I 

111TH CONGRESS 

1ST SESSION H. R. 3817 

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 

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. 

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 

5 Act 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 


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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. Clarification of commission authority to require investor disclosures 

before purchase of investment company shares. 

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

Sec. 106. Revision to recordkeeping rules. 

TITLE II—ENFORCEMENT AND REMEDIES 

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

Sec. 202. Whistleblower protection. 

Sec. 203. Conforming amendments for whistleblower protection. 

Sec. 204. Implementation and transition provisions for whistleblower protections. 

Sec. 205. Collateral bars. 

Sec. 206. Aiding and abetting authority under the Securities Act and the Investment Company Act. 

Sec. 207. Authority to impose penalties for aiding and abetting violations of the 

Investment Advisers Act. 

Sec. 208. Deadline for completing examinations, inspections and enforcement 

actions. 

Sec. 209. Nationwide service of subpoenas. 

Sec. 210. Authority to impose civil penalties in cease and desist proceedings. 

Sec. 211. Formerly associated persons. 

Sec. 212. Sharing privileged information with other authorities. 

Sec. 213. Expanded access to grand jury material. 

Sec. 214. Aiding and abetting standard of knowledge satisfied by recklessness. 

Sec. 215. Extraterritorial jurisdiction of the antifraud provisions of the Federal 

securities laws. 

Sec. 216. Fidelity bonding. 

Sec. 217. Enhanced SEC authority to conduct surveillance and risk assessment. 

Sec. 218. Investment company examinations. 

Sec. 219. Control person liability under the Securities Exchange Act. 

Sec. 220. Enhanced application of anti-fraud provisions. 

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. 

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. 


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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. 

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. Limitations on customer status. 

Sec. 510. Futures held in a portfolio margin securities account protection. 

Sec. 511. Risk-based premiums. 

Sec. 512. Budgetary treatment of Commission loans to SIPC. 

TITLE VI—SARBANES-OXLEY ACT AMENDMENTS 

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

non-public 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. Fair fund amendments. 

Sec. 605. Whistleblower protection against retaliation by a subsidiary of an 

issuer. 

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 fol5 lowing new section: 

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

7 ‘‘(a) ESTABLISHMENT AND PURPOSE.—There is es8 tablished an Investor Advisory Committee (in this section 

9 referred to as the ‘Committee’) to advise and consult with 

10 the Commission on— 


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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 

6 in the integrity of the marketplace. 

7 ‘‘(b) MEMBERSHIP.— 

8 ‘‘(1) APPOINTMENT.—The Chairman of the 

9 Commission shall appoint the members of the Com10 mittee, 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 EMPLOY18 EES.—Members shall not be considered employees or 

19 agents of the Commission solely because of member20 ship on the Committee. 

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

22 time to time at the call of the Commission, but, at a min23 imum, shall meet at least twice each year. 


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1 ‘‘(d) COMPENSATION AND TRAVEL EXPENSES.— 

2 Members of the Committee who are not full-time employ3 ees of the United States shall— 

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

5 rate fixed by the Commission while attending meet6 ings of 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 

14 is authorized to be appropriated to the Commission such 

15 sums as are necessary for the activities of the Com16 mittee.’’. 

17 SEC. 102. CLARIFICATION OF THE COMMISSION’S AUTHOR18 ITY TO ENGAGE IN CONSUMER TESTING. 

19 (a) AMENDMENT TO SECURITIES ACT OF 1933.— 

20 Section 19 of the Securities Act of 1933 (15 U.S.C. 77s) 

21 is amended by adding at the end the following new sub22 section: 

23 ‘‘(e) For the purposes of evaluating its rules and pro24 grams and for considering, proposing, adopting, or engag25 ing in rules or programs, the Commission is authorized 


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1 to gather information, communicate with investors or 

2 other members of the public, and engage in such tem3 porary or experimental programs as the Commission in its 

4 discretion determines is in the public interest or for the 

5 protection of investors. The Commission may delegate to 

6 its staff some or all of the authority conferred by this sub7 section.’’. 

8 (b) AMENDMENT TO SECURITIES EXCHANGE ACT OF

9 1934.—Section 23 of the Securities Exchange Act of 1934 

10 (15 U.S.C. 78w) is amended by redesignating subsections 

11 (b), (c), and (d) as subsections (c), (d), and (e), respec12 tively, and inserting after subsection (a) the following: 

13 ‘‘(b) For the purposes of evaluating its rules and pro14 grams and for considering proposing, adopting, or engag15 ing in rules or programs, the Commission is authorized 

16 to gather information, communicate with investors or 

17 other members of the public, and engage in such tem18 porary or experimental programs as the Commission in its 

19 discretion determines is in the public interest or for the 

20 protection of investors. The Commission may delegate to 

21 its staff some or all of the authority conferred by this sub22 section.’’. 

23 (c) AMENDMENT TO INVESTMENT COMPANY ACT OF

24 1940.—Section 38 of the Investment Company Act of 


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1 1940 (15 U.S.C. 80a–38) is amended by adding at the 

2 end the following new subsection: 

3 ‘‘(d) GATHERING INFORMATION.—For the purposes 

4 of evaluating its rules and programs and for considering 

5 proposing, adopting, or engaging in rules or programs, the 

6 Commission is authorized to gather information, commu7 nicate with investors or other members of the public, and 

8 engage in such temporary or experimental programs as 

9 the Commission in its discretion determines is in the pub10 lic interest or for the protection of investors. The Commis11 sion may delegate to its staff some or all of the authority 

12 conferred by this subsection.’’. 

13 (d) AMENDMENT TO THE INVESTMENT ADVISERS

14 ACT OF 1940.—Section 211 of the Investment Advisers 

15 Act of 1940 (15 U.S.C. 80b–11) is amended by adding 

16 at the end the following new subsection: 

17 ‘‘(e) For the purposes of evaluating its rules and pro18 grams and for considering proposing, adopting, or engag19 ing in rules or programs, the Commission is authorized 

20 to gather information, communicate with investors or 

21 other members of the public, and engage in such tem22 porary or experimental programs as the Commission in its 

23 discretion determines is in the public interest or for the 

24 protection of investors. The Commission may delegate to 


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1 its staff some or all of the authority conferred by this sub2 section.’’. 

3 SEC. 103. ESTABLISHMENT OF A FIDUCIARY DUTY FOR 

4 BROKERS, DEALERS, AND INVESTMENT AD5 VISERS, AND HARMONIZATION OF REGULA6 TION. 

7 (a) IN GENERAL.— 

8 (1) SECURITIES EXCHANGE ACT OF 1934.—Sec9 tion 15 of the Securities Exchange Act of 1934 (15 

10 U.S.C. 78o) is amended— 

11 (A) by redesignating the second subsection 

12 (i) as subsection (j); and 

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

14 subsections: 

15 ‘‘(k) STANDARDS OF CONDUCT.— 

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

17 provision of this Act or the Investment Advisers Act 

18 of 1940, the Commission shall promulgate rules to 

19 provide that, with respect to a broker or dealer that 

20 is providing investment advice to a retail customer 

21 (and such other customers as the Commission may 

22 by rule provide), the standard of conduct for such 

23 broker or dealer with respect to such customer shall 

24 be the same as the standard of conduct applicable 

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1 visers Act of 1940. The receipt of compensation 

2 based on commission shall not, in and of itself, be 

3 considered a violation of such standard applied to a 

4 broker or dealer. 

5 ‘‘(2) RETAIL CUSTOMER DEFINED.—For pur6 poses of this subsection, the term ‘retail customer’ 

7 means an individual, or the legal representative of 

8 such individual, who— 

9 ‘‘(A) receives personalized investment ad10 vice from a broker or dealer; and 

11 ‘‘(B) uses such advice primarily for per12 sonal, family, or household purposes. 

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

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

15 disclosures to investors regarding the terms of their 

16 relationships with brokers, dealers, and investment 

17 advisers; and 

18 ‘‘(2) examine and, where appropriate, promul19 gate rules prohibiting sales practices, conflicts of in20 terest, and compensation schemes for financial inter21 mediaries (including brokers, dealers, and invest22 ment advisers) that it deems contrary to the public 

23 interest and the interests of investors.’’. 

24 (2) INVESTMENT ADVISERS ACT OF 1940.—Sec25 tion 211 of the Investment Advisers Act of 1940, as 


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

2 adding at the end the following new subsection: 

3 ‘‘(f) STANDARDS OF CONDUCT.— 

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

5 provision of this Act or the Securities Exchange Act 

6 of 1934, the Commission shall promulgate rules to 

7 provide that the standards of conduct for all bro8 kers, dealers, and investment advisers, in providing 

9 investment advice to retail customers (and such 

10 other customers as the Commission may by rule pro11 vide), shall be to act in the best interest of the cus12 tomer without regard to the financial or other inter13 est of the broker, dealer, or investment adviser pro14 viding the advice. 

15 ‘‘(2) RETAIL CUSTOMER DEFINED.—For pur16 poses of this subsection, the term ‘retail customer’ 

17 means an individual, or the legal representative of 

18 such individual, who— 

19 ‘‘(A) receives personalized investment ad20 vice from a broker, dealer, or investment ad21 viser; and 

22 ‘‘(B) uses such advice primarily for per23 sonal, family, or household purposes. 

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


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

2 disclosures to investors regarding the terms of their 

3 relationships with brokers, dealers, and investment 

4 advisers; and 

5 ‘‘(2) examine and, where appropriate, promul6 gate rules prohibiting sales practices, conflicts of in7 terest, and compensation schemes for financial inter8 mediaries (including brokers, dealers, and invest9 ment advisers) that it deems contrary to the public 

10 interest and the interests of investors.’’. 

11 (b) HARMONIZATION OF ENFORCEMENT AND REM12 EDY REGULATIONS.—Section 15 of the Securities Ex13 change Act of 1934, as amended by subsection (a), is fur14 ther amended by adding at the end the following new sub15 section: 

16 ‘‘(m) HARMONIZATION OF ENFORCEMENT AND REM17 EDY REGULATIONS.—The Commission shall issue regula18 tions to ensure, to the extent practicable, that the enforce19 ment options and remedies available for violations of the 

20 standard of conduct applicable to a broker or dealer pro21 viding investment advice to a retail customer are commen22 surate with those enforcement options and remedies avail23 able for violations of the standard of conduct applicable 

24 to investment advisers under the Investment Advisers Act 

25 of 1940.’’. 


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1 SEC. 104. CLARIFICATION OF COMMISSION AUTHORITY TO 

2 REQUIRE INVESTOR DISCLOSURES BEFORE 

3 PURCHASE OF INVESTMENT COMPANY 

4 SHARES. 

5 Section 24 of the Investment Company Act of 1940 

6 (15 U.S.C. 80a–24) is amended by adding at the end the 

7 following new subsection: 

8 ‘‘(h) TIMING OF DISCLOSURE.—Notwithstanding any 

9 other provision of this Act or the Securities Act of 1933, 

10 the Commission is authorized to promulgate rules desig11 nating documents or information that must precede a sale 

12 to a purchaser of securities issued by a registered invest13 ment company.’’. 

14 SEC. 105. BENEFICIAL OWNERSHIP AND SHORT-SWING 

15 PROFIT REPORTING. 

16 (a) BENEFICIAL OWNERSHIP REPORTING.—Section 

17 13 of the Securities Exchange Act of 1934 (15 U.S.C. 

18 78m) is amended— 

19 (1) in subsection (d)(1)— 

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

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

22 such shorter time as the Commission may es23 tablish by rule’’; and 

24 (B) by striking ‘‘send to the issuer of the 

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1 istered or certified mail, send to each exchange 

2 where the security is traded, and’’; 

3 (2) in subsection (d)(2)— 

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

5 issuer and the exchange, and’’; and 

6 (B) by striking ‘‘shall be transmitted to 

7 the issuer and the exchange and’’; 

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

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

10 (4) in subsection (g)(2)— 

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

12 and 

13 (B) by striking ‘‘shall be transmitted to 

14 the issuer and’’. 

15 (b) SHORT-SWING PROFIT REPORTING.—Section 

16 16(a) of the Securities Exchange Act of 1934 (15 U.S.C. 

17 78p(a)) is amended— 

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

19 security is registered on a national securities ex20 change, also with the exchange)’’; and 

21 (2) in paragraph (2)(B), by inserting after ‘‘of22 ficer’’ the following: ‘‘, or within such shorter time 

23 as the Commission may establish by rule’’. 


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1 SEC. 106. REVISION TO RECORDKEEPING RULES. 

2 (a) INVESTMENT COMPANY ACT OF 1940 AMEND3 MENTS.—Section 31 of the Investment Company Act of 

4 1940 (15 U.S.C. 80a–30) is amended— 

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

6 the following: ‘‘Each person with custody or use of 

7 a registered investment company’s securities, depos8 its, or credits shall maintain and preserve all records 

9 that relate to the person’s custody or use of the reg10 istered investment company’s securities, deposits, or 

11 credits for such period or periods as the Commis12 sion, by rules and regulations, may prescribe as nec13 essary or appropriate in the public interest or for 

14 the protection of investors.’’; and 

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

16 following new paragraph: 

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

18 USE.— 

19 ‘‘(A) IN GENERAL.—Notwithstanding para20 graph (1), records of persons with custody or 

21 use of a registered investment company’s secu22 rities, deposits, or credits, that relate to such 

23 custody or use, are subject at any time, or from 

24 time to time, to such reasonable periodic, spe25 cial, or other examinations and other informa26 tion and document requests by representatives 


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1 of the Commission as the Commission deems 

2 necessary or appropriate in the public interest 

3 or for the protection of investors. 

4 ‘‘(B) CERTAIN PERSONS SUBJECT TO

5 OTHER REGULATION.—Persons subject to regu6 lation and examination by a Federal financial 

7 institution regulatory agency (as such term is 

8 defined under section 212(c)(2) of title 18, 

9 United States Code) may satisfy any examina10 tion request, information request, or document 

11 request described under subparagraph (A), by 

12 providing the Commission with a detailed list13 ing, in writing, of the registered investment 

14 company’s securities, deposits, or credits within 

15 such person’s custody or use.’’. 

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

18 1940 (15 U.S.C. 80b–4) is amended by adding at the end 

19 the following new subsection: 

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

21 USE.— 

22 ‘‘(1) IN GENERAL.—Records of persons with 

23 custody or use of a client’s securities, deposits, or 

24 credits, that relate to such custody or use, are sub25 ject at any time, or from time to time, to such reaVerDate Nov 24 2008 02:38 Oct 17, 2009 Jkt 089200 PO 00000 Frm 00015 Fmt 6652 Sfmt 6201 E:\BILLS\H3817.IH H3817

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1 sonable periodic, special, or other examinations and 

2 other information and document requests by rep3 resentatives of the Commission as the Commission 

4 deems necessary or appropriate in the public interest 

5 or for the protection of investors. 

6 ‘‘(2) CERTAIN PERSONS SUBJECT TO OTHER

7 REGULATION.—Persons subject to regulation and ex8 amination by a Federal financial institution regu9 latory agency (as such term is defined under section 

10 212(c)(2) of title 18, United States Code) may sat11 isfy any examination request, information request, 

12 or document request described under paragraph (1), 

13 by providing the Commission with a detailed listing, 

14 in writing, of the client’s securities, deposits, or 

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

16 TITLE II—ENFORCEMENT AND 

17 REMEDIES 

18 SEC. 201. AUTHORITY TO RESTRICT MANDATORY PRE-DIS19 PUTE ARBITRATION. 

20 (a) AMENDMENT TO SECURITIES EXCHANGE ACT OF

21 1934.—Section 15 of the Securities Exchange Act of 1934 

22 (15 U.S.C. 78o), as amended by section 103) is further 

23 amended by adding at the end the following new sub24 section: 


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1 ‘‘(m) AUTHORITY TO RESTRICT MANDATORY PRE2 DISPUTE ARBITRATION.—The Commission, by rule, may 

3 prohibit, or impose conditions or limitations on the use 

4 of, agreements that require customers or clients of any 

5 broker, dealer, or municipal securities dealer to arbitrate 

6 any future dispute between them arising under the Fed7 eral securities laws or the rules of a self-regulatory organi8 zation if it finds that such prohibition, imposition of condi9 tions, or limitations are in the public interest and for the 

10 protection of investors.’’. 

11 (b) AMENDMENT TO INVESTMENT ADVISERS ACT OF

12 1940.—Section 205 of the Investment Advisers Act of 

13 1940 (15 U.S.C. 80b–5) is amended by adding at the end 

14 the following new subsection: 

15 ‘‘(f) AUTHORITY TO RESTRICT MANDATORY PRE16 DISPUTE ARBITRATION.—The Commission, by rule, may 

17 prohibit, or impose conditions or limitations on the use 

18 of, agreements that require customers or clients of any 

19 investment adviser to arbitrate any future dispute between 

20 them arising under the Federal securities laws or the rules 

21 of a self-regulatory organization if it finds that such prohi22 bition, imposition of conditions, or limitations are in the 

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


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1 SEC. 202. WHISTLEBLOWER PROTECTION. 

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

3 et seq.) is amended by adding after section 21E the fol4 lowing new section: 

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

6 PROTECTION. 

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

8 action brought by the Commission under the securities 

9 laws that results in monetary sanctions exceeding 

10 $1,000,000, the Commission, under regulations prescribed 

11 by the Commission and subject to subsection (b), may pay 

12 an award or awards not exceeding an amount equal to 30 

13 percent, in total, of the monetary sanctions imposed in the 

14 action or related actions to one or more whistleblowers 

15 who voluntarily provided original information to the Com16 mission that led to the successful enforcement of the ac17 tion. Any amount payable under the preceding sentence 

18 shall be paid from the fund described in subsection (f). 

19 ‘‘(b) DETERMINATION OF AMOUNT OF AWARD; DE20 NIAL OF AWARD.— 

21 ‘‘(1) DETERMINATION OF AMOUNT OF

22 AWARD.—The determination of the amount of an 

23 award, within the limit specified in subsection (a), 

24 shall be in the sole discretion of the Commission. 

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1 cess of the judicial or administrative action described 

2 in subsection (a), the degree of assistance provided 

3 by the whistleblower and any legal representative of 

4 the whistleblower in such action, the Commission’s 

5 programmatic interest in deterring violations of the 

6 securities laws by making awards to whistleblowers 

7 who provide information that leads to the successful 

8 enforcement of such laws, and such additional fac9 tors as the Commission may establish by rules or 

10 regulations. 

11 ‘‘(2) DENIAL OF AWARD.—No award under 

12 subsection (a) shall be made— 

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

14 the time he or she acquired the original infor15 mation submitted to the Commission, a mem16 ber, officer, or employee of any appropriate reg17 ulatory agency, the Department of Justice, or a 

18 self-regulatory organization; 

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

20 of a criminal violation related to the judicial or 

21 administrative action for which the whistle22 blower otherwise could receive an award under 

23 this section; or 


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1 ‘‘(C) to any whistleblower who fails to sub2 mit information to the Commission in such 

3 form as the Commission may, by rule, require. 

4 ‘‘(c) REPRESENTATION.— 

5 ‘‘(1) PERMITTED REPRESENTATION.—Any 

6 whistleblower who makes a claim for an award under 

7 subsection (a) may be represented by counsel. 

8 ‘‘(2) REQUIRED REPRESENTATION.—Any whis9 tleblower who makes a claim for an award under 

10 subsection (a) must be represented by counsel if the 

11 whistleblower submits the information upon which 

12 the claim is based anonymously. Prior to the pay13 ment of an award, the whistleblower must disclose 

14 his or her identity and provide such other informa15 tion as the Commission may require. 

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

17 the Commission is necessary for any whistleblower to re18 ceive an award under subsection (a), unless the Commis19 sion, by rule or regulation, so requires. 

20 ‘‘(e) APPEALS.—Any determinations under this sec21 tion, including whether, to whom, or in what amounts to 

22 make awards, shall be in the sole discretion of the Com23 mission, and any such determinations shall be final and 

24 not subject to judicial review. 

25 ‘‘(f) INVESTOR PROTECTION FUND.— 


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1 ‘‘(1) FUND ESTABLISHED.—There is estab2 lished in the Treasury of the United States a fund 

3 to be known as the ‘Securities and Exchange Com4 mission Investor Protection Fund’ (referred to in 

5 this section as the ‘Fund’). 

6 ‘‘(2) USE OF FUND.—The Fund shall be avail7 able to the Commission, without further appropria8 tion or fiscal year limitation, for the following pur9 poses: 

10 ‘‘(A) Paying awards to whistleblowers as 

11 provided in subsection (a). 

12 ‘‘(B) Funding investor education initiatives 

13 designed to help investors protect themselves 

14 against securities fraud or other violations of 

15 the securities laws, or the rules and regulations 

16 thereunder. 

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

18 deposited into or credited to the Fund— 

19 ‘‘(A) any monetary sanction collected by 

20 the Commission in any judicial or administra21 tive action brought by the Commission under 

22 the securities laws that is not added to a 

23 disgorgement fund pursuant to section 308 of 

24 the Sarbanes-Oxley Act of 2002 or other fund 

25 or otherwise distributed to victims of a violation 


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1 of the securities laws, or the rules and regula2 tions thereunder, underlying such action, unless 

3 the balance of the Fund at the time the mone4 tary sanction is collected exceeds $100,000,000; 

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

6 disgorgement fund pursuant to section 308 of 

7 the Sarbanes-Oxley Act of 2002 or other fund 

8 that is not distributed to the victims for whom 

9 the disgorgement fund was established, unless 

10 the balance of the Fund at the time the deter11 mination is made not to distribute the monetary 

12 sanction to such victims exceeds $100,000,000; 

13 and 

14 ‘‘(C) all income from investments made 

15 under paragraph (4). 

16 ‘‘(4) INVESTMENTS.— 

17 ‘‘(A) AMOUNTS IN FUND MAY BE IN18 VESTED.—The Commission may request the 

19 Secretary of the Treasury to invest the portion 

20 of the Fund that is not, in the Commission’s 

21 judgment, required to meet the current needs of 

22 the Fund. 

23 ‘‘(B) ELIGIBLE INVESTMENTS.—Invest24 ments shall be made by the Secretary of the 

25 Treasury in obligations of the United States or 


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1 obligations that are guaranteed as to principal 

2 and interest by the United States, with matu3 rities suitable to the needs of the Fund as de4 termined by the Commission. 

5 ‘‘(C) INTEREST AND PROCEEDS CRED6 ITED.—The interest on, and the proceeds from 

7 the sale or redemption of, any obligations held 

8 in the Fund shall be credited to, and form a 

9 part of, the Fund. 

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

11 October 30 of each year, the Commission shall 

12 transmit to the Committee on Banking, Housing, 

13 and Urban Affairs of the Senate, and the Committee 

14 on Financial Services of the House of Representa15 tives a report on— 

16 ‘‘(A) the Commission’s whistleblower 

17 award program under this section, including a 

18 description of the number of awards granted 

19 and the types of cases in which awards granted 

20 during the preceding fiscal year; 

21 ‘‘(B) investor education initiatives de22 scribed in paragraph (2)(B) that were funded 

23 by the Fund during the preceding fiscal year; 

24 ‘‘(C) the balance of the Fund at the begin25 ning of the preceding fiscal year; 


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1 ‘‘(D) the amounts deposited into or cred2 ited to the Fund during the preceding fiscal 

3 year; 

4 ‘‘(E) the amount of earnings on invest5 ments of amounts in the Fund during the pre6 ceding fiscal year; 

7 ‘‘(F) the amount paid from the Fund dur8 ing the preceding fiscal year to whistleblowers 

9 pursuant to subsection (a); 

10 ‘‘(G) the amount paid from the Fund dur11 ing the preceding fiscal year for investor edu12 cation initiatives described in paragraph (1)(B); 

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

14 of the preceding fiscal year; and 

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

16 statements, including a balance sheet, income 

17 statement, and cash flow analysis. 

18 ‘‘(g) PROTECTION OF WHISTLEBLOWERS.— 

19 ‘‘(1) PROHIBITION AGAINST RETALIATION.— 

20 ‘‘(A) IN GENERAL.—No employer may dis21 charge, demote, suspend, threaten, harass, or in 

22 any other manner discriminate against an em23 ployee, contractor, or agent in the terms and 

24 conditions of employment because of any lawful 

25 act done by the employee, contractor, or agent 


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1 in providing information to the Commission in 

2 accordance with subsection (a), or in assisting 

3 in any investigation or judicial or administrative 

4 action of the Commission based upon or related 

5 to such information. 

6 ‘‘(B) ENFORCEMENT.— 

7 ‘‘(i) CAUSE OF ACTION.—An indi8 vidual who alleges discharge or other dis9 crimination in violation of subparagraph 

10 (A) may bring an action under this sub11 section in the appropriate district court of 

12 the United States for the relief provided in 

13 subparagraph (C). 

14 ‘‘(i) SUBPOENAS.—A subpoena requir15 ing the attendance of a witness at a trial 

16 or hearing conducted under this section 

17 may be served at any place in the United 

18 States. 

19 ‘‘(ii) STATUTE OF LIMITATIONS.—An 

20 action under this subsection may not be 

21 brought more than 6 years after the date 

22 on which the violation of subparagraph (A) 

23 occurred, or more than 3 years after the 

24 date when facts material to the right of ac25 tion are known or reasonably should have 


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1 been known by the employee alleging a vio2 lation of subparagraph (A), but in no event 

3 after 10 years after the date on which the 

4 violation occurs. 

5 ‘‘(C) RELIEF.—An employee, contractor, 

6 or agent prevailing in any action brought under 

7 subparagraph (B) shall be entitled to all relief 

8 necessary to make that employee, contractor, or 

9 agent whole, including reinstatement with the 

10 same seniority status that the employee, con11 tractor, or agent would have had, but for the 

12 discrimination, 2 times the amount of back pay, 

13 with interest, and compensation for any special 

14 damages sustained as a result of the discrimi15 nation, including litigation costs, expert witness 

16 fees, and reasonable attorneys’ fees. 

17 ‘‘(2) CONFIDENTIALITY.— 

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

19 subparagraph (B), all information provided to 

20 the Commission by a whistleblower shall be con21 fidential and privileged as an evidentiary matter 

22 (and shall not be subject to civil discovery or 

23 other legal process) in any proceeding in any 

24 Federal or State court or administrative agen25 cy, and shall be exempt from disclosure, in the 


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1 hands of an agency or establishment of the 

2 Federal Government, under the Freedom of In3 formation Act (5 U.S.C. 552), or otherwise, un4 less and until required to be disclosed to a de5 fendant or respondent in connection with a pub6 lic proceeding instituted by the Commission or 

7 any entity described in subparagraph (B). For 

8 purposes of section 552 of title 5, United States 

9 Code, this paragraph shall be considered a stat10 ute described in subsection (b)(3)(B) of such 

11 section 552. Nothing herein is intended to limit 

12 the Attorney General’s ability to present such 

13 evidence to a grand jury or to share such evi14 dence with potential witnesses or defendants in 

15 the course of an ongoing criminal investigation. 

16 ‘‘(B) AVAILABILITY TO GOVERNMENT

17 AGENCIES.—Without the loss of its status as 

18 confidential and privileged in the hands of the 

19 Commission, all information referred to in sub20 paragraph (A) may, in the discretion of the 

21 Commission, when determined by the Commis22 sion to be necessary to accomplish the purposes 

23 of this Act and protect investors, be made avail24 able to— 


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1 ‘‘(i) the Attorney General of the 

2 United States, 

3 ‘‘(ii) an appropriate regulatory au4 thority, 

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

6 ‘‘(iv) State attorneys general in con7 nection with any criminal investigation, 

8 and 

9 ‘‘(v) any appropriate State regulatory 

10 authority, 

11 each of which shall maintain such information 

12 as confidential and privileged, in accordance 

13 with the requirements in subparagraph (A). 

14 ‘‘(3) RIGHTS RETAINED.—Nothing in this sec15 tion shall be deemed to diminish the rights, privi16 leges, or remedies of any whistleblower under any 

17 Federal or State law, or under any collective bar18 gaining agreement. 

19 ‘‘(h) RULEMAKING AUTHORITY.—The Commission 

20 shall have the authority to issue such rules and regulations 

21 as may be necessary or appropriate to implement the pro22 visions of this section. 

23 ‘‘(i) DEFINITIONS.—For purposes of this section, the 

24 following terms have the following meanings: 


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1 ‘‘(1) ORIGINAL INFORMATION.—The term 

2 ‘original information’ means information that— 

3 ‘‘(A) is based on the direct and inde4 pendent knowledge or analysis of a whistle5 blower; 

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

7 any other source; and 

8 ‘‘(C) is not based on allegations in a judi9 cial or administrative hearing, in a govern10 mental report, hearing, audit, or investigation, 

11 or from the news media, unless the whistle12 blower is the initial source of the information 

13 that resulted in the judicial or administrative 

14 hearing, governmental report, hearing, audit, or 

15 investigation, or the news media’s report on the 

16 allegations. 

17 ‘‘(2) MONETARY SANCTIONS.—The term ‘mone18 tary sanctions,’ when used with respect to any judi19 cial or administrative action, means any monies, in20 cluding but not limited to penalties, disgorgement, 

21 and interest, ordered to be paid, and any monies de22 posited into a disgorgement fund pursuant to section 

23 308(b) of the Sarbanes-Oxley Act of 2002 (15 

24 U.S.C. 7246(b)), as a result of such action or any 

25 settlement of such action. 


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1 ‘‘(3) RELATED ACTION.—The term ‘related ac2 tion,’ when used with respect to any judicial or ad3 ministrative action brought by the Commission 

4 under the securities laws, means any judicial or ad5 ministrative action brought by an entity described in 

6 subsection (g)(2)(B) that is based upon the same 

7 original information provided by a whistleblower 

8 pursuant to subsection (a) that led to the successful 

9 enforcement of the Commission action. 

10 ‘‘(4) WHISTLEBLOWER.—The term ‘whistle11 blower’ means an individual, or two or more individ12 uals acting jointly, who submit information to the 

13 Commission as provided in this section.’’. 

14 SEC. 203. CONFORMING AMENDMENTS FOR WHISTLE15 BLOWER PROTECTION. 

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

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

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

19 2002’’: 

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

21 1933 (15 U.S.C. 77t(d)(3)(A)). 

22 (2) Section 42(e)(3)(A) of the Investment Com23 pany Act of 1940 (15 U.S.C. 80a–41(e)(3)(A)). 

24 (3) Section 209(e)(3)(A) of the Investment Ad25 visers Act of 1940 (15 U.S.C. 80b–9(e)(3)(A)). 


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1 (b) SECURITIES EXCHANGE ACT.—The Securities 

2 Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amend3 ed— 

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

5 78u(d)(3)(C)(i)), by inserting ‘‘and section 21F of 

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

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

8 1(d)(1))— 

9 (A) by striking ‘‘(subject to subsection 

10 (e))’’; and 

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

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

13 and 

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

15 and redesignating subsections (f) and (g) as sub16 section (e) and (f), respectively. 

17 SEC. 204. IMPLEMENTATION AND TRANSITION PROVISIONS 

18 FOR WHISTLEBLOWER PROTECTIONS. 

19 (a) IMPLEMENTING RULES.—The Securities and Ex20 change Commission shall issue final regulations imple21 menting the provisions of section 21F of the Securities 

22 Exchange Act of 1934, as added by this title, no later than 

23 270 days after the date of enactment of this Act. 

24 (b) ORIGINAL INFORMATION.—Information sub25 mitted to the Commission by a whistleblower in accordVerDate Nov 24 2008 02:38 Oct 17, 2009 Jkt 089200 PO 00000 Frm 00031 Fmt 6652 Sfmt 6201 E:\BILLS\H3817.IH H3817

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1 ance with regulations implementing the provisions of sec2 tion 21F of the Securities Exchange Act of 1934, as added 

3 by this title, shall not lose its status as original informa4 tion, as defined in subsection (i)(1) of such section, solely 

5 because the whistleblower submitted such information 

6 prior to the effective date of such regulations, provided 

7 such information was submitted after the date of enact8 ment of this Act, or related to insider trading violations 

9 for which a bounty could have been paid at the time such 

10 information was submitted. 

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

12 pursuant to section 21F of the Securities Exchange Act 

13 of 1934, as added by this title, regardless of whether any 

14 violation of a provision of the securities laws, or a rule 

15 or regulation thereunder, underlying the judicial or admin16 istrative action upon which the award is based occurred 

17 prior to the date of enactment of this Act. 

18 SEC. 205. COLLATERAL BARS. 

19 (a) SECTION 15 OF THE SECURITIES EXCHANGE ACT

20 OF 1934.—Section 15(b)(6)(A) of the Securities Ex21 change Act of 1934 (15 U.S.C. 78o(b)(6)(A)) is amended 

22 by striking ‘‘12 months, or bar such person from being 

23 associated with a broker or dealer,’’ and inserting ‘‘12 

24 months, or bar any such person from being associated with 

25 a broker, dealer, investment adviser, municipal securities 


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1 dealer, transfer agent, or nationally recognized statistical 

2 rating organization,’’. 

3 (b) SECTION 15B OF THE SECURITIES EXCHANGE

4 ACT OF 1934.—Section 15B(c)(4) of the Securities Ex5 change Act of 1934 (15 U.S.C. 78o–4(c)(4)) is amended 

6 by striking ‘‘twelve months or bar any such person from 

7 being associated with a municipal securities dealer,’’ and 

8 inserting ‘‘12 months or bar any such person from being 

9 associated with a broker, dealer, investment adviser, mu10 nicipal securities dealer, transfer agent, or nationally rec11 ognized statistical rating organization,’’. 

12 (c) SECTION 17A OF THE SECURITIES EXCHANGE

13 ACT OF 1934.—Section 17A(c)(4)(C) of the Securities 

14 Exchange Act of 1934 (15 U.S.C. 78q–1(c)(4)(C)) is 

15 amended by striking ‘‘twelve months or bar any such per16 son from being associated with the transfer agent,’’ and 

17 inserting ‘‘12 months or bar any such person from being 

18 associated with any transfer agent, broker, dealer, invest19 ment adviser, municipal securities dealer, or nationally 

20 recognized statistical rating organization,’’. 

21 (d) SECTION 203 OF THE INVESTMENT ADVISERS

22 ACT OF 1940.—Section 203(f) of the Investment Advisers 

23 Act of 1940 (15 U.S.C. 80b–3(f)) is amended by striking 

24 ‘‘twelve months or bar any such person from being associ25 ated with an investment adviser,’’ and inserting ‘‘12 


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1 months or bar any such person from being associated with 

2 an investment adviser, broker, dealer, municipal securities 

3 dealer, transfer agent, or nationally recognized statistical 

4 rating organization,’’. 

5 SEC. 206. AIDING AND ABETTING AUTHORITY UNDER THE 

6 SECURITIES ACT AND THE INVESTMENT COM7 PANY ACT. 

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

9 15 of the Securities Act of 1933 (15 U.S.C. 77o) is 

10 amended— 

11 (1) by striking ‘‘Every person who’’ and insert12 ing ‘‘(a) CONTROLLING PERSONS.—Every person 

13 who’’; and 

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

15 ‘‘(b) PROSECUTION OF PERSONS WHO AID AND

16 ABET VIOLATIONS.—For purposes of any action brought 

17 by the Commission under subparagraph (b) or (d) of sec18 tion 20, any person that knowingly or recklessly provides 

19 substantial assistance to another person in violation of a 

20 provision of this Act, or of any rule or regulation issued 

21 under this Act, shall be deemed to be in violation of such 

22 provision to the same extent as the person to whom such 

23 assistance is provided.’’. 

24 (c) UNDER THE INVESTMENT COMPANY ACT OF

25 1940.—Section 48 of the Investment Company Act of 


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1 1940 (15 U.S.C. 80a–48) is amended by redesignating 

2 subsection (b) as subsection (c) and inserting after sub3 section (a) the following: 

4 ‘‘(b) For purposes of any action brought by the Com5 mission under subsection (d) or (e) of section 42, any per6 son that knowingly or recklessly provides substantial as7 sistance to another person in violation of a provision of 

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

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

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

11 is provided.’’. 

12 SEC. 207. AUTHORITY TO IMPOSE PENALTIES FOR AIDING 

13 AND ABETTING VIOLATIONS OF THE INVEST14 MENT ADVISERS ACT. 

15 Section 209 of the Investment Advisers Act of 1940 

16 (15 U.S.C. 80b–9) is amended by inserting at the end the 

17 following new subsection: 

18 ‘‘(f) AIDING AND ABETTING.—For purposes of any 

19 action brought by the Commission under subsection (e), 

20 any person that knowingly or recklessly has aided, abetted, 

21 counseled, commanded, induced, or procured a violation 

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

23 or order hereunder, shall be deemed to be in violation of 

24 such provision, rule, regulation, or order to the same ex25 tent as the person that committed such violation.’’. 


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1 SEC. 208. DEADLINE FOR COMPLETING EXAMINATIONS, IN2 SPECTIONS AND ENFORCEMENT ACTIONS. 

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

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

5 by section 101) the following new section: 

6 ‘‘SEC. 4E. DEADLINE FOR COMPLETING EXAMINATIONS, IN7 VESTIGATIONS AND ENFORCEMENT ACTIONS. 

8 ‘‘(a) IN GENERAL.—The Commission shall complete 

9 any examination, investigations, or enforcement action ini10 tiated by the Commission not later than 180 days after 

11 the date on which such examination, inspection, or en12 forcement action is commenced. 

13 ‘‘(b) EXCEPTION FOR CERTAIN COMPLEX AC14 TIONS.—Notwithstanding subsection (a), if the head of 

15 any division or office within the Commission determines 

16 that a particular examination, investigation, or enforce17 ment action is sufficiently complex that it cannot be com18 pleted within the deadline provided under subsection (a), 

19 such head may, after providing notice to the Chairman 

20 of the Commission, extend such deadline by an additional 

21 180 days.’’. 

22 SEC. 209. NATIONWIDE SERVICE OF SUBPOENAS. 

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

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

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

26 action or proceeding instituted by the Commission under 


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

2 district, subpoenas issued by or on behalf of such court 

3 to compel the attendance of witnesses or the production 

4 of documents or tangible things (or both) may be served 

5 in any other district. Such subpoenas may be served and 

6 enforced without application to the court or a showing of 

7 cause, notwithstanding the provisions of rule 45(b)(2), 

8 (c)(3)(A)(ii), and (c)(3)(B)(iii) of the Federal Rules of 

9 Civil Procedure.’’. 

10 (b) SECURITIES EXCHANGE ACT OF 1934.—Section 

11 27 of the Securities Exchange Act of 1934 (15 U.S.C. 

12 78aa) is amended by inserting after the third sentence the 

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

14 Commission under this title in a United States district 

15 court for any judicial district, subpoenas issued by or on 

16 behalf of such court to compel the attendance of witnesses 

17 or the production of documents or tangible things (or 

18 both) may be served in any other district. Such subpoenas 

19 may be served and enforced without application to the 

20 court or a showing of cause, notwithstanding the provi21 sions of rule 45(b)(2), (c)(3)(A)(ii), and (c)(3)(B)(iii) of 

22 the Federal Rules of Civil Procedure.’’. 

23 (c) INVESTMENT COMPANY ACT OF 1940.—Section 

24 44 of the Investment Company Act of 1940 (15 U.S.C. 

25 80a–43) is amended by inserting after the fourth sentence 


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

2 the Commission under this title in a United States district 

3 court for any judicial district, subpoenas issued by or on 

4 behalf of such court to compel the attendance of witnesses 

5 or the production of documents or tangible things (or 

6 both) may be served in any other district. Such subpoenas 

7 may be served and enforced without application to the 

8 court or a showing of cause, notwithstanding the provi9 sions of rule 45(b)(2), (c)(3)(A)(ii), and (c)(3)(B)(iii) of 

10 the Federal Rules of Civil Procedure.’’. 

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

12 214 of the Investment Advisers Act of 1940 (15 U.S.C. 

13 80b–14) is amended by inserting after the third sentence 

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

15 the Commission under this title in a United States district 

16 court for any judicial district, subpoenas issued by or on 

17 behalf of such court to compel the attendance of witnesses 

18 or the production of documents or tangible things (or 

19 both) may be served in any other district. Such subpoenas 

20 may be served and enforced without application to the 

21 court or a showing of cause, notwithstanding the provi22 sions of rule 45(b)(2), (c)(3)(A)(ii), and (c)(3)(B)(iii) of 

23 the Federal Rules of Civil Procedure.’’. 


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1 SEC. 210. AUTHORITY TO IMPOSE CIVIL PENALTIES IN 

2 CEASE AND DESIST PROCEEDINGS. 

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

4 8A of the Securities Act of 1933 (15 U.S.C. 77h–1) is 

5 amended by adding at the end the following new sub6 section: 

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

8 ‘‘(1) GROUNDS FOR IMPOSING.—In any cease9 and-desist proceeding under subsection (a), the 

10 Commission may impose a civil penalty on a person 

11 if it finds, on the record after notice and opportunity 

12 for hearing, that— 

13 ‘‘(A) such person— 

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

15 provision of this title, or any rule or regu16 lation thereunder; or 

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

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

19 regulation thereunder; and 

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

21 ‘‘(2) MAXIMUM AMOUNT OF PENALTY.— 

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

23 of penalty for each act or omission described in 

24 paragraph (1) shall be $7,500 for a natural 

25 person or $75,000 for any other person. 


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1 ‘‘(B) SECOND TIER.—Notwithstanding 

2 paragraph (A), the maximum amount of pen3 alty for each such act or omission shall be 

4 $75,000 for a natural person or $375,000 for 

5 any other person if the act or omission de6 scribed in paragraph (1) involved fraud, deceit, 

7 manipulation, or deliberate or reckless dis8 regard of a regulatory requirement. 

9 ‘‘(C) THIRD TIER.—Notwithstanding para10 graphs (A) and (B), the maximum amount of 

11 penalty for each such act or omission shall be 

12 $150,000 for a natural person or $725,000 for 

13 any other person if— 

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

15 paragraph (1) involved fraud, deceit, ma16 nipulation, or deliberate or reckless dis17 regard of a regulatory requirement; and 

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

19 indirectly resulted in substantial losses or 

20 created a significant risk of substantial 

21 losses to other persons or resulted in sub22 stantial pecuniary gain to the person who 

23 committed the act or omission. 

24 ‘‘(3) EVIDENCE CONCERNING ABILITY TO

25 PAY.—In any proceeding in which the Commission 


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1 may impose a penalty under this section, a respond2 ent may present evidence of the respondent’s ability 

3 to pay such penalty. The Commission may, in its 

4 discretion, consider such evidence in determining 

5 whether such penalty is in the public interest. Such 

6 evidence may relate to the extent of such person’s 

7 ability to continue in business and the collectability 

8 of a penalty, taking into account any other claims of 

9 the United States or third parties upon such per10 son’s assets and the amount of such person’s as11 sets.’’. 

12 (b) UNDER THE SECURITIES EXCHANGE ACT OF

13 1934.—Subsection (a) of section 21B of the Securities 

14 Exchange Act of 1934 (15 U.S.C. 78u–2(a)) is amend15 ed— 

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

17 TO ASSESS MONEY PENALTIES.—In any pro18 ceeding’’ and inserting the following: 

19 ‘‘(a) COMMISSION AUTHORITY TO ASSESS MONEY

20 PENALTIES.— 

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

22 (2) by redesignating paragraphs (1) through 

23 (4) of such subsection as subparagraphs (A) through 

24 (D), respectively, and moving such redesignated subVerDate Nov 24 2008 02:38 Oct 17, 2009 Jkt 089200 PO 00000 Frm 00041 Fmt 6652 Sfmt 6201 E:\BILLS\H3817.IH H3817

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1 paragraphs and the matter following such subpara2 graphs 2 ems to the right; and 

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

4 following new paragraph: 

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

6 any proceeding instituted pursuant to section 21C of 

7 this title against any person, the Commission may 

8 impose a civil penalty if it finds, on the record after 

9 notice and opportunity for hearing, that such per10 son— 

11 ‘‘(A) is violating or has violated any provi12 sion of this title, or any rule or regulation 

13 thereunder; or 

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

15 any provision of this title, or any rule or regula16 tion thereunder.’’. 

17 (c) UNDER THE INVESTMENT COMPANY ACT OF

18 1940.—Paragraph (1) of section 9(d) of the Investment 

19 Company Act of 1940 (15 U.S.C. 80a–9(d)(1)) is amend20 ed— 

21 (1) by striking ‘‘(1) AUTHORITY OF COMMIS22 SION.—In any proceeding’’ and inserting the fol23 lowing: 

24 ‘‘(1) AUTHORITY OF COMMISSION.— 

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


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1 (2) by redesignating subparagraphs (A) through 

2 (C) of such paragraph as clauses (i) through (iii), 

3 respectively, and by moving such redesignated 

4 clauses and the matter following such subparagraphs 

5 2 ems to the right; and 

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

7 following new subparagraph: 

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

9 In any proceeding instituted pursuant to sub10 section (f) against any person, the Commission 

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

12 record after notice and opportunity for hearing, 

13 that such person— 

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

15 provision of this title, or any rule or regu16 lation thereunder; or 

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

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

19 regulation thereunder.’’. 

20 (d) UNDER THE INVESTMENT ADVISERS ACT OF

21 1940.—Paragraph (1) of section 203(i) of the Investment 

22 Advisers Act of 1940 (15 U.S.C. 80b–3(i)(1)) is amend23 ed— 


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1 (1) by striking ‘‘(1) AUTHORITY OF COMMIS2 SION.—In any proceeding’’ and inserting the fol3 lowing: 

4 ‘‘(1) AUTHORITY OF COMMISSION.— 

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

6 (2) by redesignating subparagraphs (A) through 

7 (D) of such paragraph as clauses (i) through (iv), 

8 respectively, and moving such redesignated clauses 

9 and the matter following such subparagraphs 2 ems 

10 to the right; and 

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

12 following new subparagraph: 

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

14 In any proceeding instituted pursuant to sub15 section (k) against any person, the Commission 

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

17 record after notice and opportunity for hearing, 

18 that such person— 

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

20 provision of this title, or any rule or regu21 lation thereunder; or 

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

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

24 regulation thereunder.’’. 


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1 SEC. 211. FORMERLY ASSOCIATED PERSONS. 

2 (a) MEMBER OR EMPLOYEE OF THE MUNICIPAL SE3 CURITIES RULEMAKING BOARD.—Section 15B(c)(8) of 

4 the Securities Exchange Act of 1934 (15 U.S.C. 78o– 

5 4(c)(8)) is amended by striking ‘‘any member or em6 ployee’’ and inserting ‘‘any person who is, or at the time 

7 of the alleged misconduct was, a member or employee’’. 

8 (b) PERSON ASSOCIATED WITH A GOVERNMENT SE9 CURITIES BROKER OR DEALER.—Section 15C of the Se10 curities Exchange Act of 1934 (15 U.S.C. 78o–5) is 

11 amended— 

12 (1) in subsection (c)(1)(C), by striking ‘‘or 

13 seeking to become associated,’’ and inserting ‘‘seek14 ing to become associated, or, at the time of the al15 leged misconduct, associated or seeking to become 

16 associated’’; 

17 (2) in subsection (c)(2)(A), by inserting ‘‘, seek18 ing to become associated, or, at the time of the al19 leged misconduct, associated or seeking to become 

20 associated’’ after ‘‘any person associated’’; and 

21 (3) in subsection (c)(2)(B), by inserting ‘‘, 

22 seeking to become associated, or, at the time of the 

23 alleged misconduct, associated or seeking to become 

24 associated’’ after ‘‘any person associated’’. 

25 (c) PERSON ASSOCIATED WITH A MEMBER OF A NA26 TIONAL SECURITIES EXCHANGE OR REGISTERED SECURIVerDate Nov 24 2008 02:38 Oct 17, 2009 Jkt 089200 PO 00000 Frm 00045 Fmt 6652 Sfmt 6201 E:\BILLS\H3817.IH H3817

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1 TIES ASSOCIATION.—Section 21(a)(1) of the Securities 

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

3 by inserting ‘‘, or, as to any act or practice, or omission 

4 to act, while associated with a member, formerly associ5 ated’’ after ‘‘member or a person associated’’. 

6 (d) PARTICIPANT OF A REGISTERED CLEARING

7 AGENCY.—Section 21(a)(1) of the Securities Exchange 

8 Act of 1934 (15 U.S.C. 78u(a)(1)) is amended by insert9 ing ‘‘or, as to any act or practice, or omission to act, while 

10 a participant, was a participant,’’ after ‘‘in which such 

11 person is a participant,’’. 

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

13 ORGANIZATION.—Section 19(h)(4) of the Securities Ex14 change Act of 1934 (15 U.S.C. 78s(h)(4)) is amended— 

15 (1) by striking ‘‘any officer or director’’ and in16 serting ‘‘any person who is, or at the time of the al17 leged misconduct was, an officer or director’’; and 

18 (2) by striking ‘‘such officer or director’’ and 

19 inserting ‘‘such person’’. 

20 (f) OFFICER OR DIRECTOR OF AN INVESTMENT COM21 PANY.—Section 36(a) of the Investment Company Act of 

22 1940 (15 U.S.C. 80a–35(a)) is amended— 

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

24 inserting ‘‘a person who is, or at the time of the al25 leged misconduct was, serving or acting’’; and 


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

2 and inserting ‘‘such person so serves or acts, or at 

3 the time of the alleged misconduct, so served or 

4 acted’’. 

5 (g) PERSON ASSOCIATED WITH A PUBLIC ACCOUNT6 ING FIRM.— 

7 (1) SARBANES-OXLEY ACT OF 2002 AMEND8 MENT.—Section 2(a)(9) of the Sarbanes-Oxley Act 

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

10 at the end the following new subparagraph: 

11 ‘‘(C) INVESTIGATIVE AND ENFORCEMENT

12 AUTHORITY.—For purposes of the provisions of 

13 sections 3(c), 101(c), 105, and 107(c) and 

14 Board or Commission rules thereunder, except 

15 to the extent specifically excepted by such rules, 

16 the terms defined in subparagraph (A) shall in17 clude any person associated, seeking to become 

18 associated, or formerly associated with a public 

19 accounting firm, except— 

20 ‘‘(i) the authority to conduct an inves21 tigation of such person under section 

22 105(b) shall apply only with respect to any 

23 act or practice, or omission to act, while 

24 such person was associated or seeking to 

25 become associated with that firm; and 


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1 ‘‘(ii) the authority to commence a dis2 ciplinary proceeding under section 

3 105(c)(1), or impose disciplinary sanctions 

4 under section 105(c)(4), against such per5 son shall apply only on— 

6 ‘‘(I) the basis of misconduct oc7 curring while such person was associ8 ated or seeking to become associated 

9 with that firm; or 

10 ‘‘(II) on a violation of section 

11 105(b).’’. 

12 (2) SECURITIES EXCHANGE ACT OF 1934

13 AMENDMENT.—Section 21(a)(1) of the Securities 

14 Exchange Act of 1934 (15 U.S.C. 78u(a)(1)) is 

15 amended by striking ‘‘or a person associated with 

16 such a firm’’ and inserting ‘‘, a person associated 

17 with such a firm, or, as to any act, practice, or omis18 sion to act, while associated with such firm, a person 

19 formerly associated with such a firm’’. 

20 (h) SUPERVISORY PERSONNEL OF AN AUDIT

21 FIRM.—Section 105(c)(6) of the Sarbanes-Oxley Act of 

22 2002 (15 U.S.C. 7215(c)(6)) is amended— 

23 (1) in subparagraph (A), by striking ‘‘the su24 pervisory personnel’’ and inserting ‘‘any person who 


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1 is, or at the time of the alleged failure reasonably to 

2 supervise was, a supervisory person’’; 

3 (2) in subparagraph (A)(i), by inserting after 

4 ‘‘failed reasonably to supervise’’ the following: ‘‘any 

5 person who is, or at the time of the alleged failure, 

6 was’’; 

7 (3) in subparagraph (A)(ii), by striking ‘‘associ8 ated’’; 

9 (4) in subparagraph (B)— 

10 (A) by striking ‘‘No associated person’’ 

11 and inserting ‘‘No current or former super12 visory person’’; and 

13 (B) by striking ‘‘any other person’’ and in14 serting ‘‘any current or former associated per15 son’’; and 

16 (5) in subparagraph (B)(i), by striking ‘‘associ17 ated’’. 

18 (i) MEMBER OF THE PUBLIC COMPANY ACCOUNTING

19 OVERSIGHT BOARD.—Section 107(d)(3) of the Sarbanes20 Oxley Act of 2002 (15 U.S.C. 7217(d)(3)) is amended by 

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

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


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1 SEC. 212. SHARING PRIVILEGED INFORMATION WITH 

2 OTHER AUTHORITIES. 

3 Section 24 of the Securities Exchange Act of 1934 

4 (15 U.S.C. 78x) is amended— 

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

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

7 (2) in subsection (e), as redesignated, by strik8 ing ‘‘as provided in subsection (e)’’ and inserting ‘‘as 

9 provided in subsection (f)’’; and 

10 (3) by inserting after subsection (c) the fol11 lowing new subsection (d)— 

12 ‘‘(d) SHARING PRIVILEGED INFORMATION WITH

13 OTHER AUTHORITIES.— 

14 ‘‘(1) PRIVILEGED INFORMATION PROVIDED BY

15 THE COMMISSION.—The Commission shall not be 

16 deemed to have waived any privilege applicable to 

17 any information by transferring that information to 

18 or permitting that information to be used by— 

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

20 title 18, United States Code); 

21 ‘‘(B) any foreign securities authority; 

22 ‘‘(C) any foreign law enforcement author23 ity; or 

24 ‘‘(D) any State securities or law enforce25 ment authority. 


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1 ‘‘(2) NON-DISCLOSURE OF PRIVILEGED INFOR2 MATION PROVIDED TO THE COMMISSION.—Except as 

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

4 be compelled to disclose privileged information ob5 tained from any foreign securities authority, or for6 eign law enforcement authority, if the authority has 

7 in good faith determined and represented to the 

8 Commission that the information is privileged. 

9 ‘‘(3) NON-WAIVER OF PRIVILEGED INFORMA10 TION PROVIDED TO THE COMMISSION.—No Federal 

11 agency or State securities or law enforcement au12 thority shall be deemed to have waived any privilege 

13 applicable to any information by transferring that 

14 information to or permitting that information to be 

15 used by the Commission. 

16 ‘‘(4) DEFINITIONS.—For purposes of this sub17 section: 

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

19 work-product privilege, attorney-client privilege, 

20 governmental privilege, or other privilege recog21 nized under Federal, foreign, or State law. 

22 ‘‘(B) The term ‘foreign law enforcement 

23 authority’ means any foreign authority that is 

24 empowered under foreign law to detect, inves25 tigate or prosecute potential violations of law. 


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1 ‘‘(C) The term ‘State securities or law en2 forcement authority’ means the authority of any 

3 State or territory that is empowered under 

4 State or territory law to detect, investigate or 

5 prosecute potential violations of law.’’. 

6 SEC. 213. EXPANDED ACCESS TO GRAND JURY MATERIAL. 

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

8 Act of 2002 is amended by adding at the end the following 

9 new section: 

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

11 ‘‘(a) DISCLOSURE.— 

12 ‘‘(1) IN GENERAL.—Upon motion of an attor13 ney for the government, a court may direct disclo14 sure of matters occurring before a grand jury during 

15 an investigation of conduct that may constitute a 

16 violation of any provision of the securities laws to 

17 the Commission for use in relation to any matter 

18 within the jurisdiction of the Commission. 

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

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

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

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

23 has been disclosed under this section shall not use such 

24 matter other than for the purpose for which such disclo25 sure was authorized. 


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

2 terms ‘attorney for the government’ and ‘grand jury infor3 mation’ have the meanings given to those terms in section 

4 3322 of title 18, United States Code.’’. 

5 (b) CONFORMING AMENDMENT.—The table of con6 tents in section 1(b) of the Sarbanes-Oxley Act of 2002 

7 is amended by inserting after the item relating to section 

8 604 the following: 

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

9 SEC. 214. AIDING AND ABETTING STANDARD OF KNOWL10 EDGE SATISFIED BY RECKLESSNESS. 

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

12 (15 U.S.C. 78t(e)) is amended by inserting ‘‘or recklessly’’ 

13 after ‘‘knowingly’’. 

14 SEC. 215. EXTRATERRITORIAL JURISDICTION OF THE ANTI15 FRAUD PROVISIONS OF THE FEDERAL SECU16 RITIES LAWS. 

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

18 22 of the Securities Act of 1933 (15 U.S.C. 77v(a)) is 

19 amended by adding at the end the following new sub20 section: 

21 ‘‘(c) EXTRATERRITORIAL JURISDICTION.—The juris22 diction of the district courts of the United States and the 

23 United States courts of any Territory described under 

24 subsection (a) includes violations of section 17(a), and all 


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1 suits in equity and actions at law under that section, in2 volving— 

3 ‘‘(1) conduct within the United States that con4 stitutes significant steps in furtherance of the viola5 tion, even if the securities transaction occurs outside 

6 the United States and involves only foreign inves7 tors; or 

8 ‘‘(2) conduct occurring outside the United 

9 States that has a foreseeable substantial effect with10 in the United States.’’. 

11 (b) UNDER THE SECURITIES EXCHANGE ACT OF

12 1934.—Section 27 of the Securities Exchange Act of 1934 

13 (15 U.S.C. 78aa) is amended— 

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

15 following: 

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

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

18 subsection: 

19 ‘‘(b) EXTRATERRITORIAL JURISDICTION.—The juris20 diction of the district courts of the United States and the 

21 United States courts of any Territory or other place sub22 ject to the jurisdiction of the United States described 

23 under subsection (a) includes violations of the antifraud 

24 provisions of this title, and all suits in equity and actions 

25 at law under those provisions, involving— 


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1 ‘‘(1) conduct within the United States that con2 stitutes significant steps in furtherance of the viola3 tion, even if the securities transaction occurs outside 

4 the United States and involves only foreign inves5 tors; or 

6 ‘‘(2) conduct occurring outside the United 

7 States that has a foreseeable substantial effect with8 in the United States.’’. 

9 (c) UNDER THE INVESTMENT ADVISERS ACT OF

10 1940.—Section 214 of the Investment Advisers Act of 

11 1940 (15 U.S.C. 80b–14) is amended— 

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

13 following: 

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

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

16 subsection: 

17 ‘‘(b) EXTRATERRITORIAL JURISDICTION.—The juris18 diction of the district courts of the United States and the 

19 United States courts of any Territory or other place sub20 ject to the jurisdiction of the United States described 

21 under subsection (a) includes violations of section 206, 

22 and all suits in equity and actions at law under that sec23 tion, involving— 

24 ‘‘(1) conduct within the United States that con25 stitutes significant steps in furtherance of the violaVerDate Nov 24 2008 02:38 Oct 17, 2009 Jkt 089200 PO 00000 Frm 00055 Fmt 6652 Sfmt 6201 E:\BILLS\H3817.IH H3817

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1 tion, even if the securities transaction occurs outside 

2 the United States and involves only foreign inves3 tors; or 

4 ‘‘(2) conduct occurring outside the United 

5 States that has a foreseeable substantial effect with6 in the United States.’’. 

7 SEC. 216. FIDELITY BONDING. 

8 Section 17(g) of the Investment Company Act of 

9 1940 (15 U.S.C. 80a–17(g)) is amended to read as fol10 lows: 

11 ‘‘(g) FIDELITY BONDING.— 

12 ‘‘(1) IN GENERAL.—The Commission is author13 ized to require that a registered management invest14 ment company provide and maintain a bond against 

15 loss caused by any fraudulent act or theft committed 

16 by any officer or employee of the company, either 

17 alone or in collusion with others, in such form and 

18 amount as the Commission may prescribe by rule, 

19 regulation, or order for the protection of investors. 

20 ‘‘(2) DEFINITIONS.—For purposes of this sub21 section, the term ‘officer or employee’ shall include 

22 the officers and employees of the depositor, trustee, 

23 investment adviser, or any other manager of the reg24 istered investment company, and any affiliated per25 son of any such person.’’. 


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1 SEC. 217. ENHANCED SEC AUTHORITY TO CONDUCT SUR2 VEILLANCE AND RISK ASSESSMENT. 

3 (a) SECURITIES EXCHANGE ACT OF 1934 AMEND4 MENTS.—Section 17(b) of the Securities Exchange Act of 

5 1934 (15 U.S.C. 78q(b)) is amended by adding at the end 

6 the following new paragraph: 

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

8 All persons described in subsection (a) of this sec9 tion are subject at any time, or from time to time, 

10 to such reasonable periodic, special, or other infor11 mation and document requests by representatives of 

12 the Commission as the Commission by rule or order 

13 deems necessary or appropriate to conduct surveil14 lance or risk assessments of the securities markets, 

15 persons registered with the Commission under this 

16 title, or otherwise in furtherance of the purposes of 

17 this title.’’. 

18 (b) INVESTMENT COMPANY ACT OF 1940 AMEND19 MENTS.—Section 31(b) of the Investment Company Act 

20 of 1940 (15 U.S.C. 80a–30(b)) is amended by adding at 

21 the end the following new paragraph: 

22 ‘‘(4) SURVEILLANCE AND RISK ASSESSMENT.— 

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

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

25 periodic, special, or other information and document 

26 requests by representatives of the Commission as the 


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1 Commission by rule or order deems necessary or ap2 propriate to conduct surveillance or risk assessments 

3 of the securities markets, persons registered with the 

4 Commission under this title, or otherwise in further5 ance of the purposes of this title.’’. 

6 (c) INVESTMENT ADVISERS ACT OF 1940 AMEND7 MENTS.—Section 204 of the Investment Advisers Act of 

8 1940 (15 U.S.C. 80b–4) is amended by adding at the end 

9 the following new subsection: 

10 ‘‘(d) SURVEILLANCE AND RISK ASSESSMENT.—All 

11 persons described in subsection (a) are subject at any 

12 time, or from time to time, to such reasonable periodic, 

13 special, or other information and document requests by 

14 representatives of the Commission as the Commission by 

15 rule or order deems necessary or appropriate to conduct 

16 surveillance or risk assessments of the securities markets, 

17 persons registered with the Commission under this title, 

18 or otherwise in furtherance of the purposes of this title.’’. 

19 SEC. 218. INVESTMENT COMPANY EXAMINATIONS. 

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

21 1940 (15 U.S.C. 80a–30) is amended to read as follows: 

22 ‘‘(1) IN GENERAL.—All records of each reg23 istered investment company, and each underwriter, 

24 broker, dealer, or investment adviser that is a major25 ity-owned subsidiary of such a company, shall be 


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1 subject at any time, or from time to time, to such 

2 reasonable periodic, special, or other examinations 

3 by representatives of the Commission as the Com4 mission deems necessary or appropriate in the public 

5 interest or for the protection of investors.’’. 

6 SEC. 219. CONTROL PERSON LIABILITY UNDER THE SECU7 RITIES EXCHANGE ACT. 

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

9 (15 U.S.C. 78t(a)) is amended by inserting after ‘‘con10 trolled person is liable’’ the following: ‘‘including to the 

11 Commission in any action brought under paragraph (1) 

12 or (3) of section 21(d),’’. 

13 SEC. 220. ENHANCED APPLICATION OF ANTI-FRAUD PROVI14 SIONS. 

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

16 et seq.) is amended— 

17 (1) in section 9— 

18 (A) by striking ‘‘registered on a national 

19 securities exchange’’ each place it appears and 

20 inserting ‘‘other than a government security’’; 

21 (B) in subsection (b), by striking ‘‘by use 

22 of any facility of a national securities ex23 change,’’; and 


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

2 ‘‘unlawful for any’’ the following: ‘‘broker, deal3 er, or’’; 

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

5 on a national securities exchange’’ each place it ap6 pears and inserting ‘‘other than a government secu7 rity’’; and 

8 (3) in section 15(c)(1)(A), by striking ‘‘other9 wise than on a national securities exchange of which 

10 it is a member’’. 

11 TITLE III—COMMISSION 

12 FUNDING AND ORGANIZATION 

13 SEC. 301. AUTHORIZATION OF APPROPRIATIONS. 

14 Section 35 of the Securities Exchange Act of 1934 

15 (15 U.S.C. 78kk) is amended to read as follows: 

16 ‘‘SEC. 35. AUTHORIZATION OF APPROPRIATIONS. 

17 ‘‘In addition to any other funds authorized to be ap18 propriated to the Commission, there are authorized to be 

19 appropriated to carry out the functions, powers, and du20 ties of the Commission— 

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

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

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

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

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


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

2 SEC. 302. INVESTMENT ADVISER REGULATION FUNDING. 

3 Section 203 of the Investment Advisers Act of 1940 

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

5 following new subsection: 

6 ‘‘(l) ANNUAL ASSESSMENT.— 

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

8 accordance with this subsection, collect from invest9 ment advisers required to register with the Commis10 sion under this title, fees designed to help recover 

11 the cost of inspections and examinations of reg12 istered investment advisers conducted by the Com13 mission pursuant to 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 Commis20 sion shall consider— 

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

22 ‘‘(B) the risk profile of the investment ad23 viser; 

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

25 adviser; and 


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1 ‘‘(D) such other relevant factors as the 

2 Commission determines to be appropriate. 

3 ‘‘(3) AMOUNT AND USE OF FEES.— 

4 ‘‘(A) MINIMUM AGGREGATE AMOUNT.— 

5 The aggregate amount of fees determined by 

6 the Commission under this subsection for any 

7 fiscal year shall be greater than the amount the 

8 Commission spent on inspections and examina9 tions of registered investment advisers during 

10 the 2009 fiscal year. 

11 ‘‘(B) EXCESS FEES.—The Commission 

12 may retain any excess fees collected under this 

13 subsection during a fiscal year for application 

14 towards the costs of inspections and examina15 tions of investment advisers in future fiscal 

16 years. 

17 ‘‘(4) REVIEW AND ADJUSTMENT OF FEES.— 

18 The Commission may review fee rates established 

19 pursuant to this section before the end of any fiscal 

20 year and make any appropriate adjustments prior to 

21 collecting any such fee in the following fiscal year. 

22 ‘‘(5) PENALTY FEE.—The Commission shall 

23 prescribe by rule or regulation an additional fee to 

24 be assessed as a penalty for late payment of fees re25 quired by this subsection. 


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

2 in fees made pursuant to this section shall not be 

3 subject 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 

7 (15 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’’ 

11 and inserting ‘‘August 31’’; and 

12 (3) in subsection (j)— 

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 

17 collected under subsection (d) of this section)’’ 

18 and inserting ‘‘(including fees estimated to be 

19 collected under subsections (b) and (c) prior to 

20 the effective date of the uniform adjusted rate 

21 and assessments estimated to be collected under 

22 subsection (d))’’. 

23 SEC. 304. COMMISSION ORGANIZATIONAL STUDY AND RE24 FORM. 

25 (a) STUDY REQUIRED.— 


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

2 the 60-day period beginning on the date of the en3 actment of this Act, the Securities and Exchange 

4 Commission (hereinafter in this section referred to 

5 as the ‘‘SEC’’) shall hire an independent consultant 

6 of high caliber and with expertise in organizational 

7 restructuring to examine the internal operations, 

8 structure, funding, and need for comprehensive re9 form of the SEC, self-regulatory organizations, and 

10 other entities relevant to the regulation of securities 

11 and the protection of securities investors. 

12 (2) SPECIFIC AREAS FOR STUDY.—The study 

13 required under paragraph (1) shall, at a minimum, 

14 include the study of— 

15 (A) the possible elimination of unnecessary 

16 or redundant units at the SEC; 

17 (B) improving communications between 

18 SEC offices and divisions; 

19 (C) the need to put in place a clear chain 

20 of command structure, particularly for enforce21 ment examinations and compliance inspections; 

22 (D) the SEC’s hiring policies and personal 

23 practices, including— 

24 (i) whether there is a need to further 

25 streamline hiring authorities for those who 


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1 are not lawyers, accountants, compliance 

2 examiners, or economists; 

3 (ii) whether there is a need for further 

4 pay reforms; 

5 (iii) the experiential mix of SEC em6 ployees and whether such mix efficiently 

7 and effectively permits the SEC to protect 

8 investors; and 

9 (iv) the application of civil service 

10 laws by the SEC; and 

11 (E) the present self-regulatory organiza12 tional structure and a determination of whether 

13 the present reliance on self-regulatory organiza14 tions promotes efficient and effective govern15 ance for the securities markets. 

16 (b) CONSULTANT REPORT.—Not later than the end 

17 of the 180-day period beginning on the date of the enact18 ment of this Act, the independent consultant hired pursu19 ant to subsection (a)(1) shall issue a report to the SEC 

20 and the Congress containing— 

21 (1) a detailed description of any findings and 

22 conclusions made while carrying out the study re23 quired under subsection (a)(1); 

24 (2) recommendations for legislative, regulatory, 

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1 mines appropriate to enable the SEC and other enti2 ties on which it reports to perform their statutorily 

3 or otherwise mandated missions. 

4 (c) SEC REPORT.—Not later than the end of the 6- 

5 month period beginning on the date the consultant issues 

6 the report under subsection (b), and every 6-months there7 after during the 2-year period following the date on which 

8 the consultant issues such report, the SEC shall issue a 

9 report to the Committee on Financial Services of the 

10 House of Representatives and the Committee on Banking, 

11 Housing, and Urban Affairs of the Senate describing the 

12 SEC’s implementation of the regulatory and administra13 tive recommendations contained in the consultant’s report. 

14 TITLE IV—ADDITIONAL 

15 COMMISSION REFORMS 

16 SEC. 401. REGULATION OF SECURITIES LENDING. 

17 Section 10 of the Securities Exchange Act of 1934 

18 (15 U.S.C. 78j) is amended by adding at the end the fol19 lowing new subsection: 

20 ‘‘(c) To effect or accept a transaction involving the 

21 loan or borrowing of securities in contravention of such 

22 rules and regulations as the Commission may prescribe as 

23 necessary or appropriate in the public interest or for the 

24 protection of investors.’’. 


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1 SEC. 402. LOST AND STOLEN SECURITIES. 

2 Section 17(f)(1) of the Securities Exchange Act of 

3 1934 (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 sto10 len’’ and inserting ‘‘stolen, cancelled, or reported in 

11 such other manner as the Commission, by rule, may 

12 prescribe’’. 

13 SEC. 403. FINGERPRINTING. 

14 Section 17(f)(2) of the Securities Exchange Act of 

15 1934 (15 U.S.C. 78q(f)(2)) is amended— 

16 (1) by striking ‘‘and registered clearing agen17 cy,’’ and inserting ‘‘registered clearing agency, reg18 istered securities information processor, national se19 curities exchange, and national securities associa20 tion’’; and 

21 (2) by striking ‘‘or clearing agency,’’ and insert22 ing ‘‘clearing agency, securities information proc23 essor, national securities exchange, or national secu24 rities association,’’. 


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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 organi6 zation,’’. 

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 

11 1940 (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 

14 ‘‘registered or required to be registered with the 

15 Commission’’; 

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 

21 OF THE PUBLIC UTILITY HOLDING COMPANY 

22 ACT OF 1935. 

23 (a) SECURITIES EXCHANGE ACT OF 1934.—The Se24 curities Exchange Act of 1934 (15 U.S.C. 78 et seq.) is 

25 amended— 


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1 (1) in section 3(a)(47) (15 U.S.C. 78c(a)(47)), 

2 by striking ‘‘the Public Utility Holding Company 

3 Act 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 charac9 terized 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 substan20 tially disrupts, or threatens to substantially dis21 rupt— 

22 ‘‘(i) the functioning of securities mar23 kets, investment companies, or any other 

24 significant portion or segment of the secu25 rities markets; or 


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1 ‘‘(ii) the transmission or processing of 

2 securities transactions.’’. 

3 (3) in section 21(h)(2) (15 U.S.C. 78u(h)(2)), 

4 by striking ‘‘section 18(c) of the Public Utility Hold5 ing Company Act of 1935,’’. 

6 (b) TRUST INDENTURE ACT OF 1939.—The Trust 

7 Indenture Act of 1939 (15 U.S.C. 77aaa et seq.) is 

8 amended— 

9 (1) in section 303 (15 U.S.C. 77ccc), by 

10 amending paragraph (17) to read as follows: 

11 ‘‘(17) The terms ‘Securities Act of 1933’ and 

12 ‘Securities Exchange Act of 1934’ shall be deemed 

13 to refer, respectively, to such Acts, as amended, 

14 whether amended prior to or after the enactment of 

15 this title.’’; 

16 (2) in section 308 (15 U.S.C. 77hhh), by strik17 ing ‘‘Securities Act of 1933, the Securities Exchange 

18 Act of 1934, or the Public Utility Holding Company 

19 Act of 1935’’ each place it appears and inserting 

20 ‘‘Securities Act of 1933 or the Securities Exchange 

21 Act of 1934’’; 

22 (3) in section 310 (15 U.S.C. 77jjj), by striking 

23 subsection (c) (including the preceding heading); 

24 (4) in section 311 (15 U.S.C. 77kkk) by strik25 ing subsection (c); 


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1 (5) in section 323(b) (15 U.S.C. 77www(b)), by 

2 striking ‘‘Securities Act of 1933, or the Securities 

3 Exchange Act of 1934, or the Public Utility Holding 

4 Company Act of 1935’’ and inserting ‘‘Securities Act 

5 of 1933 or the Securities Exchange Act of 1934’’; 

6 and 

7 (6) in section 326 (15 U.S.C. 77zzz), by strik8 ing ‘‘Securities Act of 1933, or the Securities Ex9 change Act of 1934, or the Public Utility Holding 

10 Company Act of 1935,’’ and inserting ‘‘Securities 

11 Act of 1933 or the Securities Exchange Act of 

12 1934’’. 

13 (c) INVESTMENT COMPANY ACT OF 1940.—The In14 vestment Company Act of 1940 (15 U.S.C. 80a–1 et seq.) 

15 is amended— 

16 (1) in section 2(a)(44) (15 U.S.C. 80a– 

17 2(a)(44)), by striking ‘‘ ‘Public Utility Holding Com18 pany Act of 1935’,’’; 

19 (2) in section 3(c) (15 U.S.C. 80a–3(c)), by 

20 amending paragraph (8) to read as follows: 

21 ‘‘(8) [Repealed]’’; 

22 (3) in section 38(b) (15 U.S.C. 80a–37(b)), by 

23 striking ‘‘the Public Utility Holding Company Act of 

24 1935,’’; and 


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1 (4) in section 50 (15 U.S.C. 80a–49), by strik2 ing ‘‘the Public Utility Holding Company Act of 

3 1935,’’. 

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

5 202(a)(21) of the Investment Advisers Act of 1940 (15 

6 U.S.C. 80b–2(a)(21)) is amended by striking ‘‘ ‘Public 

7 Utility Holding Company Act of 1935’,’’. 

8 SEC. 407. PROMOTING TRANSPARENCY IN FINANCIAL RE9 PORTING. 

10 (a) FINDINGS.—Congress finds the following: 

11 (1) Transparent and clear financial reporting is 

12 integral to the continued growth and strength of our 

13 capital markets and the confidence of investors. 

14 (2) The increasing detail and volume of ac15 counting, auditing, and reporting guidance pose a 

16 major challenge. 

17 (3) The complexity of accounting and auditing 

18 standards in the United States has added to the 

19 costs and effort involved in financial reporting. 

20 (b) TESTIMONY REQUIRED ON REDUCING COM21 PLEXITY IN FINANCIAL REPORTING.—The Securities and 

22 Exchange Commission, the Financial Accounting Stand23 ards Board, and the Public Company Accounting Over24 sight Board shall annually provide oral testimony by their 

25 respective Chairpersons or a designee of the Chairperson, 


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1 beginning in 2010, and for 5 years thereafter, to the Com2 mittee on Financial Services of the House of Representa3 tives on their efforts to reduce the complexity in financial 

4 reporting to provide more accurate and clear financial in5 formation to investors, including— 

6 (1) reassessing complex and outdated account7 ing standards; 

8 (2) improving the understandability, consist9 ency, and overall usability of the existing accounting 

10 and auditing literature; 

11 (3) developing principles-based accounting 

12 standards; 

13 (4) encouraging the use and acceptance of 

14 interactive data; and 

15 (5) promoting disclosures in ‘‘plain English’’. 

16 SEC. 408. UNLAWFUL MARGIN LENDING. 

17 Section 7(c)(1)(A) of the Securities Exchange Act of 

18 1934 (15 U.S.C. 78g(c)(1)(A)) is amended by striking ‘‘; 

19 and’’ and inserting ‘‘; or’’. 

20 SEC. 409. PROTECTING CONFIDENTIALITY OF MATERIALS 

21 SUBMITTED TO THE COMMISSION. 

22 (a) SECURITIES EXCHANGE ACT OF 1934.—Section 

23 17(j) of the Securities Exchange Act of 1934 (15 U.S.C. 

24 78q(j)) is amended to read as follows: 


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1 ‘‘(j) AUTHORITY TO LIMIT DISCLOSURE OF INFOR2 MATION.— 

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

4 provision of law, the Commission shall not be com5 pelled to disclose any information, documents, 

6 records, or reports that relate to an examination of 

7 a person subject to or described in this section, in8 cluding subsection (i)(5)(A), or the financial or oper9 ational condition of such persons, or any information 

10 supplied to the Commission by any domestic or for11 eign regulatory agency that relates to the financial 

12 or operational condition of such persons, of any as13 sociated person of such persons, or any affiliate of 

14 an investment bank holding company. 

15 ‘‘(2) CERTAIN EXCEPTIONS.—Nothing in this 

16 subsection shall authorize the Commission to with17 hold information from the Congress, prevent the 

18 Commission from complying with a request for infor19 mation from any other Federal department or agen20 cy or any self-regulatory organization requesting the 

21 information for purposes within the scope of its ju22 risdiction, or prevent the Commission from com23 plying with an order of a court of the United States 

24 in an action brought by the United States or the 

25 Commission against a person subject to or described 


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1 in this section to produce information, documents, 

2 records, or reports relating directly to the examina3 tion of that person or the financial or operational 

4 condition of that person or an associated or affili5 ated person of that person. 

6 ‘‘(3) TREATMENT UNDER SECTION 552 OF

7 TITLE 5, UNITED STATES CODE.—For purposes of 

8 section 552 of title 5, United States Code, this sub9 section shall be considered a statute described in 

10 subsection (b)(3)(B) of that section. 

11 ‘‘(4) CERTAIN INFORMATION TO BE CONFIDEN12 TIAL.—In prescribing regulations to carry out the 

13 requirements of this subsection, the Commission 

14 shall designate information described in or obtained 

15 pursuant to subparagraphs (A), (B), and (C) of sub16 section (i)(3) as confidential information for pur17 poses of section 24(b)(2) of this title.’’. 

18 (b) INVESTMENT COMPANY ACT OF 1940.—Section 

19 31(b) of the Investment Company Act of 1940 (15 U.S.C. 

20 80a–30(b)) is amended by adding at the end the following 

21 new paragraph: 

22 ‘‘(4) CONFIDENTIALITY.— 

23 ‘‘(A) IN GENERAL.—Notwithstanding any 

24 other provision of law, the Commission shall not 

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1 ments, records, or reports that relate to an ex2 amination of a person subject to or described in 

3 this section. 

4 ‘‘(B) CERTAIN EXCEPTIONS.—Nothing in 

5 this subsection shall authorize the Commission 

6 to withhold information from the Congress, pre7 vent the Commission from complying with a re8 quest for information from any other Federal 

9 department or agency requesting the informa10 tion 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 

14 States or the Commission against a person sub15 ject to or described in this section to produce 

16 information, documents, records, or reports re17 lating directly to the examination of that person 

18 or the financial or operational condition of that 

19 person or an associated or affiliated person of 

20 that person. 

21 ‘‘(C) TREATMENT UNDER SECTION 552 OF

22 TITLE 5, UNITED STATES CODE.—For purposes 

23 of section 552 of title 5, United States Code, 

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1 scribed in subsection (b)(3)(B) of that sec2 tion.’’. 

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

4 204 of the Investment Advisers Act of 1940 (15 U.S.C. 

5 80b–4) is amended by adding at the end the following new 

6 subsection: 

7 ‘‘(d) CONFIDENTIALITY.— 

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

9 provision of law, the Commission shall not be com10 pelled to disclose any information, documents, 

11 records, or reports that relate to an examination of 

12 a person subject to or described in this section. 

13 ‘‘(2) CERTAIN EXCEPTIONS.—Nothing in this 

14 subsection shall authorize the Commission to with15 hold information from Congress, prevent the Com16 mission from complying with a request for informa17 tion from any other Federal department or agency 

18 requesting the information for purposes within the 

19 scope of its jurisdiction, or prevent the Commission 

20 from complying with an order of a court of the 

21 United States in an action brought by the United 

22 States or the Commission against a person subject 

23 to or described in this section to produce informa24 tion, documents, records, or reports relating directly 

25 to the examination of that person or the financial or 


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1 operational condition of that person or an associated 

2 or affiliated person of that person. 

3 ‘‘(3) TREATMENT UNDER SECTION 552 OF

4 TITLE 5, UNITED STATES CODE.—For purposes of 

5 section 552 of title 5, United States Code, this sub6 section shall be considered a statute described in 

7 subsection (b)(3)(B) of that section.’’. 

8 SEC. 410. TECHNICAL CORRECTIONS. 

9 (a) SECURITIES ACT OF 1933.—The Securities Act 

10 of 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 section 18(b)(1)(C) (15 U.S.C. 

14 77r(b)(1)(C)), by striking ‘‘is a security’’ and insert15 ing ‘‘a security’’; 

16 (3) in section 18(c)(2)(B)(i) (15 U.S.C. 

17 77r(c)(2)(B)(i)), by striking ‘‘State, or’’ and insert18 ing ‘‘State or’’; 

19 (4) in section 19(d)(6)(A) (15 U.S.C. 

20 77s(d)(6)(A)), by striking ‘‘in paragraph (1) of (3)’’ 

21 and inserting ‘‘in paragraph (1) or (3)’’; and 

22 (5) in section 27A(c)(1)(B)(ii) (15 U.S.C. 77z– 

23 2(c)(1)(B)(ii)), by striking ‘‘business entity;’’ and in24 serting ‘‘business entity,’’. 


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1 (b) SECURITIES EXCHANGE ACT OF 1934.—The Se2 curities Exchange Act of 1934 (15 U.S.C. 78 et seq.) is 

3 amended— 

4 (1) in section 2(1)(a) (15 U.S.C. 78b(1)(a)), by 

5 striking ‘‘affected’’ and inserting ‘‘effected’’; 

6 (2) in section 3(a)(55)(A) (15 U.S.C. 

7 78c(a)(55)(A)), by striking ‘‘section 3(a)(12) of the 

8 Securities Exchange Act of 1934’’ and inserting 

9 ‘‘section 3(a)(12) of this Act’’; 

10 (3) in section 3(g) (15 U.S.C. 78c(g)), by strik11 ing ‘‘company, account person, or entity’’ and insert12 ing ‘‘company, account, person, or entity’’; 

13 (4) in section 10A(i)(1)(B)(i) (15 U.S.C. 78j– 

14 1(i)(1)(B)(i)), by striking ‘‘nonaudit’’ and inserting 

15 ‘‘non-audit’’; 

16 (5) in section 13(b)(1) (15 U.S.C. 78m(b)(1)), 

17 by striking ‘‘earning statement’’ and inserting 

18 ‘‘earnings statement’’; 

19 (6) in section 15(b)(1) (15 U.S.C. 78o(b)(1))— 

20 (A) by striking the sentence beginning 

21 ‘‘The order granting’’ and ending ‘‘from such 

22 membership.’’ in subparagraph (B); and 

23 (B) by inserting such sentence in the mat24 ter following such subparagraph after ‘‘are sat25 isfied.’’; 


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1 (7) in section 15 (15 U.S.C. 78o), by redesig2 nating subsection (i), as added by section 303(f) of 

3 the Commodity Futures Modernization Act of 2000 

4 (114 Stat. 2763A–455), as subsection (j); 

5 (8) in section 15C(a)(2) (15 U.S.C. 78o– 

6 5(a)(2))— 

7 (A) by redesignating clauses (i) and (ii) as 

8 subparagraphs (A) and (B), respectively; 

9 (B) by striking the sentence beginning 

10 ‘‘The order granting’’ and ending ‘‘from such 

11 membership.’’ in such subparagraph (B), as re12 designated; and 

13 (C) by inserting such sentence in the mat14 ter following such redesignated subparagraph 

15 after ‘‘are satisfied.’’; 

16 (9) in section 16(a)(2)(C) (15 U.S.C. 

17 78p(a)(2)(C)), by striking ‘‘section 206(b)’’ and in18 serting ‘‘section 206B’’; 

19 (10) in section 17(b)(1)(B) (15 U.S.C. 

20 78q(b)(1)(B)), by striking ‘‘15A(k) gives’’ and in21 serting ‘‘15A(k), give’’; and 

22 (11) in section 21C(c)(2) (15 U.S.C. 78u– 

23 3(c)(2)), by striking ‘‘paragraph (1) subsection’’ and 

24 inserting ‘‘Paragraph (1)’’. 


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1 (c) TRUST INDENTURE ACT OF 1939.—The Trust 

2 Indenture Act of 1939 (15 U.S.C. 77aaa et seq.) is 

3 amended— 

4 (1) in section 304(b) (15 U.S.C. 77ddd(b)), by 

5 striking ‘‘section 2 of such Act’’ and inserting ‘‘sec6 tion 2(a) of such Act’’; 

7 (2) in section 313(a)(4) (15 U.S.C. 

8 77mmm(a)(4)) by striking ‘‘subsection 311’’ and in9 serting ‘‘section 311(b)’’; and 

10 (3) in section 317(a)(1) (15 U.S.C. 

11 77qqq(a)(1)), by striking ‘‘(1),’’ and inserting ‘‘(1)’’. 

12 (d) INVESTMENT COMPANY ACT OF 1940.—The In13 vestment Company Act of 1940 (15 U.S.C. 80a–1 et seq.) 

14 is amended— 

15 (1) in section 2(a)(19) (15 U.S.C. 80a– 

16 2(a)(19)) by striking ‘‘clause (vi)’’ both places it ap17 pears in the last two sentences and inserting ‘‘clause 

18 (vii)’’; 

19 (2) in section 9(b)(4)(B) (15 U.S.C. 80a– 

20 9(b)(4)(B)), by inserting ‘‘or’’ after the semicolon at 

21 the end; 

22 (3) in section 12(d)(1)(J) (15 U.S.C. 80a– 

23 12(d)(1)(J)), by striking ‘‘any provision of this sub24 section’’ and inserting ‘‘any provision of this para25 graph’’; 


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1 (4) in section 13(a)(3) (15 U.S.C. 80a– 

2 13(a)(3)), by inserting ‘‘or’’ after the semicolon at 

3 the end; 

4 (5) in section 17(f)(4) (15 U.S.C. 80a– 

5 17(f)(4)), by striking ‘‘No such member’’ and insert6 ing ‘‘No member of a national securities exchange’’; 

7 (6) in section 17(f)(6) (15 U.S.C. 80a– 

8 17(f)(6)), by striking ‘‘company may serve’’ and in9 serting ‘‘company, may serve’’; and 

10 (7) in section 61(a)(3)(B)(iii) (15 U.S.C. 80a– 

11 60(a)(3)(B)(iii))— 

12 (A) by striking ‘‘paragraph (1) of section 

13 205’’ and inserting ‘‘section 205(a)(1)’’; and 

14 (B) by striking ‘‘clause (A) or (B) of that 

15 section’’ and inserting ‘‘section 205(b)(1) or 

16 (2)’’. 

17 (e) INVESTMENT ADVISERS ACT OF 1940.—The In18 vestment Advisers Act of 1940 (15 U.S.C. 80b–1 et seq.) 

19 is amended— 

20 (1) in each of the following sections, by striking 

21 ‘‘principal business office’’ or ‘‘principal place of 

22 business’’ (whichever and wherever it appears) and 

23 inserting ‘‘principal office and place of business’’: 

24 sections 203(c)(1)(A), 203(k)(4)(B), 213(a), 222(b), 

25 and 222(c) (15 U.S.C. 80b–3(c)(1)(A), 80b– 


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1 3(k)(4)(B), 80b–13(a), 80b–18a(b), and 80b– 

2 18a(c)); and 

3 (2) in section 206(3) (15 U.S.C. 80b–6(3)), by 

4 inserting ‘‘or’’ after the semicolon at the end. 

5 SEC. 411. MUNICIPAL SECURITIES. 

6 Section 15B(b) of the Securities Exchange Act of 

7 1934 (15 U.S.C. 78o–4(b)) is amended— 

8 (1) by amending paragraph (1) to read as fol9 lows: 

10 ‘‘(1) COMPOSITION OF THE MUNICIPAL SECURI11 TIES RULEMAKING BOARD.—Not later than the end 

12 of the 120-day period beginning on the date of the 

13 enactment of this paragraph, the Municipal Securi14 ties Rulemaking Board (hereinafter in this section 

15 referred to as the ‘Board’), shall be composed of 

16 members which shall perform the duties set forth in 

17 this section and shall consist of— 

18 ‘‘(A) a majority of public representatives, 

19 at least one of whom shall be representative of 

20 investors in municipal securities and at least 

21 one of whom shall be representative of issuers 

22 of municipal securities (which members are 

23 hereinafter referred to as ‘public representa24 tives’); 


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1 ‘‘(B) at least one individual who is rep2 resentative of municipal securities brokers and 

3 municipal securities dealers which are not 

4 banks or subsidiaries or departments or divi5 sions of banks (which members are hereinafter 

6 referred to as ‘broker-dealer representatives’); 

7 and 

8 ‘‘(C) at least one individual who is rep9 resentative of municipal securities dealers which 

10 are banks or subsidiaries or departments or di11 visions of banks (which members are herein12 after referred to as ‘bank representatives’)’’; 

13 and 

14 (2) by amending paragraph (2)(B) to read as 

15 follows: 

16 ‘‘(B) Establish fair procedures for the 

17 nomination and election of members of the 

18 Board and assure fair representation in such 

19 nominations and elections. Such rules— 

20 ‘‘(i) shall establish requirements re21 garding the independence of public rep22 resentatives; 

23 ‘‘(ii) shall provide that the number of 

24 public representatives of the Board shall at 

25 all times exceed the total number of 


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1 broker-dealer representatives and bank 

2 representatives; 

3 ‘‘(iii) shall specify the term members 

4 shall serve; and 

5 ‘‘(iv) may increase or decrease the 

6 number of members which shall constitute 

7 the whole Board, but in no case may such 

8 number be an even number.’’. 

9 SEC. 412. INTERESTED PERSON DEFINITION. 

10 Section 2(a)(19)(A) of the Investment Company Act 

11 of 1940 (15 U.S.C. 80a–2(a)(19)(A)) is amended— 

12 (1) by striking clauses (v) and (vi); 

13 (2) by inserting after clause (iv) the following 

14 new clause: 

15 ‘‘(v) any natural person who is a 

16 member of a class of persons who the 

17 Commission, by rule or regulation, deter18 mines are unlikely to exercise an appro19 priate degree of independence as a result 

20 of— 

21 ‘‘(I) a material business or pro22 fessional relationship with such com23 pany or any affiliated person of such 

24 company; or 


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1 ‘‘(II) a close familial relationship 

2 with any natural person who is an af3 filiated person of such company;’’; 

4 (3) by redesignating clause (vii) as clause (vi); 

5 and 

6 (4) in clause (vi), as redesignated, by striking 

7 ‘‘two completed fiscal years’’ and inserting ‘‘five 

8 completed fiscal years’’. 

9 SEC. 413. RULEMAKING AUTHORITY TO PROTECT REDEEM10 ING INVESTORS. 

11 Section 22(e) of the Investment Company Act of 

12 1940 (15 U.S.C. 80a–22(e)) is amended by adding at the 

13 end the following: ‘‘The Commission may, by rules and 

14 regulations, limit the extent to which a registered open15 end investment company may own, hold, or invest in il16 liquid securities or other illiquid property’’. 

17 TITLE V—SECURITIES INVESTOR 

18 PROTECTION ACT AMENDMENTS 

19 SEC. 501. INCREASING THE MINIMUM ASSESSMENT PAID BY 

20 SIPC MEMBERS. 

21 Section 4(d)(1)(C) of the Securities Investor Protec22 tion Act of 1970 (15 U.S.C. 78ddd(d)(1)(C)) is amended 

23 by striking ‘‘$150 per annum’’ and inserting the following: 

24 ‘‘0.02 percent of the gross revenues of such member of 

25 SIPC’’. 


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1 SEC. 502. INCREASING THE BORROWING LIMIT ON TREAS2 URY LOANS. 

3 Section 4(h) of the Securities Investor Protection Act 

4 of 1970 (15 U.S.C. 78ddd(h)) is amended by striking ‘‘of 

5 not to exceed $1,000,000,000’’ and inserting ‘‘not to ex6 ceed $2,500,000,000’’. 

7 SEC. 503. INCREASING THE CASH LIMIT OF PROTECTION. 

8 Section 9 of the Securities Investor Protection Act 

9 of 1970 (15 U.S.C. 78fff–3) is amended— 

10 (1) in subsection (a)(1), by striking ‘‘$100,000 

11 for each such customer’’ and inserting ‘‘the standard 

12 maximum cash advance amount for each such cus13 tomer, as determined in accordance with subsection 

14 (d)’’; and 

15 (2) by adding the following new subsections: 

16 ‘‘(d) STANDARD MAXIMUM CASH ADVANCE AMOUNT

17 DEFINED.—For purposes of this section, the term ‘stand18 ard maximum cash advance amount’ means $250,000, as 

19 such amount may be adjusted after March 31, 2010, as 

20 provided under subsection (e). 

21 ‘‘(e) INFLATION ADJUSTMENT.— 

22 ‘‘(1) IN GENERAL.—No later than April 1, 

23 2010, and every 5 years thereafter, and subject to 

24 the approval of the Commission as provided under 

25 section 3(e)(2), the Board of Directors of SIPC shall 

26 determine whether an inflation adjustment to the 


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1 standard maximum cash advance amount is appro2 priate. If the Board of Directors of SIPC determines 

3 such an adjustment is appropriate, then the stand4 ard maximum cash advance amount shall be an 

5 amount equal to— 

6 ‘‘(A) $250,000 multiplied by, 

7 ‘‘(B) the ratio of the annual value of the 

8 Personal Consumption Expenditures Chain9 Type Price Index (or any successor index there10 to), published by the Department of Commerce, 

11 for the calendar year preceding the year in 

12 which such determination is made, to the pub13 lished annual value of such index for the cal14 endar year preceding the year in which this 

15 subsection was enacted. 

16 The index values used in calculations under this 

17 paragraph shall be, as of the date of the calculation, 

18 the values most recently published by the Depart19 ment of Commerce. 

20 ‘‘(2) ROUNDING.—If the standard maximum 

21 cash advance amount determined under paragraph 

22 (1) for any period is not a multiple of $10,000, the 

23 amount so determined shall be rounded down to the 

24 nearest $10,000. 


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1 ‘‘(3) PUBLICATION AND REPORT TO THE CON2 GRESS.—Not later than April 5 of any calendar year 

3 in which a determination is required to be made 

4 under paragraph (1)— 

5 ‘‘(A) the Commission shall publish in the 

6 Federal Register the standard maximum cash 

7 advance amount; and 

8 ‘‘(B) the Board of Directors of SIPC shall 

9 submit a report to the Congress containing 

10 stating the standard maximum cash advance 

11 amount. 

12 ‘‘(4) IMPLEMENTATION PERIOD.—Any adjust13 ment to the standard maximum cash advance 

14 amount shall take effect on January 1 of the year 

15 immediately succeeding the calendar year in which 

16 such adjustment is made. 

17 ‘‘(5) INFLATION ADJUSTMENT CONSIDER18 ATIONS.—In making any determination under para19 graph (1) to increase the standard maximum cash 

20 advance amount, the Board of Directors of SIPC 

21 shall consider— 

22 ‘‘(A) the overall state of the fund and the 

23 economic conditions affecting members of 

24 SIPC; 


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1 ‘‘(B) the potential problems affecting mem2 bers of SIPC; and 

3 ‘‘(C) such other factors as the Board of 

4 Directors of SIPC may determine appro5 priate.’’. 

6 SEC. 504. SIPC AS TRUSTEE IN SIPA LIQUIDATION PRO7 CEEDINGS. 

8 Section 5(b)(3) of the Securities Investor Protection 

9 Act of 1970 (15 U.S.C. 78eee(b)(3)) is amended— 

10 (1) by striking ‘‘SIPC has determined that the 

11 liabilities of the debtor to unsecured general credi12 tors and to subordinated lenders appear to aggre13 gate less than $750,000 and that’’; and 

14 (2) by striking ‘‘five hundred’’ and inserting 

15 ‘‘five thousand’’. 

16 SEC. 505. INSIDERS INELIGIBLE FOR SIPC ADVANCES. 

17 Section 9(a)(4) of the Securities Investor Protection 

18 Act of 1970 (15 U.S.C. 78fff–3(a)(4)) is amended by in19 serting ‘‘an insider (as such term is defined under section 

20 101(31) of title 11, United States Code),’’ after ‘‘or net 

21 profits of the debtor,’’. 

22 SEC. 506. ELIGIBILITY FOR DIRECT PAYMENT PROCEDURE. 

23 Section 10(a)(4) of the Securities Investor Protection 

24 Act of 1970 (15 U.S.C. 78fff–4(a)(4)) is amended by 

25 striking ‘‘$250,000’’ and inserting ‘‘$850,000’’. 


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1 SEC. 507. INCREASING THE FINE FOR PROHIBITED ACTS 

2 UNDER SIPA. 

3 Section 14(c) of the Securities Investor Protection 

4 Act of 1970 (15 U.S.C. 78jjj(c)) is amended— 

5 (1) in paragraph (1), by striking ‘‘$50,000’’ 

6 and inserting ‘‘$250,000’’; and 

7 (2) in paragraph (2), by striking ‘‘$50,000’’ 

8 and inserting ‘‘$250,000’’. 

9 SEC. 508. PENALTY FOR MISREPRESENTATION OF SIPC 

10 MEMBERSHIP OR PROTECTION. 

11 Section 14 of the Securities Investor Protection Act 

12 of 1970 (15 U.S.C. 78jjj) is amended by adding at the 

13 end the following new subsection: 

14 ‘‘(d) MISREPRESENTATION OF SIPC MEMBERSHIP

15 OR PROTECTION.— 

16 ‘‘(1) IN GENERAL.—Any person who falsely 

17 represents by any means (including, without limita18 tion, through the Internet or any other medium of 

19 mass communication), with actual knowledge of the 

20 falsity of the representation and with an intent to 

21 deceive or cause injury to another, that such person, 

22 or another person, is a member of SIPC or that any 

23 person or account is protected or is eligible for pro24 tection under this Act or by SIPC, shall be liable for 

25 any damages caused thereby and shall be fined not 


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1 more than $250,000 or imprisoned for not more 

2 than five years. 

3 ‘‘(2) INTERNET SERVICE PROVIDERS.—Any 

4 Internet service provider that, on or through a sys5 tem or network controlled or operated by the Inter6 net service provider, transmits, routes, provides con7 nections for, or stores any material containing any 

8 misrepresentation of the kind prohibited in para9 graph (1) shall be liable for any damages caused 

10 thereby, including damages suffered by SIPC, if the 

11 Internet service provider— 

12 ‘‘(A) has actual knowledge that the mate13 rial contains a misrepresentation of the kind 

14 prohibited in paragraph (1), or 

15 ‘‘(B) in the absence of actual knowledge, is 

16 aware of facts or circumstances from which it 

17 is apparent that the material contains a mis18 representation of the kind prohibited in para19 graph (1), and 

20 upon obtaining such knowledge or awareness, fails to 

21 act expeditiously to remove, or disable access to, the 

22 material. 

23 ‘‘(3) INJUNCTIONS.—Any court having jurisdic24 tion of a civil action arising under this Act may 

25 grant temporary injunctions and final injunctions on 


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1 such terms as the court deems reasonable to prevent 

2 or restrain any violation of paragraph (1) or (2). 

3 Any such injunction may be served anywhere in the 

4 United States on the person enjoined, shall be oper5 ative throughout the United States, and shall be en6 forceable, by proceedings in contempt or otherwise, 

7 by any United States court having jurisdiction over 

8 that person. The clerk of the court granting the in9 junction shall, when requested by any other court in 

10 which enforcement of the injunction is sought, trans11 mit promptly to the other court a certified copy of 

12 all papers in the case on file in such clerk’s office.’’. 

13 SEC. 509. LIMITATIONS ON CUSTOMER STATUS. 

14 Section 16(2) of the Securities Investor Protection 

15 Act of 1970 (15 U.S.C. 78lll(2)) is amended— 

16 (1) in subparagraph (A), by striking ‘‘or’’; 

17 (2) in subparagraph (B), by striking the period 

18 at the end and inserting ‘‘; or’’; and 

19 (3) by adding at the end the following new sub20 paragraph: 

21 ‘‘(C) any person to the extent such person 

22 has a claim for cash or securities arising out of 

23 a repurchase agreement or reverse repurchase 

24 agreement (as such terms are defined under 

25 section 47 of title 11, United States Code).’’. 


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1 SEC. 510. FUTURES HELD IN A PORTFOLIO MARGIN SECU2 RITIES ACCOUNT PROTECTION. 

3 (a) SIPC ADVANCES.—Section 9(a)(1) of the Securi4 ties Investor Protection Act of 1970 (15 U.S.C. 78fff– 

5 3(a)(1)) is amended by inserting ‘‘or options on com6 modity futures contracts’’ after ‘‘claim for securities’’. 

7 (b) DEFINITIONS.—Section 16 of such Act (15 

8 U.S.C. 78lll) is amended— 

9 (1) by amending paragraph (2) to read as fol10 lows: 

11 ‘‘(2) CUSTOMER.— 

12 ‘‘(A) IN GENERAL.—The term ‘customer’ 

13 of a debtor means any person (including any 

14 person with whom the debtor deals as principal 

15 or agent) who has a claim on account of securi16 ties received, acquired, or held by the debtor in 

17 the ordinary course of its business as a broker 

18 or dealer from or for the securities accounts of 

19 such person for safekeeping, with a view to sale, 

20 to cover consummated sales, pursuant to pur21 chases, as collateral, security, or for purposes of 

22 effecting transfer. 

23 ‘‘(B) INCLUDED PERSONS.—The term 

24 ‘customer’ includes— 


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1 ‘‘(i) any person who has deposited 

2 cash with the debtor for the purpose of 

3 purchasing securities; and 

4 ‘‘(ii) any person who has a claim 

5 against the debtor for, or a claim against 

6 the debtor arising out of sales or conver7 sions of, cash, securities, futures contracts, 

8 or options on futures contracts received, 

9 acquired, or held in a portfolio margining 

10 account carried as a securities account 

11 pursuant to a portfolio margining program 

12 approved by the Commission. 

13 ‘‘(C) EXCLUDED PERSONS.—The term 

14 ‘customer’ does not include— 

15 ‘‘(i) any person to the extent that the 

16 claim of such person arises out of trans17 actions with a foreign subsidiary of a mem18 ber of SIPC; or 

19 ‘‘(ii) any person to the extent that 

20 such person has a claim for cash or securi21 ties which by contract, agreement, or un22 derstanding, or by operation of law, is part 

23 of the capital of the debtor, or is subordi24 nated to the claims of any or all creditors 

25 of the debtor, notwithstanding that some 


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1 ground exists for declaring such contract, 

2 agreement, or understanding void or void3 able in a suit between the claimant and the 

4 debtor.’’; 

5 (2) in paragraph (4), by inserting after the first 

6 sentence the following new sentence: ‘‘In the case of 

7 portfolio margining accounts of customers that are 

8 carried as securities accounts pursuant to a portfolio 

9 margining program approved by the Commission, 

10 such term shall also include futures contracts and 

11 options on futures contracts received, acquired, or 

12 held by or for the account of a debtor from or for 

13 such accounts, and the proceeds thereof.’’; 

14 (3) in paragraph (9), by inserting before ‘‘Such 

15 term’’ in the matter following subparagraph (L) the 

16 following: ‘‘The term includes revenues earned by a 

17 broker or dealer in connection with transactions in 

18 customers’ portfolio margining accounts carried as 

19 securities accounts pursuant to a portfolio margining 

20 program approved by the Commission.’’; and 

21 (4) in paragraph (11)— 

22 (A) by amending subparagraph (A) to read 

23 as follows: 

24 ‘‘(A) calculating the sum which would have 

25 been owed by the debtor to such customer if the 


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1 debtor had liquidated, by sale or purchase on 

2 the filing date— 

3 ‘‘(i) all securities positions of such 

4 customer (other than customer name secu5 rities reclaimed by such customer); and 

6 ‘‘(ii) all positions in futures contracts 

7 and options on futures contracts held in a 

8 portfolio margining account carried as a 

9 securities account pursuant to a portfolio 

10 margining program approved by the Com11 mission; minus’’; and 

12 (B) by inserting before ‘‘In determining’’ 

13 in the matter following subparagraph (C) the 

14 following: ‘‘A claim for a commodity futures 

15 contract received, acquired, or held in a port16 folio margining account pursuant to a portfolio 

17 margining program approved by the Commis18 sion, or a claim for a security futures contract, 

19 shall be deemed to be a claim for the mark-to20 market (variation) payments due with respect 

21 to such contract as of the filing date, and such 

22 claim shall be treated as a claim for cash.’’. 


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1 SEC. 511. RISK-BASED PREMIUMS. 

2 Section 4(c) of the Securities Investor Protection Act 

3 of 1970 (15 U.S.C. 78ddd(c)) is amended by adding at 

4 the end the following new paragraph: 

5 ‘‘(4) RISK-BASED ASSESSMENT SYSTEM.— 

6 ‘‘(A) IN GENERAL.—Assessments made 

7 pursuant to paragraph (2) shall made using a 

8 risk-based assessment system. 

9 ‘‘(B) RISK-BASED ASSESSMENT SYSTEM

10 DEFINED.—For purposes of this paragraph, the 

11 term ‘risk-based assessment system’ means a 

12 system for calculating a member’s assessment 

13 based on— 

14 ‘‘(i) the probability that the fund will 

15 incur a loss with respect to the member, 

16 taking into consideration the risks attrib17 utable to— 

18 ‘‘(I) the size of the member; 

19 ‘‘(II) the number of enforcement 

20 and compliance actions taken against 

21 such member during the previous 5- 

22 year period by SIPC, the Commission, 

23 State securities regulators, and other 

24 Federal and State financial regu25 lators; 


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1 ‘‘(III) the number of years such 

2 member has been in operation; and 

3 ‘‘(IV) any other factors SIPC de4 termines are relevant to assessing 

5 such probability; 

6 ‘‘(ii) the likely amount of any such 

7 loss; and 

8 ‘‘(iii) the revenue needs of the fund. 

9 ‘‘(C) SEPARATE ASSESSMENT SYSTEMS.— 

10 SIPC may establish separate risk-based assess11 ment systems for large and small members of 

12 SIPC. 

13 ‘‘(D) MODIFICATIONS TO THE RISK-BASED

14 ASSESSMENT SYSTEM ALLOWED ONLY AFTER

15 NOTICE AND COMMENT.—In revising or modi16 fying the risk-based assessment system at any 

17 time after the date of the enactment of this 

18 paragraph, SIPC may implement such revisions 

19 or modification in final form only after notice 

20 and opportunity for comment.’’. 

21 SEC. 512. BUDGETARY TREATMENT OF COMMISSION LOANS 

22 TO SIPC. 

23 Section 4(g) of the Securities Investor Protection Act 

24 of 1970 (15 U.S.C. 78ddd(g)) is amended by adding at 

25 the end the following: ‘‘Any loan made by the Commission 


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1 to SIPC under this subsection shall not be considered to 

2 result in a new direct loan obligation or a new loan guar3 antee commitment for purposes of section 504 of the Fed4 eral Credit Reform Act of 1990.’’ 

5 TITLE VI—SARBANES-OXLEY ACT 

6 AMENDMENTS 

7 SEC. 601. PUBLIC COMPANY ACCOUNTING OVERSIGHT 

8 BOARD OVERSIGHT OF AUDITORS OF NON9 PUBLIC BROKERS AND DEALERS. 

10 (a) DEFINITIONS.—Title I of the Sarbanes-Oxley Act 

11 of 2002 is amended by adding at the end the following 

12 new section: 

13 ‘‘SEC. 110. DEFINITIONS. 

14 ‘‘For the purposes of this title, and notwithstanding 

15 section 2: 

16 ‘‘(1) AUDIT.—The term ‘audit’ means an exam17 ination of the financial statements, reports, docu18 ments, or notices, of any issuer, broker, or dealer by 

19 an independent public accounting firm in accordance 

20 with the rules of the Board or the Commission (or, 

21 for the period preceding the adoption of applicable 

22 rules of the Board under section 103, in accordance 

23 with then-applicable generally accepted auditing and 

24 related standards for such purposes), for the purVerDate Nov 24 2008 02:38 Oct 17, 2009 Jkt 089200 PO 00000 Frm 00100 Fmt 6652 Sfmt 6201 E:\BILLS\H3817.IH H3817

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1 pose of expressing an opinion on such financial 

2 statements, reports, documents, or notices. 

3 ‘‘(2) AUDIT REPORT.—The term ‘audit report’ 

4 means a document, report, notice, or other record— 

5 ‘‘(A) prepared following an audit per6 formed for purposes of compliance by an issuer, 

7 broker, or dealer with the requirements of the 

8 securities laws; and 

9 ‘‘(B) in which a public accounting firm ei10 ther— 

11 ‘‘(i) sets forth the opinion of that firm 

12 regarding a financial statement, report, no13 tice, other document, procedures, or con14 trols; or 

15 ‘‘(ii) asserts that no such opinion can 

16 be expressed. 

17 ‘‘(3) PROFESSIONAL STANDARDS.—The term 

18 ‘professional standards’ means— 

19 ‘‘(A) accounting principles that are— 

20 ‘‘(i) established by the standard set21 ting body described in section 19(b) of the 

22 Securities Act of 1933, as amended by this 

23 Act, or prescribed by the Commission 

24 under section 19(a) of that Act (15 U.S.C. 

25 17a(s)) or section 13(b) of the Securities 


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1 Exchange Act of 1934 (15 U.S.C. 78a(m)); 

2 and 

3 ‘‘(ii) relevant to audit reports for par4 ticular issuers, brokers, or dealers, or dealt 

5 with in the quality control system of a par6 ticular registered public accounting firm; 

7 and 

8 ‘‘(B) auditing standards, standards for at9 testation engagements, quality control policies 

10 and procedures, ethical and competency stand11 ards, and independence standards (including 

12 rules implementing title II) that the Board or 

13 the Commission determines— 

14 ‘‘(i) relate to the preparation or 

15 issuance of audit reports for issuers, bro16 kers, or dealers; and 

17 ‘‘(ii) are established or adopted by the 

18 Board under section 103(a), or are pro19 mulgated as rules of the Commission. 

20 ‘‘(4) BROKER.—The term ‘broker’ means a 

21 broker (as such term is defined in section 3(a)(4) of 

22 the Securities Exchange Act of 1934 (15 U.S.C. 

23 78c(a)(4))) that is required to file a balance sheet, 

24 income statement, or other financial statement 

25 under section 17(e)(1)(A) of such Act (15 U.S.C. 


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1 78q(e)(1)(A)), where such balance sheet, income 

2 statement, or financial statement is required to be 

3 certified by a registered public accounting firm. 

4 ‘‘(5) DEALER.—The term ‘dealer’ means a 

5 dealer (as such term is defined in section 3(a)(5) of 

6 the Securities Exchange Act of 1934 (15 U.S.C. 

7 78c(a)(5))) that is required to file a balance sheet, 

8 income statement, or other financial statement 

9 under section 17(e)(1)(A) of such Act (15 U.S.C. 

10 78q(e)(1)(A)), where such balance sheet, income 

11 statement, or financial statement is required to be 

12 certified by a registered public accounting firm. 

13 ‘‘(6) SELF-REGULATORY ORGANIZATION.—The 

14 term ‘self-regulatory organization’ has the same 

15 meaning as in section 3(a)(26) of the Securities Ex16 change Act of 1934 (15 U.S.C. 78c(a)(26)).’’. 

17 (b) ESTABLISHMENT AND ADMINISTRATION OF THE

18 PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD.— 

19 Section 101 of such Act is amended— 

20 (1) by striking ‘‘issuers’’ each place it appears 

21 and inserting ‘‘issuers, brokers, and dealers’’; 

22 (2) in subsection (a), by striking ‘‘public com23 panies’’ and inserting ‘‘companies’’; and 


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1 (3) in subsection (a), by striking ‘‘for compa2 nies the securities of which are sold to, and held by 

3 and for, public investors’’. 

4 (c) REGISTRATION WITH THE BOARD.—Section 102 

5 of such Act is amended— 

6 (1) by striking ‘‘Beginning 180 days after the 

7 date of the determination of the Commission under 

8 section 101(d), it’’ and inserting ‘‘It’’; 

9 (2) in subsections (a) and (b)(2)(G), by striking 

10 ‘‘issuer’’ each place it appears and inserting ‘‘issuer, 

11 broker, or dealer’’; and 

12 (3) by striking ‘‘issuers’’ and inserting ‘‘issuers, 

13 brokers, and dealers’’. 

14 (d) AUDITING AND INDEPENDENCE.—Section 103(a) 

15 of such Act is amended— 

16 (1) in paragraph (1), by striking ‘‘and such eth17 ics standards’’ and inserting ‘‘such ethics standards, 

18 and such independence standards’’; 

19 (2) in paragraph (2)(A)(iii), by striking ‘‘de20 scribe in each audit report’’ and inserting ‘‘in each 

21 audit report for an issuer, describe’’; and 

22 (3) in paragraph (2)(B)(i), by striking 

23 ‘‘issuers’’ and inserting ‘‘issuers, brokers, and deal24 ers’’. 


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1 (e) INSPECTIONS OF REGISTERED PUBLIC ACCOUNT2 ING FIRMS.—Section 104 of such Act is amended— 

3 (1) in subsection (a), by striking ‘‘issuers’’ and 

4 inserting ‘‘issuers, brokers, and dealers’’; 

5 (2) in subsection (b)(1)(A)— 

6 (A) by striking ‘‘audit reports’’ and insert7 ing ‘‘audit reports on annual financial state8 ments’’; and 

9 (B) by striking ‘‘and’’; 

10 (3) in subsection (b)(1)(B)— 

11 (A) by striking ‘‘audit reports’’ and insert12 ing ‘‘audit reports on annual financial state13 ments’’; and 

14 (B) by striking the period on the end and 

15 inserting ‘‘; and’’; and 

16 (4) by adding at the end of subsection (b)(1) 

17 the following new subparagraph: 

18 ‘‘(C) with respect to each registered public 

19 accounting firm that regularly provides audit 

20 reports and is not described under subpara21 graph (A) or (B), on a basis to be determined 

22 by the Board, by rule, consistent with the pub23 lic interest and protection of investors.’’. 


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1 (f) INVESTIGATIONS AND DISCIPLINARY PRO2 CEEDINGS.—Section 105(c)(7)(B) of such Act is amend3 ed— 

4 (1) by striking ‘‘any issuer’’ each place it ap5 pears and inserting ‘‘any issuer, broker, or dealer’’; 

6 and 

7 (2) by striking ‘‘an issuer under this sub8 section’’ and inserting ‘‘a registered public account9 ing firm under this subsection’’. 

10 (g) FOREIGN PUBLIC ACCOUNTING FIRMS.—Section 

11 106 of such Act is amended— 

12 (1) by striking ‘‘issuer’’ and inserting ‘‘issuer, 

13 broker, or dealer’’; and 

14 (2) by striking ‘‘issuers’’ and inserting ‘‘issuers, 

15 brokers, or dealers’’. 

16 (h) FUNDING.—Section 109 of such Act is amend17 ed— 

18 (1) in subsection (c)(2), by striking ‘‘subsection 

19 (i)’’ and inserting ‘‘subsection (j)’’; 

20 (2) in subsection (d)(2), by striking ‘‘allowing 

21 for differentiation among classes of issuers, as ap22 propriate’’ and inserting ‘‘and among brokers and 

23 dealers that are not issuers, in accordance with sub24 section (h), and allowing for differentiation among 


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1 classes of issuers and brokers and dealers, as appro2 priate’’; 

3 (3) in subsection (d), by inserting at the end 

4 the following new paragraph: 

5 ‘‘(3) BROKERS AND DEALERS.—The rules of 

6 the Board under paragraph (1) shall provide that 

7 the allocation, assessment, and collection by the 

8 Board (or an agent appointed by the Board) of the 

9 fee established under paragraph (1) with respect to 

10 brokers and dealers shall not begin until the first 

11 day of the first full fiscal year beginning after the 

12 date of the enactment of this paragraph.’’; 

13 (4) by redesignating subsections (h), (i), and (j) 

14 as subsections (i), (j), and (k), respectively; and 

15 (5) by inserting after subsection (g) the fol16 lowing new subsection: 

17 ‘‘(h) ALLOCATION OF ACCOUNTING SUPPORT FEES

18 AMONG BROKERS AND DEALERS.— 

19 ‘‘(1) IN GENERAL.—Any amount due from bro20 kers and dealers that are not issuers (or a particular 

21 class of such brokers and dealers) under this section 

22 to fund the budget of the Board shall be allocated 

23 among and payable by such brokers and dealers (or 

24 such brokers and dealers in a particular class, as ap25 plicable). A broker or dealer’s allocation shall be in 


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1 proportion to the broker or dealer’s net capital com2 pared to the total net capital of all brokers and deal3 ers that are not issuers, in accordance with the rules 

4 of the Board. 

5 ‘‘(2) OBLIGATION TO PAY.—Every broker or 

6 dealer shall pay the share of a reasonable annual ac7 counting support fee or fees allocated to such broker 

8 or dealer under this section.’’. 

9 (i) REFERRAL OF INVESTIGATIONS TO A SELF-REGU10 LATORY ORGANIZATION.—Section 105(b)(4)(B) of the 

11 Sarbanes-Oxley Act of 2002 is amended— 

12 (1) by redesignating clauses (ii) and (iii) as 

13 clauses (iii) and (iv), respectively; and 

14 (2) by inserting after clause (i) the following 

15 new clause: 

16 ‘‘(ii) to a self-regulatory organization, 

17 in the case of an investigation that con18 cerns an audit report for a broker or deal19 er that is subject to the jurisdiction of 

20 such self-regulatory organization;’’. 

21 (j) USE OF DOCUMENTS RELATED TO AN INSPEC22 TION OR INVESTIGATION.—Section 105(b)(5)(B)(ii) of 

23 such Act is amended— 

24 (1) in subclause (III), by striking ‘‘and’’; 


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1 (2) in subclause (IV), by striking the comma 

2 and inserting ‘‘; and’’; and 

3 (3) by inserting after subclause (IV) the fol4 lowing new subclause: 

5 ‘‘(V) a self-regulatory organiza6 tion, with respect to an audit report 

7 for a broker or dealer that is subject 

8 to the jurisdiction of such self-regu9 latory organization,’’. 

10 SEC. 602. FOREIGN REGULATORY INFORMATION SHARING. 

11 (a) DEFINITION.—Section 2(a) of the Sarbanes12 Oxley Act of 2002 (15 U.S.C. 7201(a)) is amended by 

13 inserting after paragraph (16) the following: 

14 ‘‘(17) FOREIGN AUDITOR OVERSIGHT AUTHOR15 ITY.—The term ‘foreign auditor oversight authority’ 

16 means any governmental body or other entity em17 powered by a foreign government to conduct inspec18 tions of public accounting firms or otherwise to ad19 minister or enforce laws related to the regulation of 

20 public accounting firms.’’. 

21 (b) AVAILABILITY TO SHARE INFORMATION.—Sec22 tion 105(b)(5) of the Sarbanes-Oxley Act of 2002 (15 

23 U.S.C. 7215(b)(5)) is amended by adding at the end the 

24 following: 


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1 ‘‘(C) AVAILABILITY TO FOREIGN OVER2 SIGHT AUTHORITIES.—When in the Board’s 

3 discretion it is necessary to accomplish the pur4 poses of this Act or to protect investors, and 

5 without the loss of its status as confidential and 

6 privileged in the hands of the Board, all infor7 mation referred to in subparagraph (A) that re8 lates to a public accounting firm within the in9 spection authority, or other regulatory or law 

10 enforcement jurisdiction, of a foreign auditor 

11 oversight authority may be made available to 

12 the foreign auditor oversight authority if the 

13 foreign auditor oversight authority provides 

14 such assurances of confidentiality as the Board 

15 determines appropriate.’’. 

16 (c) CONFORMING AMENDMENT.—Section 

17 105(b)(5)(A) of the Sarbanes-Oxley Act of 2002 (15 

18 U.S.C. 7215(b)(5)(A)) is amended by striking ‘‘subpara19 graph (B)’’ and inserting ‘‘subparagraphs (B) and (C)’’. 

20 SEC. 603. EXPANSION OF AUDIT INFORMATION TO BE PRO21 DUCED AND EXCHANGED WITH FOREIGN 

22 COUNTERPARTS. 

23 Section 106 of the Sarbanes-Oxley Act of 2002 (15 

24 U.S.C. 7216) is amended— 


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1 (1) by amending subsection (b) to read as fol2 lows: 

3 ‘‘(b) PRODUCTION OF DOCUMENTS.— 

4 ‘‘(1) PRODUCTION BY FOREIGN FIRMS.—If a 

5 foreign public accounting firm issues an audit re6 port, performs audit work, conducts interim reviews, 

7 or performs material services, with respect to any 

8 issuer or its subsidiaries, the foreign public account9 ing firm shall produce its audit documentation and 

10 all other documents related to any such audit work 

11 or interim review to the Commission or the Board 

12 when requested by the Commission or the Board in 

13 connection with any investigation and the foreign 

14 public accounting firm shall be subject to the juris15 diction of the courts of the United States for pur16 poses of enforcement of any request of such docu17 ments. 

18 ‘‘(2) OTHER PRODUCTION.—Any registered 

19 public accounting firm that relies, in whole or in 

20 part, on the work of a foreign public accounting firm 

21 in issuing an audit report, performing audit work, 

22 conducting an interim review, or performing mate23 rial services, with respect to any issuer or its sub24 sidiaries, shall— 


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1 ‘‘(A) produce the foreign public accounting 

2 firm’s audit documentation and all other docu3 ments related to any such work in response to 

4 a request for production by the Commission or 

5 the Board; and 

6 ‘‘(B) secure the agreement of any foreign 

7 public accounting firm to such production, as a 

8 condition of its reliance on the work of that for9 eign public accounting firm.’’; 

10 (2) by redesignating subsection (d) as sub11 section (f); and 

12 (3) by inserting after subsection (c) the fol13 lowing new subsections: 

14 ‘‘(d) SERVICE OF REQUESTS OR PROCESS.—Any for15 eign public accounting firm that performs work for a do16 mestic registered public accounting firm shall furnish to 

17 the domestic firm a written irrevocable consent and power 

18 of attorney that designates the domestic firm as an agent 

19 upon whom may be served any process, pleadings, or other 

20 papers in any action brought to enforce this section. Any 

21 foreign firm that issues an audit report, performs audit 

22 work, performs interim reviews, or performs material serv23 ices, shall designate to the Commission or the Board an 

24 agent in the United States upon whom may be served any 

25 process, pleading, or other papers in any action brought 


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1 to enforce this section or any request by the Commission 

2 or the Board under this section. 

3 ‘‘(e) SANCTIONS.—A willful refusal to comply, in 

4 whole in or in part, with any request by the Commission 

5 or the Board under this section, shall be a violation of 

6 this Act.’’. 

7 SEC. 604. 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 RE13 LIEF OF VICTIMS.—If in any judicial or administrative ac14 tion brought by the Commission under the securities laws 

15 (as such term is defined in section 3(a)(47) of the Securi16 ties Exchange Act of 1934 (15 U.S.C. 78c(a)(47)), the 

17 Commission obtains a civil penalty against any person for 

18 a violation of such laws or the rules and regulations there19 under, the amount of such civil penalty shall, on the mo20 tion or at the direction of the Commission, be added to 

21 and become part of a disgorgement fund or other fund 

22 established for the benefit of the victims of such viola23 tion.’’; 

24 (2) in subsection (b), by— 


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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. 605. WHISTLEBLOWER PROTECTION AGAINST RETAL9 IATION BY A SUBSIDIARY OF AN ISSUER. 

10 Section 1514A of title 18, United States Code, is 

11 amended by inserting ‘‘including any subsidiary or affil12 iate whose financial information is included in the consoli13 dated financial statements of such company,’’ after ‘‘(15 

14 U.S.C. 78o(d)),’’. 

Æ 


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