘‘(i) is violating or has violated any 

2 provision of this title, or any rule or regula3 tion thereunder; or 

4 ‘‘(ii) is or was a cause of the violation 

5 of any provision of this title, or any rule or 

6 regulation thereunder; and 

7 ‘‘(B) such penalty is in the public interest. 

8 ‘‘(2) MAXIMUM AMOUNT OF PENALTY.— 

9 ‘‘(A) FIRST TIER.—The maximum amount 

10 of penalty for each act or omission described in 

11 paragraph (1) shall be $7,500 for a natural per12 son or $75,000 for any other person. 

13 ‘‘(B) SECOND TIER.—Notwithstanding 

14 paragraph (A), the maximum amount of penalty 

15 for each such act or omission shall be $75,000 for 

16 a natural person or $375,000 for any other per17 son if the act or omission described in paragraph 

18 (1) involved fraud, deceit, manipulation, or de19 liberate or reckless disregard of a regulatory re20 quirement. 

21 ‘‘(C) THIRD TIER.—Notwithstanding para22 graphs (A) and (B), the maximum amount of 

23 penalty for each such act or omission shall be 

24 $150,000 for a natural person or $725,000 for 

25 any other person if— 


srobinson on DSKHWCL6B1PROD with BILLS
52 

•HR 3817 RH

1 ‘‘(i) the act or omission described in 

2 paragraph (1) involved fraud, deceit, ma3 nipulation, or deliberate or reckless dis4 regard of a regulatory requirement; and 

5 ‘‘(ii) such act or omission directly or 

6 indirectly resulted in substantial losses or 

7 created a significant risk of substantial 

8 losses to other persons or resulted in sub9 stantial pecuniary gain to the person who 

10 committed the act or omission. 

11 ‘‘(3) EVIDENCE CONCERNING ABILITY TO PAY.— 

12 In any proceeding in which the Commission may im13 pose a penalty under this section, a respondent may 

14 present evidence of the respondent’s ability to pay 

15 such penalty. The Commission may, in its discretion, 

16 consider such evidence in determining whether such 

17 penalty is in the public interest. Such evidence may 

18 relate to the extent of such person’s ability to continue 

19 in business and the collectability of a penalty, taking 

20 into account any other claims of the United States or 

21 third parties upon such person’s assets and the 

22 amount of such person’s assets.’’. 

23 (b) UNDER THE SECURITIES EXCHANGE ACT OF

24 1934.—Subsection (a) of section 21B of the Securities Ex25 change Act of 1934 (15 U.S.C. 78u–2(a)) is amended— 


srobinson on DSKHWCL6B1PROD with BILLS
53 

•HR 3817 RH

1 (1) by striking ‘‘(a) COMMISSION AUTHORITY TO

2 ASSESS MONEY PENALTIES.—In any proceeding’’ 

3 and inserting the following: 

4 ‘‘(a) COMMISSION AUTHORITY TO ASSESS MONEY

5 PENALTIES.— 

6 ‘‘(1) IN GENERAL.—In any proceeding’’; 

7 (2) by redesignating paragraphs (1) through (4) 

8 of such subsection as subparagraphs (A) through (D), 

9 respectively, and moving such redesignated subpara10 graphs and the matter following such subparagraphs 

11 2 ems to the right; and 

12 (3) by adding at the end of such subsection the 

13 following new paragraph: 

14 ‘‘(2) CEASE-AND-DESIST PROCEEDINGS.—In any 

15 proceeding instituted pursuant to section 21C of this 

16 title against any person, the Commission may impose 

17 a civil penalty if it finds, on the record after notice 

18 and opportunity for hearing, that such person— 

19 ‘‘(A) is violating or has violated any provi20 sion of this title, or any rule or regulation there21 under; or 

22 ‘‘(B) is or was a cause of the violation of 

23 any provision of this title, or any rule or regula24 tion thereunder.’’. 


srobinson on DSKHWCL6B1PROD with BILLS
54 

•HR 3817 RH

1 (c) UNDER THE INVESTMENT COMPANY ACT OF

2 1940.—Paragraph (1) of section 9(d) of the Investment 

3 Company Act of 1940 (15 U.S.C. 80a–9(d)(1)) is amend4 ed— 

5 (1) by striking ‘‘(1) AUTHORITY OF COMMIS6 SION.—In any proceeding’’ and inserting the fol7 lowing: 

8 ‘‘(1) AUTHORITY OF COMMISSION.— 

9 ‘‘(A) IN GENERAL.—In any proceeding’’; 

10 (2) by redesignating subparagraphs (A) through 

11 (C) of such paragraph as clauses (i) through (iii), re12 spectively, and by moving such redesignated clauses 

13 and the matter following such subparagraphs 2 ems 

14 to the right; and 

15 (3) by adding at the end of such paragraph the 

16 following new subparagraph: 

17 ‘‘(B) CEASE-AND-DESIST PROCEEDINGS.— 

18 In any proceeding instituted pursuant to sub19 section (f) against any person, the Commission 

20 may impose a civil penalty if it finds, on the 

21 record after notice and opportunity for hearing, 

22 that such person— 

23 ‘‘(i) is violating or has violated any 

24 provision of this title, or any rule or regula25 tion thereunder; or 


srobinson on DSKHWCL6B1PROD with BILLS
55 

•HR 3817 RH

1 ‘‘(ii) is or was a cause of the violation 

2 of any provision of this title, or any rule or 

3 regulation thereunder.’’. 

4 (d) UNDER THE INVESTMENT ADVISERS ACT OF

5 1940.—Paragraph (1) of section 203(i) of the Investment 

6 Advisers Act of 1940 (15 U.S.C. 80b–3(i)(1)) is amended— 

7 (1) by striking ‘‘(1) AUTHORITY OF COMMIS8 SION.—In any proceeding’’ and inserting the fol9 lowing: 

10 ‘‘(1) AUTHORITY OF COMMISSION.— 

11 ‘‘(A) IN GENERAL.—In any proceeding’’; 

12 (2) by redesignating subparagraphs (A) through 

13 (D) of such paragraph as clauses (i) through (iv), re14 spectively, and moving such redesignated clauses and 

15 the matter following such subparagraphs 2 ems to the 

16 right; and 

17 (3) by adding at the end of such paragraph the 

18 following new subparagraph: 

19 ‘‘(B) CEASE-AND-DESIST PROCEEDINGS.— 

20 In any proceeding instituted pursuant to sub21 section (k) against any person, the Commission 

22 may impose a civil penalty if it finds, on the 

23 record after notice and opportunity for hearing, 

24 that such person— 


srobinson on DSKHWCL6B1PROD with BILLS
56 

•HR 3817 RH

1 ‘‘(i) is violating or has violated any 

2 provision of this title, or any rule or regula3 tion thereunder; or 

4 ‘‘(ii) is or was a cause of the violation 

5 of any provision of this title, or any rule or 

6 regulation thereunder.’’. 

7 SEC. 212. FORMERLY ASSOCIATED PERSONS. 

8 (a) MEMBER OR EMPLOYEE OF THE MUNICIPAL SECU9 RITIES RULEMAKING BOARD.—Section 15B(c)(8) of the Se10 curities Exchange Act of 1934 (15 U.S.C. 78o–4(c)(8)) is 

11 amended by striking ‘‘any member or employee’’ and insert12 ing ‘‘any person who is, or at the time of the alleged mis13 conduct was, a member or employee’’. 

14 (b) PERSON ASSOCIATED WITH A GOVERNMENT SECU15 RITIES BROKER OR DEALER.—Section 15C of the Securities 

16 Exchange Act of 1934 (15 U.S.C. 78o–5) is amended— 

17 (1) in subsection (c)(1)(C), by striking ‘‘or seek18 ing to become associated,’’ and inserting ‘‘seeking to 

19 become associated, or, at the time of the alleged mis20 conduct, associated or seeking to become associated’’; 

21 (2) in subsection (c)(2)(A), by inserting ‘‘, seek22 ing to become associated, or, at the time of the alleged 

23 misconduct, associated or seeking to become associ24 ated’’ after ‘‘any person associated’’; and 


srobinson on DSKHWCL6B1PROD with BILLS
57 

•HR 3817 RH

1 (3) in subsection (c)(2)(B), by inserting ‘‘, seek2 ing to become associated, or, at the time of the alleged 

3 misconduct, associated or seeking to become associ4 ated’’ after ‘‘any person associated’’. 

5 (c) PERSON ASSOCIATED WITH A MEMBER OF A NA6 TIONAL SECURITIES EXCHANGE OR REGISTERED SECURI7 TIES ASSOCIATION.—Section 21(a)(1) of the Securities Ex8 change Act of 1934 (15 U.S.C. 78u(a)(1)) is amended by 

9 inserting ‘‘, or, as to any act or practice, or omission to 

10 act, while associated with a member, formerly associated’’ 

11 after ‘‘member or a person associated’’. 

12 (d) PARTICIPANT OF A REGISTERED CLEARING AGEN13 CY.—Section 21(a)(1) of the Securities Exchange Act of 

14 1934 (15 U.S.C. 78u(a)(1)) is amended by inserting ‘‘or, 

15 as to any act or practice, or omission to act, while a partic16 ipant, was a participant,’’ after ‘‘in which such person is 

17 a participant,’’. 

18 (e) OFFICER OR DIRECTOR OF A SELF-REGULATORY

19 ORGANIZATION.—Section 19(h)(4) of the Securities Ex20 change Act of 1934 (15 U.S.C. 78s(h)(4)) is amended— 

21 (1) by striking ‘‘any officer or director’’ and in22 serting ‘‘any person who is, or at the time of the al23 leged misconduct was, an officer or director’’; and 

24 (2) by striking ‘‘such officer or director’’ and in25 serting ‘‘such person’’. 


srobinson on DSKHWCL6B1PROD with BILLS
58 

•HR 3817 RH

1 (f) OFFICER OR DIRECTOR OF AN INVESTMENT COM2 PANY.—Section 36(a) of the Investment Company Act of 

3 1940 (15 U.S.C. 80a–35(a)) is amended— 

4 (1) by striking ‘‘a person serving or acting’’ and 

5 inserting ‘‘a person who is, or at the time of the al6 leged misconduct was, serving or acting’’; and 

7 (2) by striking ‘‘such person so serves or acts’’ 

8 and inserting ‘‘such person so serves or acts, or at the 

9 time of the alleged misconduct, so served or acted’’. 

10 (g) PERSON ASSOCIATED WITH A PUBLIC ACCOUNT11 ING FIRM.— 

12 (1) SARBANES-OXLEY ACT OF 2002 AMEND13 MENT.—Section 2(a)(9) of the Sarbanes-Oxley Act of 

14 2002 (15 U.S.C. 7201(9)) is amended by adding at 

15 the end the following new subparagraph: 

16 ‘‘(C) INVESTIGATIVE AND ENFORCEMENT

17 AUTHORITY.—For purposes of the provisions of 

18 sections 3(c), 101(c), 105, and 107(c) and Board 

19 or Commission rules thereunder, except to the ex20 tent specifically excepted by such rules, the terms 

21 defined in subparagraph (A) shall include any 

22 person associated, seeking to become associated, 

23 or formerly associated with a public accounting 

24 firm, except— 


srobinson on DSKHWCL6B1PROD with BILLS
59 

•HR 3817 RH

1 ‘‘(i) the authority to conduct an inves2 tigation of such person under section 105(b) 

3 shall apply only with respect to any act or 

4 practice, or omission to act, while such per5 son was associated or seeking to become as6 sociated with a registered public accounting 

7 firm; and 

8 ‘‘(ii) the authority to commence a pro9 ceeding under section 105(c)(1), or impose 

10 disciplinary sanctions under section 

11 105(c)(4), against such person shall apply 

12 only on— 

13 ‘‘(I) the basis of conduct occurring 

14 while such person was associated or 

15 seeking to become associated with a 

16 registered public accounting firm; or 

17 ‘‘(II) non-cooperation as described 

18 in section 105(b)(3) with respect to a 

19 demand in a Board investigation for 

20 testimony, documents, or other infor21 mation relating to a period when such 

22 person was associated or seeking to be23 come associated with a registered pub24 lic accounting firm.’’. 


srobinson on DSKHWCL6B1PROD with BILLS
60 

•HR 3817 RH

1 (2) SECURITIES EXCHANGE ACT OF 1934 AMEND2 MENT.—Section 21(a)(1) of the Securities Exchange 

3 Act of 1934 (15 U.S.C. 78u(a)(1)) is amended by 

4 striking ‘‘or a person associated with such a firm’’ 

5 and inserting ‘‘, a person associated with such a firm, 

6 or, as to any act, practice, or omission to act while 

7 associated with such firm, a person formerly associ8 ated with such a firm’’. 

9 (h) SUPERVISORY PERSONNEL OF AN AUDIT FIRM.— 

10 Section 105(c)(6) of the Sarbanes-Oxley Act of 2002 (15 

11 U.S.C. 7215(c)(6)) is amended— 

12 (1) in subparagraph (A), by striking ‘‘the super13 visory personnel’’ and inserting ‘‘any person who is, 

14 or at the time of the alleged failure reasonably to su15 pervise was, a supervisory person’’; and 

16 (2) in subparagraph (B)— 

17 (A) by striking ‘‘No associated person’’ and 

18 inserting ‘‘No current or former supervisory per19 son’’; and 

20 (B) by striking ‘‘any other person’’ and in21 serting ‘‘any associated person’’. 

22 (i) MEMBER OF THE PUBLIC COMPANY ACCOUNTING

23 OVERSIGHT BOARD.—Section 107(d)(3) of the Sarbanes24 Oxley Act of 2002 (15 U.S.C. 7217(d)(3)) is amended by 


srobinson on DSKHWCL6B1PROD with BILLS
61 

•HR 3817 RH

1 striking ‘‘any member’’ and inserting ‘‘any person who is, 

2 or at the time of the alleged misconduct was, a member’’. 

3 SEC. 213. SHARING PRIVILEGED INFORMATION WITH 

4 OTHER AUTHORITIES. 

5 Section 24 of the Securities Exchange Act of 1934 (15 

6 U.S.C. 78x) is amended— 

7 (1) by redesignating subsections (d) and (e) as 

8 subsections (e) and (f), respectively; 

9 (2) in subsection (e), as redesignated, by striking 

10 ‘‘as provided in subsection (e)’’ and inserting ‘‘as pro11 vided in subsection (f)’’; and 

12 (3) by inserting after subsection (c) the following 

13 new subsection: 

14 ‘‘(d) SHARING PRIVILEGED INFORMATION WITH

15 OTHER AUTHORITIES.— 

16 ‘‘(1) PRIVILEGED INFORMATION PROVIDED BY

17 THE COMMISSION.—The Commission shall not be 

18 deemed to have waived any privilege applicable to 

19 any information by transferring that information to 

20 or permitting that information to be used by— 

21 ‘‘(A) any agency (as defined in section 6 of 

22 title 18, United States Code); 

23 ‘‘(B) any foreign securities authority; 

24 ‘‘(C) the Public Company Accounting Over25 sight Board; 


srobinson on DSKHWCL6B1PROD with BILLS
62 

•HR 3817 RH

1 ‘‘(D) any self-regulatory organization; 

2 ‘‘(E) any foreign law enforcement author3 ity; or 

4 ‘‘(F) any State securities or law enforce5 ment authority. 

6 ‘‘(2) NON-DISCLOSURE OF PRIVILEGED INFORMA7 TION PROVIDED TO THE COMMISSION.—Except as 

8 provided in subsection (f), the Commission shall not 

9 be compelled to disclose privileged information ob10 tained from any foreign securities authority, or for11 eign law enforcement authority, if the authority has 

12 in good faith determined and represented to the Com13 mission that the information is privileged. 

14 ‘‘(3) NON-WAIVER OF PRIVILEGED INFORMATION

15 PROVIDED TO THE COMMISSION.— 

16 ‘‘(A) IN GENERAL.—Federal agencies, State 

17 securities and law enforcement authorities, self18 regulatory organizations, and the Public Com19 pany Accounting Oversight Board shall not be 

20 deemed to have waived any privilege applicable 

21 to any information by transferring that informa22 tion to or permitting that information to be used 

23 by the Commission. 

24 ‘‘(B) EXCEPTION WITH RESPECT TO CER25 TAIN ACTIONS.—The provisions of subparagraph 


srobinson on DSKHWCL6B1PROD with BILLS
63 

•HR 3817 RH

1 (A) shall not apply to a self-regulatory organiza2 tion or the Public Company Accounting Over3 sight Board with respect to information used by 

4 the Commission in an action against such orga5 nization. 

6 ‘‘(4) DEFINITIONS.—For purposes of this sub7 section: 

8 ‘‘(A) The term ‘privilege’ includes any 

9 work-product privilege, attorney-client privilege, 

10 governmental privilege, or other privilege recog11 nized under Federal, foreign, or State law. 

12 ‘‘(B) The term ‘foreign law enforcement au13 thority’ means any foreign authority that is em14 powered under foreign law to detect, investigate 

15 or prosecute potential violations of law. 

16 ‘‘(C) The term ‘State securities or law en17 forcement authority’ means the authority of any 

18 State or territory that is empowered under State 

19 or territory law to detect, investigate or pros20 ecute potential violations of law.’’. 

21 SEC. 214. EXPANDED ACCESS TO GRAND JURY MATERIAL. 

22 (a) IN GENERAL.—Title VI of the Sarbanes-Oxley Act 

23 of 2002 is amended by adding at the end the following new 

24 section: 


srobinson on DSKHWCL6B1PROD with BILLS
64 

•HR 3817 RH

1 ‘‘SEC. 605. ACCESS TO GRAND JURY INFORMATION. 

2 ‘‘(a) DISCLOSURE.— 

3 ‘‘(1) IN GENERAL.—Upon motion of an attorney 

4 for the government, a court may direct disclosure of 

5 matters occurring before a grand jury during an in6 vestigation of conduct that may constitute a violation 

7 of any provision of the securities laws to the Commis8 sion for use in relation to any matter within the ju9 risdiction of the Commission. 

10 ‘‘(2) SUBSTANTIAL NEED REQUIRED.—A court 

11 may issue an order under paragraph (1) only upon 

12 a finding of a substantial need in the public interest. 

13 ‘‘(b) USE OF MATTER.—A person to whom a matter 

14 has been disclosed under this section shall not use such mat15 ter other than for the purpose for which such disclosure was 

16 authorized. 

17 ‘‘(c) DEFINITIONS.—As used in this section, the terms 

18 ‘attorney for the government’ and ‘grand jury information’ 

19 have the meanings given to those terms in section 3322 of 

20 title 18, United States Code.’’. 

21 (b) CONFORMING AMENDMENT.—The table of contents 

22 in section 1(b) of the Sarbanes-Oxley Act of 2002 is amend23 ed by inserting after the item relating to section 604 the 

24 following: 

‘‘Sec. 605. Access to grand jury information.’’. 


srobinson on DSKHWCL6B1PROD with BILLS
65 

•HR 3817 RH

1 SEC. 215. AIDING AND ABETTING STANDARD OF KNOWL2 EDGE SATISFIED BY RECKLESSNESS. 

3 Section 20(e) of the Securities Exchange Act of 1934 

4 (15 U.S.C. 78t(e)) is amended by inserting ‘‘or recklessly’’ 

5 after ‘‘knowingly’’. 

6 SEC. 216. EXTRATERRITORIAL JURISDICTION OF THE ANTI7 FRAUD PROVISIONS OF THE FEDERAL SECU8 RITIES LAWS. 

9 (a) UNDER THE SECURITIES ACT OF 1933.—Section 

10 22 of the Securities Act of 1933 (15 U.S.C. 77v(a)) is 

11 amended by adding at the end the following new subsection: 

12 ‘‘(c) EXTRATERRITORIAL JURISDICTION.—The juris13 diction of the district courts of the United States and the 

14 United States courts of any Territory described under sub15 section (a) includes violations of section 17(a), and all suits 

16 in equity and actions at law under that section, involv17 ing— 

18 ‘‘(1) conduct within the United States that con19 stitutes significant steps in furtherance of the viola20 tion, even if the securities transaction occurs outside 

21 the United States and involves only foreign investors; 

22 or 

23 ‘‘(2) conduct occurring outside the United States 

24 that has a foreseeable substantial effect within the 

25 United States.’’. 


srobinson on DSKHWCL6B1PROD with BILLS
66 

•HR 3817 RH

1 (b) UNDER THE SECURITIES EXCHANGE ACT OF

2 1934.—Section 27 of the Securities Exchange Act of 1934 

3 (15 U.S.C. 78aa) is amended— 

4 (1) by striking ‘‘The district’’ and inserting the 

5 following: 

6 ‘‘(a) IN GENERAL.—The district’’; and 

7 (2) by inserting at the end the following new 

8 subsection: 

9 ‘‘(b) EXTRATERRITORIAL JURISDICTION.—The juris10 diction of the district courts of the United States and the 

11 United States courts of any Territory or other place subject 

12 to the jurisdiction of the United States described under sub13 section (a) includes violations of the antifraud provisions 

14 of this title, and all suits in equity and actions at law under 

15 those provisions, involving— 

16 ‘‘(1) conduct within the United States that con17 stitutes significant steps in furtherance of the viola18 tion, even if the securities transaction occurs outside 

19 the United States and involves only foreign investors; 

20 or 

21 ‘‘(2) conduct occurring outside the United States 

22 that has a foreseeable substantial effect within the 

23 United States.’’. 


srobinson on DSKHWCL6B1PROD with BILLS
67 

•HR 3817 RH

1 (c) UNDER THE INVESTMENT ADVISERS ACT OF

2 1940.—Section 214 of the Investment Advisers Act of 1940 

3 (15 U.S.C. 80b–14) is amended— 

4 (1) by striking ‘‘The district’’ and inserting the 

5 following: 

6 ‘‘(a) IN GENERAL.—The district’’; and 

7 (2) by inserting at the end the following new 

8 subsection: 

9 ‘‘(b) EXTRATERRITORIAL JURISDICTION.—The juris10 diction of the district courts of the United States and the 

11 United States courts of any Territory or other place subject 

12 to the jurisdiction of the United States described under sub13 section (a) includes violations of section 206, and all suits 

14 in equity and actions at law under that section, involv15 ing— 

16 ‘‘(1) conduct within the United States that con17 stitutes significant steps in furtherance of the viola18 tion, even if the violation is committed by a foreign 

19 adviser and involves only foreign investors; or 

20 ‘‘(2) conduct occurring outside the United States 

21 that has a foreseeable substantial effect within the 

22 United States.’’. 

23 SEC. 217. FIDELITY BONDING. 

24 Section 17(g) of the Investment Company Act of 1940 

25 (15 U.S.C. 80a–17(g)) is amended to read as follows: 


srobinson on DSKHWCL6B1PROD with BILLS
68 

•HR 3817 RH

1 ‘‘(g) FIDELITY BONDING.— 

2 ‘‘(1) IN GENERAL.—The Commission is author3 ized to require that a registered management com4 pany provide and maintain a fidelity bond against 

5 loss as to any officer or employee who has access to 

6 securities or funds of the company, either directly or 

7 through authority to draw upon such funds or to di8 rect generally the disposition of such securities (unless 

9 the officer or employee has such access solely through 

10 his position as an officer or employee of a bank), in 

11 such form and amount as the Commission may pre12 scribe by rule, regulation, or order for the protection 

13 of investors. 

14 ‘‘(2) DEFINITIONS.—For purposes of this sub15 section: 

16 ‘‘(A) MANAGEMENT COMPANY.—The term 

17 ‘management company’ has the meaning given 

18 such term under section 4 of the Investment 

19 Company Act of 1940. 

20 ‘‘(B) OFFICER OR EMPLOYEE.—The term 

21 ‘officer or employee’ means— 

22 ‘‘(i) any officer or employee of the 

23 management company; and; 

24 ‘‘(ii) any officer or employee of any in25 vestment adviser to the management comVerDate Mar 15 2010 22:39 Dec 17, 2010 Jkt 099200 PO 00000 Frm 00068 Fmt 6652 Sfmt 6203 E:\BILLS\H3817.RH H3817

srobinson on DSKHWCL6B1PROD with BILLS
69 

•HR 3817 RH

1 pany, or of any affiliated company of any 

2 such investment adviser, as the Commission 

3 may prescribe by rule, regulation, or order 

4 for the protection of investors. 

5 ‘‘(C) OTHER DEFINITIONS.—The terms ‘af6 filiated company’ and ‘investment adviser’ shall 

7 have the meaning given such terms under section 

8 2 of the Investment Company Act of 1940.’’. 

9 SEC. 218. ENHANCED SEC AUTHORITY TO CONDUCT SUR10 VEILLANCE AND RISK ASSESSMENT. 

11 (a) SECURITIES EXCHANGE ACT OF 1934 AMEND12 MENTS.—Section 17(b) of the Securities Exchange Act of 

13 1934 (15 U.S.C. 78q(b)) is amended by adding at the end 

14 the following new paragraph: 

15 ‘‘(5) SURVEILLANCE AND RISK ASSESSMENT.— 

16 All persons described in subsection (a) of this section 

17 are subject at any time, or from time to time, to such 

18 reasonable periodic, special, or other information and 

19 document requests by representatives of the Commis20 sion as the Commission by rule or order deems nec21 essary or appropriate to conduct surveillance or risk 

22 assessments of the securities markets, persons reg23 istered with the Commission under this title, or other24 wise in furtherance of the purposes of this title.’’. 


srobinson on DSKHWCL6B1PROD with BILLS
70 

•HR 3817 RH

1 (b) INVESTMENT COMPANY ACT OF 1940 AMEND2 MENTS.—Section 31(b) of the Investment Company Act of 

3 1940 (15 U.S.C. 80a–30(b)), as amended by section 

4 106(a)(2), is further amended by adding at the end the fol5 lowing new paragraph: 

6 ‘‘(5) SURVEILLANCE AND RISK ASSESSMENT.— 

7 All persons described in paragraph (1) are subject at 

8 any time, or from time to time, to such reasonable 

9 periodic, special, or other information and document 

10 requests by representatives of the Commission as the 

11 Commission by rule or order deems necessary or ap12 propriate to conduct surveillance or risk assessments 

13 of the securities markets, persons registered with the 

14 Commission under this title, or otherwise in further15 ance of the purposes of this title.’’. 

16 (c) INVESTMENT ADVISERS ACT OF 1940 AMEND17 MENTS.—Section 204 of the Investment Advisers Act of 

18 1940 (15 U.S.C. 80b–4), as amended by section 106(b), is 

19 further amended by adding at the end the following new 

20 subsection: 

21 ‘‘(e) SURVEILLANCE AND RISK ASSESSMENT.—All per22 sons described in subsection (a) are subject at any time, 

23 or from time to time, to such reasonable periodic, special, 

24 or other information and document requests by representa25 tives of the Commission as the Commission by rule or order 


srobinson on DSKHWCL6B1PROD with BILLS
71 

•HR 3817 RH

1 deems necessary or appropriate to conduct surveillance or 

2 risk assessments of the securities markets, persons registered 

3 with the Commission under this title, or otherwise in fur4 therance of the purposes of this title.’’. 

5 SEC. 219. INVESTMENT COMPANY EXAMINATIONS. 

6 Section 31(b)(1) of the Investment Company Act of 

7 1940 (15 U.S.C. 80a–30) is amended to read as follows: 

8 ‘‘(1) IN GENERAL.—All records of each registered 

9 investment company, and each underwriter, broker, 

10 dealer, or investment adviser that is a majority11 owned subsidiary of such a company, shall be subject 

12 at any time, or from time to time, to such reasonable 

13 periodic, special, or other examinations by representa14 tives of the Commission as the Commission deems 

15 necessary or appropriate in the public interest or for 

16 the protection of investors.’’. 

17 SEC. 220. CONTROL PERSON LIABILITY UNDER THE SECURI18 TIES EXCHANGE ACT. 

19 Section 20(a) of the Securities Exchange Act of 1934 

20 (15 U.S.C. 78t(a)) is amended by inserting after ‘‘controlled 

21 person is liable,’’ the following: ‘‘including to the Commis22 sion in any action brought under paragraph (1) or (3) of 

23 section 21(d),’’. 


srobinson on DSKHWCL6B1PROD with BILLS
72 

•HR 3817 RH

1 SEC. 221. ENHANCED APPLICATION OF ANTI-FRAUD PROVI2 SIONS. 

3 The Securities Exchange Act of 1934 (15 U.S.C. 78a 

4 et seq.) is amended— 

5 (1) in section 9— 

6 (A) by striking ‘‘registered on a national se7 curities exchange’’ each place it appears and in8 serting ‘‘other than a government security’’; 

9 (B) in subsection (b), by striking ‘‘by use of 

10 any facility of a national securities exchange,’’; 

11 and 

12 (C) in subsection (c), by inserting after 

13 ‘‘unlawful for any’’ the following: ‘‘broker, deal14 er, or’’; 

15 (2) in section 10(a)(1), by striking ‘‘registered on 

16 a national securities exchange’’ and inserting ‘‘other 

17 than a government security’’; and 

18 (3) in section 15(c)(1)(A), by striking ‘‘otherwise 

19 than on a national securities exchange of which it is 

20 a member’’. 

21 SEC. 222. SEC AUTHORITY TO ISSUE RULES ON PROXY AC22 CESS. 

23 Section 14(a) of the Securities Exchange Act of 1934 

24 (15 U.S.C. 78n(a)) is amended— 

25 (1) by inserting ‘‘(1)’’ after ‘‘(a)’’; and 

26 (2) by adding at the end the following: 


srobinson on DSKHWCL6B1PROD with BILLS
73 

•HR 3817 RH

1 ‘‘(2) The authority of the Commission to prescribe 

2 rules and regulations under paragraph (1) includes rules 

3 and regulations that require the inclusion and set proce4 dures relating to the inclusion, in a solicitation of a proxy 

5 or consent or authorization by or on behalf of an issuer, 

6 of a nominee or nominees submitted by shareholders to serve 

7 on the issuer’s board of directors.’’. 

8 TITLE III—COMMISSION 

9 FUNDING AND ORGANIZATION 

10 SEC. 301. AUTHORIZATION OF APPROPRIATIONS. 

11 Section 35 of the Securities Exchange Act of 1934 (15 

12 U.S.C. 78kk) is amended to read as follows: 

13 ‘‘SEC. 35. AUTHORIZATION OF APPROPRIATIONS. 

14 ‘‘In addition to any other funds authorized to be ap15 propriated to the Commission, there are authorized to be 

16 appropriated to carry out the functions, powers, and duties 

17 of the Commission— 

18 ‘‘(1) for fiscal year 2010, $1,115,000,000; 

19 ‘‘(2) for fiscal year 2011, $1,300,000,000; 

20 ‘‘(3) for fiscal year 2012, $1,500,000,000; 

21 ‘‘(4) for fiscal year 2013, $1,750,000,000; 

22 ‘‘(5) for fiscal year 2014, $2,000,000,000; and 

23 ‘‘(6) for fiscal year 2015, $2,250,000,000.’’. 


srobinson on DSKHWCL6B1PROD with BILLS
74 

•HR 3817 RH

1 SEC. 302. INVESTMENT ADVISER REGULATION FUNDING. 

2 Section 203 of the Investment Advisers Act of 1940 (15 

3 U.S.C. 80b–3) is amended by adding at the end the fol4 lowing new subsection: 

5 ‘‘(l) ANNUAL ASSESSMENT.— 

6 ‘‘(1) IN GENERAL.—The Commission shall, in 

7 accordance with this subsection, promulgate rules 

8 pursuant to which it may collect from investment ad9 visers required to register with the Commission under 

10 this title, fees designed to help recover the cost of in11 spections and examinations of registered investment 

12 advisers conducted by the Commission pursuant to 

13 this title. 

14 ‘‘(2) FEE PAYMENT REQUIRED.—An investment 

15 adviser shall, at the time of registration with the 

16 Commission, and each fiscal year thereafter during 

17 which such adviser is so registered, pay to the Com18 mission a fair and reasonable fee determined by the 

19 Commission. In determining such fee, the Commission 

20 shall consider objective factors such as— 

21 ‘‘(A) the investment adviser’s size; 

22 ‘‘(B) the number of clients of the investment 

23 adviser; 

24 ‘‘(C) the types of clients of the investment 

25 adviser; and 


srobinson on DSKHWCL6B1PROD with BILLS
75 

•HR 3817 RH

1 ‘‘(D) such other relevant factors as the Com2 mission determines to be appropriate. 

3 ‘‘(3) AMOUNT AND USE OF FEES.— 

4 ‘‘(A) MINIMUM AGGREGATE AMOUNT.—The 

5 aggregate amount of fees determined by the Com6 mission under this subsection for any fiscal year 

7 shall be greater than the amount the Commission 

8 spent on inspections and examinations of reg9 istered investment advisers during the 2009 fis10 cal year. 

11 ‘‘(B) EXCESS FEES.—The Commission may 

12 retain any excess fees collected under this sub13 section during a fiscal year for application to14 wards the costs of inspections and examinations 

15 of investment advisers in future fiscal years. 

16 ‘‘(4) REVIEW AND ADJUSTMENT OF FEES.—The 

17 Commission may review fee rates established pursu18 ant to this section before the end of any fiscal year 

19 and make any appropriate adjustments prior to col20 lecting any such fee in the following fiscal year. 

21 ‘‘(5) PENALTY FEE.—The Commission shall pre22 scribe by rule or regulation an additional fee to be as23 sessed as a penalty for late payment of fees required 

24 by this subsection. 


srobinson on DSKHWCL6B1PROD with BILLS
76 

•HR 3817 RH

1 ‘‘(6) JUDICIAL REVIEW.—Increases or decreases 

2 in fees made pursuant to this section shall not be sub3 ject to judicial review.’’. 

4 SEC. 303. AMENDMENTS TO SECTION 31 OF THE SECURI5 TIES EXCHANGE ACT OF 1934. 

6 Section 31 of the Securities Exchange Act of 1934 (15 

7 U.S.C. 78ee) is amended— 

8 (1) in subsection (e)(2), by striking ‘‘September 

9 30’’ and inserting ‘‘September 25’’; 

10 (2) in subsection (g), by striking ‘‘April 30’’ and 

11 inserting ‘‘August 31’’; and 

12 (3) in subsection (j)(2)— 

13 (A) by striking ‘‘5 months’’ and inserting 

14 ‘‘4 months’’; and 

15 (B) by striking ‘‘(including fees collected 

16 during such 5-month period and assessments col17 lected under subsection (d))’’ and inserting ‘‘(in18 cluding fees estimated to be collected under sub19 sections (b) and (c) prior to the effective date of 

20 the uniform adjusted rate and assessments esti21 mated to be collected under subsection (d))’’. 

22 SEC. 304. COMMISSION ORGANIZATIONAL STUDY AND RE23 FORM. 

24 (a) STUDY REQUIRED.— 


srobinson on DSKHWCL6B1PROD with BILLS
77 

•HR 3817 RH

1 (1) IN GENERAL.—Not later than the end of the 

2 90-day period beginning on the date of the enactment 

3 of this Act, the Securities and Exchange Commission 

4 (hereinafter in this section referred to as the ‘‘SEC’’) 

5 shall hire an independent consultant of high caliber 

6 and with expertise in organizational restructuring 

7 and the operations of capital markets to examine the 

8 internal operations, structure, funding, and the need 

9 for comprehensive reform of the SEC, as well as the 

10 SEC’s relationship with the reliance on self-regu11 latory organizations and other entities relevant to the 

12 regulation of securities and the protection of securities 

13 investors that are under the SEC’s oversight. 

14 (2) SPECIFIC AREAS FOR STUDY.—The study re15 quired under paragraph (1) shall, at a minimum, in16 clude the study of— 

17 (A) the possible elimination of unnecessary 

18 or redundant units at the SEC; 

19 (B) improving communications between 

20 SEC offices and divisions; 

21 (C) the need to put in place a clear chain22 of-command structure, particularly for enforce23 ment examinations and compliance inspections; 

24 (D) the effect of high-frequency trading and 

25 other technological advances on the market and 


srobinson on DSKHWCL6B1PROD with BILLS
78 

•HR 3817 RH

1 what the SEC requires to monitor the effect of 

2 such trading and advances on the market; 

3 (E) the SEC’s hiring authorities, workplace 

4 policies, and personal practices, including— 

5 (i) whether there is a need to further 

6 streamline hiring authorities for those who 

7 are not lawyers, accountants, compliance 

8 examiners, or economists; 

9 (ii) whether there is a need for further 

10 pay reforms; 

11 (iii) the diversity of skill sets of SEC 

12 employees and whether the present skill set 

13 diversity efficiently and effectively fosters 

14 the SEC’s mission of investor protection; 

15 and 

16 (iv) the application of civil service 

17 laws by the SEC; 

18 (F) whether the SEC’s oversight and reli19 ance on self-regulatory organizations promotes 

20 efficient and effective governance for the securi21 ties markets; and 

22 (G) whether adjusting the SEC’s reliance on 

23 self-regulatory organizations is necessary to pro24 mote more efficient and effective governance for 

25 the securities markets. 


srobinson on DSKHWCL6B1PROD with BILLS
79 

•HR 3817 RH

1 (b) CONSULTANT REPORT.—Not later than the end of 

2 the 150-day period after being retained, the independent 

3 consultant hired pursuant to subsection (a)(1) shall issue 

4 a report to the SEC and the Congress containing— 

5 (1) a detailed description of any findings and 

6 conclusions made while carrying out the study re7 quired under subsection (a)(1); 

8 (2) recommendations for legislative, regulatory, 

9 or administrative action that the consultant deter10 mines appropriate to enable the SEC and other enti11 ties on which it reports to perform their statutorily 

12 or otherwise mandated missions. 

13 (c) SEC REPORT.—Not later than the end of the 6- 

14 month period beginning on the date the consultant issues 

15 the report under subsection (b), and every 6-months there16 after during the 2-year period following the date on which 

17 the consultant issues such report, the SEC shall issue a re18 port to the Committee on Financial Services of the House 

19 of Representatives and the Committee on Banking, Hous20 ing, and Urban Affairs of the Senate describing the SEC’s 

21 implementation of the regulatory and administrative rec22 ommendations contained in the consultant’s report. 

23 SEC. 305. CAPITAL MARKETS SAFETY BOARD. 

24 There is established within the Securities and Ex25 change Commission an office to be known as the Capital 


srobinson on DSKHWCL6B1PROD with BILLS
80 

•HR 3817 RH

1 Markets Safety Board whose purpose shall be to conduct 

2 investigations, at the direction of the Commission, of failed 

3 institutions registered with the Commission, to determine 

4 what caused such institutions to fail. Upon the conclusion 

5 of an investigation, the Board shall make available on the 

6 Commission’s website a report of its findings, including rec7 ommendations regarding how others can avoid similar mis8 takes. No information that may compromise an ongoing 

9 Federal investigation shall be made available in any such 

10 report. 

11 SEC. 306. REPORT ON IMPLEMENTATION OF ‘‘POST-MADOFF 

12 REFORMS’’. 

13 (a) IN GENERAL.—Not later than 6 months after the 

14 date of the enactment of this Act, the Securities and Ex15 change Commission shall provide to the Committee on Fi16 nancial Services of the House of Representatives and the 

17 Committee on Banking, Housing, and Urban Affairs of the 

18 Senate a report describing the implementation of reforms 

19 outlined by the Commission in the wake of the discovery 

20 of fraud by Bernie Madoff. 

21 (b) CONTENTS OF REPORT.—The report required by 

22 subsection (a) shall include an analysis of— 

23 (1) how many of the post-Madoff reforms have 

24 been implemented and to what extent; and 


srobinson on DSKHWCL6B1PROD with BILLS
81 

•HR 3817 RH

1 (2) whether there is overlap between any of the 

2 Commission’s reform proposals and those rec3 ommended by the Inspector General of the Commis4 sion. 

5 (c) PUBLICATION OF REPORT.—The Commission and 

6 the Committees referred to in subsection (a) shall publish 

7 the report required by such subsection on their Web sites. 

8 SEC. 307. JOINT ADVISORY COMMITTEE. 

9 The Securities and Exchange Commission and the 

10 Commodities Futures Trading Commission may jointly 

11 form and operate a joint advisory committee composed of 

12 members of each Commission and industry experts and par13 ticipants. The purposes of such an advisory committee in14 clude— 

15 (1) considering and developing solutions to 

16 emerging and ongoing issues of common interest in 

17 the futures and securities markets; 

18 (2) identifying emerging regulatory risks and as19 sess and quantify their implications for investors and 

20 other market participants, and provide recommenda21 tions for solutions; 

22 (3) serving as a vehicle for discussion and com23 munication on regulatory issues of mutual concerns 

24 affecting each Commission, the regulated markets, and 

25 the industry generally; and 


srobinson on DSKHWCL6B1PROD with BILLS
82 

•HR 3817 RH

1 (4) reporting regularly to each Commission and 

2 to Congress on its activities. 

3 TITLE IV—ADDITIONAL 

4 COMMISSION REFORMS 

5 SEC. 401. REGULATION OF SECURITIES LENDING. 

6 Section 10 of the Securities Exchange Act of 1934 (15 

7 U.S.C. 78j) is amended by adding at the end the following 

8 new subsection: 

9 ‘‘(c)(1) To effect, accept, or facilitate a transaction in10 volving the loan or borrowing of securities in contravention 

11 of such rules and regulations as the Commission may pre12 scribe as necessary or appropriate in the public interest or 

13 for the protection of investors. 

14 ‘‘(2) Nothing in paragraph (1) shall be construed to 

15 limit the authority of an appropriate Federal banking 

16 agency (as defined in section 3 of the Federal Deposit Insur17 ance Act (12 U.S.C. 1813(q))), the National Credit Union 

18 Administration, or any other Federal department or agency 

19 identified under law as having a systemic risk responsi20 bility from prescribing rules or regulations to impose re21 strictions on transactions involving the loan or borrowing 

22 of securities in order to protect the safety and soundness 

23 of a financial institution or to protect the financial system 

24 from systemic risk.’’. 


srobinson on DSKHWCL6B1PROD with BILLS
83 

•HR 3817 RH

1 SEC. 402. LOST AND STOLEN SECURITIES. 

2 Section 17(f)(1) of the Securities Exchange Act of 1934 

3 (15 U.S.C. 78q(f)(1)) is amended— 

4 (1) in subparagraph (A), by striking ‘‘missing, 

5 lost, counterfeit, or stolen securities’’ and inserting 

6 ‘‘securities that are missing, lost, counterfeit, stolen, 

7 cancelled, or any other category of securities as the 

8 Commission, by rule, may prescribe’’; and 

9 (2) in subparagraph (B), by striking ‘‘or stolen’’ 

10 and inserting ‘‘stolen, cancelled, or reported in such 

11 other manner as the Commission, by rule, may pre12 scribe’’. 

13 SEC. 403. FINGERPRINTING. 

14 Section 17(f)(2) of the Securities Exchange Act of 1934 

15 (15 U.S.C. 78q(f)(2)) is amended— 

16 (1) by striking ‘‘and registered clearing agency,’’ 

17 and inserting ‘‘registered clearing agency, registered 

18 securities information processor, national securities 

19 exchange, and national securities association’’; and 

20 (2) by striking ‘‘or clearing agency,’’ and insert21 ing ‘‘clearing agency, securities information processor, 

22 national securities exchange, or national securities as23 sociation,’’. 


srobinson on DSKHWCL6B1PROD with BILLS
84 

•HR 3817 RH

1 SEC. 404. EQUAL TREATMENT OF SELF-REGULATORY ORGA2 NIZATION RULES. 

3 Section 29(a) of the Securities Exchange Act of 1934 

4 (15 U.S.C. 78cc(a)) is amended by striking ‘‘an exchange 

5 required thereby’’ and inserting ‘‘a self-regulatory organiza6 tion,’’. 

7 SEC. 405. CLARIFICATION THAT SECTION 205 OF THE IN8 VESTMENT ADVISERS ACT OF 1940 DOES NOT 

9 APPLY TO STATE-REGISTERED ADVISERS. 

10 Section 205(a) of the Investment Advisers Act of 1940 

11 (15 U.S.C. 80b–5(a)) is amended— 

12 (1) by striking ‘‘, unless exempt from registra13 tion pursuant to section 203(b),’’ and inserting ‘‘reg14 istered or required to be registered with the Commis15 sion’’; 

16 (2) by striking ‘‘make use of the mails or any 

17 means or instrumentality of interstate commerce, di18 rectly or indirectly, to’’; and 

19 (3) by striking ‘‘to’’ after ‘‘in any way’’. 

20 SEC. 406. CONFORMING AMENDMENTS FOR THE REPEAL OF 

21 THE PUBLIC UTILITY HOLDING COMPANY ACT 

22 OF 1935. 

23 (a) SECURITIES EXCHANGE ACT OF 1934.—The Secu24 rities Exchange Act of 1934 (15 U.S.C. 78 et seq.) is amend25 ed— 


srobinson on DSKHWCL6B1PROD with BILLS
85 

•HR 3817 RH

1 (1) in section 3(a)(47) (15 U.S.C. 78c(a)(47)), 

2 by striking ‘‘the Public Utility Holding Company Act 

3 of 1935 (15 U.S.C. 79a et seq.),’’; and 

4 (2) in section 12(k) (15 U.S.C. 78l(k)), by 

5 amending paragraph (7) to read as follows:

6 ‘‘(7) DEFINITION.—For purposes of this sub7 section, the term ‘emergency’ means— 

8 ‘‘(A) a major market disturbance character9 ized by or constituting— 

10 ‘‘(i) sudden and excessive fluctuations 

11 of securities prices generally, or a substan12 tial threat thereof, that threaten fair and 

13 orderly markets; or 

14 ‘‘(ii) a substantial disruption of the 

15 safe or efficient operation of the national 

16 system for clearance and settlement of 

17 transactions in securities, or a substantial 

18 threat thereof; or 

19 ‘‘(B) a major disturbance that substantially 

20 disrupts, or threatens to substantially disrupt— 

21 ‘‘(i) the functioning of securities mar22 kets, investment companies, or any other 

23 significant portion or segment of the securi24 ties markets; or 


srobinson on DSKHWCL6B1PROD with BILLS
86 

•HR 3817 RH

1 ‘‘(ii) the transmission or processing of 

2 securities transactions.’’. 

3 (3) in section 21(h)(2) (15 U.S.C. 78u(h)(2)), by 

4 striking ‘‘section 18(c) of the Public Utility Holding 

5 Company Act of 1935,’’. 

6 (b) TRUST INDENTURE ACT OF 1939.—The Trust In7 denture Act of 1939 (15 U.S.C. 77aaa et seq.) is amended— 

8 (1) in section 303 (15 U.S.C. 77ccc), by amend9 ing paragraph (17) to read as follows: 

10 ‘‘(17) The terms ‘Securities Act of 1933’ and ‘Se11 curities Exchange Act of 1934’ shall be deemed to 

12 refer, respectively, to such Acts, as amended, whether 

13 amended prior to or after the enactment of this title.’’; 

14 (2) in section 308 (15 U.S.C. 77hhh), by striking 

15 ‘‘Securities Act of 1933, the Securities Exchange Act 

16 of 1934, or the Public Utility Holding Company Act 

17 of 1935’’ each place it appears and inserting ‘‘Securi18 ties Act of 1933 or the Securities Exchange Act of 

19 1934’’; 

20 (3) in section 310 (15 U.S.C. 77jjj), by striking 

21 subsection (c); 

22 (4) in section 311 (15 U.S.C. 77kkk) by striking 

23 subsection (c); 

24 (5) in section 323(b) (15 U.S.C. 77www(b)), by 

25 striking ‘‘Securities Act of 1933, or the Securities ExVerDate Mar 15 2010 22:39 Dec 17, 2010 Jkt 099200 PO 00000 Frm 00086 Fmt 6652 Sfmt 6203 E:\BILLS\H3817.RH H3817

srobinson on DSKHWCL6B1PROD with BILLS
87 

•HR 3817 RH

1 change Act of 1934, or the Public Utility Holding 

2 Company Act of 1935’’ and inserting ‘‘Securities Act 

3 of 1933 or the Securities Exchange Act of 1934’’; and 

4 (6) in section 326 (15 U.S.C. 77zzz), by striking 

5 ‘‘Securities Act of 1933, or the Securities Exchange 

6 Act of 1934, or the Public Utility Holding Company 

7 Act of 1935,’’ and inserting ‘‘Securities Act of 1933 

8 or the Securities Exchange Act of 1934’’. 

9 (c) INVESTMENT COMPANY ACT OF 1940.—The Invest10 ment Company Act of 1940 (15 U.S.C. 80a–1 et seq.) is 

11 amended— 

12 (1) in section 2(a)(44) (15 U.S.C. 80a–2(a)(44)), 

13 by striking ‘‘ ‘Public Utility Holding Company Act of 

14 1935’,’’; 

15 (2) in section 3(c) (15 U.S.C. 80a–3(c)), by 

16 amending paragraph (8) to read as follows: 

17 ‘‘(8) [Repealed]’’; 

18 (3) in section 38(b) (15 U.S.C. 80a–37(b)), by 

19 striking ‘‘the Public Utility Holding Company Act of 

20 1935,’’; and 

21 (4) in section 50 (15 U.S.C. 80a–49), by striking 

22 ‘‘the Public Utility Holding Company Act of 1935,’’. 

23 (d) INVESTMENT ADVISERS ACT OF 1940.—Section 

24 202(a)(21) of the Investment Advisers Act of 1940 (15 


srobinson on DSKHWCL6B1PROD with BILLS
88 

•HR 3817 RH

1 U.S.C. 80b–2(a)(21)) is amended by striking ‘‘ ‘Public Util2 ity Holding Company Act of 1935’,’’. 

3 SEC. 407. PROMOTING TRANSPARENCY IN FINANCIAL RE4 PORTING. 

5 (a) FINDINGS.—Congress finds the following: 

6 (1) Transparent and clear financial reporting is 

7 integral to the continued growth and strength of our 

8 capital markets and the confidence of investors. 

9 (2) The increasing detail and volume of account10 ing, auditing, and reporting guidance pose a major 

11 challenge. 

12 (3) The complexity of accounting and auditing 

13 standards in the United States has added to the costs 

14 and effort involved in financial reporting. 

15 (b) TESTIMONY REQUIRED ON REDUCING COMPLEXITY

16 IN FINANCIAL REPORTING.—The Securities and Exchange 

17 Commission, the Public Company Accounting Oversight 

18 Board, and the standard setting body designated pursuant 

19 to section 19(b) of the Securities Act of 1933 shall annually 

20 provide oral testimony by their respective Chairpersons or 

21 a designee of the Chairperson, beginning in 2010, and for 

22 5 years thereafter, to the Committee on Financial Services 

23 of the House of Representatives on their efforts to reduce 

24 the complexity in financial reporting to provide more accuVerDate Mar 15 2010 22:39 Dec 17, 2010 Jkt 099200 PO 00000 Frm 00088 Fmt 6652 Sfmt 6203 E:\BILLS\H3817.RH H3817

srobinson on DSKHWCL6B1PROD with BILLS
89 

•HR 3817 RH

1 rate and clear financial information to investors, includ2 ing— 

3 (1) reassessing complex and outdated accounting 

4 standards; 

5 (2) improving the understandability, consistency, 

6 and overall usability of the existing accounting and 

7 auditing literature; 

8 (3) developing principles-based accounting 

9 standards; 

10 (4) encouraging the use and acceptance of inter11 active data; and 

12 (5) promoting disclosures in ‘‘plain English’’. 

13 SEC. 408. UNLAWFUL MARGIN LENDING. 

14 Section 7(c)(1)(A) of the Securities Exchange Act of 

15 1934 (15 U.S.C. 78g(c)(1)(A)) is amended by striking ‘‘; 

16 and’’ and inserting ‘‘; or’’. 

17 SEC. 409. PROTECTING CONFIDENTIALITY OF MATERIALS 

18 SUBMITTED TO THE COMMISSION. 

19 (a) SECURITIES EXCHANGE ACT OF 1934.—Section 

20 17(j) of the Securities Exchange Act of 1934 (15 U.S.C. 

21 78q(j)) is amended to read as follows: 

22 ‘‘(j) AUTHORITY TO LIMIT DISCLOSURE OF INFORMA23 TION.— 

24 ‘‘(1) IN GENERAL.—Notwithstanding any other 

25 provision of law, the Commission shall not be comVerDate Mar 15 2010 22:39 Dec 17, 2010 Jkt 099200 PO 00000 Frm 00089 Fmt 6652 Sfmt 6203 E:\BILLS\H3817.RH H3817

srobinson on DSKHWCL6B1PROD with BILLS
90 

•HR 3817 RH

1 pelled to disclose any information, documents, 

2 records, or reports that relate to an examination, sur3 veillance, or risk assessment of a person subject to or 

4 described in this section, including subsection 

5 (i)(5)(A), or the financial or operational condition of 

6 such persons, or any information supplied to the 

7 Commission by any domestic or foreign regulatory 

8 agency or self-regulatory organization that relates to 

9 the financial or operational condition of such persons, 

10 of any associated person of such persons, or any affil11 iate of an investment bank holding company. 

12 ‘‘(2) CERTAIN EXCEPTIONS.—Nothing in this 

13 subsection shall authorize the Commission to withhold 

14 information from the Congress, prevent the Commis15 sion from complying with a request for information 

16 from any other Federal department or agency, the 

17 Public Company Accounting Oversight Board, or any 

18 self-regulatory organization requesting the informa19 tion for purposes within the scope of its jurisdiction, 

20 or prevent the Commission from complying with an 

21 order of a court of the United States in an action 

22 brought by the United States or the Commission 

23 against a person subject to or described in this section 

24 to produce information, documents, records, or reports 

25 relating directly to the examination, surveillance, or 


srobinson on DSKHWCL6B1PROD with BILLS
91 

•HR 3817 RH

1 risk assessment of that person or the financial or 

2 operational condition of that person or an associated 

3 or affiliated person of that person. 

4 ‘‘(3) TREATMENT UNDER SECTION 552 OF TITLE

5 5, UNITED STATES CODE.—For purposes of section 

6 552 of title 5, United States Code, this subsection 

7 shall be considered a statute described in subsection 

8 (b)(3)(B) of that section. 

9 ‘‘(4) CERTAIN INFORMATION TO BE CONFIDEN10 TIAL.—In prescribing regulations to carry out the re11 quirements of this subsection, the Commission shall 

12 designate information described in or obtained pursu13 ant to subparagraphs (A), (B), and (C) of subsection 

14 (i)(3) as confidential information for purposes of sec15 tion 24(b)(2) of this title.’’. 

16 (b) INVESTMENT COMPANY ACT OF 1940.—Section 

17 31(b) of the Investment Company Act of 1940 (15 U.S.C. 

18 80a–30(b)), as amended by sections 106(a)(2) and 

19 218(b)(4), is further amended by adding at the end the fol20 lowing new paragraph: 

21 ‘‘(6) CONFIDENTIALITY.— 

22 ‘‘(A) IN GENERAL.—Notwithstanding any 

23 other provision of law, the Commission shall not 

24 be compelled to disclose any information, docu25 ments, records, or reports that relate to an examVerDate Mar 15 2010 22:39 Dec 17, 2010 Jkt 099200 PO 00000 Frm 00091 Fmt 6652 Sfmt 6203 E:\BILLS\H3817.RH H3817

srobinson on DSKHWCL6B1PROD with BILLS
92 

•HR 3817 RH

1 ination, surveillance, or risk assessment of a per2 son subject to or described in this section. 

3 ‘‘(B) CERTAIN EXCEPTIONS.—Nothing in 

4 this subsection shall authorize the Commission to 

5 withhold information from the Congress, prevent 

6 the Commission from complying with a request 

7 for information from any other Federal depart8 ment or agency, or the Public Company Ac9 counting Oversight Board requesting the infor10 mation for purposes within the scope of its juris11 diction, or prevent the Commission from com12 plying with an order of a court of the United 

13 States in an action brought by the United States 

14 or the Commission against a person subject to or 

15 described in this section to produce information, 

16 documents, records, or reports relating directly to 

17 the examination of that person or the financial 

18 or operational condition of that person or an as19 sociated or affiliated person of that person. 

20 ‘‘(C) TREATMENT UNDER SECTION 552 OF

21 TITLE 5, UNITED STATES CODE.—For purposes of 

22 section 552 of title 5, United States Code, this 

23 subsection shall be considered a statute described 

24 in subsection (b)(3)(B) of that section.’’. 


srobinson on DSKHWCL6B1PROD with BILLS
93 

•HR 3817 RH

1 (c) INVESTMENT ADVISERS ACT OF 1940.—Section 

2 204 of the Investment Advisers Act of 1940 (15 U.S.C. 80b– 

3 4), as amended by sections 106(b) and 218(c), is further 

4 amended by adding at the end the following new subsection: 

5 ‘‘(f) CONFIDENTIALITY.— 

6 ‘‘(1) IN GENERAL.—Notwithstanding any other 

7 provision of law, the Commission shall not be com8 pelled to disclose any information, documents, 

9 records, or reports that relate to an examination of a 

10 person subject to or described in this section. 

11 ‘‘(2) CERTAIN EXCEPTIONS.—Nothing in this 

12 subsection shall authorize the Commission to withhold 

13 information from Congress, prevent the Commission 

14 from complying with a request for information from 

15 any other Federal department or agency, the Public 

16 Company Accounting Oversight Board, or a self-regu17 latory organization requesting the information for 

18 purposes within the scope of its jurisdiction, or pre19 vent the Commission from complying with an order 

20 of a court of the United States in an action brought 

21 by the United States or the Commission against a 

22 person subject to or described in this section to 

23 produce information, documents, records, or reports 

24 relating directly to the examination of that person or 


srobinson on DSKHWCL6B1PROD with BILLS
94 

•HR 3817 RH

1 the financial or operational condition of that person 

2 or an associated or affiliated person of that person. 

3 ‘‘(3) TREATMENT UNDER SECTION 552 OF TITLE

4 5, UNITED STATES CODE.—For purposes of section 

5 552 of title 5, United States Code, this subsection 

6 shall be considered a statute described in subsection 

7 (b)(3)(B) of that section.’’. 

8 SEC. 410. TECHNICAL CORRECTIONS. 

9 (a) SECURITIES ACT OF 1933.—The Securities Act of 

10 1933 (15 U.S.C. 77a et seq.) is amended— 

11 (1) in section 3(a)(4) (15 U.S.C. 77c(a)(4)), by 

12 striking ‘‘individual;’’ and inserting ‘‘individual,’’; 

13 (2) in the matter following paragraph (5) of sec14 tion 11(a), by striking ‘‘earning statement’’ and in15 serting ‘‘earnings statement’’. 

16 (3) in section 18(b)(1)(C) (15 U.S.C. 

17 77r(b)(1)(C)), by striking ‘‘is a security’’ and insert18 ing ‘‘a security’’; 

19 (4) in section 18(c)(2)(B)(i) (15 U.S.C. 

20 77r(c)(2)(B)(i)), by striking ‘‘State, or’’ and inserting 

21 ‘‘State or’’; 

22 (5) in section 19(d)(6)(A) (15 U.S.C. 

23 77s(d)(6)(A)), by striking ‘‘in paragraph (1) of (3)’’ 

24 and inserting ‘‘in paragraph (1) or (3)’’; and 


srobinson on DSKHWCL6B1PROD with BILLS
95 

•HR 3817 RH

1 (6) in section 27A(c)(1)(B)(ii) (15 U.S.C. 77z– 

2 2(c)(1)(B)(ii)), by striking ‘‘business entity;’’ and in3 serting ‘‘business entity,’’. 

4 (b) SECURITIES EXCHANGE ACT OF 1934.—The Secu5 rities Exchange Act of 1934 (15 U.S.C. 78 et seq.) is amend6 ed— 

7 (1) in section 2(1)(a) (15 U.S.C. 78b(1)(a)), by 

8 striking ‘‘affected’’ and inserting ‘‘effected’’; 

9 (2) in section 3(a)(55)(A) (15 U.S.C. 

10 78c(a)(55)(A)), by striking ‘‘section 3(a)(12) of the 

11 Securities Exchange Act of 1934’’ and inserting ‘‘sec12 tion 3(a)(12) of this Act’’; 

13 (3) in section 3(g) (15 U.S.C. 78c(g)), by strik14 ing ‘‘company, account person, or entity’’ and insert15 ing ‘‘company, account, person, or entity’’; 

16 (4) in section 10A(i)(1)(B)(i) (15 U.S.C. 78j– 

17 1(i)(1)(B)(i)), by striking ‘‘nonaudit’’ and inserting 

18 ‘‘non-audit’’; 

19 (5) in section 13(b)(1) (15 U.S.C. 78m(b)(1)), by 

20 striking ‘‘earning statement’’ and inserting ‘‘earnings 

21 statement’’; 

22 (6) in section 15(b)(1) (15 U.S.C. 78o(b)(1))— 

23 (A) by striking the sentence beginning ‘‘The 

24 order granting’’ and ending ‘‘from such member25 ship.’’ in subparagraph (B); and 


srobinson on DSKHWCL6B1PROD with BILLS
96 

•HR 3817 RH

1 (B) by inserting such sentence in the matter 

2 following such subparagraph after ‘‘are satis3 fied.’’; 

4 (7) in section 15C(a)(2) (15 U.S.C. 78o– 

5 5(a)(2))— 

6 (A) by redesignating clauses (i) and (ii) as 

7 subparagraphs (A) and (B), respectively; 

8 (B) by striking the sentence beginning ‘‘The 

9 order granting’’ and ending ‘‘from such member10 ship.’’ in such subparagraph (B), as redesig11 nated; and 

12 (C) by inserting such sentence in the matter 

13 following such redesignated subparagraph after 

14 ‘‘are satisfied.’’; 

15 (8) in section 16(a)(2)(C) (15 U.S.C. 

16 78p(a)(2)(C)), by striking ‘‘section 206(b)’’ and in17 serting ‘‘section 206B’’; 

18 (9) in section 17(b)(1)(B) (15 U.S.C. 

19 78q(b)(1)(B)), by striking ‘‘15A(k) gives’’ and insert20 ing ‘‘15A(k), give’’; and 

21 (10) in section 21C(c)(2) (15 U.S.C. 78u– 

22 3(c)(2)), by striking ‘‘paragraph (1) subsection’’ and 

23 inserting ‘‘Paragraph (1)’’. 

24 (c) TRUST INDENTURE ACT OF 1939.—The Trust In25 denture Act of 1939 (15 U.S.C. 77aaa et seq.) is amended— 


srobinson on DSKHWCL6B1PROD with BILLS
97 

•HR 3817 RH

1 (1) in section 304(b) (15 U.S.C. 77ddd(b)), by 

2 striking ‘‘section 2 of such Act’’ and inserting ‘‘section 

3 2(a) of such Act’’; 

4 (2) in section 313(a)(4) (15 U.S.C. 

5 77mmm(a)(4)) by striking ‘‘subsection (b) of section 

6 311’’ and inserting ‘‘section 311(b)’’; and 

7 (3) in section 317(a)(1) (15 U.S.C. 77qqq(a)(1)), 

8 by striking ‘‘(1),’’ and inserting ‘‘(1)’’. 

9 (d) INVESTMENT COMPANY ACT OF 1940.—The Invest10 ment Company Act of 1940 (15 U.S.C. 80a–1 et seq.) is 

11 amended— 

12 (1) in section 2(a)(19)(B) (15 U.S.C. 80a– 

13 2(a)(19)(B)) by striking ‘‘clause (vi)’’ both places it 

14 appears in the last two sentences and inserting 

15 ‘‘clause (vii)’’; 

16 (2) in section 9(b)(4)(B) (15 U.S.C. 80a– 

17 9(b)(4)(B)), by inserting ‘‘or’’ after the semicolon at 

18 the end; 

19 (3) in section 12(d)(1)(J) (15 U.S.C. 80a– 

20 12(d)(1)(J)), by striking ‘‘any provision of this sub21 section’’ and inserting ‘‘any provision of this para22 graph’’; 

23 (4) in section 13(a)(3) (15 U.S.C. 80a–13(a)(3)), 

24 by inserting ‘‘or’’ after the semicolon at the end; 


srobinson on DSKHWCL6B1PROD with BILLS
98 

•HR 3817 RH

1 (5) in section 17(f)(4) (15 U.S.C. 80a–17(f)(4)), 

2 by striking ‘‘No such member’’ and inserting ‘‘No 

3 member of a national securities exchange’’; 

4 (6) in section 17(f)(6) (15 U.S.C. 80a–17(f)(6)), 

5 by striking ‘‘company may serve’’ and inserting 

6 ‘‘company, may serve’’; and 

7 (7) in section 61(a)(3)(B)(iii) (15 U.S.C. 80a– 

8 60(a)(3)(B)(iii))— 

9 (A) by striking ‘‘paragraph (1) of section 

10 205’’ and inserting ‘‘section 205(a)(1)’’; and 

11 (B) by striking ‘‘clause (A) or (B) of that 

12 section’’ and inserting ‘‘section 205(b)(1) or (2)’’. 

13 (e) INVESTMENT ADVISERS ACT OF 1940.—The Invest14 ment Advisers Act of 1940 (15 U.S.C. 80b–1 et seq.) is 

15 amended— 

16 (1) in each of the following sections, by striking 

17 ‘‘principal business office’’ or ‘‘principal place of 

18 business’’ (whichever and wherever it appears) and 

19 inserting ‘‘principal office and place of business’’: sec20 tions 203(c)(1)(A), 203(k)(4)(B), 213(a), 222(b), and 

21 222(c) (15 U.S.C. 80b–3(c)(1)(A), 80b–3(k)(4)(B), 

22 80b–13(a), 80b–18a(b), and 80b–18a(c)); and 

23 (2) in section 206(3) (15 U.S.C. 80b–6(3)), by 

24 inserting ‘‘or’’ after the semicolon at the end. 


srobinson on DSKHWCL6B1PROD with BILLS
99 

•HR 3817 RH

1 SEC. 411. MUNICIPAL SECURITIES. 

2 Section 15B(b) of the Securities Exchange Act of 1934 

3 (15 U.S.C. 78o–4(b)) is amended— 

4 (1) by amending paragraph (1) to read as fol5 lows:(1) Not later than October 1, 2010, the Munic6 ipal Securities Rulemaking Board (hereinafter in this 

7 section referred to as the ‘Board’), shall be composed 

8 of members which shall perform the duties set forth in 

9 this section and shall consist of— 

10 ‘‘(A) a majority of independent public rep11 resentatives, at least one of whom shall be rep12 resentative of investors in municipal securities 

13 and at least one of whom shall be representative 

14 of issuers of municipal securities (which mem15 bers are hereinafter referred to as ‘public rep16 resentatives’); 

17 ‘‘(B) at least one individual who is rep18 resentative of municipal securities brokers and 

19 municipal securities dealers which are not banks 

20 or subsidiaries or departments or divisions of 

21 banks (which members are hereinafter referred to 

22 as ‘broker-dealer representatives’); and 

23 ‘‘(C) at least one individual who is rep24 resentative of municipal securities dealers which 

25 are banks or subsidiaries or departments or diviVerDate Mar 15 2010 22:39 Dec 17, 2010 Jkt 099200 PO 00000 Frm 00099 Fmt 6652 Sfmt 6203 E:\BILLS\H3817.RH H3817

srobinson on DSKHWCL6B1PROD with BILLS
100 

•HR 3817 RH

1 sions of banks (which members are hereinafter 

2 referred to as ‘bank representatives’).’’; and 

3 (2) by amending paragraph (2)(B) to read as 

4 follows: 

5 ‘‘(B) Establish fair procedures for the nomina6 tion and election of members of the Board and assure 

7 fair representation in such nominations and elections 

8 of municipal securities brokers and municipal securi9 ties dealers. Such rules— 

10 ‘‘(i) shall establish requirements regarding 

11 the independence of public representatives; 

12 ‘‘(ii) shall provide that the number of public 

13 representatives of the Board shall at all times ex14 ceed the total number of broker-dealer representa15 tives and bank representatives; 

16 ‘‘(iii) shall establish minimum knowledge, 

17 experience, and other appropriate qualifications 

18 for individuals to serve as public representatives, 

19 which may include, among other things, prior 

20 work experience in the securities, municipal fi21 nance, or municipal securities industries; 

22 ‘‘(iv) shall specify the term members shall 

23 serve; and 

24 ‘‘(v) may increase or decrease the number of 

25 members which shall constitute the whole Board, 


srobinson on DSKHWCL6B1PROD with BILLS
101 

•HR 3817 RH

1 but in no case may such number be an even 

2 number.’’. 

3 SEC. 412. INTERESTED PERSON DEFINITION. 

4 Section 2(a)(19)(A) of the Investment Company Act 

5 of 1940 (15 U.S.C. 80a–2(a)(19)(A)) is amended— 

6 (1) by striking clauses (v) and (vi); 

7 (2) by inserting after clause (iv) the following 

8 new clause: 

9 ‘‘(v) any natural person who is a 

10 member of a class of persons who the Com11 mission, by rule or regulation, determines 

12 are unlikely to exercise an appropriate de13 gree of independence as a result of— 

14 ‘‘(I) a material business or profes15 sional relationship with such company 

16 or any affiliated person of such com17 pany; or 

18 ‘‘(II) a close familial relationship 

19 with any natural person who is an af20 filiated person of such company;’’; 

21 (3) by redesignating clause (vii) as clause (vi); 

22 and 

23 (4) in clause (vi), as redesignated, by striking 

24 ‘‘two completed fiscal years’’ and inserting ‘‘five com25 pleted fiscal years’’. 


srobinson on DSKHWCL6B1PROD with BILLS
102 

•HR 3817 RH

1 SEC. 413. RULEMAKING AUTHORITY TO PROTECT REDEEM2 ING INVESTORS. 

3 Section 22(e) of the Investment Company Act of 1940 

4 (15 U.S.C. 80a–22(e)) is amended by adding at the end 

5 the following: ‘‘The Commission may, by rules and regula6 tions, limit the extent to which a registered open-end invest7 ment company may own, hold, or invest in illiquid securi8 ties or other illiquid property.’’. 

9 SEC. 414. STUDY ON SEC REVOLVING DOOR. 

10 (a) GOVERNMENT ACCOUNTABILITY OFFICE STUDY.— 

11 The Comptroller General of the United States shall conduct 

12 a study that will— 

13 (1) review the number of employees who leave the 

14 Securities and Exchange Commission to work for fi15 nancial institutions regulated by such Commission; 

16 (2) determine how many employees who leave the 

17 Securities and Exchange Commission worked on cases 

18 that involved financial institutions regulated by such 

19 Commission; 

20 (3) review the length of time employees work for 

21 the Securities and Exchange Commission before leav22 ing to be employed by financial institutions regulated 

23 by such Commission; 

24 (4) review existing internal controls and make 

25 recommendations on strengthening such controls to 

26 ensure that employees of the Securities and Exchange 


srobinson on DSKHWCL6B1PROD with BILLS
103 

•HR 3817 RH

1 Commission who are later employed by financial in2 stitutions did not assist such institutions in violating 

3 any rules or regulations of the Commission during the 

4 course of their employment with such Commission; 

5 (5) determine if greater post-employment restric6 tions are necessary to prevent employees of the Secu7 rities and Exchange Commission from being employed 

8 by financial institutions after employment with such 

9 Commission; 

10 (6) determine if the volume of employees of the 

11 Securities and Exchange Commission who are later 

12 employed by financial institutions has led to ineffi13 ciencies in enforcement; 

14 (7) determine if employees of the Securities and 

15 Exchange Commission who are later employed by fi16 nancial institutions have engaged in information 

17 sharing or assisted such institutions in circumventing 

18 Federal rules and regulations while employed by such 

19 Commission; 

20 (8) review any information that may address the 

21 volume of employees of the Securities and Exchange 

22 Commission who are later employed by financial in23 stitutions, and make recommendations to Congress; 

24 and 


srobinson on DSKHWCL6B1PROD with BILLS
104 

•HR 3817 RH

1 (9) review other additional issues as may be 

2 raised during the course of the study conducted under 

3 this subsection. 

4 (b) REPORT.—Not later than 1 year after the date of 

5 the enactment of this Act, the Comptroller General of the 

6 United States shall submit to the Committee on Financial 

7 Services of the House of Representatives and the Committee 

8 on Banking, Housing, and Urban Affairs of the Senate a 

9 report on the results of the study required by subsection (a). 

10 SEC. 415. STUDY ON INTERNAL CONTROL EVALUATION AND 

11 REPORTING COST BURDENS ON SMALLER 

12 ISSUERS. 

13 (a) STUDY REQUIRED.—The Government Account14 ability Office and the Securities and Exchange Commission 

15 shall each conduct a study evaluating the costs and benefits 

16 of complying with section 404(b) of the Sarbanes-Oxley Act 

17 of 2002 (15 U.S.C. § 7262(b)) on issuers who are not accel18 erated or large accelerated filers as defined by Commission 

19 Rule 12b-2. The study shall— 

20 (1) include recommendations, administrative re21 forms, and legislative proposals on implementation 

22 steps that could be taken to reduce compliance bur23 dens on these issuers; and 


srobinson on DSKHWCL6B1PROD with BILLS
105 

•HR 3817 RH

1 (2) determine the efficacy of the Securities and 

2 Exchange Commission’s measures to limit the cost of 

3 compliance on smaller issuers. 

4 (b) REPORTS REQUIRED.—On or before June 1, 2010, 

5 the Government Accountability Office and the Securities 

6 and Exchange Commission shall submit separate reports to 

7 Congress containing the findings and conclusions of the 

8 studies required under subsection (a), together with such 

9 recommendations for regulatory, legislative, or administra10 tive action as may be appropriate. 

11 (c) EFFECTIVE DATE CONTINGENT ON REPORTS.—Re12 quirements under section 404(b) of the Sarbanes-Oxley Act 

13 of 2002 on issuers described under subsection (a) shall not 

14 become effective until the results of the report are delivered, 

15 but in no case before June 1, 2011. 

16 SECTION 416. ANALYSIS OF RULE REGARDING SMALLER RE17 PORTING COMPANIES. 

18 (a) FINDINGS.—Congress finds the following: 

19 (1) Many small businesses in cutting-edge tech20 nology sectors require significant capital investment 

21 to develop new technologies related to clean energy, 

22 drug treatments for terminal diseases and food pro23 duction in hunger-stricken areas of the World. 

24 (2) Many technology companies conducting re25 search do not meet the definition of ‘‘smaller reportVerDate Mar 15 2010 22:39 Dec 17, 2010 Jkt 099200 PO 00000 Frm 00105 Fmt 6652 Sfmt 6203 E:\BILLS\H3817.RH H3817

srobinson on DSKHWCL6B1PROD with BILLS
106 

•HR 3817 RH

1 ing company’’ under the Securities and Exchange 

2 Commission’s Rule 12b–2 due to unusually high pub3 lic floats despite low or zero revenue. 

4 (3) The Final Report of the Advisory Committee 

5 on Smaller Public Companies to the Securities and 

6 Exchange Commission recommended that a company 

7 with a market capitalization of less than about 

8 $787,000,000 be considered a smallcap company and 

9 that the Commission provide exemptions from section 

10 404(b) of the Sarbanes-Oxley Act to companies with 

11 less than $250,000,000 in annual revenues. 

12 (b) STUDY OF USING REVENUE AS CRITERIA TO DE13 FINE SMALLER REPORTING COMPANY.—The Securities and 

14 Exchange Commission shall conduct a study of the inclu15 sion of revenue as a criteria used in defining smaller report16 ing company as defined under the Commission’s Rule 12b17 2 to account for smaller public companies with public floats 

18 less than $700,000,000 and revenues less than $250,000,000. 

19 Not later than 180 days after the date of enactment of this 

20 Act, the Commission shall provide the Committee on Finan21 cial Services of the House of Representatives and the Com22 mittee on Banking, Housing and Urban Affairs of the Sen23 ate a report of the findings of the study. 


srobinson on DSKHWCL6B1PROD with BILLS
107 

•HR 3817 RH

1 SEC. 417. FINANCIAL REPORTING FORUM. 

2 (a) ESTABLISHMENT.—There is hereby established a 

3 Financial Reporting Forum (hereinafter referred to as the 

4 ‘‘Forum’’), which shall consist of— 

5 (1) the Chairman of the Securities Exchange 

6 Commission (hereinafter referred to as the ‘‘SEC’’); 

7 (2) the head of the Financial Accounting Stand8 ards Board; 

9 (3) the Chairman of the Public Company Ac10 counting Oversight Board; 

11 (4) the head of each appropriate Federal banking 

12 agency, as such term is defined under section 3(q) of 

13 the Federal Deposit Insurance Act (12 U.S.C. 

14 1813(q)); 

15 (5) the Administrator of the National Credit 

16 Union Administration; 

17 (6) the Secretary of the Treasury; 

18 (7) a representative of a non-financial institu19 tion, appointed by the SEC; 

20 (8) a representative of a financial institution, 

21 appointed by the SEC; 

22 (9) a representative of auditors, appointed by the 

23 SEC; and 

24 (10) a representative of investors, appointed by 

25 the SEC. 


srobinson on DSKHWCL6B1PROD with BILLS
108 

•HR 3817 RH

1 (b) MEETINGS.—The Forum shall meet no less often 

2 than quarterly. 

3 (c) DUTIES.—The Forum shall meet to discuss imme4 diate and long-term issues critical to financial reporting. 

5 (d) REPORTING.—The Forum shall issue an annual re6 port to the Congress detailing any determinations or find7 ings made by the Forum during the previous year, includ8 ing any legislative recommendations the Forum may have 

9 related to financial reporting matters. 

10 SEC. 418. INVESTMENT ADVISERS SUBJECT TO STATE AU11 THORITIES. 

12 Section 203A(a) of the Investment Advisers Act of 1940 

13 (15 U.S.C. 80b–3a(a)) is amended— 

14 (1) by redesignating paragraph (2) as para15 graph (3); and 

16 (2) by inserting after paragraph (1) the fol17 lowing new paragraph: 

18 ‘‘(2) TREATMENT OF CERTAIN MID-SIZED IN19 VESTMENT ADVISERS.—Notwithstanding paragraph 

20 (1), an investment adviser that— 

21 ‘‘(A) is regulated and examined, or required 

22 to be regulated and examined, by a State; and 

23 ‘‘(B) has assets under management be24 tween— 


srobinson on DSKHWCL6B1PROD with BILLS
109 

•HR 3817 RH

1 ‘‘(i) the amount specified under sub2 paragraph (A) of paragraph (1), as such 

3 amount may have been adjusted by the 

4 Commission pursuant to that subpara5 graph, and 

6 ‘‘(ii) $100,000,000, or such higher 

7 amount as the Commission may, by rule, 

8 deem appropriate in accordance with the 

9 purposes of this title, 

10 shall register with, and be subject to examination 

11 by, such State. The Commission shall publish a 

12 list of the States that regulate and examine, or 

13 require regulation and examination of, invest14 ment advisers to which the requirements of this 

15 paragraph apply.’’. 

16 SEC. 419. CUSTODIAL REQUIREMENTS. 

17 Not later than 180 days after the date of the enactment 

18 of this Act, the Securities and Exchange Commission shall 

19 adopt a rule pursuant to its authority under section 211(a) 

20 of the Investment Advisers Act of 1940 making it unlawful 

21 under section 206(4) of such Act for an investment adviser 

22 registered under the Act to have custody of funds or securi23 ties of a client the value of which exceeds $10,000,000, sub24 ject to such exception the Commission determines in such 


srobinson on DSKHWCL6B1PROD with BILLS
110 

•HR 3817 RH

1 rule are in the public interest and consistent with the pro2 tection of investors, unless— 

3 (1) the funds and securities are maintained with 

4 a qualified custodian either in a separate account for 

5 each client under the client’s name, or in accounts 

6 that contain only client funds and securities under 

7 the name of the investment adviser as agent or trustee 

8 for the client; and 

9 (2) the qualified custodian does not directly or 

10 indirectly provide investment advice with respect to 

11 such funds or securities. 

12 SEC. 420. OMBUDSMAN. 

13 (a) APPOINTMENT.—Not later than 180 days after the 

14 date of the enactment of this Act, the Chairman of the Secu15 rities and Exchange Commission shall appoint an Ombuds16 man who shall report directly to the Chairman. 

17 (b) DUTIES.—The Ombudsman appointed under sub18 section (a) shall— 

19 (1) act as a liaison between the Commission and 

20 any affected person with respect to any problem such 

21 person may have in dealing with the Commission re22 sulting from the regulatory activities of the Commis23 sion; 

24 (2) review and make recommendations regarding 

25 Commission policies and procedures to encourage perVerDate Mar 15 2010 22:39 Dec 17, 2010 Jkt 099200 PO 00000 Frm 00110 Fmt 6652 Sfmt 6203 E:\BILLS\H3817.RH H3817

srobinson on DSKHWCL6B1PROD with BILLS
111 

•HR 3817 RH

1 sons to present questions to the Commission regarding 

2 compliance with Federal securities laws; and 

3 (3) maintain confidentiality of communications 

4 between such persons and the Ombudsman. 

5 (c) LIMITATION.—In carrying out the duties under 

6 subsection (b), the Ombudsman shall utilize personnel of the 

7 Commission to the extent practicable. Nothing in this sec8 tion shall be construed as replacing, altering, or dimin9 ishing the activities of any ombudsman or similar office 

10 in any other agency. 

11 (d) REPORT.—Each year, the Ombudsman shall sub12 mit a report to the Commission for inclusion in the annual 

13 report that describes the activities and evaluates the effec14 tiveness of the Ombudsman during the preceding year. In 

15 that report, the Ombudsman shall include solicited com16 ments and evaluations from registrants in regards to the 

17 effectiveness of the Ombudsman. 

18 TITLE V—SECURITIES INVESTOR 

19 PROTECTION ACT AMENDMENTS 

20 SEC. 501. INCREASING THE MINIMUM ASSESSMENT PAID BY 

21 SIPC MEMBERS. 

22 Section 4(d)(1)(C) of the Securities Investor Protection 

23 Act of 1970 (15 U.S.C. 78ddd(d)(1)(C)) is amended by 

24 striking ‘‘$150 per annum’’ and inserting the following: 


srobinson on DSKHWCL6B1PROD with BILLS
112 

•HR 3817 RH

1 ‘‘0.02 percent of the gross revenues from the securities busi2 ness of such member of SIPC’’. 

3 SEC. 502. INCREASING THE BORROWING LIMIT ON TREAS4 URY LOANS. 

5 Section 4(h) of the Securities Investor Protection Act 

6 of 1970 (15 U.S.C. 78ddd(h)) is amended by striking ‘‘of 

7 not to exceed $1,000,000,000’’ and inserting ‘‘the lesser of 

8 $2,500,000,000 or the target amount of the SIPC Fund 

9 specified in the bylaws of SIPC’’. 

10 SEC. 503. INCREASING THE CASH LIMIT OF PROTECTION. 

11 Section 9 of the Securities Investor Protection Act of 

12 1970 (15 U.S.C. 78fff–3) is amended— 

13 (1) in subsection (a)(1), by striking ‘‘$100,000 

14 for each such customer’’ and inserting ‘‘the standard 

15 maximum cash advance amount for each such cus16 tomer, as determined in accordance with subsection 

17 (d)’’; and 

18 (2) by adding the following new subsections: 

19 ‘‘(d) STANDARD MAXIMUM CASH ADVANCE AMOUNT

20 DEFINED.—For purposes of this section, the term ‘standard 

21 maximum cash advance amount’ means $250,000, as such 

22 amount may be adjusted after March 31, 2010, as provided 

23 under subsection (e). 

24 ‘‘(e) INFLATION ADJUSTMENT.— 


srobinson on DSKHWCL6B1PROD with BILLS
113 

•HR 3817 RH

1 ‘‘(1) IN GENERAL.—No later than April 1, 2010, 

2 and every 5 years thereafter, and subject to the ap3 proval of the Commission as provided under section 

4 3(e)(2), the Board of Directors of SIPC shall deter5 mine whether an inflation adjustment to the standard 

6 maximum cash advance amount is appropriate. If the 

7 Board of Directors of SIPC determines such an ad8 justment is appropriate, then the standard maximum 

9 cash advance amount shall be an amount equal to— 

10 ‘‘(A) $250,000 multiplied by, 

11 ‘‘(B) the ratio of the annual value of the 

12 Personal Consumption Expenditures Chain-Type 

13 Price Index (or any successor index thereto), 

14 published by the Department of Commerce, for 

15 the calendar year preceding the year in which 

16 such determination is made, to the published an17 nual value of such index for the calendar year 

18 preceding the year in which this subsection was 

19 enacted. 

20 The index values used in calculations under this 

21 paragraph shall be, as of the date of the calculation, 

22 the values most recently published by the Department 

23 of Commerce. 

24 ‘‘(2) ROUNDING.—If the standard maximum 

25 cash advance amount determined under paragraph 


srobinson on DSKHWCL6B1PROD with BILLS
114 

•HR 3817 RH

1 (1) for any period is not a multiple of $10,000, the 

2 amount so determined shall be rounded down to the 

3 nearest $10,000. 

4 ‘‘(3) PUBLICATION AND REPORT TO THE CON5 GRESS.—Not later than April 5 of any calendar year 

6 in which a determination is required to be made 

7 under paragraph (1)— 

8 ‘‘(A) the Commission shall publish in the 

9 Federal Register the standard maximum cash 

10 advance amount; and 

11 ‘‘(B) the Board of Directors of SIPC shall 

12 submit a report to the Congress containing stat13 ing the standard maximum cash advance 

14 amount. 

15 ‘‘(4) IMPLEMENTATION PERIOD.—Any adjust16 ment to the standard maximum cash advance amount 

17 shall take effect on January 1 of the year immediately 

18 succeeding the calendar year in which such adjust19 ment is made. 

20 ‘‘(5) INFLATION ADJUSTMENT CONSIDER21 ATIONS.—In making any determination under para22 graph (1) to increase the standard maximum cash ad23 vance amount, the Board of Directors of SIPC shall 

24 consider— 


srobinson on DSKHWCL6B1PROD with BILLS
115 

•HR 3817 RH

1 ‘‘(A) the overall state of the fund and the 

2 economic conditions affecting members of SIPC; 

3 ‘‘(B) the potential problems affecting mem4 bers of SIPC; and 

5 ‘‘(C) such other factors as the Board of Di6 rectors of SIPC may determine appropriate.’’. 

7 SEC. 504. SIPC AS TRUSTEE IN SIPA LIQUIDATION PRO8 CEEDINGS. 

9 Section 5(b)(3) of the Securities Investor Protection 

10 Act of 1970 (15 U.S.C. 78eee(b)(3)) is amended— 

11 (1) by striking ‘‘SIPC has determined that the 

12 liabilities of the debtor to unsecured general creditors 

13 and to subordinated lenders appear to aggregate less 

14 than $750,000 and that’’; and 

15 (2) by striking ‘‘five hundred’’ and inserting 

16 ‘‘five thousand’’. 

17 SEC. 505. INSIDERS INELIGIBLE FOR SIPC ADVANCES. 

18 Section 9(a)(4) of the Securities Investor Protection 

19 Act of 1970 (15 U.S.C. 78fff–3(a)(4)) is amended by insert20 ing ‘‘an insider,’’ after ‘‘or net profits of the debtor,’’. 

21 SEC. 506. ELIGIBILITY FOR DIRECT PAYMENT PROCEDURE. 

22 Section 10(a)(4) of the Securities Investor Protection 

23 Act of 1970 (15 U.S.C. 78fff–4(a)(4)) is amended by strik24 ing ‘‘$250,000’’ and inserting ‘‘$850,000’’. 


srobinson on DSKHWCL6B1PROD with BILLS
116 

•HR 3817 RH

1 SEC. 507. INCREASING THE FINE FOR PROHIBITED ACTS 

2 UNDER SIPA. 

3 Section 14(c) of the Securities Investor Protection Act 

4 of 1970 (15 U.S.C. 78jjj(c)) is amended— 

5 (1) in paragraph (1), by striking ‘‘$50,000’’ and 

6 inserting ‘‘$250,000’’; and 

7 (2) in paragraph (2), by striking ‘‘$50,000’’ and 

8 inserting ‘‘$250,000’’. 

9 SEC. 508. PENALTY FOR MISREPRESENTATION OF SIPC 

10 MEMBERSHIP OR PROTECTION. 

11 Section 14 of the Securities Investor Protection Act of 

12 1970 (15 U.S.C. 78jjj) is amended by adding at the end 

13 the following new subsection: 

14 ‘‘(d) MISREPRESENTATION OF SIPC MEMBERSHIP OR

15 PROTECTION.— 

16 ‘‘(1) IN GENERAL.—Any person who falsely rep17 resents by any means (including, without limitation, 

18 through the Internet or any other medium of mass 

19 communication), with actual knowledge of the falsity 

20 of the representation and with an intent to deceive or 

21 cause injury to another, that such person, or another 

22 person, is a member of SIPC or that any person or 

23 account is protected or is eligible for protection under 

24 this Act or by SIPC, shall be liable for any damages 

25 caused thereby and shall be fined not more than 

26 $250,000 or imprisoned for not more than five years. 


srobinson on DSKHWCL6B1PROD with BILLS
117 

•HR 3817 RH

1 ‘‘(2) INTERNET SERVICE PROVIDERS.—Any 

2 Internet service provider that, on or through a system 

3 or network controlled or operated by the Internet serv4 ice provider, transmits, routes, provides connections 

5 for, or stores any material containing any misrepre6 sentation of the kind prohibited in paragraph (1) 

7 shall be liable for any damages caused thereby, in8 cluding damages suffered by SIPC, if the Internet 

9 service provider— 

10 ‘‘(A) has actual knowledge that the material 

11 contains a misrepresentation of the kind prohib12 ited in paragraph (1), or 

13 ‘‘(B) in the absence of actual knowledge, is 

14 aware of facts or circumstances from which it is 

15 apparent that the material contains a misrepre16 sentation of the kind prohibited in paragraph 

17 (1), and 

18 upon obtaining such knowledge or awareness, fails to 

19 act expeditiously to remove, or disable access to, the 

20 material. 

21 ‘‘(3) INJUNCTIONS.—Any court having jurisdic22 tion of a civil action arising under this Act may 

23 grant temporary injunctions and final injunctions on 

24 such terms as the court deems reasonable to prevent 

25 or restrain any violation of paragraph (1) or (2). 


srobinson on DSKHWCL6B1PROD with BILLS
118 

•HR 3817 RH

1 Any such injunction may be served anywhere in the 

2 United States on the person enjoined, shall be opera3 tive throughout the United States, and shall be en4 forceable, by proceedings in contempt or otherwise, by 

5 any United States court having jurisdiction over that 

6 person. The clerk of the court granting the injunction 

7 shall, when requested by any other court in which en8 forcement of the injunction is sought, transmit 

9 promptly to the other court a certified copy of all pa10 pers in the case on file in such clerk’s office.’’. 

11 SEC. 509. FUTURES HELD IN A PORTFOLIO MARGIN SECURI12 TIES ACCOUNT PROTECTION. 

13 (a) SIPC ADVANCES.—Section 9(a)(1) of the Securi14 ties Investor Protection Act of 1970 (15 U.S.C. 78fff– 

15 3(a)(1)) is amended by inserting ‘‘or options on futures con16 tracts’’ after ‘‘claim for securities’’. 

17 (b) DEFINITIONS.—Section 16 of such Act (15 U.S.C. 

18 78lll) is amended— 

19 (1) by amending paragraph (2) to read as fol20 lows: 

21 ‘‘(2) CUSTOMER.— 

22 ‘‘(A) IN GENERAL.—The term ‘customer’ of 

23 a debtor means any person (including any per24 son with whom the debtor deals as principal or 

25 agent) who has a claim on account of securities 


srobinson on DSKHWCL6B1PROD with BILLS
119 

•HR 3817 RH

1 received, acquired, or held by the debtor in the 

2 ordinary course of its business as a broker or 

3 dealer from or for the securities accounts of such 

4 person for safekeeping, with a view to sale, to 

5 cover consummated sales, pursuant to purchases, 

6 as collateral, security, or for purposes of effecting 

7 transfer. The term ‘customer’ includes any per8 son who has a claim against the debtor arising 

9 out of sales or conversions of such securities. 

10 ‘‘(B) INCLUDED PERSONS.—The term ‘cus11 tomer’ includes— 

12 ‘‘(i) any person who has deposited cash 

13 with the debtor for the purpose of pur14 chasing securities; and 

15 ‘‘(ii) any person who has a claim 

16 against the debtor for, or a claim against 

17 the debtor arising out of sales or conversions 

18 of, cash, securities, futures contracts, or op19 tions on futures contracts received, acquired, 

20 or held in a portfolio margining account 

21 carried as a securities account pursuant to 

22 a portfolio margining program approved by 

23 the Commission. 

24 ‘‘(C) EXCLUDED PERSONS.—The term ‘cus25 tomer’ does not include— 


srobinson on DSKHWCL6B1PROD with BILLS
120 

•HR 3817 RH

1 ‘‘(i) any person to the extent that the 

2 claim of such person arises out of trans3 actions with a foreign subsidiary of a mem4 ber of SIPC; 

5 ‘‘(ii) any person to the extent that such 

6 person has a claim for cash or securities 

7 which by contract, agreement, or under8 standing, or by operation of law, is part of 

9 the capital of the debtor, or is subordinated 

10 to the claims of any or all creditors of the 

11 debtor, notwithstanding that some ground 

12 exists for declaring such contract, agree13 ment, or understanding void or voidable in 

14 a suit between the claimant and the debtor; 

15 or 

16 ‘‘(iii) any person to the extent such 

17 person has a claim relating to any open re18 purchase or open reverse repurchase agree19 ment. 

20 For purposes of this paragraph, the term ‘repur21 chase agreement’ means the sale of a security at 

22 a specified price with a simultaneous agreement 

23 or obligation to repurchase the security at a 

24 specified price on a specified future date.’’; 


srobinson on DSKHWCL6B1PROD with BILLS
121 

•HR 3817 RH

1 (2) in paragraph (4), by inserting after the first 

2 sentence the following new sentence: ‘‘In the case of 

3 portfolio margining accounts of customers that are 

4 carried as securities accounts pursuant to a portfolio 

5 margining program approved by the Commission, 

6 such term shall also include futures contracts and op7 tions on futures contracts received, acquired, or held 

8 by or for the account of a debtor from or for such ac9 counts, and the proceeds thereof.’’; 

10 (3) in paragraph (9), by inserting before ‘‘Such 

11 term’’ in the matter following subparagraph (L) the 

12 following: ‘‘The term includes revenues earned by a 

13 broker or dealer in connection with transactions in 

14 customers’ portfolio margining accounts carried as se15 curities accounts pursuant to a portfolio margining 

16 program approved by the Commission.’’; and 

17 (4) in paragraph (11)— 

18 (A) by amending subparagraph (A) to read 

19 as follows: 

20 ‘‘(A) calculating the sum which would have 

21 been owed by the debtor to such customer if the 

22 debtor had liquidated, by sale or purchase on the 

23 filing date— 


srobinson on DSKHWCL6B1PROD with BILLS
122 

•HR 3817 RH

1 ‘‘(i) all securities positions of such cus2 tomer (other than customer name securities 

3 reclaimed by such customer); and 

4 ‘‘(ii) all positions in futures contracts 

5 and options on futures contracts held in a 

6 portfolio margining account carried as a se7 curities account pursuant to a portfolio 

8 margining program approved by the Com9 mission; minus’’; and 

10 (B) by inserting before ‘‘In determining’’ in 

11 the matter following subparagraph (C) the fol12 lowing: ‘‘A claim for a commodity futures con13 tract received, acquired, or held in a portfolio 

14 margining account pursuant to a portfolio mar15 gining program approved by the Commission, or 

16 a claim for a security futures contract, shall be 

17 deemed to be a claim for the mark-to-market 

18 (variation) payments due with respect to such 

19 contract as of the filing date, and such claim 

20 shall be treated as a claim for cash.’’. 

21 SEC. 510. STUDY AND REPORT ON THE FEASIBILITY OF 

22 RISK-BASED ASSESSMENTS FOR SIPC MEM23 BERS. 

24 (a) STUDY REQUIRED.—The Comptroller General of 

25 the United States shall conduct a study on whether the SeVerDate Mar 15 2010 22:39 Dec 17, 2010 Jkt 099200 PO 00000 Frm 00122 Fmt 6652 Sfmt 6203 E:\BILLS\H3817.RH H3817

srobinson on DSKHWCL6B1PROD with BILLS
123 

•HR 3817 RH

1 curities Investor Protection Corporation (hereafter in this 

2 section referred to as ‘‘SIPC’’) should be required to impose 

3 assessments, on its member brokers and dealers, based on 

4 risk for the purpose of adequately maintaining the SIPC 

5 Fund. 

6 (b) CONTENT.—The Comptroller General in con7 ducting this study shall— 

8 (1) identify and examine available approaches, 

9 including modeling, to measure broker and dealer 

10 operational risk; 

11 (2) analyze whether the available approaches to 

12 measure broker and dealer operational risk can be 

13 used in managing the aggregate risk to the SIPC 

14 Fund; 

15 (3) explore whether objective measures like the 

16 volume of assets of the SIPC member, previous en17 forcement and compliance actions taken by regulatory 

18 bodies against the SIPC member, or the number of 

19 years the SIPC member has been in operation, among 

20 other factors, can be used to assess the probability the 

21 fund will incur a loss with respect to the SIPC mem22 ber; 

23 (4) examine the impact that risk-based assess24 ments could have on large and small brokers and 

25 dealers; and 


srobinson on DSKHWCL6B1PROD with BILLS
124 

•HR 3817 RH

1 (5) examine the impact that risk-based assess2 ments could have on institutional and retail brokers 

3 and dealers. 

4 (c) CONSULTATION.—The Comptroller General in 

5 planning and conducting this study shall consult with the 

6 Securities and Exchange Commission, the Federal Deposit 

7 Insurance Corporation, SIPC, the Financial Industry Reg8 ulatory Authority, and any other public or private sector 

9 organization that the Comptroller General considers appro10 priate. 

11 (d) REPORT REQUIRED.—Not later than one year 

12 after the date of enactment of this Act, the Comptroller gen13 eral shall submit a report of the results of the study required 

14 by this section to the Committee on Banking, Housing, and 

15 Urban Affairs of the Senate and the Committee on Finan16 cial Services of the House of Representatives. 

17 SEC. 511. BUDGETARY TREATMENT OF COMMISSION LOANS 

18 TO SIPC. 

19 Section 4(g) of the Securities Investor Protection Act 

20 of 1970 (15 U.S.C. 78ddd(g)) is amended by adding at the 

21 end the following: ‘‘Any loan made by the Commission to 

22 SIPC under this subsection shall not be considered to result 

23 in a new direct loan obligation or a new loan guarantee 

24 commitment for purposes of section 504 of the Federal Cred25 it Reform Act of 1990.’’. 


srobinson on DSKHWCL6B1PROD with BILLS
125 

•HR 3817 RH

1 TITLE VI—SARBANES-OXLEY ACT 

2 AMENDMENTS 

3 SEC. 601. PUBLIC COMPANY ACCOUNTING OVERSIGHT 

4 BOARD OVERSIGHT OF AUDITORS OF BRO5 KERS AND DEALERS. 

6 (a) DEFINITIONS.—(1) Title I of the Sarbanes-Oxley 

7 Act of 2002 is amended by adding at the end the following 

8 new section: 

9 ‘‘SEC. 110. DEFINITIONS. 

10 ‘‘For the purposes of this title, and notwithstanding 

11 section 2: 

12 ‘‘(1) AUDIT.—The term ‘audit’ means an exam13 ination of the financial statements, reports, docu14 ments, procedures or controls, or notices, of any 

15 issuer, broker, or dealer by an independent public ac16 counting firm in accordance with the rules of the 

17 Board or the Commission (or, for the period pre18 ceding the adoption of applicable rules of the Board 

19 under section 103, in accordance with then-applicable 

20 generally accepted auditing and related standards for 

21 such purposes), for the purpose of expressing an opin22 ion on such financial statements, reports, documents, 

23 procedures or controls, or notices. 

24 ‘‘(2) AUDIT REPORT.—The term ‘audit report’ 

25 means a document, report, notice, or other record— 


srobinson on DSKHWCL6B1PROD with BILLS
126 

•HR 3817 RH

1 ‘‘(A) prepared following an audit performed 

2 for purposes of compliance by an issuer, broker, 

3 or dealer with the requirements of the securities 

4 laws; and 

5 ‘‘(B) in which a public accounting firm ei6 ther— 

7 ‘‘(i) sets forth the opinion of that firm 

8 regarding a financial statement, report, no9 tice, other document, procedures, or controls; 

10 or 

11 ‘‘(ii) asserts that no such opinion can 

12 be expressed. 

13 ‘‘(3) PROFESSIONAL STANDARDS.—The term 

14 ‘professional standards’ means— 

15 ‘‘(A) accounting principles that are— 

16 ‘‘(i) established by the standard setting 

17 body described in section 19(b) of the Secu18 rities Act of 1933, as amended by this Act, 

19 or prescribed by the Commission under sec20 tion 19(a) of that Act (15 U.S.C. 17a(s)) or 

21 section 13(b) of the Securities Exchange Act 

22 of 1934 (15 U.S.C. 78a(m)); and 

23 ‘‘(ii) relevant to audit reports for par24 ticular issuers, brokers, or dealers, or dealt 

25 with in the quality control system of a parVerDate Mar 15 2010 22:39 Dec 17, 2010 Jkt 099200 PO 00000 Frm 00126 Fmt 6652 Sfmt 6203 E:\BILLS\H3817.RH H3817

srobinson on DSKHWCL6B1PROD with BILLS
127 

•HR 3817 RH

1 ticular registered public accounting firm; 

2 and 

3 ‘‘(B) auditing standards, standards for at4 testation engagements, quality control policies 

5 and procedures, ethical and competency stand6 ards, and independence standards (including 

7 rules implementing title II) that the Board or 

8 the Commission determines— 

9 ‘‘(i) relate to the preparation or 

10 issuance of audit reports for issuers, bro11 kers, or dealers; and 

12 ‘‘(ii) are established or adopted by the 

13 Board under section 103(a), or are promul14 gated as rules of the Commission. 

15 ‘‘(4) BROKER.—The term ‘broker’ means a 

16 broker (as such term is defined in section 3(a)(4) of 

17 the Securities Exchange Act of 1934 (15 U.S.C. 

18 78c(a)(4))) that is required to file a balance sheet, in19 come statement, or other financial statement under 

20 section 17(e)(1)(A) of such Act (15 U.S.C. 

21 78q(e)(1)(A)), where such balance sheet, income state22 ment, or financial statement is required to be certified 

23 by a registered public accounting firm. 

24 ‘‘(5) DEALER.—The term ‘dealer’ means a dealer 

25 (as such term is defined in section 3(a)(5) of the SeVerDate Mar 15 2010 22:39 Dec 17, 2010 Jkt 099200 PO 00000 Frm 00127 Fmt 6652 Sfmt 6203 E:\BILLS\H3817.RH H3817

srobinson on DSKHWCL6B1PROD with BILLS
128 

•HR 3817 RH

1 curities Exchange Act of 1934 (15 U.S.C. 78c(a)(5))) 

2 that is required to file a balance sheet, income state3 ment, or other financial statement under section 

4 17(e)(1)(A) of such Act (15 U.S.C. 78q(e)(1)(A)), 

5 where such balance sheet, income statement, or finan6 cial statement is required to be certified by a reg7 istered public accounting firm. 

8 ‘‘(6) SELF-REGULATORY ORGANIZATION.—The 

9 term ‘self-regulatory organization’ has the same 

10 meaning as in section 3(a)(26) of the Securities Ex11 change Act of 1934 (15 U.S.C. 78c(a)(26)).’’. 

12 (2) The table of sections in section 1(b) of such Act 

13 is amended, by inserting after the item relating to section 

14 109 the following new item: 

‘‘Sec. 110. Definitions.’’. 

15 (b) ESTABLISHMENT AND ADMINISTRATION OF THE

16 PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD.—Sec17 tion 101 of such Act is amended— 

18 (1) by striking ‘‘issuers’’ each place it appears 

19 and inserting ‘‘issuers, brokers, and dealers’’; 

20 (2) in subsection (a), by striking ‘‘public compa21 nies’’ and inserting ‘‘companies’’; and 

22 (3) in subsection (a), by striking ‘‘for companies 

23 the securities of which are sold to, and held by and 

24 for, public investors’’. 


srobinson on DSKHWCL6B1PROD with BILLS
129 

•HR 3817 RH

1 (c) REGISTRATION WITH THE BOARD.—Section 102 of 

2 such Act is amended— 

3 (1) in subsection (a), by striking ‘‘Beginning 180 

4 days after the date of the determination of the Com5 mission under section 101(d), it’’ and inserting ‘‘It’’; 

6 (2) in subsections (a) and (b)(2)(G), by striking 

7 ‘‘issuer’’ each place it appears and inserting ‘‘issuer, 

8 broker, or dealer’’; and 

9 (3) in subsection (b)(2)(A), by striking ‘‘issuers’’ 

10 and inserting ‘‘issuers, brokers, and dealers’’. 

11 (d) AUDITING AND INDEPENDENCE.—Section 103(a) of 

12 such Act is amended— 

13 (1) in paragraph (1), by striking ‘‘and such eth14 ics standards’’ and inserting ‘‘such ethics standards, 

15 and such independence standards’’; 

16 (2) in paragraph (2)(A)(iii), by striking ‘‘de17 scribe in each audit report’’ and inserting ‘‘in each 

18 audit report for an issuer, describe’’; and 

19 (3) in paragraph (2)(B)(i), by striking ‘‘issuers’’ 

20 and inserting ‘‘issuers, brokers, and dealers’’. 

21 (e) INSPECTIONS OF REGISTERED PUBLIC ACCOUNT22 ING FIRMS.—Section 104 of such Act is amended— 

23 (1) in subsection (a), by striking ‘‘issuers’’ and 

24 inserting ‘‘issuers, brokers, and dealers’’; 

25 (2) in subsection (b)(1)(A)— 


srobinson on DSKHWCL6B1PROD with BILLS
130 

•HR 3817 RH

1 (A) by striking ‘‘audit reports’’ and insert2 ing ‘‘audit reports on annual financial state3 ments’’; and 

4 (B) by striking ‘‘and’’; 

5 (3) in subsection (b)(1)(B)— 

6 (A) by striking ‘‘audit reports’’ and insert7 ing ‘‘audit reports on annual financial state8 ments’’; and 

9 (B) by striking the period at the end and 

10 inserting ‘‘; and’’; and 

11 (4) by adding at the end of subsection (b)(1) the 

12 following new subparagraph: 

13 ‘‘(C) with respect to each registered public 

14 accounting firm that regularly provides audit re15 ports and is not described under subparagraph 

16 (A) or (B), on a basis to be determined by the 

17 Board, by rule, consistent with the public inter18 est and protection of investors.’’. 

19 (f) INVESTIGATIONS AND DISCIPLINARY PRO20 CEEDINGS.—Section 105(c)(7)(B) of such Act is amended— 

21 (1) in the subparagraph heading, by inserting ‘‘, 

22 BROKER, OR DEALER’’ after ‘‘ISSUER’’; 

23 (2) by striking ‘‘any issuer’’ each place it ap24 pears and inserting ‘‘any issuer, broker, or dealer’’; 

25 and 


srobinson on DSKHWCL6B1PROD with BILLS
131 

•HR 3817 RH

1 (3) by striking ‘‘an issuer under this subsection’’ 

2 and inserting ‘‘a registered public accounting firm 

3 under this subsection’’. 

4 (g) FOREIGN PUBLIC ACCOUNTING FIRMS.—Section 

5 106 of such Act is amended— 

6 (1) in subsection (a)(1), by striking ‘‘issuer’’ and 

7 inserting ‘‘issuer, broker, or dealer’’; and 

8 (2) in subsection (a)(2), by striking ‘‘issuers’’ 

9 and inserting ‘‘issuers, brokers, or dealers’’. 

10 (h) FUNDING.—Section 109 of such Act is amended— 

11 (1) in subsection (c)(2), by striking ‘‘subsection 

12 (i)’’ and inserting ‘‘subsection (j)’’; 

13 (2) in subsection (d)(2), by striking ‘‘allowing 

14 for differentiation among classes of issuers, as appro15 priate’’ and inserting ‘‘and among brokers and deal16 ers in accordance with subsection (h), and allowing 

17 for differentiation among classes of issuers and bro18 kers and dealers, as appropriate’’; 

19 (3) in subsection (d), by inserting at the end the 

20 following new paragraph: 

21 ‘‘(3) BROKERS AND DEALERS.—The rules of the 

22 Board under paragraph (1) shall provide that the al23 location, assessment, and collection by the Board (or 

24 an agent appointed by the Board) of the fee estab25 lished under paragraph (1) with respect to brokers 


srobinson on DSKHWCL6B1PROD with BILLS
132 

•HR 3817 RH

1 and dealers shall not begin until the first day of the 

2 first full fiscal year beginning after the date of the en3 actment of this paragraph.’’; 

4 (4) by redesignating subsections (h), (i), and (j) 

5 as subsections (i), (j), and (k), respectively; and 

6 (5) by inserting after subsection (g) the following 

7 new subsection: 

8 ‘‘(h) ALLOCATION OF ACCOUNTING SUPPORT FEES

9 AMONG BROKERS AND DEALERS.— 

10 ‘‘(1) IN GENERAL.—Any amount due from bro11 kers and dealers (or a particular class of such brokers 

12 and dealers) under this section to fund the budget of 

13 the Board shall be allocated among and payable by 

14 such brokers and dealers (or such brokers and dealers 

15 in a particular class, as applicable). A broker or deal16 er’s allocation shall be in proportion to the broker or 

17 dealer’s net capital compared to the total net capital 

18 of all brokers and dealer, in accordance with the rules 

19 of the Board. 

20 ‘‘(2) OBLIGATION TO PAY.—Every broker or deal21 er shall pay the share of a reasonable annual account22 ing support fee or fees allocated to such broker or 

23 dealer under this section.’’. 


srobinson on DSKHWCL6B1PROD with BILLS
133 

•HR 3817 RH

1 (i) REFERRAL OF INVESTIGATIONS TO A SELF-REGU2 LATORY ORGANIZATION.—Section 105(b)(4)(B) of the Sar3 banes-Oxley Act of 2002 is amended— 

4 (1) by redesignating clauses (ii) and (iii) as 

5 clauses (iii) and (iv), respectively; and 

6 (2) by inserting after clause (i) the following new 

7 clause: 

8 ‘‘(ii) to a self-regulatory organization, 

9 in the case of an investigation that concerns 

10 an audit report for a broker or dealer that 

11 is subject to the jurisdiction of such self-reg12 ulatory organization;’’. 

13 (j) USE OF DOCUMENTS RELATED TO AN INSPECTION

14 OR INVESTIGATION.—Section 105(b)(5)(B)(ii) of such Act 

15 is amended— 

16 (1) in subclause (III), by striking ‘‘and’’; 

17 (2) in subclause (IV), by striking the comma and 

18 inserting ‘‘; and’’; and 

19 (3) by inserting after subclause (IV) the fol20 lowing new subclause: 

21 ‘‘(V) a self-regulatory organiza22 tion, with respect to an audit report 

23 for a broker or dealer that is subject to 

24 the jurisdiction of such self-regulatory 

25 organization,’’. 


srobinson on DSKHWCL6B1PROD with BILLS
134 

•HR 3817 RH

1 SEC. 602. FOREIGN REGULATORY INFORMATION SHARING. 

2 (a) DEFINITION.—Section 2(a) of the Sarbanes-Oxley 

3 Act of 2002 (15 U.S.C. 7201(a)) is amended by inserting 

4 after paragraph (16) the following: 

5 ‘‘(17) FOREIGN AUDITOR OVERSIGHT AUTHOR6 ITY.—The term ‘foreign auditor oversight authority’ 

7 means any governmental body or other entity empow8 ered by a foreign government to conduct inspections 

9 of public accounting firms or otherwise to administer 

10 or enforce laws related to the regulation of public ac11 counting firms.’’. 

12 (b) AVAILABILITY TO SHARE INFORMATION.—Section 

13 105(b)(5) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 

14 7215(b)(5)) is amended by adding at the end the following: 

15 ‘‘(C) AVAILABILITY TO FOREIGN OVERSIGHT

16 AUTHORITIES.—When in the Board’s discretion 

17 it is necessary to accomplish the purposes of this 

18 Act or to protect investors, and without the loss 

19 of its status as confidential and privileged in the 

20 hands of the Board, all information referred to 

21 in subparagraph (A) that relates to a public ac22 counting firm within the inspection authority, or 

23 other regulatory or law enforcement jurisdiction, 

24 of a foreign auditor oversight authority may be 

25 made available to the foreign auditor oversight 

26 authority if the foreign auditor oversight authorVerDate Mar 15 2010 22:39 Dec 17, 2010 Jkt 099200 PO 00000 Frm 00134 Fmt 6652 Sfmt 6203 E:\BILLS\H3817.RH H3817

srobinson on DSKHWCL6B1PROD with BILLS
135 

•HR 3817 RH

1 ity provides such assurances of confidentiality as 

2 the Board determines appropriate.’’. 

3 (c) CONFORMING AMENDMENT.—Section 105(b)(5)(A) 

4 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 

5 7215(b)(5)(A)) is amended by striking ‘‘subparagraph (B)’’ 

6 and inserting ‘‘subparagraphs (B) and (C)’’. 

7 SEC. 603. EXPANSION OF AUDIT INFORMATION TO BE PRO8 DUCED AND EXCHANGED WITH FOREIGN 

9 COUNTERPARTS. 

10 Section 106 of the Sarbanes-Oxley Act of 2002 (15 

11 U.S.C. 7216) is amended— 

12 (1) by amending subsection (b) to read as fol13 lows: 

14 ‘‘(b) PRODUCTION OF DOCUMENTS.— 

15 ‘‘(1) PRODUCTION BY FOREIGN FIRMS.—If a for16 eign public accounting firm issues an audit report, 

17 performs audit work, conducts interim reviews, or 

18 performs material services upon which a registered 

19 public accounting firm relies in the conduct of an 

20 audit or interim review, the foreign public accounting 

21 firm shall produce its audit work papers and all 

22 other documents related to any such audit work or in23 terim review to the Commission or the Board when 

24 requested by the Commission or the Board and the 

25 foreign public accounting firm shall be subject to the 


srobinson on DSKHWCL6B1PROD with BILLS
136 

•HR 3817 RH

1 jurisdiction of the courts of the United States for pur2 poses of enforcement of any request of such documents. 

3 ‘‘(2) OTHER PRODUCTION.—Any registered pub4 lic accounting firm that relies, in whole or in part, 

5 on the work of a foreign public accounting firm in 

6 issuing an audit report, performing audit work, or 

7 conducting an interim review, shall— 

8 ‘‘(A) produce the foreign public accounting 

9 firm’s audit work papers and all other docu10 ments related to any such work in response to a 

11 request for production by the Commission or the 

12 Board; and 

13 ‘‘(B) secure the agreement of any foreign 

14 public accounting firm to such production, as a 

15 condition of its reliance on the work of that for16 eign public accounting firm.’’; 

17 (2) by redesignating subsection (d) as subsection 

18 (g); and 

19 (3) by inserting after subsection (c) the following 

20 new subsections: 

21 ‘‘(d) SERVICE OF REQUESTS OR PROCESS.—Any for22 eign public accounting firm that performs work for a do23 mestic registered public accounting firm shall furnish to the 

24 domestic firm a written irrevocable consent and power of 

25 attorney that designates the domestic firm as an agent upon 


srobinson on DSKHWCL6B1PROD with BILLS
137 

•HR 3817 RH

1 whom may be served any process, pleadings, or other papers 

2 in any action brought to enforce this section. Any foreign 

3 public accounting firm that issues an audit report, per4 forms audit work, performs interim reviews, or performs 

5 other material services upon which a registered public ac6 counting firm relies in the conduct of an audit or interim 

7 review, shall designate to the Commission or the Board an 

8 agent in the United States upon whom may be served any 

9 process, pleading, or other papers in any action brought 

10 to enforce this section or any request by the Commission 

11 or the Board under this section. 

12 ‘‘(e) SANCTIONS.—A willful refusal to comply, in 

13 whole in or in part, with any request by the Commission 

14 or the Board under this section, shall be a violation of this 

15 Act. 

16 ‘‘(f) OTHER MEANS OF SATISFYING PRODUCTION OB17 LIGATIONS.—Notwithstanding any other provision of this 

18 section, the staff of the Commission or Board may allow 

19 foreign public accounting firms subject to this section to 

20 meet production obligations under this section though alter21 nate means, such as through foreign counterparts of the 

22 Commission or Board.’’. 


srobinson on DSKHWCL6B1PROD with BILLS
138 

•HR 3817 RH

1 SEC. 604. CONFORMING AMENDMENT RELATED TO REG2 ISTRATION. 

3 Section 102(b)(3)(A) of the Sarbanes-Oxley Act of 2002 

4 (15 U.S. Code 7212(b)(3)(A)) is amended by striking ‘‘by 

5 the Board’’ and inserting ‘‘by the Commission or the 

6 Board’’. 

7 SEC. 605. FAIR FUND AMENDMENTS. 

8 Section 308 of the Sarbanes-Oxley Act of 2002 (15 

9 U.S.C. 7246(a)) is amended— 

10 (1) by amending subsection (a) to read as fol11 lows: 

12 ‘‘(a) CIVIL PENALTIES TO BE USED FOR THE RELIEF

13 OF VICTIMS.—If in any judicial or administrative action 

14 brought by the Commission under the securities laws (as 

15 such term is defined in section 3(a)(47) of the Securities 

16 Exchange Act of 1934 (15 U.S.C. 78c(a)(47)), the Commis17 sion obtains a civil penalty against any person for a viola18 tion of such laws or the rules and regulations thereunder, 

19 or such person agrees in settlement of any such action to 

20 such civil penalty, the amount of such civil penalty or set21 tlement shall, on the motion or at the direction of the Com22 mission, be added to and become part of a disgorgement 

23 fund or other fund established for the benefit of the victims 

24 of such violation.’’; 

25 (2) in subsection (b), by— 


srobinson on DSKHWCL6B1PROD with BILLS
139 

•HR 3817 RH

1 (A) striking ‘‘for a disgorgement fund de2 scribed in subsection (a)’’ and inserting ‘‘for a 

3 disgorgement fund or other fund described in 

4 subsection (a)’’; and 

5 (B) striking ‘‘in the disgorgement fund’’ 

6 and inserting ‘‘in such fund’’; and 

7 (3) by striking subsection (e). 

8 SEC. 606. EXEMPTION FOR NONACCELERATED FILERS. 

9 (a) EXEMPTION.—Section 404 of the Sarbanes-Oxley 

10 Act of 2002 is amended by adding at the end the following: 

11 ‘‘(c) EXEMPTION FOR SMALLER ISSUERS.—Subsection 

12 (b) shall not apply with respect to any audit report pre13 pared for an issuer that is not an accelerated filer within 

14 the meaning Rule 12b–2 of the Commission (17 C.F.R. 

15 240.12b–2).’’. 

16 (b) STUDY.—The Securities and Exchange Commis17 sion and the Comptroller General shall jointly conduct a 

18 study to determine how the Commission could reduce the 

19 burden of complying with section 404(b) of the Sarbanes20 Oxley Act of 2002 for companies whose market capitaliza21 tion is between $75,000,000 and $250,000,000 for the rel22 evant reporting period while maintaining investor protec23 tions for such companies. The study shall also consider 

24 whether any such methods of reducing the compliance bur25 den or a complete exemption for such companies from comVerDate Mar 15 2010 22:39 Dec 17, 2010 Jkt 099200 PO 00000 Frm 00139 Fmt 6652 Sfmt 6203 E:\BILLS\H3817.RH H3817

srobinson on DSKHWCL6B1PROD with BILLS
140 

•HR 3817 RH

1 pliance with such section would encourage companies to list 

2 on exchanges in the United States in their initial public 

3 offerings. Not later than 180 days after the date of the enact4 ment of this Act, the Commission and the Comptroller Gen5 eral shall transmit a report of such study to Congress. 

6 SEC. 607. WHISTLEBLOWER PROTECTION AGAINST RETAL7 IATION BY A SUBSIDIARY OF AN ISSUER. 

8 Section 1514A(a) of title 18, United States Code, is 

9 amended by inserting ‘‘including any subsidiary or affiliate 

10 whose financial information is included in the consolidated 

11 financial statements of such company,’’ after ‘‘(15 U.S.C. 

12 78o(d)),’’. 

13 SEC. 608. CONGRESSIONAL ACCESS TO INFORMATION. 

14 Section 101 of the Sarbanes-Oxley Act of 2002 is 

15 amended by adding at the end the following: 

16 ‘‘(i) CONGRESSIONAL ACCESS TO INFORMATION.— 

17 Nothing in this section shall— 

18 ‘‘(1) affect the Boards obligations, if any, to pro19 vide access to records under the Right to Financial 

20 Privacy Act; or 

21 ‘‘(2) authorize the Board to withhold informa22 tion from Congress or prevent the Board from com23 plying with an order of a court of the United States 

24 in an action commenced by the United States or the 

25 Board.’’. 


srobinson on DSKHWCL6B1PROD with BILLS
141 

•HR 3817 RH

1 SEC. 609. CREATION OF OMBUDSMAN FOR THE PCAOB. 

2 (a) OMBUDSMAN.—Title I of the Sarbanes-Oxley Act 

3 of 2002 (15 U.S.C. 7211 et seq.), as amended by section 

4 601(a)(1), is further amended by adding at the end the fol5 lowing new section: 

6 ‘‘SEC. 111. OMBUDSMAN. 

7 ‘‘(a) ESTABLISHMENT REQUIRED.—Not later than 180 

8 days after the date of enactment of the Investor Protection 

9 Act, the Board shall appoint an ombudsman for the Board. 

10 The Ombudsman shall report directly to the Chairman. 

11 ‘‘(b) DUTIES OF OMBUDSMAN.—The ombudsman ap12 pointed in accordance with subsection (a) for the Board 

13 shall— 

14 ‘‘(1) act as a liaison between the Board and— 

15 ‘‘(A) any registered public accounting firm 

16 or issuer with respect to issues or disputes con17 cerning the preparation or issuance of any audit 

18 report with respect to that issuer; and 

19 ‘‘(B) any affected registered public account20 ing firm or issuer with respect to— 

21 ‘‘(i) any problem such firm or issuer 

22 may have in dealing with the Board result23 ing from the regulatory activities of the 

24 Board, particularly with regard to the im25 plementation of section 404; and 


srobinson on DSKHWCL6B1PROD with BILLS
142 

•HR 3817 RH

1 ‘‘(ii) issues caused by the relationships 

2 of registered public accounting firms and 

3 issuers generally; and 

4 ‘‘(2) assure that safeguards exist to encourage 

5 complainants to come forward and to preserve con6 fidentiality; and 

7 ‘‘(3) carry out such activities, and any other ac8 tivities assigned by the Board, in accordance with 

9 guidelines prescribed by the Board.’’. 

10 (b) CONFORMING AMENDMENT.—The table of sections 

11 in section 1(b) of such Act is amended, by inserting after 

12 the item relating to section 110 (as added by section 

13 601(a)(2)) the following new item: 

‘‘Sec. 111. Ombudsman.’’. 

14 SEC. 610. AUDITING OVERSIGHT BOARD. 

15 The Sarbanes-Oxley Act of 2002 is amended— 

16 (1) in section 2(a)(5), by striking ‘‘Public Com17 pany Accounting Oversight Board’’ and inserting 

18 ‘‘Auditing Oversight Board’’; 

19 (2) in section 101(a), by striking ‘‘Public Com20 pany Accounting Oversight Board’’ and inserting 

21 ‘‘Auditing Oversight Board’’; and 

22 (3) in the heading of title I, by striking ‘‘PUB23 LIC COMPANY ACCOUNTING OVER24 SIGHT BOARD’’ and inserting ‘‘AUDITING 

25 OVERSIGHT BOARD’’. 


srobinson on DSKHWCL6B1PROD with BILLS
143 

•HR 3817 RH

1 TITLE VII—SENIOR INVESTMENT 

2 PROTECTION 

3 SEC. 701. FINDINGS. 

4 Congress finds that— 

5 (1) many seniors are targeted by salespersons 

6 and advisers using misleading certifications and pro7 fessional designations; 

8 (2) many certifications and professional designa9 tions used by salespersons and advisers represent lim10 ited training or expertise, and may in fact be of no 

11 value with respect to advising seniors on financial 

12 and estate planning matters, and far too often, such 

13 designations are obtained simply by attending a 

14 weekend seminar and passing an open book, multiple 

15 choice test; 

16 (3) many seniors have lost their life savings be17 cause salespersons and advisers holding a misleading 

18 designation have steered them toward products that 

19 were unsuitable for them, given their retirement needs 

20 and life expectancies; 

21 (4) seniors have a right to clearly know whether 

22 they are working with a qualified adviser who under23 stands the products and is working in their best in24 terest or a self-interested salesperson or adviser advo25 cating particular products; and 


srobinson on DSKHWCL6B1PROD with BILLS
144 

•HR 3817 RH

1 (5) many existing State laws and enforcement 

2 measures addressing the use of certifications, profes3 sional designations, and suitability standards in sell4 ing financial products to seniors are inadequate to 

5 protect senior investors from salespersons and advis6 ers using such designations. 

7 SEC. 702. DEFINITIONS. 

8 For purposes of this title: 

9 (1) MISLEADING DESIGNATION.—The term ‘‘mis10 leading designation’’— 

11 (A) means the use of a purported certifi12 cation, professional designation, or other creden13 tial, that indicates or implies that a salesperson 

14 or adviser has special certification or training in 

15 advising or servicing seniors; and 

16 (B) does not include any legitimate certifi17 cation, professional designation, license, or other 

18 credential, if— 

19 (i) it has been offered by an academic 

20 institution having regional accreditation; or 

21 (ii) it meets the standards for certifi22 cations, licenses, and professional designa23 tions outlined by the North American Secu24 rities Administrators Association (in this 

25 title referred to as the ‘‘NASAA’’) Model 


srobinson on DSKHWCL6B1PROD with BILLS
145 

•HR 3817 RH

1 Rule on the Use of Senior-Specific Certifi2 cations and Professional Designations, as in 

3 effect on the date of the enactment of this 

4 Act, or any successor thereto, or it was 

5 issued by or obtained from any State. 

6 (2) FINANCIAL PRODUCT.—The term ‘‘financial 

7 product’’ means securities, insurance products (in8 cluding insurance products which pay a return, 

9 whether fixed or variable), and bank and loan prod10 ucts. 

11 (3) MISLEADING OR FRAUDULENT MARKETING.— 

12 The term ‘‘misleading or fraudulent marketing’’ 

13 means the use of a misleading designation when sell14 ing to or advising a senior about the sale of a finan15 cial product. 

16 (4) SENIOR.—The term ‘‘senior’’ means any in17 dividual who has attained the age of 62 years or 

18 more. 

19 (5) STATE.—The term ‘‘State’’ means each of the 

20 50 States, the District of Columbia, and the unincor21 porated territories of Puerto Rico and the U.S. Virgin 

22 Islands. 


srobinson on DSKHWCL6B1PROD with BILLS
146 

•HR 3817 RH

1 SEC. 703. GRANTS TO STATES FOR ENHANCED PROTECTION 

2 OF SENIORS FROM BEING MISLEAD BY FALSE 

3 DESIGNATIONS. 

4 (a) GRANT PROGRAM.—The Securities and Exchange 

5 Commission (in this title referred to as the ‘‘Commis6 sion’’)— 

7 (1) shall establish a program in accordance with 

8 this title to provide grants to States— 

9 (A) to investigate and prosecute misleading 

10 and fraudulent marketing practices; or 

11 (B) to develop educational materials and 

12 training aimed at reducing misleading and 

13 fraudulent marketing of financial products to14 ward seniors; and 

15 (2) may establish such performance objectives, re16 porting requirements, and application procedures for 

17 States and State agencies receiving grants under this 

18 title as the Commission determines are necessary to 

19 carry out and assess the effectiveness of the program 

20 under this title. 

21 (b) USE OF GRANT AMOUNTS.—A grant under this 

22 title may be used (including through subgrants) by the 

23 State or the appropriate State agency designated by the 

24 State— 

25 (1) to fund additional staff to identify, inves26 tigate, and prosecute (through civil, administrative, 


srobinson on DSKHWCL6B1PROD with BILLS
147 

•HR 3817 RH

1 or criminal enforcement actions) cases involving mis2 leading or fraudulent marketing of financial products 

3 to seniors; 

4 (2) to fund technology, equipment, and training 

5 for regulators, prosecutors, and law enforcement in 

6 order to identify salespersons and advisers who target 

7 seniors through the use of misleading designations; 

8 (3) to fund technology, equipment, and training 

9 for prosecutors to increase the successful prosecution 

10 of those targeting seniors with the use of misleading 

11 designations; 

12 (4) to provide educational materials and train13 ing to regulators on the appropriateness of the use of 

14 designations by salespersons and advisers of financial 

15 products; 

16 (5) to provide educational materials and train17 ing to seniors to increase their awareness and under18 standing of designations; and 

19 (6) to develop comprehensive plans to combat 

20 misleading or fraudulent marketing of financial prod21 ucts to seniors. 

22 (c) GRANT REQUIREMENTS.— 

23 (1) MAXIMUM.—The amount of a grant under 

24 this title may not exceed $500,000 per fiscal year per 

25 State, if all requirements of paragraphs (2), (3), (4), 


srobinson on DSKHWCL6B1PROD with BILLS
148 

•HR 3817 RH

1 and (5) are met. Such amount shall be limited to 

2 $100,000 per fiscal year per State in any case in 

3 which the State meets the requirements of— 

4 (A) paragraphs (2) and (3), but not each of 

5 paragraphs (4) and (5); or 

6 (B) paragraphs (4) and (5), but not each of 

7 paragraphs (2) and (3). 

8 (2) STANDARD DESIGNATION RULES FOR SECURI9 TIES.—A State shall have adopted rules on the appro10 priate use of designations in the offer or sale of secu11 rities or investment advice, which shall meet or exceed 

12 the minimum requirements of the NASAA Model Rule 

13 on the Use of Senior-Specific Certifications and Pro14 fessional Designations, as in effect on the date of the 

15 enactment of this Act, or any successor thereto. 

16 (3) SUITABILITY RULES FOR SECURITIES.—A 

17 State shall have adopted standard rules on the suit18 ability requirements in the sale of securities, which 

19 shall, to the extent practicable, conform to the min20 imum requirements on suitability imposed by self-reg21 ulatory organization rules under the securities laws 

22 (as defined in section 3 of the Securities Exchange 

23 Act of 1934). 

24 (4) STANDARD DESIGNATION RULES FOR INSUR25 ANCE PRODUCTS.—A State shall have adopted standVerDate Mar 15 2010 22:39 Dec 17, 2010 Jkt 099200 PO 00000 Frm 00148 Fmt 6652 Sfmt 6203 E:\BILLS\H3817.RH H3817

srobinson on DSKHWCL6B1PROD with BILLS
149 

•HR 3817 RH

1 ard rules on the appropriate use of designations in 

2 the sale of insurance products, which shall, to the ex3 tent practicable, conform to the minimum require4 ments of the National Association of Insurance Com5 missioners Model Regulation on the Use of Senior6 Specific Certifications and Professional Designations 

7 in the Sale of Life Insurance and Annuities, as in ef8 fect on the date of the enactment of this Act, or any 

9 successor thereto. 

10 (5) SUITABILITY AND SUPERVISION RULES FOR

11 ANNUITY PRODUCTS.— 

12 (A) IN GENERAL.—A State shall have 

13 adopted rules governing insurer supervision of, 

14 suitability of, and insurer and insurance pro15 ducer conduct relating to, the sale of annuity 

16 products, including fixed and index annuities. 

17 (B) ANNUITY PRODUCTS CRITERIA.—The 

18 rules required by subparagraph (A) shall, to the 

19 extent practicable, provide— 

20 (i) that insurers, and insurance pro21 ducers are responsible for, and liable for 

22 penalties for, the suitability of each rec23 ommended annuity transaction; 

24 (ii) that insurers and insurance pro25 ducers are required to apply a standard for 


srobinson on DSKHWCL6B1PROD with BILLS
150 

•HR 3817 RH

1 determining the suitability of each rec2 ommended annuity transaction, including 

3 fixed and index annuities, that is at least 

4 as protective of the interests of the consumer 

5 as rule 2821(b) of the Financial Industry 

6 Regulatory Authority (in this paragraph re7 ferred to as ‘‘FINRA’’), as in effect on the 

8 date of the enactment of this Act, or any 

9 successor to such rule; 

10 (iii) that insurers and insurance pro11 ducers are required to maintain a process 

12 for review of the suitability, and approval 

13 or disapproval, of each recommended annu14 ity transaction that is at least as protective 

15 of the interests of the consumer as the prin16 cipal review required under rule 2821(c) of 

17 FINRA, as in effect on the date of the enact18 ment of this Act, or any successor to such 

19 rule; 

20 (iv) that insurers and insurance pro21 ducers are required to maintain processes 

22 for the supervision of direct annuity sales 

23 and insurance producer-recommended an24 nuity sales (including procedures for the in25 surer to obtain and confirm consumer suitVerDate Mar 15 2010 22:39 Dec 17, 2010 Jkt 099200 PO 00000 Frm 00150 Fmt 6652 Sfmt 6203 E:\BILLS\H3817.RH H3817

srobinson on DSKHWCL6B1PROD with BILLS
151 

•HR 3817 RH

1 ability information and for the insurer to 

2 confirm consumer understanding of the an3 nuity transaction) that are at least as pro4 tective of the interests of the consumer as 

5 member broker and dealer supervision re6 quirements of FINRA, as in effect on the 

7 date of the enactment of this Act, or any 

8 successor to such requirements; 

9 (v) that insurers are required to verify 

10 that each insurance producer successfully 

11 completes, and each insurance producer is 

12 required to receive, training designed to en13 sure that the insurance producer is com14 petent to recommend each class of annuity; 

15 (vi) that insurers are required to verify 

16 that insurance producers receive, and insur17 ance producers are required to receive, 

18 training regarding the features of each of19 fered annuity product, to an extent that is 

20 at least as protective of the interests of the 

21 consumer as the FINRA firm element train22 ing requirements, as in effect on the date of 

23 the enactment of this Act, or any successor 

24 to such requirements; 


srobinson on DSKHWCL6B1PROD with BILLS
152 

•HR 3817 RH

1 (vii) for coordination of such rules 

2 with the rules of FINRA governing member 

3 brokers, dealers, and security representa4 tives, to the extent appropriate, consistent 

5 with protecting the interests of consumers, 

6 for State insurance regulators to rely on, or 

7 to avoid duplication of FINRA rules; and 

8 (viii) for exemption from such rules 

9 only if such exemption is consistent with 

10 the protection of consumers. 

11 SEC. 704. APPLICATIONS. 

12 To be eligible for a grant under this title, the State 

13 or appropriate State agency shall submit to the Commis14 sion a proposal to use the grant money to protect seniors 

15 from misleading or fraudulent marketing techniques in the 

16 offer and sale of financial products, which application 

17 shall— 

18 (1) identify the scope of the problem; 

19 (2) describe how the proposed program will help 

20 to protect seniors from misleading or fraudulent mar21 keting in the sale of financial products, including, at 

22 a minimum— 

23 (A) by proactively identifying senior vic24 tims of misleading and fraudulent marketing in 

25 the offer and sale of financial products; 


srobinson on DSKHWCL6B1PROD with BILLS
153 

•HR 3817 RH

1 (B) how the proposed program can assist in 

2 the investigation and prosecution of those using 

3 misleading or fraudulent marketing in the offer 

4 and sale of financial products to seniors; and 

5 (C) how the proposed program can help dis6 courage and reduce future cases of misleading or 

7 fraudulent marketing in the offer and sale of fi8 nancial products to seniors; and 

9 (3) describe how the proposed program is to be 

10 integrated with other existing State efforts. 

11 SEC. 705. LENGTH OF PARTICIPATION. 

12 A State receiving a grant under this title shall be pro13 vided assistance funds for a period of 3 years, after which 

14 the State may reapply for additional funding. 

15 SEC. 706. AUTHORIZATION OF APPROPRIATIONS. 

16 There are authorized to be appropriated to carry out 

17 this title, $8,000,000 for each of the fiscal years 2011 

18 through 2015. 


srobinson on DSKHWCL6B1PROD with BILLS
154 

•HR 3817 RH

1 TITLE VIII—REGISTRATION OF 

2 MUNICIPAL FINANCIAL ADVI3 SORS 

4 SEC. 801. MUNICIPAL FINANCIAL ADVISER REGISTRATION 

5 REQUIREMENT. 

6 (a) IN GENERAL.—The Securities Exchange Act of 

7 1934 is amended by inserting after section 15E (15 U.S.C. 

8 78o–7) the following new section: 

9 ‘‘SEC. 15F. MUNICIPAL FINANCIAL ADVISER REGISTRATION 

10 REQUIREMENT. 

11 ‘‘(a)(1)(A) It shall be unlawful for any person to make 

12 use of the mails or any means or instrumentality of inter13 state commerce to act as a municipal financial adviser un14 less such person is registered as a municipal financial ad15 viser in accordance with subsection (b). 

16 ‘‘(B) Subparagraph (A) shall not apply to a natural 

17 person associated with a municipal financial adviser, as 

18 long as such adviser is registered in accordance with sub19 section (b) and is not a natural person. 

20 ‘‘(2) The Commission, by rule or order, as it deems 

21 consistent with the public interest and the protection of in22 vestors, may conditionally or unconditionally exempt from 

23 paragraph (1) of this section any municipal financial ad24 viser or class of municipal financial advisers specified in 

25 such rule or order. 


srobinson on DSKHWCL6B1PROD with BILLS
155 

•HR 3817 RH

1 ‘‘(b)(1) A municipal financial adviser may be reg2 istered by filing with the Commission an application for 

3 registration in such form and containing such information 

4 and documents concerning such municipal financial ad5 viser and any persons associated with such municipal fi6 nancial adviser as the Commission, by rule, may prescribe 

7 as necessary or appropriate in the public interest or for 

8 the protection of investors. Within 45 days of the date of 

9 the filing of such application (or within such longer period 

10 as to which the applicant consents), the Commission shall— 

11 ‘‘(A) by order grant registration, or 

12 ‘‘(B) institute proceedings to determine whether 

13 registration should be denied. Such proceedings shall 

14 include notice of the grounds for denial under consid15 eration and opportunity for hearing and shall be con16 cluded within 120 days of the date of the filing of the 

17 application for registration. At the conclusion of such 

18 proceedings, the Commission, by order, shall grant or 

19 deny such registration. The Commission may extend 

20 the time for conclusion of such proceedings for up to 

21 90 days if it finds good cause for such extension and 

22 publishes its reasons for so finding or for such longer 

23 period as to which the applicant consents. 

24 The Commission shall grant such registration if the 

25 Commission finds that the requirements of this section 


srobinson on DSKHWCL6B1PROD with BILLS
156 

•HR 3817 RH

1 are satisfied. The Commission shall deny such reg2 istration if it does not make such a finding or if it 

3 finds that if the applicant were so registered, its reg4 istration would be subject to suspension or revocation 

5 under paragraph (4). 

6 ‘‘(2) An application for registration of a municipal 

7 financial adviser to be formed or organized may be made 

8 by a municipal financial adviser to which the municipal 

9 financial adviser to be formed or organized is to be the suc10 cessor. Such application, in such form as the Commission, 

11 by rule, may prescribe, shall contain such information and 

12 documents concerning the applicant, the successor, and any 

13 persons associated with the applicant or the successor, as 

14 the Commission, by rule, may prescribe as necessary or ap15 propriate in the public interest or for the protection of in16 vestors. The grant or denial of registration to such an appli17 cant shall be in accordance with the procedures set forth 

18 in paragraph (1) of this subsection. If the Commission 

19 grants such registration, the registration shall terminate on 

20 the 45th day after the effective date thereof, unless prior 

21 thereto the successor shall, in accordance with such rules 

22 and regulations as the Commission may prescribe, adopt 

23 the application for registration as its own. 

24 ‘‘(3) Any provision of this title (other than section 5 

25 and subsection (a) of this section) which prohibits any act, 


srobinson on DSKHWCL6B1PROD with BILLS
157 

•HR 3817 RH

1 practice, or course of business if the mails or any means 

2 or instrumentality of interstate commerce is used in connec3 tion therewith shall also prohibit any such act, practice, 

4 or course of business by any registered municipal financial 

5 adviser or any person acting on behalf of such a municipal 

6 financial adviser, irrespective of any use of the mails or 

7 any means or instrumentality of interstate commerce in 

8 connection therewith. 

9 ‘‘(4) The Commission, by order, shall censure, place 

10 limitations on the activities, functions, or operations of, 

11 suspend for a period not exceeding 12 months, or revoke 

12 the registration of any municipal financial adviser if it 

13 finds, on the record after notice and opportunity for hear14 ing, that such censure, placing of limitations, suspension, 

15 or revocation is in the public interest and that such munic16 ipal financial adviser, whether prior or subsequent to be17 coming such, or any person associated with such municipal 

18 financial adviser, whether prior or subsequent to becoming 

19 so associated— 

20 ‘‘(A) has willfully made or caused to be made in 

21 any application for registration or report required to 

22 be filed with the Commission or with any other ap23 propriate regulatory agency under this title, or in 

24 any proceeding before the Commission with respect to 

25 registration, any statement which was at the time 


srobinson on DSKHWCL6B1PROD with BILLS
158 

•HR 3817 RH

1 and in the light of the circumstances under which it 

2 was made false or misleading with respect to any ma3 terial fact, or has omitted to state in any such appli4 cation or report any material fact which is required 

5 to be stated therein; 

6 ‘‘(B) has been convicted within 10 years pre7 ceding the filing of any application for registration or 

8 at any time thereafter of any felony or misdemeanor 

9 or of a substantially equivalent crime by a foreign 

10 court of competent jurisdiction which the Commission 

11 finds— 

12 ‘‘(i) involves the purchase or sale of any se13 curity, the taking of a false oath, the making of 

14 a false report, bribery, perjury, burglary, any 

15 substantially equivalent activity however de16 nominated by the laws of the relevant foreign 

17 government, or conspiracy to commit any such 

18 offense; 

19 ‘‘(ii) arises out of the conduct of the busi20 ness of a municipal financial adviser, broker, 

21 dealer, municipal securities dealer, government 

22 securities broker, government securities dealer, 

23 investment adviser, bank, insurance company, fi24 duciary, transfer agent, nationally recognized 

25 statistical rating organization, foreign person 


srobinson on DSKHWCL6B1PROD with BILLS
159 

•HR 3817 RH

1 performing a function substantially equivalent to 

2 any of the above, or entity or person required to 

3 be registered under the Commodity Exchange Act 

4 (7 U.S.C. 1 et seq.) or any substantially equiva5 lent foreign statute or regulation; 

6 ‘‘(iii) involves the larceny, theft, robbery, ex7 tortion, forgery, counterfeiting, fraudulent con8 cealment, embezzlement, fraudulent conversion, 

9 or misappropriation of funds, or securities, or 

10 substantially equivalent activity however de11 nominated by the laws of the relevant foreign 

12 government; or 

13 ‘‘(iv) involves the violation of section 152, 

14 1341, 1342, or 1343 or chapter 25 or 47 of title 

15 18, or a violation of a substantially equivalent 

16 foreign statute; 

17 ‘‘(C) is permanently or temporarily enjoined by 

18 order, judgment, or decree of any court of competent 

19 jurisdiction from acting as a municipal financial ad20 viser, investment adviser, underwriter, broker, dealer, 

21 municipal securities dealer, government securities 

22 broker, government securities dealer, transfer agent, 

23 nationally recognized statistical rating organization, 

24 foreign person performing a function substantially 

25 equivalent to any of the above, or entity or person reVerDate Mar 15 2010 22:39 Dec 17, 2010 Jkt 099200 PO 00000 Frm 00159 Fmt 6652 Sfmt 6203 E:\BILLS\H3817.RH H3817

srobinson on DSKHWCL6B1PROD with BILLS
160 

•HR 3817 RH

1 quired to be registered under the Commodity Ex2 change Act or any substantially equivalent foreign 

3 statute or regulation, or as an affiliated person or 

4 employee of any investment company, bank, insur5 ance company, foreign entity substantially equivalent 

6 to any of the above, or entity or person required to 

7 be registered under the Commodity Exchange Act or 

8 any substantially equivalent foreign statute or regula9 tion or from engaging in or continuing any conduct 

10 or practice in connection with any such activity, or 

11 in connection with the purchase or sale of any secu12 rity; 

13 ‘‘(D) has willfully violated any provision of the 

14 Securities Act of 1933, the Investment Advisers Act of 

15 1940, the Investment Company Act of 1940, the Com16 modity Exchange Act, this title, the rules or regula17 tions under any of such statutes, or is unable to com18 ply with any such provision; 

19 ‘‘(E) has willfully aided, abetted, counseled, com20 manded, induced, or procured the violation by any 

21 other person of any provision of the Securities Act of 

22 1933, the Investment Advisers Act of 1940, the Invest23 ment Company Act of 1940, the Commodity Exchange 

24 Act, this title, the rules or regulations under any of 

25 such statutes, or has failed reasonably to supervise, 


srobinson on DSKHWCL6B1PROD with BILLS
161 

•HR 3817 RH

1 with a view to preventing violations of the provisions 

2 of such statutes, rules, and regulations, another per3 son who commits such a violation, if such other per4 son is subject to his supervision. For the purposes of 

5 this subparagraph, no person shall be deemed to have 

6 failed reasonably to supervise any other person, if— 

7 ‘‘(i) there have been established procedures, 

8 and a system for applying such procedures, 

9 which would reasonably be expected to prevent 

10 and detect, insofar as practicable, any such vio11 lation by such other person, and 

12 ‘‘(ii) such person has reasonably discharged 

13 the duties and obligations incumbent upon him 

14 by reason of such procedures and system without 

15 reasonable cause to believe that such procedures 

16 and system were not being complied with; 

17 ‘‘(F) is subject to any order of the Commission 

18 barring or suspending the right of the person to be as19 sociated with a municipal financial adviser; 

20 ‘‘(G) has been found by a foreign financial regu21 latory authority to have— 

22 ‘‘(i) made or caused to be made in any ap23 plication for registration or report required to be 

24 filed with a foreign financial regulatory author25 ity, or in any proceeding before a foreign finanVerDate Mar 15 2010 22:39 Dec 17, 2010 Jkt 099200 PO 00000 Frm 00161 Fmt 6652 Sfmt 6203 E:\BILLS\H3817.RH H3817

srobinson on DSKHWCL6B1PROD with BILLS
162 

•HR 3817 RH

1 cial regulatory authority with respect to reg2 istration, any statement that was at the time 

3 and in the light of the circumstances under 

4 which it was made false or misleading with re5 spect to any material fact, or has omitted to 

6 state in any application or report to the foreign 

7 financial regulatory authority any material fact 

8 that is required to be stated therein; 

9 ‘‘(ii) violated any foreign statute or regula10 tion regarding transactions in securities, or con11 tracts of sale of a commodity for future delivery, 

12 traded on or subject to the rules of a contract 

13 market or any board of trade; or 

14 ‘‘(iii) aided, abetted, counseled, commanded, 

15 induced, or procured the violation by any person 

16 of any provision of any statutory provisions en17 acted by a foreign government, or rules or regu18 lations thereunder, empowering a foreign finan19 cial regulatory authority regarding transactions 

20 in securities, or contracts of sale of a commodity 

21 for future delivery, traded on or subject to the 

22 rules of a contract market or any board of trade, 

23 or has been found, by a foreign financial regu24 latory authority, to have failed reasonably to su25 pervise, with a view to preventing violations of 


srobinson on DSKHWCL6B1PROD with BILLS
163 

•HR 3817 RH

1 such statutory provisions, rules, and regulations, 

2 another person who commits such a violation, if 

3 such other person is subject to his supervision; or 

4 ‘‘(H) is subject to any final order of a State se5 curities commission (or any agency or officer per6 forming like functions), State authority that super7 vises or examines banks, savings associations, or cred8 it unions, State insurance commission (or any agency 

9 or office performing like functions), an appropriate 

10 Federal banking agency (as defined in section 3 of the 

11 Federal Deposit Insurance Act (12 U.S.C. 1813(q))), 

12 or the National Credit Union Administration, that— 

13 ‘‘(i) bars such person from association with 

14 an entity regulated by such commission, author15 ity, agency, or officer, or from engaging in the 

16 business of securities, insurance, banking, sav17 ings association activities, or credit union activi18 ties; or 

19 ‘‘(ii) constitutes a final order based on vio20 lations of any laws or regulations that prohibit 

21 fraudulent, manipulative, or deceptive conduct. 

22 ‘‘(5) Pending final determination whether any reg23 istration under this subsection shall be revoked, the Com24 mission, by order, may suspend such registration, if such 

25 suspension appears to the Commission, after notice and opVerDate Mar 15 2010 22:39 Dec 17, 2010 Jkt 099200 PO 00000 Frm 00163 Fmt 6652 Sfmt 6203 E:\BILLS\H3817.RH H3817

srobinson on DSKHWCL6B1PROD with BILLS
164 

•HR 3817 RH

1 portunity for hearing, to be necessary or appropriate in the 

2 public interest or for the protection of investors. Any reg3 istered municipal financial adviser may, upon such terms 

4 and conditions as the Commission deems necessary or ap5 propriate in the public interest or for the protection of in6 vestors, withdraw from registration by filing a written no7 tice of withdrawal with the Commission. If the Commission 

8 finds that any registered municipal financial adviser is no 

9 longer in existence or has ceased to do business as a munic10 ipal financial adviser, the Commission, by order, shall can11 cel the registration of such municipal financial adviser. 

12 ‘‘(6)(A) With respect to any person who is associated, 

13 who is seeking to become associated, or, at the time of the 

14 alleged misconduct, who was associated or was seeking to 

15 become associated with a municipal financial adviser, the 

16 Commission, by order, shall censure, place limitations on 

17 the activities or functions of such person, or suspend for 

18 a period not exceeding 12 months, or bar such person from 

19 being associated with a municipal financial adviser, if the 

20 Commission finds, on the record after notice and oppor21 tunity for a hearing, that such censure, placing of limita22 tions, suspension, or bar is in the public interest and that 

23 such person— 

24 ‘‘(i) has committed or omitted any act, or is sub25 ject to an order or finding, enumerated in subparaVerDate Mar 15 2010 22:39 Dec 17, 2010 Jkt 099200 PO 00000 Frm 00164 Fmt 6652 Sfmt 6203 E:\BILLS\H3817.RH H3817

srobinson on DSKHWCL6B1PROD with BILLS
165 

•HR 3817 RH

1 graph (A), (D), or (E) of paragraph (4) of this sub2 section; 

3 ‘‘(ii) has been convicted of any offense specified 

4 in subparagraph (B) of such paragraph (4) within 10 

5 years of the commencement of the proceedings under 

6 this paragraph; or 

7 ‘‘(iii) is enjoined from any action, conduct, or 

8 practice specified in subparagraph (C) of such para9 graph (4). 

10 ‘‘(B) It shall be unlawful— 

11 ‘‘(i) for any person as to whom an order under 

12 subparagraph (A) is in effect, without the consent of 

13 the Commission, willfully to become, or to be, associ14 ated with a municipal financial adviser in con15 travention of such order; or 

16 ‘‘(ii) for any municipal financial adviser to per17 mit such a person, without the consent of the Com18 mission, to become or remain, a person associated 

19 with the municipal financial adviser in contravention 

20 of such order, if such municipal financial adviser 

21 knew, or in the exercise of reasonable care should have 

22 known, of such order. 

23 ‘‘(7) No registered municipal financial adviser shall 

24 act as such unless it meets such standards of operational 

25 capability and such municipal financial adviser and all 


srobinson on DSKHWCL6B1PROD with BILLS
166 

•HR 3817 RH

1 natural persons associated with such municipal financial 

2 adviser meet such standards of training, experience, com3 petence, and such other qualifications as the Commission 

4 finds necessary or appropriate in the public interest or for 

5 the protection of investors. The Commission shall establish 

6 such standards by rules and regulations, which may— 

7 ‘‘(A) specify that all or any portion of such 

8 standards shall be applicable to any class of munic9 ipal financial advisers and persons associated with 

10 municipal financial advisers; 

11 ‘‘(B) require persons in any such class to pass 

12 tests prescribed in accordance with such rules and 

13 regulations, which tests shall, with respect to any 

14 class of partners, officers, or supervisory employees 

15 (which latter term may be defined by the Commis16 sion’s rules and regulations) engaged in the manage17 ment of the municipal financial adviser, include ques18 tions relating to bookkeeping, accounting, supervision 

19 of employees, maintenance of records, and other ap20 propriate matters; and 

21 ‘‘(C) provide that persons in any such class other 

22 than municipal financial advisers and partners, offi23 cers, and supervisory employees of municipal finan24 cial advisers, may be qualified solely on the basis of 

25 compliance with such standards of training and such 


srobinson on DSKHWCL6B1PROD with BILLS
167 

•HR 3817 RH

1 other qualifications as the Commission finds appro2 priate. 

3 The Commission, by rule, may prescribe reasonable fees and 

4 charges to defray its costs in carrying out this paragraph, 

5 including, but not limited to, fees for any test administered 

6 by it or under its direction. 

7 ‘‘(c)(1)(A) No municipal financial adviser shall make 

8 use of the mails or any means or instrumentality of inter9 state commerce in connection with which such municipal 

10 financial adviser engages in any fraudulent, deceptive, or 

11 manipulative act or practice or violates such rules and reg12 ulations regarding conflicts of interest or fair practices, in13 cluding but not limited to rules and regulations related to 

14 political contributions, as the Commission shall prescribe 

15 in the public interest or for the protection of investors or 

16 to maintain fair and orderly markets. 

17 ‘‘(B) The Commission shall, for the purposes of this 

18 paragraph as the Commission finds necessary or appro19 priate in the public interest or for the protection of inves20 tors, by rules and regulations define, and prescribe means 

21 reasonably designed to prevent, such acts and practices as 

22 are fraudulent, deceptive, or manipulative. 

23 ‘‘(2) If the Commission finds, after notice and oppor24 tunity for a hearing, that any person subject to the provi25 sions of this section or any rule or regulation thereunder 


srobinson on DSKHWCL6B1PROD with BILLS
168 

•HR 3817 RH

1 has failed to comply with any such provision, rule, or regu2 lation in any material respect, the Commission may pub3 lish its findings and issue an order requiring such person, 

4 and any person who was a cause of the failure to comply 

5 due to an act or omission the person knew or should have 

6 known would contribute to the failure to comply, to comply, 

7 or to take steps to effect compliance, with such provision 

8 or such rule or regulation thereunder upon such terms and 

9 conditions and within such time as the Commission may 

10 specify in such order. 

11 ‘‘(d) Every registered municipal financial adviser 

12 shall establish, maintain, and enforce written policies and 

13 procedures reasonably designed, taking into consideration 

14 the nature of such municipal financial adviser’s business, 

15 to prevent the misuse in violation of this title, or the rules 

16 or regulations thereunder, of material, nonpublic informa17 tion by such municipal financial adviser or any person as18 sociated with such municipal financial adviser. The Com19 mission, as it deems necessary or appropriate in the public 

20 interest or for the protection of investors, shall adopt rules 

21 or regulations to require specific policies or procedures rea22 sonably designed to prevent misuse in violation of this title 

23 (or the rules or regulations thereunder) of material, non24 public information. 


srobinson on DSKHWCL6B1PROD with BILLS
169 

•HR 3817 RH

1 ‘‘(e) A municipal financial adviser and any person as2 sociated with such municipal financial adviser shall be 

3 deemed to have a fiduciary duty to any municipal securi4 ties issuer for whom such municipal financial adviser acts 

5 as a municipal financial adviser. A municipal financial 

6 adviser may not engage in any act, practice, or course of 

7 business which is not consistent with a municipal financial 

8 adviser’s fiduciary duty. The Commission shall, for the pur9 poses of this paragraph, by rules and regulations define, 

10 and prescribe means reasonably designed to prevent, such 

11 acts, practices, and courses of business as are not consistent 

12 with a municipal financial adviser’s fiduciary duty to its 

13 clients.’’. 

14 (b) DEFINITION.—Section 3(a) of the Securities Ex15 change Act of 1934 (15 U.S.C. 78c(a)) is amended by add16 ing at the end the following new paragraphs: 

17 ‘‘(65) MUNICIPAL FINANCIAL ADVISER.— 

18 ‘‘(A) The term ‘municipal financial adviser’ 

19 means a person who, for compensation, engages 

20 in the business of— 

21 ‘‘(i) providing advice to a municipal 

22 securities issuer with respect to— 

23 ‘‘(I) the issuance or proposed 

24 issuance of securities, including any 

25 remarketing of municipal securities diVerDate Mar 15 2010 22:39 Dec 17, 2010 Jkt 099200 PO 00000 Frm 00169 Fmt 6652 Sfmt 6203 E:\BILLS\H3817.RH H3817

srobinson on DSKHWCL6B1PROD with BILLS
170 

•HR 3817 RH

1 rectly or indirectly by or on behalf of 

2 a municipal securities issuer; 

3 ‘‘(II) the investment of proceeds 

4 from securities issued by such munic5 ipal securities issuer; 

6 ‘‘(III) the hedging of any risks as7 sociated with subclauses (I) or (II), in8 cluding advice as to swap agreements 

9 (as defined in section 206A of the 

10 Gramm-Leach-Bliley Act regardless of 

11 whether the counterparties constitute 

12 eligible contract participants); or 

13 ‘‘(IV) preparation of disclosure 

14 documents in connection with the 

15 issuance, proposed issuance, or pre16 vious issuance of securities issued by a 

17 municipal securities issuer, including, 

18 without limitation, official statements 

19 and documents prepared in connection 

20 with a written agreement or contract 

21 for the benefit of holders of such securi22 ties described in section 240.15c2–12 of 

23 title 17, Code of Federal Regulations; 

24 ‘‘(ii) assisting a municipal securities 

25 issuer in selecting or negotiating guaranteed 


srobinson on DSKHWCL6B1PROD with BILLS
171 

•HR 3817 RH

1 investment contracts or other investment 

2 products; or 

3 ‘‘(iii) assisting any municipal securi4 ties issuer in the primary offering of securi5 ties not involving a public offering. 

6 ‘‘(B) Such term does not include— 

7 ‘‘(i) an attorney, if the attorney is of8 fering advice or providing services that are 

9 of a traditional legal nature; 

10 ‘‘(ii) a nationally recognized statistical 

11 rating organization to the extent it is in12 volved in the process of developing credit 

13 ratings; 

14 ‘‘(iii) a registered broker-dealer when 

15 acting as an underwriter, as such term is 

16 defined in section 2(a)(11) of the Securities 

17 Act of 1933 (15 U.S.C. section 77b(a)(11)); 

18 or 

19 ‘‘(iv) a State or any political subdivi20 sion thereof. 

21 ‘‘(66) MUNICIPAL SECURITIES ISSUER.—The 

22 term ‘municipal securities issuer’ means— 

23 ‘‘(A) any entity that has the ability to issue 

24 a security the interest on which is excludable 

25 from gross income under section 103 of the InterVerDate Mar 15 2010 22:39 Dec 17, 2010 Jkt 099200 PO 00000 Frm 00171 Fmt 6652 Sfmt 6203 E:\BILLS\H3817.RH H3817

srobinson on DSKHWCL6B1PROD with BILLS
172 

•HR 3817 RH

1 nal Revenue Code of 1986 and the regulations 

2 thereunder; or 

3 ‘‘(B) any person who receives the proceeds 

4 generated from the issuance of municipal securi5 ties. 

6 ‘‘(67) PERSON ASSOCIATED WITH A MUNICIPAL

7 FINANCIAL ADVISER; ASSOCIATED PERSON OF A MU8 NICIPAL FINANCIAL ADVISER.—The term ‘person asso9 ciated with a municipal financial adviser’ or ‘associ10 ated person of a municipal financial adviser’ means 

11 any partner, officer, director, or branch manager of 

12 such municipal financial adviser (or any person oc13 cupying a similar status or performing similar func14 tions), any person directly or indirectly controlling, 

15 controlled by, or under common control with such 

16 municipal financial adviser, or any employee of such 

17 municipal financial adviser, except that any person 

18 associated with a municipal financial adviser whose 

19 functions are solely clerical or ministerial shall not be 

20 included in the meaning of such term for purposes of 

21 section 15F(b) (other than paragraph (6) thereof).’’. 

22 SEC. 802. CONFORMING AMENDMENTS. 

23 (a) SECURITIES EXCHANGE ACT OF 1934 .—The Secu24 rities Exchange Act of 1934 is amended— 


srobinson on DSKHWCL6B1PROD with BILLS
173 

•HR 3817 RH

1 (1) in section 15(b)(4)(B)(ii) (15 U.S.C. 

2 78o(b)(4)(B)(ii)), by inserting ‘‘municipal finance 

3 adviser,’’ after ‘‘nationally recognized statistical rat4 ing organization,’’; 

5 (2) in section 15(b)(4)(C) (15 U.S.C. 

6 78o(b)(4)(C)), by inserting ‘‘municipal finance ad7 viser,’’ after ‘‘nationally recognized statistical rating 

8 organization,’’; and 

9 (3) in section 17(a)(1) (15 U.S.C. 78q(a)(1)), by 

10 inserting ‘‘registered municipal financial adviser,’’ 

11 after ‘‘nationally recognized statistical rating organi12 zation,’’. 

13 (b) INVESTMENT COMPANY ACT OF 1940.—The Invest14 ment Company Act of 1940 is amended— 

15 (1) in section 2(a) (15 U.S.C. 80a–2(a)), by in16 serting at the end the following new paragraph: 

17 ‘‘(54) The term ‘municipal finance adviser’ has 

18 the same meaning as in section 3 of the Securities 

19 Exchange Act of 1934.’’; 

20 (2) in section 9(a)(1) (15 U.S.C. 80a–9(a)(1)), 

21 by inserting ‘‘municipal finance adviser,’’ after ‘‘cred22 it rating agency,’’; and 

23 (3) in section 9(a)(2) (15 U.S.C. 80a–9(a)(2)), 

24 by inserting ‘‘municipal finance adviser,’’ after ‘‘cred25 it rating agency,’’. 


srobinson on DSKHWCL6B1PROD with BILLS
174 

•HR 3817 RH

1 (c) INVESTMENT ADVISERS ACT OF 1940.—The Invest2 ment Advisers Act of 1940 is amended— 

3 (1) in section 202(a) (15 U.S.C. 80b–2(a)), by 

4 inserting at the end the following new paragraph: 

5 ‘‘(29) The term ‘municipal finance adviser’ has 

6 the same meaning as in section 3 of the Securities 

7 Exchange Act of 1934.’’; 

8 (2) in section 203(e)(2)(B) (15 U.S.C. 80b– 

9 3(e)(2)(B)), by inserting ‘‘municipal finance adviser,’’ 

10 after ‘‘credit rating agency,’’; and 

11 (3) in section 203(e)(4) (15 U.S.C. 80b–3(e)(4)) 

12 is amended by inserting ‘‘municipal finance adviser,’’ 

13 after ‘‘credit rating agency,’’. 

14 SEC. 803. EFFECTIVE DATES. 

15 (a) IN GENERAL.—The amendments made by this title 

16 shall take effect 30 days after the date of the enactment of 

17 this Act. 

18 (b) EFFECTIVE DATE AND REQUIREMENTS FOR REGU19 LATIONS.—Notwithstanding subsection (a), the Securities 

20 and Exchange Commission shall, within 120 days after the 

21 date of the enactment of this Act, publish for notice and 

22 public comment such regulations as are initially required 

23 to implement this title, and shall take final action with re24 spect to such regulations not later than 270 days after the 

25 date of enactment of this Act. 


srobinson on DSKHWCL6B1PROD with BILLS
175 

•HR 3817 RH

1 (c) REGISTRATION DATE.—No person may continue to 

2 act as a municipal financial adviser, as such term is de3 fined in section 3(a)(65) of the Securities Exchange Act of 

4 1934 (as added by this title), after 30 days after the date 

5 the regulations described in subsection (b) become effective 

6 unless such person has been registered as required by the 

7 amendment made by section 701 of this title. 


srobinson on DSKHWCL6B1PROD with BILLS
Union Calendar No. 408 

111TH CONGRESS 

2D SESSION H. R. 3817 

[Report No. 111–687, Part I] 

A BILL 

To provide the Securities and Exchange Commisfor other purposes. tors from violations of the securities laws, and sion with additional authorities to protect invesDECEMBER 17, 2010 Committee on the Judiciary discharged; committed to the 

Union and ordered to be printed Committee of the Whole House on the State of the 


srobinson on DSKHWCL6B1PROD with BILLS